Tsubaki Q2 FY2027: Operating profit jumps 46%, net income barely rises

Tsubaki’s FY2027 first-half revenue rose 28.4% year on year to ¥174.131 billion, operating profit increased 46.3% to ¥12.145 billion, and net income attributable to owners of the parent edged up 3.0% to ¥10.215 billion. Revenue and operating profit grew strongly, while net income posted only a modest increase.

• Orders: Rose 39.7% year on year to ¥204.987 billion, outpacing revenue growth.
• Revenue drivers: Power transmission sales increased in Japan, the Americas, Europe, South Korea and Taiwan. Mobility and materials handling also benefited from the consolidation of Daido Kogyo as a subsidiary.
• Net income growth was limited: Gains from the sale of investment securities were lower than a year earlier, while the company recorded restructuring costs in the current period.

The global economy remained on a gradual recovery path, supported in part by demand for capital investment, and sales increased across several of Tsubaki’s businesses. Operating profit growth stood out as a measure of underlying performance, while the smaller rise in net income reflected year-on-year differences in non-operating and extraordinary items.

Mobility delivered the strongest sales growth among the segments, while year-on-year changes in operating results varied by business. Comparisons with the prior-year period use figures restated under the revised segment classification.

Power Transmission revenue increased 16.3% year on year. Sales rose in Japan, the Americas, Europe, South Korea and Taiwan, and operating profit also exceeded the year-earlier level. Growth across regions supported steady profit gains.

Mobility revenue climbed 46.9% year on year. Sales of automotive engine timing chain systems increased at bases in the Indian Ocean region, while the consolidation of Daido Kogyo added motorcycle parts sales. Operating profit rose alongside revenue.

Materials Handling revenue grew 8.3% year on year, and its operating loss narrowed. Sales increased in Japan for systems used in metal chip conveyance and coolant treatment, though the business remained loss-making.

• Other: Revenue surged 442.9% year on year, but the operating loss widened. The category includes new businesses and building maintenance, and higher sales did not translate into improved profitability.

Mobility was the biggest driver of the improvement in operating results, with Daido Kogyo’s consolidation contributing to both sales and profit. The widening loss in Other and continued losses in Materials Handling remain challenges.

Total assets stood at ¥465.677 billion at the end of September, up ¥5.893 billion from the end of March 2026. The equity ratio was 64.5%, unchanged from the previous fiscal year-end. Cash flow from operating activities was below the year-earlier level, while Tsubaki increased capital investment and continued share buybacks.

The company paid an interim dividend of ¥40 and forecasts a year-end dividend of ¥40, for a full-year total of ¥80, unchanged from the previous fiscal year. During the first half, it repurchased 3,289,300 shares under a board resolution. The cash flow statement recorded the purchase amount at ¥8.568 billion.

Higher spending on fixed-asset acquisitions was the main reason for the increase in cash used in investing activities. Tsubaki is pursuing capital investment while also returning capital to shareholders. Cash and cash equivalents totaled ¥71.651 billion at the end of the first half, down ¥8.359 billion from the start of the period. The company is pairing investment for growth with share buybacks aimed at improving capital efficiency.

Tsubaki raised its consolidated earnings forecasts for FY2027. It increased its revenue forecast by ¥5 billion and operating profit by ¥1.1 billion from its previous estimates, while adding ¥2 billion to its forecast for ordinary profit.

The revisions reflect first-half results and the latest business outlook. For the second half, Tsubaki assumes exchange rates of ¥150 to the U.S. dollar and ¥175 to the euro. The net income forecast is unchanged, while forecast earnings per share were lowered to ¥217.39 from ¥218.17. Meeting the full-year targets will depend on sustaining sales momentum in the second half while containing restructuring costs and addressing profit challenges.

Tsubaki launched its Medium-Term Management Plan 2030 in fiscal 2026, setting out a shift toward a business portfolio focused on profitability and efforts to strengthen the management foundation of its global group. In the first half, the consolidation of Daido Kogyo contributed to expansion in businesses including Mobility.

• Medium-Term Management Plan 2030: The second phase of the company’s Long-Term Vision 2030, it aims to deliver both social and economic value.
• Management mindful of the cost of capital: Tsubaki has outlined a policy of improving capital efficiency and carried out share buybacks.
• Revised segment classification: The company reorganized its reporting segments from four categories to three, disclosing its businesses as Power Transmission, Mobility and Materials Handling.

The reorganization is intended to make it easier to assess the profitability and growth prospects of individual businesses. Key questions are whether growth from the Daido Kogyo consolidation can translate into stronger margins, and how Tsubaki will improve the earnings power of challenged businesses such as Materials Handling.

Tsubaki expects the global economy to recover, but says the outlook remains uncertain. Actual results may differ from its forecasts as exchange rates, market conditions and other factors change.

• Geopolitical risks and resource prices: Rising geopolitical risks and fluctuations in resource prices could affect demand and procurement costs.
• Monetary policy and interest rates: Persistently high interest rates and central bank policies could shape sales conditions through their impact on capital investment and consumer spending.
• Differences in regional economic conditions: Recovery in Europe and China lacks strength, partly because of weak domestic demand, creating a risk that demand in some regions will fall short of expectations.
• Foreign exchange movements: The full-year forecast assumes second-half rates of ¥150 to the U.S. dollar and ¥175 to the euro. Actual exchange rates moving away from those assumptions could affect results.
• Profitability by business: Materials Handling remains in the red, and the operating loss in Other widened. Investors should monitor progress on improving margins as well as sales growth.