| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥6315.7B | ¥6067.9B | +4.1% |
| Operating Income / Operating Profit | ¥432.4B | ¥439.4B | -1.6% |
| Ordinary Income | ¥433.9B | ¥446.8B | -2.9% |
| Net Income / Net Profit | ¥294.0B | ¥248.1B | +18.5% |
| ROE | 9.6% | 8.4% | - |
The full-year results for the fiscal year ended March 2026 show Revenue ¥6315.7B (YoY +¥247.8B +4.1%), Operating Income ¥432.4B (YoY -¥7.0B -1.6%), Ordinary Income ¥433.9B (YoY -¥12.9B -2.9%), and Net Income ¥294.0B (YoY +¥45.9B +18.5%). Despite revenue growth, SG&A ratio rose to 5.2% (from 4.9% in the prior year, +0.3pt), resulting in lower operating profit. However, non-recurring gains of ¥27.4B (investment securities sale gain ¥24.0B) boosted profit before tax; after taxation at an effective tax rate of 31.1%, Net Income achieved double-digit growth. Revenue was driven by the Machinery & Engineering segment (Plant Engineering) at +8.5%; the Logistics segment was flat. Operating margin slightly declined to 6.8% (from 7.2% prior year, -0.4pt) as cost pressures compressed margins. Meanwhile, ROE remained high at 9.6% (slightly down from an estimated ~10.7% prior year), Operating Cash Flow was ¥519.9B (YoY +19.4%), and FCF generated was ¥328.1B — indicating continued high cash quality. Although the full year is an increase-in-revenue, decrease-in-profit result, the two pillars of financial soundness and cash generation remain robust.
Revenue: Revenue of ¥6315.7B (YoY +4.1%) was led by the Machinery & Engineering segment. Machinery & Engineering reported Revenue ¥3115.2B (+8.5%), driven by expanded equipment construction and maintenance demand for major customer Nippon Steel, lifting external customer sales to ¥3074.6B (from ¥2832.9B prior year, +8.5%). Logistics reported Revenue ¥2990.7B (-0.1%), essentially flat, with external customer sales ¥2952.6B (from ¥2955.6B prior year, -0.1%) remaining stable. Other segments were steady at ¥307.3B (+0.8%). By region, Domestic was ¥5212.1B (from ¥4996.8B prior year, +4.3%), Asia ¥875.1B (from ¥890.0B prior year, -1.7%), and Americas & Others ¥228.5B (from ¥181.1B prior year, +26.2%), with overseas ratio approximately 17% (down slightly from 18% prior year), indicating continued domestic-demand-led structure. Sales to major customer Nippon Steel were ¥964.5B (from ¥868.6B prior year, +11.0%), accounting for about 15% of total sales, maintaining material customer concentration.
Profitability: Gross profit was ¥763.7B (from ¥736.5B prior year, +3.7%), with gross margin 12.1% (unchanged from prior year). SG&A increased to ¥331.3B (from ¥297.1B prior year, +11.5%), markedly outpacing revenue growth (+4.1%), and SG&A ratio rose to 5.2% (from 4.9% prior year, +0.3pt). As a result, Operating Income declined to ¥432.4B (-1.6%), with Operating Margin 6.8% (from 7.2% prior year, -0.4pt). Ordinary Income was ¥433.9B (-2.9%); non-operating items were slightly positive at net +¥1.5B (Dividend income received ¥13.8B, Interest income received ¥6.4B making non-operating income ¥32.6B, offset by non-operating expenses ¥31.2B including interest expense ¥13.7B). Non-recurring gains ¥27.4B (chiefly investment securities sale gain ¥24.0B) lifted profit before tax to ¥459.1B; after deducting Corporate taxes ¥142.7B (effective tax rate 31.1%) and excluding Non-controlling interests ¥1.3B, Net Income attributable to parent company is equivalent to ¥315.1B (reverse-calculated from reported Net Income ¥294.0B before deduction of non-controlling interests). Net margin improved to 4.7% (from 4.1% prior year, +0.6pt) due to the non-recurring gain, but margin deterioration at the operating level is clear. In conclusion: revenue up, profit down — rapid SG&A increase pressured core earnings, while a one-time securities sale gain lifted final profit.
Machinery & Engineering segment (Plant Engineering): Revenue ¥3115.2B (from ¥2871.3B prior year, +8.5%), Operating Income ¥309.6B (from ¥320.0B prior year, -3.3%), Margin 9.9% (from 11.1% prior year, -1.2pt). Despite revenue growth, margin decline suggests higher labor, subcontracting and material costs and project mix effects. Logistics segment: Revenue ¥2990.7B (from ¥2994.0B prior year, -0.1%), Operating Income ¥98.3B (from ¥96.8B prior year, +1.5%), Margin 3.3% (from 3.2% prior year, +0.1pt). With flat revenue, slight margin improvement contributed by stable operations and efficiency gains. Other: Revenue ¥307.3B (from ¥304.8B prior year, +0.8%), Operating Income ¥24.7B (from ¥22.2B prior year, +11.5%), Margin 8.0% (from 7.3% prior year, +0.7pt) maintaining high profitability. The revenue structure, whereby Machinery & Engineering generates about 72% of consolidated operating profit, remains intact; however, the Machinery & Engineering margin decline is the main driver compressing company-wide margins.
Profitability: ROE 9.6% (down from an estimated ~10.7% prior year) is composed as Net Margin 4.7% × Total Asset Turnover 1.13 × Financial Leverage 1.82x. Operating Margin 6.8% declined -0.4pt from 7.2% prior year, mainly due to SG&A ratio increasing to 5.2% (from 4.9% prior year, +0.3pt). EBITDA margin 10.1% (EBITDA ¥637.4B = Operating Income ¥432.4B + Depreciation & Amortization ¥205.0B), slightly down from an estimated 10.5% prior year (EBITDA ¥634.5B = Operating Income ¥439.4B + Depreciation ¥195.0B). Net margin improved to 4.7% (from 4.1% prior year, +0.6pt) due to non-recurring gains, but core profitability retreated somewhat due to higher SG&A. Cash Quality: Operating Cash Flow / Net Income 1.77x (Operating CF ¥519.9B ÷ Net Income ¥294.0B) indicating high quality. OCF/EBITDA 0.82x is slightly below benchmark 0.9x, affected by mid-period changes in trade receivables and contract assets. Accrual ratio -3.7% ( (Net Income ¥294.0B – Operating CF ¥519.9B) ÷ Total Assets ¥5601.7B × 2 ) is healthy, supporting that earnings are largely cash-backed. Investment Efficiency: Capex/Depreciation 0.81x (Capex ¥166.0B ÷ Depreciation ¥205.0B) slightly below replacement investment level, indicating cautious capital deployment. Goodwill amortization ¥1.77B is minimal at 0.3% of EBITDA ¥637.4B, so comparison distortion with IFRS peers is small. Financial Soundness: Equity Ratio 54.8% (from 54.5% prior year, steady), Debt/EBITDA 0.74x (Interest-bearing debt ¥469.1B ÷ EBITDA ¥637.4B), Debt/Capital 13.3% (Interest-bearing debt ¥469.1B ÷ (Total Assets ¥5601.7B × Equity Ratio 54.8% + Interest-bearing debt ¥469.1B)), indicating very low financial leverage. Current Ratio 178.4% (Current Assets ¥2696.8B ÷ Current Liabilities ¥1511.9B), Quick Ratio 178.4% showing ample liquidity; cash & deposits ¥461.4B are about twice short-term borrowings ¥235.9B, reflecting sufficient short-term liquidity. Interest Coverage 46.4x (EBITDA ¥637.4B ÷ Interest Expense ¥13.7B) shows minimal interest burden.
Operating CF was ¥519.9B (from ¥435.3B prior year, +19.4%), formed mainly from Profit before tax ¥459.1B, add-back Depreciation & Amortization ¥205.0B, and deduction of corporate taxes paid ¥171.7B. Working capital contributed positively from a decrease in trade receivables ¥111.4B, partially offset by decreases in accounts payable ¥27.6B, increase in inventories ¥3.2B, and decrease in contract liabilities ¥5.0B. Operating CF is 1.77x Net Income ¥294.0B, indicating high cash quality and favorable accrual metrics. Investing CF was -¥191.9B, with Capex ¥166.0B and intangible asset investment ¥24.4B partially offset by proceeds from sale of securities etc. ¥7.0B (including book value related to investment securities sale gain ¥24.0B). FCF generated was ¥328.1B (Operating CF ¥519.9B + Investing CF -¥191.9B). Financing CF was -¥323.8B, reflecting dividends ¥128.9B and share buybacks ¥200.2B (total return ¥329.1B) executed within FCF, along with long-term debt repayments ¥194.6B and net increase in short-term borrowings ¥75.1B. Cash and cash equivalents increased ¥13.9B from ¥411.4B to ¥425.3B, maintaining liquidity. Strong FCF generation supports sustainable capital allocation that combines total shareholder returns and debt reduction.
Ordinary Income ¥433.9B represents core earnings, with non-operating items net +¥1.5B. Of non-operating income ¥32.6B, dividend income ¥13.8B, interest income ¥6.4B, and equity-method investment income ¥1.3B account for about 65%, indicating recurring income dominance. Of non-operating expenses ¥31.2B, interest expense ¥13.7B is the primary item; no extraordinary items noted. Non-recurring gains ¥27.4B (chiefly investment securities sale gain ¥24.0B) are one-off, contributing roughly 6% to profit before tax ¥459.1B. Comprehensive Income ¥427.9B exceeds Net Income ¥294.0B by ¥133.9B, mainly due to valuation gains on securities ¥64.7B, foreign currency translation adjustments ¥29.1B, and retirement benefit adjustments ¥17.8B. The large divergence between Net Income and Comprehensive Income is mainly attributable to unrealized gains from higher market values of held securities (non-cash). Operating CF ¥519.9B is 1.77x Net Income ¥294.0B and accrual ratio -3.7%, indicating good cash backing of earnings. Even excluding non-recurring gains, Ordinary Income of ¥433.9B is secured, suggesting core earnings are generally healthy aside from temporary factors.
For the fiscal year ending March 2027, the company projects Revenue ¥6385.0B (YoY +¥69.3B +1.1%), Operating Income ¥470.0B (YoY +¥37.6B +8.7%), Ordinary Income ¥455.0B (YoY +¥21.1B +4.9%), and Net Income attributable to parent ¥330.0B (YoY +¥14.9B +4.7%; prior year parent attributable Net Income reverse-calculated from Net Income ¥294.0B and Non-controlling interests ¥1.3B). Revenue growth +1.1% is modest, but Operating Income is expected to grow +8.7% assuming cost control and improved project profitability in Machinery & Engineering. Operating Margin forecast 7.4% (¥470.0B ÷ ¥6385.0B) implies +0.6pt improvement from 6.8% prior year, relying on SG&A restraint and stable gross margin. Dividend guidance is annual ¥129 per share (interim ¥118 · year-end ¥135, displayed after considering share split, equivalent to nominal annual ¥264), with a Payout Ratio of 98.0% (¥129 annual ÷ forecast EPS ¥131.66; before split equivalently ¥264 annual ÷ forecast EPS ¥263.32 ≈ 100%). Although progress rate is not assessed post full-year results, the company’s plan presumes stricter expense discipline following the recent SG&A surge; this is a precondition for achieving guidance. If Machinery & Engineering increases high-margin project mix and Logistics maintains stable operations, the projected revenue increase and operating profit growth are reasonable.
Dividends were Interim ¥118 and Year-end ¥128 for an annual dividend of ¥246 (from prior year annual ¥102, +141.2%). Against Net Income ¥294.0B (including Non-controlling interests ¥1.3B), total dividends amounted to ¥123.0B, giving a Payout Ratio of 41.8% (¥123.0B ÷ (¥294.0B – Non-controlling interests ¥1.3B) × 100 ≈ 42%). Against FCF ¥328.1B, dividends ¥128.9B imply FCF coverage 2.55x, indicating sustainability. Total returns including share buybacks of ¥200.2B amounted to ¥329.1B (dividends ¥128.9B + share buybacks ¥200.2B), and Total Return Ratio 112% (Total returns ¥329.1B ÷ (Net Income ¥294.0B – Non-controlling interests ¥1.3B) ≈ 112%) aligns with returns executed within FCF (Total returns ¥329.1B ≈ FCF ¥328.1B). Payout Ratio ~42% is within a sustainable range and demonstrates commitment to stable dividends. For FY2027 the company forecasts annual dividend ¥129 (displayed after split, equivalent to nominal annual ¥264), a slight real increase versus prior-year annual ¥246. Total returns depend on FCF generation, but the dividend base is solid.
Large customer concentration risk: Sales to Nippon Steel ¥964.5B (≈15% of total) expose revenue and margin to order fluctuations and pricing negotiation power. Any reduction in Nippon Steel’s CAPEX plans or shifts in outsourcing policy for maintenance projects would directly affect sales and margins. Trade receivables ¥2098.5B and contract assets ¥502.7B indicate high receivables concentration toward major customers; realization delays or credit issues could pressure cash flow. DSO 121 days (Trade receivables ¥2098.5B ÷ Annual Revenue ¥6315.7B × 365 days) shows a trend toward lengthening, necessitating stricter working capital management.
Cost inflation risk: SG&A ¥331.3B (from ¥297.1B prior year, +11.5%) far outpaced revenue growth +4.1%, with rising personnel costs, subcontracting and material costs compressing margins. With Machinery & Engineering margin at 9.9% (from 11.1%, -1.2pt) and Logistics at 3.3% (from 3.2%, +0.1pt) showing diverging trends, delays in passing on costs or deterioration in project profitability could further depress margins. Depreciation ¥205.0B (from ¥196.0B prior year, +4.6%) and rising fixed costs underscore the need for SG&A containment and strict project selection.
Maturity profile / liquidity risk: Short-term liabilities ratio 50.2% (Current Liabilities ¥1511.9B ÷ Total Liabilities ¥2531.8B) indicates debt skewed to the short term. Short-term interest-bearing debt ¥235.9B (from ¥188.3B prior year, +25.3%), corporate bonds maturing within one year ¥100.0B, and long-term borrowings repayable within one year ¥134.8B together form short-term interest-bearing debt ¥470.7B, roughly matching cash & deposits ¥461.4B. Cash / short-term liabilities 1.96x (calculated as cash & deposits ¥461.4B × 2 ÷ Current Liabilities ¥1511.9B ≈ converted to cash ratio against total short-term liabilities) shows liquidity is secured, but concentrated refinancing timing combined with rising rates or market deterioration may increase funding costs and strain liquidity. Contract liabilities ¥27.98B (from ¥31.70B prior year, -11.7%) are small as advance payments, but delays in project progress could delay revenue recognition and reduce working capital flexibility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.8% | 6.3% (3.7%–8.5%) | +0.5pt |
| Net Margin | 4.7% | 2.7% (1.6%–4.7%) | +1.9pt |
Profitability exceeds industry medians, with both Operating Margin and Net Margin above sector averages. High margin in Machinery & Engineering places the company in the upper group within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 4.1% | 5.0% (-0.4%–9.4%) | -0.9pt |
Revenue growth slightly underperforms the industry median, influenced by flat Logistics results. Machinery & Engineering’s high growth cushions this, but overall growth remains close to industry average.
※ Source: Company compilation
The revenue-up profit-down pattern is mainly due to SG&A ratio rising +0.3pt, with Operating Margin 6.8% (from 7.2% prior year, -0.4pt) slightly down. Deterioration in Machinery & Engineering Operating Margin to 9.9% (from 11.1%, -1.2pt) pressured consolidated margins. Cost control and improvement in project profitability are key to restoring profitability. The company’s FY2027 guidance assumes Operating Margin improvement to 7.4% (+0.6pt), contingent on SG&A restraint and increased proportion of high-margin Machinery & Engineering projects, making progress monitoring critical.
Cash generation remains solid, securing Operating CF ¥519.9B (YoY +19.4%) and FCF ¥328.1B. Operating CF / Net Income 1.77x and accrual ratio -3.7% indicate good cash backing of earnings. Debt/EBITDA 0.74x and Interest Coverage 46.4x demonstrate very high financial resilience, and executing total returns ¥329.1B within FCF is a sustainable capital allocation. Payout Ratio ~42% and FCF coverage 2.55x support dividend stability.
Risks include large customer concentration (Nippon Steel ~15%) and working capital management (DSO 121 days, Trade receivables ¥2098.5B). Short-term liabilities ratio 50.2% and concentrated maturity profile heighten sensitivity to refinancing timing despite cash/short-term liabilities 1.96x. The non-recurring gain ¥24.0B (investment securities sale gain) is one-off, and improvement in core earnings is required for re-rating. Improving Machinery & Engineering project mix and enforcing SG&A discipline are pivotal to achieving FY2027 profit growth plan and recovering ROE to the 10% range medium-term.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the company based on publicly available financial data. Investment decisions are your responsibility; consult a professional advisor as needed before making investment choices.