| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥16434.0B | ¥16268.3B | +1.0% |
| Operating Income | ¥1655.3B | ¥1435.2B | +15.3% |
| Pre-tax Profit | ¥1854.9B | ¥1384.9B | +33.9% |
| Net Income | ¥1652.2B | ¥1173.0B | +40.9% |
| ROE | 24.2% | 23.1% | - |
For the fiscal year ended March 2026, Revenue was ¥16,434B (YoY +¥166B, +1.0%), Operating Income was ¥1,655B (YoY +¥220B, +15.3%), Ordinary Income was ¥1,152B (YoY +¥52B, +4.7%), and Net Income attributable to owners of the parent was ¥1,610B (YoY +¥481B, +42.8%). While revenue increased only marginally, profit increased substantially. Operating margin improved by 1.3pt to 10.1% (prior year 8.8%), and net margin improved by 2.9pt to 9.8% (prior year 6.9%), indicating a clear improvement in profitability. The large increase in final profit was driven by continued high margins in the Aerospace, Space & Defense segment and margin improvements in Industrial Systems & General-Purpose Machinery, together with an increase in Other Income (¥543B, prior year ¥166B), reduction in financial expenses (¥91B, prior year ¥150B), and expansion of equity-method investment income (¥142B, prior year ¥63B).
[Revenue] Revenue totaled ¥16,434B (YoY +1.0%), a marginal increase. By segment, Aerospace, Space & Defense achieved substantial revenue growth to ¥6,481B (+17.2%), establishing itself as the core business accounting for approximately 39% of consolidated revenue. Conversely, Resources, Energy & Environment was ¥3,735B (-8.5%), Industrial Systems & General-Purpose Machinery was ¥4,389B (-7.7%), and Social Infrastructure was ¥1,296B (-7.2%), all declining, indicating polarization within the portfolio. The company disposed of key affiliates in the Transportation Systems business (Niigata Transys), concrete materials business (IHI Kenmazai Kogyo), and material handling equipment business from the prior year, and the impact of structural reorganization contributed to the revenue decline. Gross profit was ¥3,795B (gross margin 23.1%, prior year 23.0%), a marginal increase, leaving room for top-line improvement.
[Profitability] Operating Income was ¥1,655B (YoY +¥220B, +15.3%), a substantial increase. SG&A was ¥2,427B (SG&A ratio 14.8%, prior year 13.7%), up about 1.1pt, but Other Income surged to ¥543B (prior year ¥166B), and one-off gains such as asset disposals pushed up profits at the operating level. By segment, Aerospace, Space & Defense recorded Operating Income of ¥1,124B (margin 17.4%, prior year 22.2%) and remained the largest contributor by amount and proportion; Industrial Systems & General-Purpose Machinery saw profitability improve significantly to ¥308B (margin 7.0%, prior year 2.3%); Resources, Energy & Environment plunged to ¥60B (margin 1.6%, prior year 4.0%). Ordinary Income was ¥1,152B (YoY +4.7%), with slower growth; this reflected higher financial income of ¥148B (prior year ¥37B) and lower financial expenses of ¥91B (prior year ¥150B), easing interest burden, and was supported by increased equity-method investment income of ¥142B (prior year ¥63B). Profit before tax was ¥1,855B (prior year ¥1,385B), income taxes were ¥203B (effective tax rate approx. 10.9%) representing a low burden, and Net Income attributable to owners of the parent was ¥1,610B (YoY +42.8%). In conclusion, higher revenue and profit were achieved due to sustained high profitability of aircraft engines and improvements outside operating profit, but the sharp increase in Other Income and low tax burden include temporary elements that boosted final profit.
In segment operating profit analysis, Aerospace, Space & Defense recorded Revenue ¥6,481B (YoY +17.2%) and Operating Income ¥1,124B (YoY -8.5%) with a margin of 17.4% (prior year 22.2%); while the largest segment by amount, its margin was compressed. Resources, Energy & Environment posted Revenue ¥3,735B (-8.5%) and Operating Income ¥60B (-63.1%) with margin down to 1.6% (prior year 4.0%), highlighting the need for structural margin improvement. Social Infrastructure reported Revenue ¥1,296B (-7.2%) and Operating Income ¥37B (turning from a ¥42B loss prior year) with margin improving to 2.9% (prior year -3.0%), indicating recovery from prior-year impairment effects. Industrial Systems & General-Purpose Machinery had Revenue ¥4,389B (-7.7%) and Operating Income ¥308B (+185.0%), with margin markedly improving to 7.0% (prior year 2.3%). Other (urban development, inspection & measurement, etc.) showed Revenue ¥533B and Operating Income ¥359B (margin 67.4%, prior year 16.8%), an outlier likely reflecting concentrated one-off real-estate related gains. Segment margins are polarized with aerospace outstanding and resources & energy lagging, clarifying the need for portfolio restructuring.
[Profitability] ROE was high at 28.4%, driven by net margin 9.8% × total asset turnover 0.68x × financial leverage 3.6x. Operating margin was 10.1%, above the manufacturing median of 7.8%, and net margin of 10.1% also well above the median 5.2%. Gross margin of 23.1% rose marginally by +0.1pt YoY, while the SG&A ratio increase to 14.8% (prior year 13.7%) offset gross margin improvement. High margins in Aerospace (17.4%) and improvements in Industrial Systems (7.0%) drove consolidated profitability, while decline in Resources & Energy (1.6%) acted as a drag. EBITDA margin was 14.7% (EBITDA ¥2,419B / Revenue ¥16,434B), indicating a solid cash-generation base.
[Cash Quality] Operating Cash Flow (OCF) was ¥1,214B versus Net Income ¥1,610B, a ratio of 0.75x, below the 0.8x threshold, indicating issues in cash conversion of profits. OCF/EBITDA was 0.50x, showing weak cash realization relative to EBITDA. Within working capital, accounts payable increased +¥1,025B and contract liabilities increased +¥587B supporting OCF, while accounts receivable increased -¥600B and inventories increased -¥864B (estimated from the difference from pre-working capital OCF ¥1,823B) pressured cash. Days Sales Outstanding (DSO) about 128 days, Days Inventory Outstanding (DIO) about 146 days, and CCC about 158 days are elongated, indicating substantial scope to improve working capital efficiency.
[Investment Efficiency] Total asset turnover was 0.68x (¥16,434B / ¥24,286B), low and indicating asset efficiency improvement is necessary. CapEx was ¥977B, 1.28x depreciation ¥763B, maintaining replacement and growth investment levels. Goodwill was ¥49B and intangible asset ratio 5.6%, indicating low M&A risk and limited impairment pressure under IFRS. Contract assets ¥1,049B and contract liabilities ¥3,114B demonstrate a strong backlog on an advance-payment basis; backlog/revenue ratio approx. 19% (contract liabilities / annual revenue) supports next-period operations.
[Financial Soundness] Equity Ratio improved to 26.9% (prior year 21.5%), with shareholders’ equity increasing to ¥6,815B (prior year ¥5,087B), strengthening the financial base. D/E ratio remained high at 2.56x (interest-bearing debt ¥17,467B / shareholders’ equity ¥6,815B; calculated including bonds, borrowings and lease liabilities). Debt/EBITDA is roughly in the 1.5–2.0x investment-grade range, and interest coverage (Operating Income ¥1,655B / Financial Expenses ¥91B ≒ 18x) sufficiently covers interest burden. Current ratio was 1.23x (current assets ¥14,514B / current liabilities ¥11,763B), indicating short-term liquidity is secured, but a sharp increase in accounts payable to ¥4,014B (+39.8%) suggests higher short-term liability dependence. Cash and cash equivalents were ¥1,551B, exceeding short-term bonds & borrowings ¥1,036B and mitigating maturity mismatch risk.
Operating Cash Flow was ¥1,214B (prior year ¥1,776B, -31.7%). OCF before working capital changes (subtotal) was ¥1,823B, from which working capital changes impacted: accounts receivable increase -¥600B, contract assets decrease +¥55B, accounts payable increase +¥1,025B, contract liabilities increase +¥587B. While inventory-related cash outflows are not explicitly stated, working capital changes totaled about -¥609B, and after income tax payments -¥582B, OCF was ¥1,214B. Increases in accounts payable and contract liabilities temporarily boosted cash, but structural cash pressure from rising receivables and inventories persists. Investing Cash Flow was -¥184B: CapEx -¥977B was partially offset by proceeds from tangible/intangible asset sales +¥307B, proceeds from sale of subsidiary shares +¥191B, and investment disposals +¥224B. Free Cash Flow was positive at ¥1,029B (OCF ¥1,214B + Investing CF -¥184B), but with dividend payments ¥212B + CapEx ¥977B = ¥1,189B, FCF coverage was about 0.87x, insufficient and supplemented by asset sale proceeds and short-term working capital liabilities. Financing Cash Flow was -¥979B with main components: short-term borrowings +¥159B, long-term borrowings +¥287B, bond redemptions -¥100B, long-term borrowings repayments -¥660B, lease payments -¥235B, dividend payments -¥212B, share buybacks -¥14B. Cash increased by ¥131B to ¥1,551B, but declining OCF and working capital efficiency remain key issues for the coming year.
From the perspective of earnings quality, distinguishing recurring income from one-off items is important. Other Income surged to ¥543B (prior year ¥166B), likely including gains on asset disposals and business restructuring. Of Operating Income ¥1,655B, the net contribution of Other Income ¥543B minus Other Expenses ¥256B = ¥287B was added, and excluding this temporary element, Adjusted Operating Income is estimated at about ¥1,368B (adjusted margin approx. 8.3%). Increased financial income of ¥148B (prior year ¥37B) and decreased financial expenses of ¥91B (prior year ¥150B) provided about ¥170B of uplift outside operating profit, so gains from financial improvements and one-off items combined to increase profit beyond the ordinary level. Increased equity-method investment income of ¥142B (prior year ¥63B) reflects improved performance at equity-method affiliates and is expected to have some sustainability. On accrual quality, OCF ¥1,214B / Net Income ¥1,610B = 0.75x, below the 0.8x threshold, indicating weak cash backing of recognized profits. While accounts payable +¥1,025B and contract liabilities +¥587B boosted OCF, accounts receivable -¥600B and inventory increase -¥864B (estimate) pressured cash, and dependence on short-term liabilities plus accumulation of inventory & receivables have reduced earnings quality. Income taxes ¥203B (effective tax rate approx. 10.9%) are materially below statutory rates; the recognition of deferred tax assets or tax adjustments may have contributed, but sustainability should be monitored.
Full-year guidance projects Revenue ¥18,300B, Operating Income ¥2,400B (YoY +45.0%), and Net Income attributable to owners of the parent ¥1,650B (YoY +2.5%). Progress against current results is: Revenue approx. 89.8% (¥16,434B / ¥18,300B), Operating Income approx. 69.0% (¥1,655B / ¥2,400B), and Net Income approx. 97.6% (¥1,610B / ¥1,650B). The lower achievement rate for Operating Income is attributed to deteriorating profitability in Resources, Energy & Environment (margin 1.6%) and rising SG&A ratio (14.8%); to expand profits in H2, further ramp-up of aircraft engine operations and continued improvement in Industrial Systems & General-Purpose Machinery are essential. Contract liabilities ¥3,114B (approx. 19% of revenue) and a substantial backlog support revenue and profit accumulation in H2, but improving working capital efficiency and strengthening cash conversion are key to achieving guidance.
Dividends are set at ¥80 per share (interim ¥70, year-end forecast ¥10; note that a 1→7 stock split was implemented on October 1, 2025, pre-split basis), with a payout ratio of 16.1% (dividend ¥50 vs. EPS ¥151.88, after split adjustment), remaining conservative. Dividend payments totaled ¥212B, giving dividend coverage relative to OCF ¥1,214B of approx. 5.7x and relative to FCF ¥1,029B of approx. 4.9x, indicating ample room. Share buybacks were small at ¥14B, and total return ratio (dividends + buybacks / Net Income) is about 14.0%. Dividend guidance is ¥11.50 per share for the full year (post-split basis; equivalent to ¥80.5 pre-split), a slight increase planned, signaling priority on profit growth and strengthening the financial base. If cash flexibility expands and working capital efficiency improves, there is potential to raise the payout ratio and expand buybacks.
Working capital efficiency deterioration: DSO 128 days, DIO 146 days, CCC 158 days indicate a prolonged working capital cycle, and OCF/Net Income 0.75x shows weak cash conversion. While increases in accounts payable +¥1,025B and contract liabilities +¥587B have temporarily boosted cash, buildup of inventory -¥864B and receivables -¥600B are structural cash pressure points. Continued inventory stagnation or collection delays could compress FCF and make balancing investment and returns difficult.
Portfolio polarization and margin deterioration in Resources & Energy: The Resources, Energy & Environment segment margin plunged to 1.6% (prior year 4.0%), yielding only ¥60B profit on ¥3,735B revenue, worsening profitability. Aerospace accounts for ¥1,124B of profit (73% of consolidated profit) while Resources & Energy contributes only ~4%, intensifying profit polarization within the portfolio. Delays in structural improvement due to commodity price volatility, project margin deterioration, or heightened competition could impair consolidated earnings stability.
High leverage and short-term liability dependence: D/E ratio remains high at 2.56x, and a rapid increase in accounts payable to ¥4,014B (+39.8%) indicates dependence on short-term liabilities. Debt/EBITDA approx. 2x and interest coverage 18x indicate earnings can cover interest at present, but in a rising-interest environment interest burden would increase and financial flexibility could decline. If the short-term cash boost from accounts payable diminishes, OCF could be further pressured and securing funds for investment and returns could become difficult.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 28.4% | 6.3% (3.3%–9.9%) | +22.1pt |
| Operating Margin | 10.1% | 7.8% (4.6%–12.3%) | +2.3pt |
| Net Margin | 10.1% | 5.2% (2.3%–8.2%) | +4.9pt |
Profitability metrics rank the company in the upper tier within the manufacturing sector, particularly ROE 28.4% significantly exceeding the median 6.3%. Operating and net margins also exceed sector medians, reflecting high margins in the aircraft engine business and the effect of financial leverage.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 1.0% | 3.7% (-0.4%–9.3%) | -2.7pt |
Revenue growth of 1.0% lags the sector median of 3.7%, making top-line expansion a challenge. Excluding effects of business disposals, declines in Resources & Energy and others are dragging down growth.
※ Source: Company compilation
Continued high profitability in Aerospace, Space & Defense and improvement in Industrial Systems & General-Purpose Machinery drove Operating Margin to 10.1% (prior year 8.8%), a 1.3pt improvement, and Net Margin to 9.8% (prior year 6.9%), a 2.9pt improvement. The large increase in final profit (+42.8%) is attributed to reduced financial expenses, increased equity-method income, and increased Other Income (asset disposals, etc.), but Other Income ¥543B includes temporary elements and sustainability beyond the next period should be watched. Margin deterioration in Resources, Energy & Environment (1.6%) and higher SG&A ratio (14.8%) remain structural challenges.
Significant scope to improve cash generation. OCF/Net Income 0.75x and OCF/EBITDA 0.50x indicate weak cash conversion, and working capital inefficiencies are apparent with DIO 146 days, DSO 128 days, CCC 158 days. While accounts payable +¥1,025B and contract liabilities +¥587B have temporarily boosted cash, compressing inventory and receivables to structurally improve OCF is the most important priority for the next period. FCF ¥1,029B covers dividends + CapEx ¥1,189B by approx. 0.87x, reflecting reliance on asset disposals; transitioning to OCF-driven funding is essential to sustain both growth investment and shareholder returns.
Contract liabilities ¥3,114B (approx. 19% of revenue) and a thick backlog support next-period operations. D/E ratio remains high at 2.56x, but Debt/EBITDA approx. 2x and interest coverage 18x show earnings can sufficiently cover interest burden. Payout ratio 16.1% and total return ratio 14.0% remain conservative; improving working capital efficiency and cash generation could create scope for higher dividends or expanded buybacks. Aircraft engine orders and the pace of structural improvement in Resources & Energy are key factors determining medium-term earnings stability and sustainability of shareholder returns.
This report was automatically generated by AI analyzing XBRL financial statement data to produce an earnings analysis. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on publicly disclosed financial statements. Investment decisions are your responsibility; please consult a professional advisor as necessary.