Material Handling and Pneumatic Equipment FY2025 Full Year: SMC leads, Daifuku surges

Results at the two companies point to a recovery in capital spending and sustained demand for automation. The benefits, however, varied by company.

• Semiconductor investment recovered: Spending tied to generative AI and broader semiconductor demand supported orders and sales at Daifuku and SMC. At SMC, demand also rebounded in Japan, North America and South Korea, while digital equipment demand in China remained firm.
• Labor shortages fueled automation: Continued demand for logistics automation to fill labor gaps benefited Daifuku's material handling business.
• Sales growth did not translate equally into profit growth: Revenue rose 6.4% year over year at SMC and 2.6% at Daifuku. Operating profit increased 0.2% at SMC, compared with 24.4% at Daifuku.
• Profitability and growth told different stories: SMC's operating margin was 22.6%, against 15.3% at Daifuku. SMC led on margin, while Daifuku posted stronger profit growth.

Daifuku was the profit growth leader. Operating profit rose 24.4% year over year to ¥100.8 billion, while net income increased 21.3%. Revenue grew 2.6%, less than SMC's 6.4%, but Daifuku delivered much stronger profit growth.

SMC lagged in profit momentum. Revenue reached ¥842.5 billion, exceeding Daifuku's ¥660.7 billion. But operating profit rose just 0.2%, and net income increased 7%, well below Daifuku's 21.3% gain.

SMC nevertheless had a higher operating margin, at 22.6% versus Daifuku's 15.3%. This is a relative assessment based on profit growth this fiscal year, not a judgment that SMC had poor results.

SMC led in revenue, while Daifuku led in profit growth

Daifuku improved its margin through cost reductions and a focus on profitable orders. Revenue rose 2.6% year over year, while operating profit climbed 24.4%. Orders increased 3.0% to ¥672.6 billion, and the backlog is expected to support future sales. The company also plans to raise its annual dividend by ¥23 from the previous year.

SMC limited operating profit growth to 0.2% as labor and depreciation costs rose. It is preparing for future demand by increasing capital investment by about 40% from the previous year. SMC also carried out a ¥50 billion share buyback while maintaining an equity ratio above 90%.

Their outlook targets differ. Daifuku forecasts revenue of ¥700 billion and operating profit of ¥105 billion. SMC expects revenue of ¥1 trillion and operating profit of ¥219 billion. Both companies will need to show they can capture demand and generate returns on investment.

Tailwinds remain, but uncertainties could still affect orders and profits.

• Shifts in capital spending: A renewed slowdown in investment by semiconductor and electronics companies could weaken order and sales growth.
• Rising costs: Continued increases in labor, depreciation and materials costs could hold back profit even as sales rise. At SMC, higher expenses restrained operating profit this fiscal year.
• Currency swings: Foreign-exchange gains boosted SMC's ordinary profit. A move in the opposite direction could weigh on earnings.
• Project profitability and delivery schedules: Equipment orders can take time to become sales. Weak project cost control or delivery execution could hurt profits and customer confidence.
• Competition and uneven demand: A shift toward higher value-added products may support margins, but price pressure from competition could make them harder to maintain. Dependence on particular industries or regions is another risk.

SMC was ahead of Daifuku in both revenue and operating profit. Revenue was ¥842.5 billion at SMC, compared with ¥660.7 billion at Daifuku. Operating profit was ¥190.6 billion at SMC and ¥100.8 billion at Daifuku.

The picture changes when growth rates are compared. Operating profit rose 24.4% year over year at Daifuku, versus 0.2% at SMC. SMC maintained a higher margin, while Daifuku worked to narrow the gap through improved profitability. The comparison calls for looking beyond revenue scale to distinguish margin from profit growth.

The two-company average shown was revenue of ¥751.6 billion and an operating margin of 19%. This is an average for these two companies and may not represent the machinery industry as a whole.

As logistics and factory automation expand, maintenance and improvement after installation are becoming as important as machinery design and production. Daifuku focuses on work involving large logistics system projects, while SMC supplies pneumatic equipment used across a wide range of manufacturing sites.

When researching the companies, look beyond revenue scale to profit growth and investment priorities. At Daifuku, order profitability and cost management are key areas to watch. At SMC, attention centers on capacity investment and efficiency improvements. The ability to understand customers' challenges and propose solutions suited to their operations can support a career at either company.