KANAMOTO CO.,LTD. FY2026 Q3 Earnings Report

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Executive Summary

The cumulative results for Q3 FY2026 showed higher revenue and substantial growth in Operating Income and Net Income, with improved profitability being the key highlight. Revenue was 1,629.2B (+2.6% YoY), Operating Income was 154.4B (+31.6%), Ordinary Income was 157.8B (+31.1%), and Net Income was 106.2B (+37.0%; attributable to owners of the parent was 100.6B, +39.1%). The primary driver of profit growth was a lower cost-of-sales ratio resulting from improved gross margins, while extraordinary income, including gains on sales of investment securities, also made a partial contribution.

Factors Affecting Business Performance

【Revenue】Revenue was 1,629.2B, an increase of +2.6% YoY. Within the Construction-Related segment, rental contract revenue increased to 1,046.5B (+4.1%), while merchandise and product sales increased to 317.3B (+7.4%), driving growth as the core business accounting for 89.8% of consolidated revenue. Meanwhile, Other Businesses (including steel-related, information equipment-related, and welfare-related businesses) recorded revenue of 166.8B, a decrease of -3.8% YoY.

【Profit and Loss】Operating Income increased +31.6% YoY to 154.4B, while Gross Profit was 521.8B (gross margin of 32.0%, up +2.2pt from 29.8% in the same period of the previous year), driven by improvements in the cost ratio. SG&A expenses were 367.4B (+3.3%), slightly exceeding the revenue growth rate, but did not offset the benefit of improved gross profit. Ordinary Income was 157.8B (+31.1%), indicating that profit growth at the operating level was maintained through the ordinary income level. Net extraordinary income of 2.1B, calculated by deducting extraordinary losses of 2.7B from extraordinary income of 4.8B (including gains on sales of investment securities of 4.4B), accounted for only 1.3% of pretax income, indicating a limited contribution from one-time factors. The Construction-Related segment margin improved to 9.6% from 7.6% in the same period of the previous year, while the Other segment also improved its margin to 6.2% (+2.7pt). In conclusion, the current period delivered higher revenue and profit, with profit growth driven primarily by improved profitability in the Construction-Related business rather than by volume expansion.

Segment Analysis

The Construction-Related segment recorded revenue of 1,462.4B (+3.4% YoY), segment profit of 139.9B (+30.8%), and a profit margin of 9.6% (+2.0pt), serving as the core contributor to consolidated profit. The Other segment (including steel-related, information equipment-related, and welfare-related businesses) saw revenue decline to 166.8B (-3.8%), but profitability improved significantly, with segment profit of 10.3B (+68.9%) and a profit margin of 6.2% (+2.7pt). Of consolidated Operating Income of 154.4B, the total for reportable segments was 139.9B, while profit from the Other category was 10.3B; both segments contributed to profit growth.

Key Financial Metrics

【Profitability】The Operating Income margin was 9.5%, improving +2.1pt from 7.4% in the same period of the previous year, while the Net Income margin was 6.2% (on an attributable-to-owners-of-the-parent basis), improving +1.6pt from 4.6% in the same period of the previous year. The gross margin was 32.0%, up +2.2pt YoY, and was the central factor behind profit growth.【Investment Efficiency】Annualized ROE was 8.6%, driven by the improvement in the Net Income margin, while the total asset turnover ratio remained at 0.654 times, reflecting the capital-intensive nature of the construction equipment rental business.【Financial Soundness】The Equity Ratio remained high at 49.6%, while cash and deposits were 720.7B, accounting for 21.7% of total assets. Short-term borrowings increased sharply from 3.1B in the same period of the previous year to 70.6B, but cash and deposits exceeded this amount by more than 10 times, meaning that the increase does not immediately represent a level that compromises liquidity.【Cash Flow Quality】Accounts receivable were 369.5B, down from 406.7B in the same period of the previous year. The decline in the balance despite revenue growth suggests improved receivables collection, although annualized DSO was 62 days, a somewhat extended level that requires continued monitoring.

Cash Flow Analysis

Although the cash flow statement has not been disclosed, changes in the balance sheet provide insight into funding trends. Cash and deposits increased by 109.6B to 720.7B from 611.1B in the same period of the previous year, suggesting improved cash-generation capacity accompanying profit growth. Meanwhile, short-term borrowings increased by 67.5B from 3.1B to 70.6B, and the balance related to short-term funding, including current maturities of long-term borrowings of 203.8B, has expanded. Property, plant and equipment remained approximately flat at 1,695.4B, suggesting that large-scale additional investment was limited. Investment securities increased by +37.9B YoY to 175.1B, indicating that part of the funds was allocated to securities investments. The coexistence of increases in cash and borrowings is also consistent with efforts to secure funding for business expansion and equipment renewal.

Earnings Quality

The increase in current-period profit was primarily attributable to recurring business activities, namely improved gross margins in the Construction-Related business, and earnings quality is generally favorable. Non-operating income was 10.1B (including dividend income of 3.3B), compared with non-operating expenses of 6.7B (including interest expense of 3.7B), resulting in a net contribution of +3.4B to Ordinary Income. Extraordinary income of 4.8B, mainly gains on sales of investment securities of 4.4B, and extraordinary losses of 2.7B, consisting of losses on disposal and sale of fixed assets, were both small. Net extraordinary income of 2.1B accounted for only 1.3% of pretax income of 159.9B, indicating that one-time factors did not materially distort performance. Comprehensive Income was 145.6B, exceeding Net Income of 106.2B. The difference was primarily attributable to valuation differences on securities of 25.8B and foreign currency translation adjustments of 13.4B, with the accumulation of unrealized gains reflecting market factors appearing as accruals.

Earnings Forecast and Guidance

Progress toward the full-year forecast as of the cumulative Q3 period was 73.7% for revenue (1,629.2B/2,210.0B), 75.7% for Operating Income (154.4B/204.0B), and 76.2% for Ordinary Income (157.8B/207.0B), all in line with standard progress levels (around 75%). Operating Income progress exceeded revenue progress, indicating some room relative to the plan in terms of profitability on a cumulative basis. However, the full-year forecast assumes a YoY Operating Income growth rate of +17.4%, below the cumulative Q3 increase of +31.6%, representing a conservative outlook premised on a lower profit growth pace in Q4 than in the cumulative period. Neither the earnings forecast nor the dividend forecast was revised during the current quarter.

Shareholder Returns

The full-year dividend forecast is ¥110.00 per share, with the Q2 dividend of ¥55.00 already paid. The forecast payout ratio against forecast full-year EPS of ¥376.23 is approximately 29.2%, substantially below the general sustainability guideline of 60% for dividends alone. Given ample cash and deposits of 720.7B and a sound financial base reflected by an Equity Ratio of 49.6%, the current dividend level is supported by both earnings and funding capacity. Treasury stock was 77.5B, down from 96.1B in the same period of the previous year. However, as the acquisition and disposal amounts for the current period cannot be identified from the disclosed data, no assessment of the Total Return Ratio, including share repurchases, is provided.

Risk Factors

1. Business concentration risk: As the Construction-Related business accounts for 89.8% of consolidated revenue, changes in public investment, private-sector construction investment, and demand for construction equipment rentals can have a significant impact on performance.

2. Accounts receivable collection risk: Annualized DSO was 62 days. Although accounts receivable declined from 406.7B in the same period of the previous year to 369.5B, the collection-period level continues to require monitoring. In addition to accounts receivable of 369.5B, the credit exposure represented by electronically recorded monetary claims of 99.2B is also substantial.

3. Increase in short-term funding: Short-term borrowings increased by +67.5B (+2,177.4%) from 3.1B in the same period of the previous year to 70.6B. Although cash and deposits of 720.7B exceed short-term borrowings by more than 10 times and therefore do not immediately represent a level that compromises liquidity, it is necessary to determine whether the funding demand is temporary or structural.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company's Operating Income margin and Net Income margin are both above the industry median.

Growth and Capital Efficiency

The Company's revenue growth rate is substantially below the industry median, indicating that its growth pace is relatively moderate compared with its high profitability.

※Source: Compiled by the Company

Key Earnings Highlights

1. The substantial increases in Operating Income of +31.6% and Net Income of +37.0%, compared with revenue growth of +2.6%, were driven by improved gross margins in the Construction-Related business (gross margin of 32.0%, +2.2pt YoY). The structure is driven by improved profitability rather than volume expansion, and whether this improvement is cyclical or structural will be the focus going forward.

2. Progress toward the full-year forecast was 73.7% for revenue and 75.7% for Operating Income, both standard levels. However, the full-year forecast for YoY profit growth (+17.4%) is below the cumulative actual result (+31.6%), indicating that management has factored in a slowdown in the Q4 profit margin.

3. The strong financial base, including an Equity Ratio of 49.6% and cash and deposits of 720.7B, provides capacity to absorb the sharp increase in short-term borrowings (+2,177.4%), and overall financial soundness remains high.

Theoretical Share Price (Reference Value)

Sensitivity: ¥4,481–¥4,742 at Cost of Equity ±1%, and ¥4,600–¥4,614 at ω±0.1.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value will be below Book Value per Share.
• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices.)

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

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