FURUYA METAL (7826) FY2026 FY Earnings Report

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Executive Summary

The current period produced substantial revenue and profit growth, with strong operating leverage driven by an improved gross margin leading earnings growth. Revenue increased to ¥1,001.4B (+74.5% YoY), Operating Income to ¥247.9B (+160.0%), Ordinary Income to ¥246.6B (+162.7%), and Net Income to ¥160.4B (+154.4%), with all indicators showing significant growth. The primary drivers of the revenue increase were the rapid expansion of the Supply Chain Support Business and the recovery in demand in the Thin Film and Fine Chemicals fields. Profit margins were lifted by revenue growth that significantly exceeded the 17.8% increase in SG&A expenses.

Factors Affecting Performance

【Revenue】Revenue expanded rapidly to ¥1,001.4B, up +74.5% YoY. By segment, the core Fine Chemicals & Recycling Business grew to ¥277.0B (27.7% composition ratio, +5.2%), Thin Film to ¥180.3B (18.0%, +60.0%), and Supply Chain Support to ¥190.4B (19.0%, +148.8%). “Other,” which is not included in the reportable segments, also surged to ¥178.6B (+1212.5%). By region, Asia, including China, recorded the largest increase at ¥391.5B (¥143.9B in the previous year), while Europe at ¥193.9B and North America at ¥141.0B also increased, indicating globally expanding demand.

【Profit and Loss】Gross profit expanded to ¥302.7B (gross margin 30.2%, +548bp from 24.7% in the previous year), while SG&A expenses remained limited to ¥54.8B (SG&A ratio 5.5%, down from 8.1% in the previous year). Consequently, Operating Income improved significantly to ¥247.9B (operating margin 24.8%, +820bp from 16.6% in the previous year). Ordinary Income was ¥246.6B. In non-operating items, derivative valuation gains and foreign exchange losses of ¥12.0B largely offset each other, making the growth of the core business the primary driver of earnings expansion. Although an impairment loss of ¥2.0B was recorded as an extraordinary loss, its impact was limited, and Net Income reached ¥160.4B. The results represent both revenue and profit growth accompanied by a qualitative improvement in the earnings structure.

Segment Analysis

The Thin Film segment recorded Revenue of ¥180.3B (+60.0%) and segment profit of ¥94.9B (+120.5%, profit margin 52.6%), making it the most profitable segment and the core contributor to profit growth. Fine Chemicals & Recycling maintained the largest revenue scale at ¥277.0B (+5.2%), while profit expanded to ¥91.6B (+41.9%, profit margin 33.1%), apparently supported by improvements in unit prices and product mix. Supply Chain Support expanded rapidly to Revenue of ¥190.4B (+148.8%), but its profit margin was relatively low at 12.2%, reflecting a structure susceptible to precious-metal market conditions and price fluctuations. Electronics (¥108.1B, +83.0%, profit margin 31.1%) and Thermal (¥66.9B, +37.6%, profit margin 34.8%) also grew steadily. It should be noted that segment profit is based on gross profit and is defined differently from consolidated Operating Income.

Key Financial Indicators

【Profitability】The operating margin improved to 24.8%, up +820bp from 16.6% in the previous year, while the Net Income margin also expanded to 16.0% (11.1% in the previous year). ROE rose significantly to 20.4%, indicating a substantial improvement in capital efficiency, and the gross margin also improved to 30.2% (24.7% in the previous year). 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥157.6B, nearly at the same level as Net Income of ¥160.4B. However, inventory absorbed ¥95.4B of funds and trade receivables absorbed ¥40.4B, while the ¥116.3B increase in accounts payable partially offset these outflows. The expansion of working capital is a point to note, as it is slowing the pace of cash conversion. 【Investment Efficiency】Capital expenditures were ¥30.1B and depreciation and amortization was ¥12.8B. Investment remained broadly at a level for maintaining and expanding existing businesses, resulting in Free Cash Flow of ¥118.2B. 【Financial Soundness】The Equity Ratio remained high at 54.9% (52.0% in the previous year), and the financial foundation is conservative and stable, with cash and deposits of ¥76.0B against long-term borrowings of ¥92.4B.

Cash Flow Analysis

Operating Cash Flow increased substantially to ¥157.6B from ¥9.2B in the previous year, reaching a level broadly consistent with Net Income of ¥160.4B. However, OCF subtotal before changes in working capital was ¥184.9B. An increase in inventories of ¥95.4B and an increase in trade receivables of ¥40.4B absorbed funds, while the ¥116.3B increase in accounts payable partially offset these effects. Investing Cash Flow represented an outflow of ¥39.5B, of which capital expenditures accounted for ¥30.1B, a scale limited to the maintenance and expansion of existing businesses. Financing Cash Flow represented an outflow of ¥172.9B, primarily attributable to repayments of short-term borrowings and dividend payments. Free Cash Flow of ¥118.2B was secured, providing sufficient capacity to cover capital expenditures and dividend payments. However, the accumulation of inventory and accounts receivable requires monitoring as a challenge to cash conversion efficiency in the next period.

Quality of Earnings

Most of the current-period profit was attributable to the expansion of Operating Income from the core business, and the impact of temporary factors was limited. The only extraordinary loss was an impairment loss of ¥2.0B, representing approximately 1.3% of Net Income of ¥160.4B. Earnings recurrence can therefore be evaluated as high. Non-operating income and expenses were broadly balanced, with non-operating income of ¥20.7B against non-operating expenses of ¥22.0B (including interest expenses of ¥9.4B and foreign exchange losses of ¥12.0B). Derivative valuation gains partially offset the impact of foreign exchange losses. Comprehensive income was ¥162.1B, close to Net Income of ¥160.4B, indicating that the impact of other comprehensive income items, such as foreign currency translation adjustments and retirement benefit adjustments, was small and the divergence from Net Income was limited. Meanwhile, increases in inventory and trade receivables put pressure on OCF, and from an accrual perspective, the expansion of working capital is a factor creating a gap between earnings and cash flow.

Earnings Forecast and Guidance

Against the full-year earnings forecast, Revenue reached ¥1,001.4B versus the plan of ¥1,010.0B, representing a progress rate of 99.1% and essentially reaching the planned level. Operating Income, however, was ¥247.9B versus the planned ¥265.0B, representing a progress rate of 93.6%, while Ordinary Income was ¥246.6B versus the planned ¥260.0B, representing a progress rate of 94.9%. Thus, profit performance was slightly below plan relative to revenue growth. The buildup of inventory toward the end of the period and the occurrence of foreign exchange losses may have somewhat restrained profit progress relative to the pace of revenue growth.

Shareholder Returns

The year-end dividend was ¥165, resulting in a Payout Ratio of 25.3% based on Net Income. Total dividends were ¥40.6B, providing ample room relative to current-period Free Cash Flow of ¥118.2B, and concerns regarding dividend sustainability are limited. No share repurchases were conducted, and shareholder returns are centered on dividends. For the next period, a dividend forecast of ¥180 and an EPS forecast of ¥719.53 have been provided. Even under the planned dividend increase, the Payout Ratio is expected to remain approximately 25%.

Risk Factors

1. Delay in cash conversion due to working capital expansion: Inventory increased sharply by +136.2% YoY and trade receivables by +117.7%, while actual OCF was limited to ¥157.6B compared with the OCF subtotal before changes in working capital of ¥184.9B. The pace of inventory normalization may affect cash-generation capacity in the next period.

2. Impact of foreign exchange fluctuations: The Company recorded foreign exchange losses of ¥12.0B in the current period. As its global operations advance, with Asia accounting for approximately 39% of Revenue, foreign exchange fluctuations will continue to affect non-operating income and expenses.

3. Profitability disparities among segments and market dependence: While the Supply Chain Support Business expanded rapidly, with Revenue increasing +148.8%, its profit margin was 12.2%, lower than those of other segments, including Thin Film at 52.6% and Fine Chemicals at 33.1%. The business has a structure susceptible to market fluctuations, including precious-metal prices.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s profitability substantially exceeds the industry median and is positioned at a high level.

Growth and Capital Efficiency

The Revenue growth rate is also outstanding within the industry, suggesting that the Company is in a phase of expanding demand.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The operating margin of 24.8% and ROE of 20.4% have reached levels substantially above the industry median, with the high-margin mix of Thin Film and Fine Chemicals serving as the primary driver of profit growth.

2. OCF improved to ¥157.6B, but the accumulation of inventory and accounts receivable created a gap from the OCF subtotal before changes in working capital of ¥184.9B. Trends in cash conversion efficiency will be a key point of focus in the next period.

3. While Revenue was nearly achieved against the full-year plan, Operating Income and Ordinary Income remained at progress rates of 93–95%. The buildup of inventory at period-end and foreign exchange effects may have had some impact on profit progress.

Theoretical Share Price (Reference Value)

Sensitivity: ¥4,484–¥4,759 at Cost of Equity ±1%; ¥4,580–¥4,677 at ω±0.1.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this does not constitute a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmark is reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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