Kobe Steel (5406) Q1 2026 earnings summary

Executive summary

• First quarter FY2026 saw sluggish activity in key demand sectors, with cost increases from higher crude oil prices due to Middle East instability impacting results.

• Net sales rose 1.6% year-over-year to ¥578.3 billion for the quarter ended June 30, 2026, but operating profit declined 34.8% to ¥20.4 billion and ordinary profit fell 21.2% to ¥22.7 billion.

• Profit attributable to owners of parent dropped 68.4% year-over-year to ¥12.2 billion, mainly due to the absence of prior-year gains from asset sales.

• Inventory valuation gains from higher aluminum and copper prices partially offset deteriorating steel metal spreads.

• Comprehensive income increased 40.2% year-over-year to ¥13.6 billion, reflecting improved other comprehensive income.

Financial highlights

• Q1 FY2026 net sales: 578.3 billion yen, up 9.2 billion yen year-over-year.

• Q1 ordinary profit: 22.6 billion yen, down 6.0 billion yen year-over-year; profit attributable to owners of parent: 12.1 billion yen, down 26.4 billion yen.

• Full-year FY2026 forecast: net sales 2,690.0 billion yen, ordinary profit 120.0 billion yen, profit attributable to owners of parent 100.0 billion yen.

• Dividend forecast maintained at 80 yen per share for the full year.

• ROIC forecast at approx. 5.5%, ROE at approx. 7.5%, net assets ratio at approx. 49%, and gross D/E ratio at 0.55 times.

Outlook and guidance

• Demand expected to remain sluggish in automotive, construction, and civil engineering sectors for the remainder of FY2026.

• Annual negative earnings impact from Middle East situation projected at 12.0 billion yen, 2.0 billion yen worse than previous forecast.

• Despite these headwinds, full-year forecasts for ordinary profit, profit attributable to owners of parent, and ROIC remain unchanged due to inventory valuation gains.

• Free cash flow forecast revised downward to break-even.

• Full-year net sales forecast at 2,690 billion yen, up 10.4% year-over-year; operating profit projected at 150 billion yen.