NTN Q2 FY2027: Operating profit rises 35% as forecast is revised

NTN's first-half revenue for the fiscal year ending March 2027 rose 2.8% from a year earlier to ¥413.5 billion. Operating profit climbed 35.0% to ¥17.3 billion, while net income attributable to owners of the parent increased 76.2% to ¥5.4 billion. Revenue increased by ¥11.3 billion, operating profit by ¥4.5 billion and net income by ¥2.3 billion.

• Price pass-through: Pricing gains supported profit, despite the impact of a smaller sales base.
• Fixed-cost cuts: Business restructuring, including production realignment, helped contain fixed costs.
• Foreign exchange: Currency movements affected revenue and earnings, and also contributed to higher sales in the Bearings and other businesses.
• Non-operating items: Ordinary profit rose 39.8% to ¥12.2 billion, but foreign-exchange losses of ¥1.9 billion and other items weighed on earnings.

Profit growth outpaced revenue growth, lifting the operating margin to 4.2% from 3.2% a year earlier. Under its DRIVE NTN100 Final plan, the company is pursuing business transformation and stronger earnings power. Whether the improvement can continue will depend on sustaining price pass-through and fixed-cost reductions in regions where demand is weak.

Japan and Asia and other regions increased profit, while Europe narrowed its loss. The Americas, by contrast, posted lower profit as sales volumes contracted. Japan delivered higher revenue and profit, while the Americas saw declines in both.

Japan recorded a sharp increase in segment profit to ¥7.2 billion, supported by demand recovery for automotive and industrial machinery OEM products and CVJ axles. In the Americas, weak demand for automotive and industrial machinery OEM products and CVJ axles meant price pass-through and fixed-cost reductions were not enough to offset lower sales.

In Europe, currency movements lifted reported revenue, but OEM sales declined. Cost reductions narrowed the segment loss to ¥800 million from ¥1.2 billion a year earlier. Asia and other regions benefited from higher sales to industrial machinery and aftermarket customers, as well as lower variable costs.

NTN revised its consolidated forecast for the fiscal year ending March 2027, projecting revenue of ¥825.0 billion, operating profit of ¥33.0 billion and net income attributable to owners of the parent of ¥15.0 billion. The plan calls for revenue to fall 0.2% from the previous year, while operating profit rises 6.3% and net income increases 16.5%.

The earnings release confirms that the outlook was revised but does not give the previous forecast figures or explain the reasons for the change. It directs readers to a separate notice on the forecast revision, so the size of the changes cannot be compared here.

First-half operating profit was ¥17.3 billion, or about 52.6% of the ¥33.0 billion full-year forecast. Meeting the plan will depend on sustaining profit growth in the second half, as well as demand in the Americas and continued improvement in Europe's profitability.

At the end of September 2026, total assets were ¥835.8 billion, down 4.9% from the previous fiscal year-end. The equity ratio rose to 35.4% from 33.8%. NTN generated cash from operations while repaying borrowings, and raised its annual dividend forecast.

Cash and cash equivalents stood at ¥109.0 billion at period-end, down ¥22.2 billion from the previous fiscal year-end. Financing activities included reductions in short-term borrowings and repayments of long-term debt. Total interest-bearing debt, including borrowings and bonds, fell to ¥277.3 billion from ¥319.1 billion at the previous fiscal year-end, based on supplementary materials.

The interim dividend increased to ¥6.50 per share from ¥5.50 a year earlier, and the forecast for the year-end dividend was set at ¥6.50. The earnings release did not mention a share buyback. The company is directing funds toward debt repayment and investment in growth and production capacity while also increasing shareholder returns.

Capital investment in the first half increased 10.2% year over year to ¥14.4 billion, while research and development spending rose 3.1% to ¥9.9 billion. R&D spending remained at 2.4% of revenue, unchanged from a year earlier.

• Capital investment: Purchases of property, plant and equipment totaled ¥15.7 billion, the main component of investing cash flow.
• Research and development: R&D spending increased from ¥9.6 billion in the year-earlier period as the company continued its technology development work.
• Management priorities: The DRIVE NTN100 Final medium-term plan prioritizes business restructuring and strengthening S,Q,C,C,D.

NTN is continuing to invest while also realigning production and reducing fixed costs. The key is to translate that spending into stronger profitability through improvements in quality, cost and delivery, rather than simply adding capacity.

Profit margins improved in the first half, but demand and profitability remain uneven across regions, while foreign exchange and restructuring costs continue to affect earnings. Meeting the full-year plan will require a recovery in weaker markets and continued benefits from the company's reforms.

• Automotive and industrial machinery demand: OEM sales declined in the Americas, where lower sales volumes weighed on profit. Sales to OEM markets also fell in Europe, and prolonged weakness could delay profitability improvements.
• Economic conditions in China and elsewhere: NTN cited a gradual slowdown in China's economy. Changes in regional conditions or customer production trends could affect sales of bearings and CVJ axles.
• Foreign-exchange movements: Currency movements can support revenue and profit, but NTN also incurred foreign-exchange losses. Further changes could offset benefits on the sales side.
• Restructuring costs: NTN recorded ¥2.3 billion in business restructuring losses in the first half, mainly in the Americas and Europe. Investors will watch whether the restructuring delivers future fixed-cost savings and whether additional costs arise.
• Litigation in Europe: An appeal proceeding over a damages claim from Renault is continuing. The claim amount was revised to €62.49 million in 2024, and developments in the case remain a point to monitor.