NEG Q3 FY2026: Operating profit drops 34%, net income falls 42%

For the nine months ended September 2026, NEG posted revenue of ¥232.4 billion, up 0.2% year on year. Operating profit fell 33.9% to ¥16 billion, while net income attributable to owners of the parent declined 41.9% to ¥9.6 billion. Revenue was nearly flat, but profitability weakened despite sales growth.

The main pressures on operating profit were higher raw material and fuel costs, along with increased expenses related to the display business's transition to all-electric melting equipment and scheduled maintenance. Start-up costs for medical glass manufacturing facilities also weighed on earnings.

Net income included special losses tied to the restructuring of the composites business, including the suspension and transfer of production at a U.S. subsidiary. Gains from the sale of investment securities and fixed assets were not enough to offset those costs, leaving net income below the prior-year level.

NEG reports a single glass business segment. By product area, Electronics and Information grew, while Functional Materials, which includes the composites business undergoing restructuring, recorded lower sales.

Electronics and Information benefited from steady display demand. Sales of electronic devices also increased across information and communications, automotive and consumer electronics applications, led by data center demand. Growth in information and communications helped offset the decline in Functional Materials.

Functional Materials sales fell at sites in Europe and the U.S. as NEG restructured its composites business. Revenue in medical, heat-resistant and construction materials was broadly in line with the prior-year period. The focus ahead will be on improving profitability through restructuring and expanding sales of new products.

Total assets stood at ¥656.4 billion at the end of September 2026, down ¥45 billion from the end of 2025. The equity ratio rose to 73.4% from 70.2%, while NEG also reduced its liabilities.

The decline in cash and deposits reflected capital investment, share buybacks and dividend payments. Bond redemptions and loan repayments also contributed to a ¥34.1 billion reduction in liabilities from year-end. NEG does not prepare a quarterly cash flow statement, so details of operating, investing and financing cash flows are not available in its published materials.

The interim dividend rose to 80 yen from 70 yen a year earlier, and the company forecasts an 80-yen year-end dividend. The full-year dividend forecast is unchanged. Share repurchases are being carried out under a board resolution, but the earnings release does not disclose the amount spent.

NEG left its full-year forecast for the fiscal year ending December 2026 unchanged from the projection announced on July 31. It expects revenue to decline 3.7% from the previous year, operating profit to fall 41.4% and net income to drop 49.4%.

For the fourth quarter, NEG expects display demand to soften, while sales of electronic devices for semiconductors and information and communications are expected to expand. In Functional Materials, restructuring at the U.S. subsidiary is expected to cause a substantial decline in composites sales, while the company continues to ramp up equipment for low-dielectric glass fiber.

NEG expects higher raw material and fuel costs due to the Middle East situation and yen depreciation, and plans to contain the increase through price revisions and productivity improvements. Nine-month net income is progressing slowly against the full-year forecast. The impact of restructuring costs and a fourth-quarter earnings recovery will be key to meeting the target.

NEG is working to improve profitability in existing businesses while strengthening supply capacity in electronic materials. Restructuring costs are weighing on earnings this fiscal year, but the company plans to continue ramping up facilities for growth markets.

• Composites restructuring: NEG recorded ¥15.7 billion in business restructuring costs, including the suspension and transfer of production at its U.S. subsidiary. That was up from ¥3.6 billion in the prior-year period.
• Low-dielectric glass fiber: The company is bringing manufacturing equipment for electronic materials into operation, with plans to build sales over time.
• Display equipment: NEG is transitioning to all-electric melting equipment, but the transition and scheduled maintenance increased costs and pressured operating profit during the period.
• Medical glass: Manufacturing equipment is being ramped up at a Malaysian subsidiary, resulting in costs during the initial operating phase.

Restructuring is bringing short-term costs and lower sales, but NEG also aims to contain cost increases through price revisions and productivity improvements. Investors will be watching when the new equipment reaches stable operation and whether the post-restructuring businesses deliver improved profitability.

The full-year outlook depends on uncertain factors including the Middle East situation, foreign exchange rates and demand trends. Higher raw material and fuel costs, together with the restructuring of the composites business, could delay an earnings recovery.

• Rising raw material and fuel prices: NEG expects prices to climb amid the Middle East situation and yen depreciation. If price revisions and productivity improvements do not offset the increase, profit margins will face further pressure.
• Composites restructuring: Sales at European and U.S. sites are declining as the U.S. subsidiary suspends and transfers production. Further sales declines and additional costs are possible in the near term.
• Softer display demand: The company expects demand to weaken in the fourth quarter. The extent to which sales of electronic devices for semiconductor and information and communications applications can offset the decline will be a key focus.
• Foreign exchange and global economic volatility: Currency movements, interest rates, trade restrictions and sudden shifts in supply and demand in individual markets could affect overseas operations and product sales.