Niterra Q2 FY2027: Raises outlook on AI chip demand, yen weakness

Niterra’s FY2027 first-half revenue reached ¥406.2 billion, up 15.7% year on year, operating profit rose 15.6% to ¥81.8 billion, and interim profit attributable to owners of the parent climbed 108.1% to ¥110.0 billion. Both automotive and semiconductor-related businesses grew revenue, lifting operating profit from core operations.

• Revenue: Increased ¥55.1 billion from a year earlier, with growth in both automotive-related and components and solutions businesses.
• Operating profit: Rose ¥11.0 billion year on year, helped by higher profit in automotive-related operations and a return to profitability in components and solutions.
• Interim profit: Increased ¥57.1 billion year on year. A ¥59.0 billion gain on the valuation of investment securities, recorded as financial income, was a major factor, so the increase should be viewed separately from operating profit growth.
• One-off expense: Niterra recorded a ¥9.8 billion loss on the transfer of a subsidiary’s business under other expenses.

Production of vehicles with internal combustion engines fell short of the year-earlier level, but demand in North America and aftermarket products provided support. In semiconductor manufacturing equipment, investment in facilities for advanced logic and memory expanded on the back of data-center spending for generative AI. Because the sharp increase in interim profit includes valuation gains that fluctuate with market prices, operating profit growth is also important when assessing underlying performance.

The core automotive-related business posted higher revenue and profit, while components and solutions lifted sales and returned to profitability. In the latter segment, investment in semiconductors for generative AI and lower fixed costs in the medical business helped improve earnings.

Automotive-related revenue rose 13.2% to ¥322.7 billion and operating profit increased 8.8% to ¥76.9 billion. Spark plugs for new-vehicle installation were affected by production cuts amid a slowdown in China, but demand led by North America made up for the shortfall. Aftermarket products also continued to grow steadily, cushioning weakness in production of vehicles with internal combustion engines.

Components and solutions revenue increased 23.7% to ¥76.0 billion, and the segment recorded operating profit of ¥5.9 billion, reversing a ¥500 million loss a year earlier. In the SPE business, demand for advanced logic and memory rose amid data-center investment for generative AI. Sales from Niterra Materials, which became a consolidated subsidiary in June last year, also contributed. The medical business made progress toward profitability through fixed-cost reductions.

• Other: Revenue increased 59.6% to ¥7.9 billion, but the segment posted an operating loss of ¥1.0 billion, compared with a ¥600 million profit a year earlier.

Niterra raised its consolidated forecast for FY2027 from the level announced on April 30, 2026. It now expects revenue of ¥810.0 billion, up 10.8% from the previous year, and operating profit of ¥160.0 billion, up 15.8%.

Niterra said the weaker yen and solid performance through the first half led it to conclude that results would exceed its April forecast, even after taking into account losses related to the withdrawal from Wells’ automotive parts business, announced in August. The earnings release did not specify the amount of the upward revision. Its assumed exchange rates for the second half are ¥150 to the dollar and ¥180 to the euro.

Niterra recorded valuation gains on investment securities in the first half but has excluded them from its full-year forecast because market prices fluctuate. First-half profit before tax rose to ¥138.1 billion, while the full-year forecast implies a decline from the previous year. The forecast therefore highlights the company’s earnings plan excluding the impact of fluctuating valuation gains.

Total assets stood at ¥1.2872 trillion at the end of September, up ¥66.1 billion from the end of the previous fiscal year, while the equity ratio attributable to owners of the parent rose to 65.5%. Operating cash flow also exceeded the year-earlier level, as Niterra maintained its financial stability while returning capital to shareholders.

Growth in profit before tax contributed to the increase in operating cash flow. Investing cash flow turned positive as there was no repeat of the large subsidiary-share acquisition outlay made a year earlier, while proceeds also came from a reduction in securities and the sale and redemption of investment securities.

• Dividend: The interim dividend was ¥119 per share before the stock split. The year-end forecast is ¥59.50 per share after the split, bringing the full-year dividend forecast to ¥238 on a pre-split basis, up from ¥205 in the previous year.
• Share buybacks: Niterra spent ¥15.0 billion to repurchase its own shares during the first half.
• Stock split: The company split its common shares two-for-one effective Oct. 1, 2026. The split’s timing should be taken into account when comparing per-share dividends.

Cash and cash equivalents totaled ¥239.2 billion at the end of the first half, up ¥51.4 billion from the start of the period. Niterra paired earnings growth with share repurchases and a higher dividend, while also increasing its equity ratio, pointing to an effort to balance shareholder returns with financial flexibility.

Niterra has flagged foreign exchange rates, raw-material prices and geopolitical conditions as factors that could affect future results. Valuation gains that boosted interim profit are also expected to affect future quarterly results as market prices move.

• Foreign exchange: The full-year forecast assumes ¥150 to the dollar and ¥180 to the euro in the second half. If actual rates differ from those assumptions, the yen value of overseas sales and profits could change.
• Precious-metal prices: Fluctuations in raw-material prices for key products such as spark plugs could affect manufacturing costs and profitability.
• Geopolitics and export controls: Escalating tensions in the Middle East and Chinese export restrictions could affect energy prices, component procurement, and customers’ production and investment plans.
• Structural changes in the automotive market: With production of vehicles with internal combustion engines below the previous year’s level, adapting the business to electric-vehicle adoption and shifts in regional demand remains a challenge.
• Valuation gains and litigation: Gains on investment securities fluctuate with market prices. Additional losses could also arise from competition-authority investigations into certain past transactions and litigation with customers.

Growth in semiconductors is offsetting changes in the automotive sector, but Niterra has excluded valuation gains from its full-year forecast and is also factoring in the business-transfer loss. Investors should track not only progress against the full-year outlook, but also the durability of semiconductor investment, automotive-related earnings power and changes in foreign-exchange assumptions.