Kobe Steel (5406) investor relations material

Executive summary

• Ordinary profit for fiscal 2025 was ¥121.3 billion, supported by record-high profits in machinery, despite a challenging demand environment and significant impairment loss in aluminum rolled products.

• Profit attributable to owners of parent was ¥93.7 billion, aided by asset sales but impacted by a ¥20.9 billion impairment loss and higher fixed costs.

• Free cash flow reached ¥128.0 billion, mainly from asset sales, with capital investment payments in line with depreciation.

• For fiscal 2026, ordinary profit and profit attributable to owners of parent are forecast to remain similar to 2025, at ¥120.0 billion and ¥100.0 billion, respectively, factoring in Middle East-related risks.

• Annual dividend maintained at ¥80 per share for both fiscal 2025 and 2026.

Financial highlights

• Fiscal 2025 net sales were ¥2,436.6 billion, down ¥118.4 billion year-over-year; ordinary profit fell by ¥35.8 billion to ¥121.3 billion.

• ROIC was 5.3%, ROE 7.7%, net assets ratio 46.4%, and gross D/E ratio 0.61x.

• Free cash flow was ¥128.0 billion in fiscal 2025, expected to drop to ¥10.0 billion in fiscal 2026 as capital investment exceeds depreciation.

• Fiscal 2026 net sales are forecast at ¥2,560.0 billion, up ¥123.4 billion year-over-year.

• Cash and cash equivalents at period end: ¥189.0 billion.

Outlook and guidance

• Demand environment expected to remain similar to fiscal 2025, excluding Middle East impacts.

• Middle East situation poses an estimated earnings risk of ¥10.0 billion for fiscal 2026.

• Ordinary profit, profit attributable to owners of parent, and ROIC projected to be stable year-over-year.

• Free cash flow expected to be ¥10.0 billion in fiscal 2026, with net assets ratio and D/E ratio in line with medium-term targets.

• Assumes recovery in materials and construction machinery, cost improvements, and better inventory valuation.