| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥417.0B | ¥412.3B | +1.1% |
| Operating Income / Operating Profit | ¥8.7B | ¥8.8B | -1.0% |
| Equity-Method Investment Income (Loss) | - | - | - |
| Ordinary Income | ¥11.2B | ¥11.1B | +0.6% |
| Net Income / Net Profit | ¥6.5B | ¥6.0B | +9.2% |
| ROE | 0.9% | 0.8% | - |
For FY2026 Q1, Revenue was ¥417.0B (YoY +¥4.6B +1.1%), Operating Income was ¥8.7B (YoY -¥0.1B -1.0%), Ordinary Income was ¥11.2B (YoY +¥0.1B +0.6%), and Net Income attributable to owners of the parent was ¥6.5B (YoY +¥0.5B +9.2%). Revenue showed only a slight increase, but gross margin improved from 15.3% to 16.1% (+0.8pt), and an increase in non-operating income together with a lower effective tax rate led to a 9.2% rise in net income. By segment, Construction Material posted Operating Income +69.9% and Construction Machine +20.6%, improving the revenue mix, while the core Machine & Tool segment saw Operating Income -13.3%, and the low-profitability profile of that segment is keeping the company-wide Operating Margin at a low fixed level of 2.1% (prior year 2.1%). Progress against the full-year plan stands at Revenue 25.3%, Operating Income 25.7%, Ordinary Income 27.3%, Net Income 29.6%, exceeding a standard Q1 run-rate (25%), and the current probability of achieving the full-year plan is favorable.
[Revenue] Revenue of ¥417.0B (+1.1%) recorded only a marginal increase. By segment, Construction Material increased to ¥103.5B (+4.8%) and Construction Machine to ¥33.2B (+25.3%), driving growth, while the core Machine And Tool decreased to ¥275.8B (-1.4%) and IoT Solution declined to ¥8.5B (-14.6%). Revenue composition was Machine & Tool 66.1%, Construction Material 24.8%, Construction Machine 8.0%, IoT 2.0%. The decline in Machine & Tool tempered company-wide top-line growth, but expansion in Construction Material and Construction Machine provided support.
[Profitability] Cost of goods sold was ¥350.0B, yielding gross profit of ¥67.0B and a gross margin of 16.1% (prior year 15.3%) — an improvement of +0.8pt. SG&A was ¥58.2B (+6.9%), with an SG&A ratio of 14.0% (prior year 13.2%), up +0.8pt, which offset the gross margin improvement; as a result Operating Income was ¥8.7B (-1.0%) and Operating Margin remained flat at 2.1%. Non-operating items included interest income ¥0.4B, dividend income ¥0.2B, foreign exchange gains ¥0.2B, etc., with non-operating income totaling ¥2.8B and non-operating expenses ¥0.3B, resulting in net non-operating income ¥2.5B and Ordinary Income of ¥11.2B (+0.6%). Extraordinary items included a gain on sale of investment securities ¥0.4B, producing net extraordinary income ¥0.4B, so Profit Before Tax was ¥11.6B (+13.3%). Income taxes were ¥5.1B with an effective tax rate of 43.7% (prior year 41.7%, +2pt), but Net Income was ¥6.5B, Net Income attributable to owners of the parent ¥6.2B (+9.2%). In conclusion, the company barely maintained a growth-in-profit trend with slight revenue increase, slight operating decline, flat ordinary income, and increased net income.
Machine And Tool recorded Revenue ¥275.8B (-1.4%), Operating Income ¥4.9B (-13.3%), Operating Margin 1.8% (prior year 2.0%) — a decline in both sales and profit; the deterioration in profitability of this core segment depressed the company-wide Operating Margin. Construction Material recorded Revenue ¥103.5B (+4.8%), Operating Income ¥3.1B (+69.9%), Margin 3.0% (prior year 1.9%) — strong sales and a large increase in profit, aided by improved gross margin and controlled SG&A. Construction Machine posted Revenue ¥33.2B (+25.3%), Operating Income ¥1.2B (+20.6%), Margin 3.5% (prior year 2.9%) — growth driven by expanded transactions. IoT Solution posted Revenue ¥8.5B (-14.6%), Operating Income ¥0.3B (-65.3%), Margin 4.1% (prior year 10.4%) — reduced scale and sharply lower profitability; though small in size, the decline has a meaningful impact on overall profitability. Of the company Operating Income ¥8.7B, segment profit aggregate was ¥9.5B less company-level adjustments of -¥0.8B. While Construction Material and Construction Machine are growing with higher margins, the low-profitability and large scale of Machine & Tool are a drag on consolidated profitability.
[Profitability] Operating Margin 2.1% (prior year 2.1%) is flat; Net Profit Margin 1.6% (prior year 1.4%) improved by +0.2pt. ROE 0.9% (prior year 0.8%) remains very low. DuPont decomposition yields Net Profit Margin 1.6% × Total Asset Turnover 0.345 × Financial Leverage 1.65x ≒ 0.9%, indicating that low net margin and asset turnover are bottlenecks. EBIT margin 2.1% is well below cautionary level (<5%), highlighting weak operating efficiency. [Cash Quality] DSO (days sales outstanding) 205 days, DIO (days inventory outstanding) 159 days, DPO (days payables outstanding) 206 days, giving CCC (cash conversion cycle) 158 days — prolonged. Year-on-year Accounts Receivable +3.3%, Inventory +17.5%, Accounts Payable +29.8% indicate working capital expansion, creating headwinds for operating cash generation. [Investment Efficiency] Total Asset Turnover 0.345x (prior year 0.353x) declined due to accumulation of inventory and receivables. ROA 0.5%, ROIC 1.1% indicate very low capital efficiency. [Financial Soundness] Equity Ratio 60.8% (prior year 63.2%) remains high though down -2.4pt; Total Assets ¥1210.0B (prior year ¥1170.2B) increased while Net Assets ¥735.2B (prior year ¥738.8B) slightly decreased. Current Ratio 187.2%, Quick Ratio 160.6% indicate ample liquidity. Cash ¥286.2B versus interest-bearing debt (short-term borrowings ¥12.2B + long-term borrowings ¥4.4B) total ¥16.6B, net cash ¥269.6B — extremely strong financial capacity. Debt-to-Equity 0.65x, Debt/Capital 2.2% are low, with no concerns on financial stability.
The statement of operating cash flows is undisclosed, but balance sheet changes indicate cash movements: Cash and deposits decreased from ¥297.6B to ¥286.2B (-¥11.4B). Accounts receivable rose from ¥226.5B to ¥234.0B (+¥7.5B) and inventories from ¥102.3B to ¥120.2B (+¥17.9B), a combined increase in receivables and inventory of +¥25.4B. Conversely, accounts payable increased significantly from ¥151.7B to ¥196.8B (+¥45.1B), suggesting part of working capital expansion was financed by higher payables. Contract liabilities (advance receipts) rose from ¥54.0B to ¥62.2B (+¥8.2B), contributing to short-term cash inflows. Tangible fixed assets increased from ¥248.1B to ¥253.6B (+¥5.5B), and goodwill rose from ¥1.6B to ¥15.5B (+¥13.9B), reflecting capital expenditures and goodwill recognition related to acquisition of part of MT FOOD SYSTEMS shares as uses of investing cash flow. Short-term borrowings increased from ¥4.7B to ¥12.2B (+¥7.5B), suggesting part of M&A funding and working capital was financed by short-term debt. Retained earnings decreased from ¥393.4B to ¥382.3B (-¥11.1B); despite recording net income ¥6.2B, dividend payments pressured retained earnings. Free cash flow generation was constrained by increases in receivables and inventory, but ample cash balances and higher accounts payable supported liquidity.
Of Ordinary Income ¥11.2B, Operating Income ¥8.7B is the core, with non-operating income ¥2.8B (0.7% of sales) having limited contribution. Composition of non-operating income: interest income ¥0.4B, dividend income ¥0.2B, FX gains ¥0.2B, other ¥0.8B — diversified and not overly dependent on extraordinary items. Extraordinary items: gain on sale of investment securities ¥0.4B, gain on disposal of fixed assets ¥0.0B, net extraordinary income ¥0.4B, representing 3.6% relative to Ordinary Income ¥11.2B — limited, indicating little one-off profit inflation. Comprehensive income ¥9.5B exceeded net income ¥6.5B by ¥3.0B, primarily due to foreign currency translation adjustments +¥6.1B, partially offset by valuation difference on securities -¥2.9B. The divergence between comprehensive and net income is due to currency effects and valuation changes that do not reflect core earnings. A high effective tax rate of 43.7% compresses bottom-line profit, meaning potential for net income improvement depends in part on tax burden reduction. Working capital expansion (Accounts Receivable +¥7.5B, Inventory +¥17.9B) suggests accruals have increased and delays in converting sales growth into cash may degrade operating cash flow quality.
Full-year plan: Revenue ¥1650.0B (+3.7%), Operating Income ¥34.0B (+0.6%), Ordinary Income ¥41.0B (-1.9%), Net Income attributable to owners of the parent ¥21.0B, EPS ¥87.93, Dividend ¥30.00. Q1 progress vs. full-year plan: Revenue 25.3% (¥417.0B/¥1650.0B), Operating Income 25.7% (¥8.7B/¥34.0B), Ordinary Income 27.3% (¥11.2B/¥41.0B), Net Income 29.6% (¥6.2B/¥21.0B) — Ordinary and Net Income are leading the standard Q1 run-rate (25%) by +2–5pt. The contribution from non-operating income and improved gross margin are seen as drivers of the favorable progress. No revisions to earnings or dividend forecasts were made this quarter, and the likelihood of achieving the full-year plan is assessed as high at present. However, if the profit decline in the core Machine & Tool segment (Operating Income -13.3%) continues, recovery in the latter half will be challenging.
Annual dividend forecast is ¥30.00, implying a Payout Ratio of 34.1% against full-year EPS ¥87.93 — a sustainable level. The dividend is unchanged from the prior year ¥30.00, maintaining a stable dividend policy. Total dividend amount is estimated at approximately ¥7.2B (Shares outstanding 24,298 thousand − Treasury shares 253 thousand = 24,045 thousand shares × ¥30) and the Payout Ratio of 34.1% vs. forecast Net Income ¥21.0B is reasonable. With cash at quarter-end ¥286.2B and net cash ¥269.6B, there is substantial financial capacity and no concern over dividend funding. Retained earnings ¥382.3B are also ample, supporting dividend sustainability. There is no mention of share buybacks; shareholder returns are limited to dividends. If profit growth and capital efficiency improve, scope for dividend increases and enhanced total returns could emerge.
Prolonged working capital efficiency risk: DSO 205 days, DIO 159 days, CCC 158 days indicate extended working capital cycles, with Accounts Receivable +3.3% and Inventory +17.5% expansion. In a demand downturn, inventory write-downs, delayed receivable collections, and pricing pressure could materialize, severely worsening operating cash flow and profitability. The Accounts Payable +29.8% increase partially offsets working capital expansion, but deterioration in supplier payment terms could affect business relationships.
Risk of persistent low profitability in Machine & Tool segment: Machine & Tool accounts for 66.1% of revenue and has an Operating Margin of 1.8% (prior year 2.0%), with Operating Income down -13.3%. Factors likely include price competition, demand volatility, and delayed cost pass-through, creating a structural bottleneck depressing company-wide Operating Margin of 2.1%. Without improvement in the flagship segment’s profitability, company-wide ROE 0.9% and ROIC 1.1% will remain low, making transformational improvement in capital efficiency difficult.
M&A integration and goodwill impairment risk: Goodwill increased from ¥1.6B to ¥15.5B (+¥13.9B, +851%), driven by acquisition of part of MT FOOD SYSTEMS shares and expanded consolidation scope. Goodwill ¥15.5B represents 2.1% of Net Assets ¥735.2B and 1.3% of Total Assets ¥1210.0B — limited at present — but the provisional purchase price allocation means delayed PMI or unmet synergies could trigger impairment risk. Intangible fixed assets also rose from ¥16.8B to ¥30.9B (+¥14.1B, +83.9%), so monitoring the investment returns and impairment risk of M&A-related assets is necessary.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.1% | – | – |
| Net Profit Margin | 1.6% | 7.4% (6.8%–7.9%) | -5.8pt |
The company’s Net Profit Margin 1.6% is -5.8pt below the industry median 7.4%, placing it in the lower tier within trading/wholesale sectors.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 1.1% | 3.8% (0.9%–6.4%) | -2.7pt |
The company’s revenue growth rate 1.1% is -2.7pt below the industry median 3.8%, indicating below-median growth.
※Source: Company compilation
Q1 progress rates (Revenue 25.3%, Operating 25.7%, Ordinary 27.3%, Net Income 29.6%) indicate a generally smooth start against the full-year plan and a favorable probability of achieving the annual targets at present. Gross margin improved from 15.3% to 16.1% (+0.8pt), and high-margin segments Construction Material (Operating Income +69.9%) and Construction Machine (+20.6%) are expanding. However, the core Machine & Tool segment posted Operating Income -13.3% and poses a challenge for recovery in the back half. With Operating Margin 2.1%, ROE 0.9%, ROIC 1.1%, profitability and capital efficiency remain low and rank in the lower industry tier; medium-term assessment will hinge on executing price pass-through, improving product mix, and controlling SG&A to realize operating leverage.
Financial soundness is very high: Cash ¥286.2B, Net Cash ¥269.6B, Equity Ratio 60.8% — no immediate stability concerns. Conversely, the working capital cycle is prolonged (CCC 158 days, DSO 205 days, DIO 159 days) with Accounts Receivable +3.3% and Inventory +17.5% expansion, which warrants attention. Increased Accounts Payable +29.8% partially offsets this, but in a demand downturn inventory write-downs or receivable delays could undermine operating cash flow quality. Goodwill +¥13.9B (+851%) from M&A is limited in impact currently, but PMI progress and impairment risk require monitoring. Payout Ratio 34.1% is a sustainable return level, and there is scope for dividend increases or stronger total returns if profit growth and capital efficiency improvements materialize.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial disclosure data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the firm based on disclosed financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.