Daido Steel Q1 Operating Profit Jumps 51% to ¥13.1 Billion as AI Demand Lifts Stainless and Magnets

Two profit figures, two different stories

Daido Steel Co., Ltd. (TSE: 5471) published consolidated results for the three months to June 30, 2026 on July 28, 2026 under IFRS. Revenue rose 14.9% to ¥163,530 million, operating profit 51.4% to ¥13,112 million, pre-tax profit 46.9% to ¥14,279 million and profit attributable to owners 41.2% to ¥9,061 million. Basic earnings per share were ¥45.34 against ¥31.18, and comprehensive income almost doubled to ¥17,814 million.

The company also publishes an adjusted operating profit, which removes items it treats as extraordinary along with foreign-exchange gains and losses, inventory valuation effects, environmental provisions, levelled property tax and paid-leave provisions. On that measure profit rose 25.4% to ¥11,492 million — half the headline growth rate. The gap is where scrap prices sit: ferrous scrap spiked from March 2026 and stayed high, which flatters reported profit through inventory valuation without saying much about underlying trading. Nickel also ran above last year's level, and crude and LNG moved with Middle East risk. Management describes its response as sustained cost reduction plus passing input costs into selling prices.

Semiconductors and magnets are the engine

Functional and Magnetic Materials was the standout: revenue rose 20.2% to ¥58,043 million and profit 89.4% to ¥5,790 million. Stainless steel order volumes rose on semiconductor demand and a push into plant applications; high alloys gained in electrical and electronic uses. The magnet business benefited from an unusual tailwind — China's tightening of heavy rare-earth export controls has turned demand toward Daido's magnets, whose selling point is precisely that they use no dysprosium or terbium. Titanium was the exception, with revenue down as medical customers worked through inventory.

Specialty steel up, engineering down

Specialty Steel, the largest segment, grew revenue 16.0% to ¥59,403 million and profit 21.5% to ¥3,155 million. Structural steel volumes rose as industrial-machinery demand recovered, offsetting weak demand from Japanese automakers; tool steel volumes fell with the same auto weakness. Automotive and Industrial Machinery Parts grew revenue 8.0% to ¥31,640 million and almost doubled profit, to ¥2,879 million. Distribution and Services grew revenue 7.0% to ¥7,188 million and profit 23.9% to ¥1,054 million. Engineering was the one segment to go backwards on profit: revenue rose 6.4% to ¥7,254 million but profit fell 66.3% to ¥229 million.

Balance sheet and unchanged guidance

Total assets rose 5.8% to ¥905,876 million from the March 31, 2026 year-end and equity attributable to owners 2.5% to ¥484,157 million, so the owners' equity ratio slipped to 53.4% from 55.2% — assets grew faster than equity.

Daido left its full-year FY3/2027 guidance unchanged: revenue of ¥630,000 million (+9.0%), operating profit of ¥40,000 million (−4.9%), adjusted operating profit of ¥40,100 million (+0.5%), pre-tax profit of ¥42,000 million (−6.2%) and profit attributable to owners of ¥27,500 million (−15.7%), for basic earnings per share of ¥137.60. Note the shape of that: the company expects reported operating profit to fall over the year even as adjusted profit edges up, which is the same inventory-valuation effect running the other way. The first quarter delivers 32.8% of the full-year operating-profit target and 28.7% of the adjusted target. Half-year guidance is revenue of ¥305,000 million and operating profit of ¥21,000 million. The annual dividend forecast rises to ¥52.00 from ¥49.00, split ¥24.00 and ¥28.00.

JapanStockPulse provides informational content only and does not constitute investment advice. Figures are taken from the company's published earnings short report and may be subject to subsequent revision.