Nichia Steel Q1 Operating Profit Jumps 63% to ¥355 Million as Volume Gains Outrun Softer Prices

Nichia Steel Works, Ltd. (TSE: 5658), a wire-rod processor based in Amagasaki, Hyogo Prefecture, reported consolidated results for the first quarter of the fiscal year ending March 2027 — the three months from April 1 to June 30, 2026 — under Japanese GAAP. Net sales rose 3.6% to ¥8,524 million, operating profit rose 62.5% to ¥355 million, ordinary profit rose 26.7% to ¥623 million and net profit attributable to owners of the parent rose 86.9% to ¥545 million. Basic earnings per share came to ¥12.14 against ¥6.20 a year earlier; no diluted figure was reported. Comprehensive income more than doubled, up 105.4% to ¥948 million.

Volumes carry the top line while selling prices slip

Nichia Steel described a domestic market in which steel demand stayed subdued — construction and civil engineering in particular remained weak on labour shortages and elevated materials and equipment costs — against a backdrop of U.S. tariff and trade policy, geopolitical risk and a slowing Chinese economy. Costs rose sharply: on top of higher labour and logistics expenses, the company cited petroleum-related products affected by the situation in the Middle East, rare-metal-related products caught by Chinese export restrictions, and the continued global surge in zinc and other sub-materials. Its response was a mix of self-help — production-cost improvement and logistics efficiency — and passing through the increases it could not absorb, alongside volume-capture and cost-reduction measures. The result was a ¥299 million sales gain driven entirely by higher volumes, and a profit gain that came from those volumes plus inventory valuation differences and cost cuts even though selling prices overall declined. Gross profit rose to ¥1,641 million from ¥1,431 million, widening the gross margin to 19.3% from 17.4%, while selling, general and administrative expenses rose to ¥1,286 million from ¥1,212 million. Operating margin improved to 4.2% from 2.7%.

Special wire rod supplies most of the profit growth

All three wire-rod segments grew sales, but only two grew profit. Special wire rod products — hard steel wire, galvanised steel wire, flat wire, stranded wire and wire rope sold into autos, power and telecoms, and public civil engineering — was the largest business and the biggest contributor, with sales up 2.7% to ¥4,533 million and segment profit up 75.3% to ¥245 million as volume growth and price improvements against cost inflation outweighed higher fixed costs. Ordinary wire rod products, the galvanised wire and processed goods used in gabions, rockfall-protection netting and fencing, saw sales rise 6.2% to ¥2,195 million and segment profit multiply more than sevenfold to ¥43 million (up 620.8%) — although demand for fencing and civil-engineering applications continued to shrink. Bolt wire rod products — torshear-type and hexagonal high-strength bolts and GN bolts, sold mainly into building construction — was the exception: sales rose 2.0% to ¥1,621 million on higher volumes, but lower selling prices pushed segment profit down 8.2% to ¥39 million as construction and civil-engineering projects stayed stalled. Real-estate leasing was roughly flat at ¥40 million of sales and ¥24 million of profit (up 4.8%), and the "other" bucket, mainly contract plating, lifted sales 15.7% to ¥151 million while profit fell 69.4% to ¥2 million. The company changed the allocation method for part of its SG&A from this quarter to reflect segment performance more appropriately; year-earlier comparisons are stated on the new basis.

A ¥340 million property-tax refund pushes net profit past the half-year plan

Below the operating line, non-operating income of ¥296 million — little changed from ¥291 million and dominated by ¥217 million of dividend income and ¥45 million of interest income — carried ordinary profit to ¥623 million, though the 26.7% gain was well short of the 62.5% at the operating line because the year-earlier quarter had the same large financial income against a far smaller operating base. Net non-operating expenses of ¥28 million included ¥17 million of losses on the redemption of securities. The step change came in the extraordinary items: Nichia Steel booked ¥340 million of extraordinary income from refunded property taxes and related items, against nothing a year earlier, offset by ¥65 million of extraordinary losses — ¥40 million of litigation-related expenses and ¥24 million of losses on the retirement of fixed assets. Pre-tax profit therefore rose to ¥899 million from ¥489 million, and after ¥278 million of tax and ¥76 million attributable to non-controlling interests, net profit attributable to owners of the parent reached ¥545 million — already above the ¥520 million the company plans for the entire first half. Note that the quarterly statements apply an accounting treatment specific to quarterly reporting, and were not subject to review by a certified public accountant or auditing firm.

Cash builds as securities mature; equity ratio eases to 72.7%

Total assets stood at ¥74,239 million at June 30, up ¥1,141 million from ¥73,097 million at the March 2026 year-end. Current assets rose ¥398 million to ¥34,461 million, driven by a ¥2,021 million increase in cash and deposits to ¥11,178 million — largely the mirror image of securities falling to ¥695 million from ¥2,191 million as holdings matured. Non-current assets rose ¥743 million to ¥39,778 million, chiefly on investment securities of ¥18,637 million, up ¥856 million as market values firmed. Total liabilities rose ¥502 million to ¥16,392 million: current liabilities of ¥10,736 million were up ¥342 million mainly on accrued payables, and non-current liabilities of ¥5,657 million were up ¥159 million mainly on deferred tax liabilities. Short-term borrowings rose ¥200 million to ¥1,700 million. Net assets rose ¥639 million to ¥57,846 million, with shareholders' equity of ¥54,003 million against ¥53,403 million — retained earnings up ¥276 million and the valuation difference on available-for-sale securities up ¥348 million. The equity ratio slipped to 72.7% from 73.1% only because assets grew slightly faster than equity. No quarterly consolidated cash-flow statement was prepared.

Guidance and the ¥10 dividend left untouched

Nichia Steel reaffirmed the forecasts it published on May 14, 2026, for both the first half and the full year. The first-half plan calls for net sales of ¥16,770 million (+1.4%), operating profit of ¥580 million (+27.9%), ordinary profit of ¥840 million (+2.3%), net profit of ¥520 million and EPS of ¥11.57. The full-year plan is net sales of ¥35,000 million (+3.6%), operating profit of ¥1,450 million (+1.3%), ordinary profit of ¥2,000 million (−10.3%) — a planned decline, since the prior year's ordinary profit was flattered by financial income — net profit of ¥1,200 million (+17.9%) and EPS of ¥26.70. Measured against those numbers the quarter is running ahead of plan on every line below operating profit: Q1 accounts for roughly 24% of the full-year sales plan, 25% of the operating-profit plan, 31% of the ordinary-profit plan and 45% of the net-profit plan. The company cautioned that actual results may differ from forecasts depending on activity levels in customer industries and movements in raw and sub-material prices. The dividend plan is likewise unchanged from the previous announcement: an interim of ¥4.00 and a year-end of ¥6.00 for an annual ¥10.00, matching the ¥10.00 paid for the year ended March 2026. Supplementary explanatory material was prepared, but no results briefing was held.

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