| Indicator | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥26626.7 B | ¥25545.1 B | +4.2% |
| Operating Income | ¥584.4 B | ¥615.3 B | -5.0% |
| Equity-method Investment Gains (Losses) | ¥-16.7 B | ¥26.0 B | -164.2% |
| Ordinary Income | ¥522.6 B | ¥597.5 B | -12.5% |
| Net Income | ¥304.8 B | ¥351.4 B | -13.3% |
| ROE | 7.0% | 9.0% | - |
For the fiscal year ended March 2026, Revenue was ¥26626.7 B (YoY +¥1081.6 B, +4.2%), Operating Income was ¥584.4 B (YoY ▲¥30.9 B, ▲5.0%), Ordinary Income was ¥522.6 B (YoY ▲¥74.9 B, ▲12.5%), and Net Income attributable to owners of the parent was ¥304.8 B (YoY ▲¥46.6 B, ▲13.3%). Revenue growth was driven by Non-ferrous Metals (+¥134.3 B) and Overseas operations (+¥176.3 B), but gross margin declined to 5.3% from 5.5% a year earlier (-0.2pt). Operating margin also contracted to 2.2% from 2.4% (-0.2pt), revealing a structure where profitability lags behind the pace of revenue expansion. At the ordinary income stage, non-operating expenses—foreign exchange losses of ¥31.5 B (prior year ¥23.7 B) and interest expense of ¥75.7 B (prior year ¥87.2 B)—weighed on results, and equity-method investment losses of ¥-16.7 B worsened significantly from prior year +¥26.0 B. Deterioration in metal raw material markets and increased volatility pressured profits. At the net income stage, income taxes of ¥153.8 B (effective tax rate 29.1%) and a contraction in special gains/losses (net +¥5.2 B, prior year +¥57.4 B) expanded the decline in net profit.
[Revenue] Revenue was ¥26626.7 B (YoY +4.2%). By segment, Overseas sales subsidiaries achieved ¥5177.1 B (+17.3%), Primary Metals ¥2441.1 B (+32.5%), and Recycled Metals ¥2842.1 B (+25.3%), delivering double-digit growth and driving expansion in non-ferrous and metal raw materials. The core Steel Business declined to ¥10719.1 B (▲7.2%), but the Food Business rose to ¥1505.3 B (+7.2%) and the Grocery segment remained resilient, providing balance. By region, Japan was slightly down at ¥16557.9 B (▲1.4%), while sales to Asia grew to ¥8203.7 B (+16.1%) and Other regions to ¥1865.1 B (+11.4%), with overseas sales supporting company-wide growth. By product/service, Non-ferrous metals increased significantly to ¥4892.1 B (prior year ¥3549.1 B), and Petroleum & Chemical products rose to ¥4567.2 B (prior year ¥4238.3 B).
[Profitability] Cost of goods sold increased to ¥25215.5 B (+5.4%), outpacing revenue growth (+4.2%), resulting in gross profit of ¥1411.2 B (+0.4%) and a gross margin of 5.3% (down 0.2pt from 5.5% prior year). SG&A was controlled at ¥826.7 B (+4.6%), roughly in line with revenue growth, but could not fully offset the weak gross profit expansion, leading to Operating Income of ¥584.4 B (▲5.0%). Operating margin narrowed to 2.2% from 2.4% (▲0.2pt). Non-operating items worsened to a net charge of ¥▲61.8 B (prior year ▲¥21.4 B). Interest and dividend income of ¥36.96 B and ¥29.96 B respectively produced ¥66.9 B of non-operating income, but interest expense of ¥75.7 B (0.28% of sales), foreign exchange losses of ¥31.5 B, and other non-operating expenses of ¥24.7 B were headwinds. Equity-method investment losses deteriorated to ¥▲16.7 B from prior year +¥26.0 B, reflecting weaker metal raw material markets. Special gains included ¥14.0 B from sale of investment securities, but this was smaller than the prior year’s large sale gain (¥52.0 B). Profit before tax was ¥527.8 B (▲19.4%); after income taxes of ¥153.8 B (effective tax rate 29.1%) and adding ¥8.6 B profit attributable to non-controlling interests, Net Income attributable to owners of the parent was ¥304.8 B (▲13.3%). In summary: revenue up, profit down. Margin contraction and worsened non-operating and equity-method items outpaced declines at the operating level, magnifying the decrease in final profit.
The Steel Business recorded Revenue of ¥10719.1 B (▲7.2%) and Profit of ¥387.1 B (+16.7%, margin 3.6%), delivering lower revenue but higher profit. Improved transaction terms and a shift to higher value-added products contributed to margin improvement. The Primary Metals Business achieved Revenue of ¥2441.1 B (+32.5%) but swung to a loss of ¥▲1.5 B (prior year +¥60.8 B); sudden metal raw material market moves and a deterioration in equity-method investment gains (▲¥40.0 B) were primary causes. The Recycled Metals Business reported Revenue of ¥2842.1 B (+25.3%) and Profit of ¥13.0 B (▲58.0%, margin 0.5%), a substantial profit decline: volumes expanded but spread compression and inventory valuation losses pressured earnings. The Food Business had Revenue of ¥1505.3 B (+7.2%) and Profit of ¥30.4 B (+31.9%, margin 2.0%), supported by expanded handling volumes in marine and livestock products and stabilized procurement costs. The Energy & Living Materials Business posted Revenue of ¥3837.1 B (▲2.0%) and Profit of ¥85.4 B (▲18.0%, margin 2.2%), impacted by lower petroleum product prices and reduced chemical volumes. Overseas sales subsidiaries delivered Revenue of ¥5177.1 B (+17.3%) but Profit of ¥55.3 B (▲33.0%, margin 1.1%)—strong revenue growth from increased steel and non-ferrous volumes to Asia pushed sales, but deteriorated transaction terms and higher logistics costs reduced profitability.
[Profitability] Operating margin of 2.2% declined 0.2pt from 2.4% a year earlier; Net margin of 1.1% narrowed 0.3pt from 1.4%, indicating persistent margin pressure in a low-margin, high-volume structure. ROE was 7.0% (Net Income ¥30.5 B ÷ average shareholders’ equity approx. ¥4349.0 B) and retreated from prior-year levels around 8.2%. DuPont decomposition shows Net margin 1.1% × Total Asset Turnover 2.20 × Financial Leverage 2.80, with the decline in Net margin being the largest driver of change. Revenue-to-Ordinary Income ratio was 2.0% (down 0.3pt from 2.3%), highlighting the impact of worsened non-operating items. [Cash Quality] Operating Cash Flow (OCF)/Net Income was 2.44x (OCF ¥743.3 B ÷ Net Income attributable to owners of the parent ¥304.8 B), a high level indicating good cash conversion. The accrual ratio was ▲3.0% ((Net Income and OCF difference) / Total Assets), showing no sign of aggressive accounting. OCF/EBITDA was 1.10x (EBITDA approx. ¥677.0 B = Operating Income ¥584.4 B + Depreciation ¥92.5 B), indicating cash generation in excess of EBITDA. [Investment Efficiency] Estimated ROIC was 6.3% (NOPAT = EBIT ¥584.4 B × (1 - effective tax rate 29.1%) ÷ Invested Capital ¥4655.1 B; Invested Capital = Equity ¥4274.8 B + Interest-bearing Debt ¥3068.8 B - Cash ¥856.7 B), implying room for improvement versus cost of capital. Capital expenditure / Depreciation was 0.42x (CapEx ¥38.6 B ÷ Depreciation ¥92.5 B), low and raising concerns about aging assets and underinvestment for future growth. [Financial Soundness] Equity Ratio was 35.7% (Net assets ¥4329.5 B ÷ Total assets ¥12126.6 B), improving 2.3pt from 33.4% a year earlier, supported by comprehensive income contributions of ¥174.6 B in valuation gains on securities and ¥39.7 B in foreign currency translation adjustments. Debt/Equity ratio was 71.8% (interest-bearing debt ¥3068.8 B ÷ shareholders’ equity ¥4274.8 B), a moderate level. Debt/EBITDA was 4.53x (interest-bearing debt ¥3068.8 B ÷ EBITDA ¥677.0 B), relatively high, but interest coverage was 8.94x (EBITDA ¥677.0 B ÷ interest expense ¥75.7 B), indicating continued capacity to service interest. Liquidity is healthy with a Current Ratio of 198.8% (current assets ¥9287.0 B ÷ current liabilities ¥4671.5 B) and Quick Ratio of 136.4% (quick assets ¥6371.6 B ÷ current liabilities ¥4671.5 B). Cash coverage of short-term borrowings was 1.25x (cash ¥856.7 B ÷ short-term borrowings ¥684.7 B), indicating adequate short-term repayment capacity.
Operating Cash Flow was ¥743.3 B (vs prior year ¥101.3 B, +633.7%), a major improvement. Profit before tax was ¥527.8 B; adding non-cash expenses—Depreciation ¥92.5 B, Goodwill amortization ¥5.7 B, etc.—raised pre-working-capital cash flow to ¥979.5 B. Working capital changes contributed: trade receivables decreased ¥183.9 B (accelerated collections) and trade payables increased ¥156.4 B (extended payment terms), both providing cash inflows, while inventories increased ¥51.6 B (stock build) partially offset those inflows. After tax payments of ¥227.8 B and interest paid ¥77.3 B, OCF was ¥743.3 B. OCF/Net Income was 2.44x and OCF/EBITDA was 1.10x, showing cash generation in excess of profits. Investing Cash Flow was ▲¥108.4 B, mainly driven by CapEx ¥38.6 B and acquisition of investment securities ¥139.3 B. Proceeds included disposal of fixed assets ¥18.3 B, sale of securities ¥23.2 B, and collection of long-term loans ¥107.5 B, which helped limit net outflows. Free Cash Flow was ¥634.9 B (OCF ¥743.3 B + Investing CF ▲¥108.4 B), ample; after dividends of ¥98.1 B and share buybacks ¥100.2 B, cash increased from opening balance ¥653.1 B to closing cash ¥856.7 B, a rise of ¥203.6 B, expanding financial flexibility. Financing Cash Flow was ▲¥476.4 B, with repayments of long-term borrowings ¥306.2 B, redemption of bonds ¥150.0 B, dividends ¥98.1 B, and share buybacks ¥100.2 B as major outflows; financing included long-term borrowings of ¥300.0 B and bond issuance ¥99.5 B, supporting simultaneous repayment and shareholder returns while containing net borrowing.
Special gains and losses for the period were net +¥5.2 B (special gains ¥14.0 B - special losses ¥8.8 B), modest and within recurring earnings. The bulk of special gains was ¥14.0 B from sale of investment securities; this is smaller than prior year’s ¥52.0 B, reducing the one-off character. Special losses were limited—loss on disposal of fixed assets ¥1.8 B and impairment on investment securities ¥3.9 B. Non-operating income totaled ¥86.9 B (0.33% of sales), primarily interest income ¥36.96 B and dividend income ¥29.96 B. Non-operating expenses were ¥148.7 B (0.56% of sales), composed of interest expense ¥75.7 B, foreign exchange losses ¥31.5 B, and other items ¥24.7 B. Foreign exchange losses rose from ¥23.7 B in the prior year, reflecting yen depreciation and volatility in foreign-currency denominated receivables/payables. Equity-method investment losses were ¥▲16.7 B (prior year +¥26.0 B), reflecting deterioration in the Primary Metals market. With OCF ¥743.3 B against Net Income ¥304.8 B, OCF/Net Income was 2.44x and the accrual ratio was ▲3.0%, indicating high quality of earnings. The sum of non-operating income plus equity-method gains/losses was ¥70.2 B, equivalent to 23.0% of Net Income ¥304.8 B, signifying limited reliance on non-core operations. The divergence between Ordinary Income ¥522.6 B and Net Income ¥304.8 B is 41.7%, mainly due to income taxes ¥153.8 B (effective tax rate 29.1%) and attributable profit to non-controlling interests. Comprehensive income of ¥621.5 B significantly exceeded Net Income ¥304.8 B, aided by valuation gains on investment securities ¥174.6 B, foreign currency translation adjustments ¥39.7 B, and retirement benefit adjustments ¥33.4 B. The ¥316.7 B gap between Net Income and Comprehensive Income reflects unrealized gains from market and FX movements, not recurring operating earnings but contributing to a thicker equity base.
Full year guidance anticipates Revenue of ¥3.0 trillion (YoY +12.7%), Operating Income ¥625 B (+6.9%), Ordinary Income ¥570 B (+9.1%), and Net Income attributable to owners of the parent ¥400 B (full-year basis; current period ¥304.8 B). Operating margin is assumed at 2.08%, slightly below this period’s 2.2%; the plan assumes absolute operating income growth driven by revenue expansion but a flat-to-somewhat deteriorating margin environment. Progress rates are Revenue 88.8%, Operating Income 93.5%, Ordinary Income 91.7%, indicating on-track operating performance, but improvement in non-operating items is assumed in the remaining quarter. EPS forecast is ¥205.64, exceeding current period actual ¥193.13. Dividend guidance is ¥33 per share on a post-split basis (equivalent to ¥165 pre-split), representing an increase; payout ratio is expected to remain around 20%. Assumptions include continuation of current levels of interest rates, FX, and commodity prices; key to achieving the plan are reduced FX volatility and stabilized interest expense. Upside factors include recovery in non-ferrous and recycled metal markets, Primary Metals returning to profitability, and margin improvements in overseas operations. Downside risks include sharp falls in commodity prices, significant yen appreciation, and rising interest rates increasing interest burden. The company notes that "matters concerning earnings forecasts are prepared based on information available as of the date of this material," indicating the forecast is subject to revision depending on external conditions.
Annual dividend paid was ¥290 per share (Interim ¥125, Year-end ¥165). The prior year dividend was ¥105, so a large increase occurred at year-end. A 1-for-5 share split was effective April 1, 2026; on a post-split basis this equals Interim ¥25 and Year-end ¥33. Total dividends paid (per cash flow statement) were ¥98.1 B, implying a payout ratio relative to Net Income attributable to owners of the parent ¥304.8 B of about 32.2%. Next fiscal year dividend guidance is ¥33 per share on a post-split basis, indicating continued stable dividend policy. Share buybacks of ¥100.2 B were conducted during the period (cash flow statement basis), and the company holds ¥17,145 thousand treasury shares (8.1% of issued shares) out of 211,663 thousand shares outstanding. Combined dividends and buybacks totaled approximately ¥198.3 B, yielding a Total Return Ratio of about 65.0% versus Net Income attributable to owners of the parent ¥304.8 B. Coverage of total returns by Free Cash Flow ¥634.9 B is 3.2x, ample; the company strengthened shareholder returns while maintaining internal reserves. Although no explicit payout ratio target is disclosed, given recent practice (around 32%) and next year’s dividend guidance, the company appears to target operation in a 20–30% range. With an Equity Ratio of 35.7% and cash ¥856.7 B, financial capacity is solid, supporting expectations for continued stable dividends and opportunistic buybacks.
Risk of persistent margin pressure and entrenched low profitability: Gross margin 5.3% (prior year 5.5%) and Operating margin 2.2% (prior year 2.4%) have been declining; in a low-margin, high-volume structure, intensified price competition and rising procurement costs are squeezing profitability. The Primary Metals swing to a loss (profit ▲¥1.5 B), Recycled Metals large profit decline (profit ¥13.0 B, ▲58.0%), and margin deterioration at Overseas sales subsidiaries (margin 1.1%, ▲33.0%) show profitability weakening across segments. With Debt/EBITDA at 4.53x and elevated leverage, sustained margin declines could impair interest coverage and trigger financial constraints.
Risk of interest rate and FX volatility worsening non-operating results: Interest expense ¥75.7 B (0.28% of sales) and foreign exchange losses ¥31.5 B weighed on results, expanding the drop from Operating Income ¥584.4 B to Ordinary Income ¥522.6 B. With interest-bearing debt ¥3068.8 B, continued rate increases would raise interest burden. FX volatility affects overseas operations with high foreign-currency exposure (Overseas sales subsidiaries revenue ¥5177.1 B and Asia sales ¥8203.7 B); yen appreciation could drive FX losses and compress transaction margins. Interest coverage is 8.94x, indicating present resilience, but combined declines in operating income and rising interest expense could rapidly deteriorate this metric.
Structural risk from working capital management and underinvestment: Inventories ¥2913.7 B (equivalent to 1.31 months of sales) and trade receivables ¥4049.8 B (1.82 months of sales) represent large working capital, with chronic inventory valuation losses and receivables collection risk. Spread compression and inventory valuation losses in the Recycled Metals segment have been major profit drivers; abrupt market shifts could increase inventory costs and hurt earnings. CapEx/Depreciation of 0.42x indicates low investment levels, raising concerns about maintaining competitiveness. Approximately 60% of OCF ¥743.3 B was allocated to shareholder returns, while CapEx was limited to ¥38.6 B. Delayed renewal of aging logistics and storage facilities or insufficient digital investment could reduce future operational efficiency.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.2% | 3.4% (1.4%–5.0%) | -1.2pt |
| Net Margin | 1.1% | 2.3% (1.0%–4.6%) | -1.1pt |
Both operating and net margins are below industry medians, placing the company in the lower tier on profitability amid a low-margin, high-volume structure and worsened non-operating items. Margin improvement is urgent.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 4.2% | 5.9% (0.4%–10.7%) | -1.7pt |
Revenue growth is slightly below the median, indicating modest growth within the industry. Accelerating expansion in non-ferrous and overseas operations is necessary to achieve industry-leading growth rates.
※ Source: Company compilation
Potential to improve non-operating items and restore ordinary income: The ¥61.8 B decline from Operating Income ¥584.4 B to Ordinary Income ¥522.6 B was primarily driven by interest expense ¥75.7 B, foreign exchange losses ¥31.5 B, and equity-method losses ¥▲16.7 B. The company’s guidance for Ordinary Income ¥570 B (+9.1%) assumes stabilization of interest and FX and a return to profitability in equity-method investments. Although interest rate levels remain elevated, a pause in yen depreciation and stronger hedging of foreign-currency receivables/payables could reduce FX losses. If Primary Metals improves (current period ▲¥1.5 B → return to profit), this could reverse equity-method losses and be an upside for non-operating items. Continued repayment of long-term borrowings (¥306.2 B repaid during the period, ¥300.0 B procured) could reduce interest-bearing debt and lower interest expense over time, supporting earnings.
Profitability gaps by segment and possible portfolio restructuring: While Steel (margin 3.6%) and Food (margin 2.0%) are relatively profitable, low-return segments such as Overseas sales subsidiaries (margin 1.1%) and Primary Metals (▲0.06%) drag on corporate performance. Recycled Metals shows a high margin on a percentage basis (4.58%) but profit in absolute terms fell to ¥13.0 B; balancing volume expansion and price improvement is a challenge. Overseas sales subsidiaries’ Revenue ¥5177.1 B accounts for 19.4% of company revenue but contributed only ¥55.3 B in profit—revising transaction terms and rationalizing loss-making locations are keys to improving returns. Primary Metals may require market recovery, but options include reorganizing equity-method affiliates and reinforcing inventory controls to cut costs. Reallocation of resources across segments and M&A to scale higher-margin businesses could act as a catalyst for medium-term ROE improvement.
Ample cash generation and scope to deploy financial flexibility: With OCF ¥743.3 B, OCF/Net Income 2.44x, and OCF/EBITDA 1.10x, cash generation substantially exceeds accounting profits. Free Cash Flow ¥634.9 B remains positive even after dividends and buybacks, and cash ¥856.7 B and Current Ratio 198.8% indicate strong liquidity. The company strengthened shareholder returns (Total Return Ratio 65.0%, payout ratio 32.2%) while improving capital efficiency via ¥100.2 B in buybacks. Going forward, options include accelerating debt reduction from Debt/EBITDA 4.53x or shifting cash toward growth investments. Comprehensive income of ¥621.5 B (including valuation gains on securities ¥174.6 B) increased equity, suggesting opportunities for strategic divestitures of investment securities or redeployment into M&A financing. Depending on cash allocation, there is substantial scope to enhance shareholder value through both ROE improvement and growth acceleration.
This report was automatically generated by AI analysis of XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.