MERF Inc.

Business Details

As a non-ferrous metal business centered on copper, this segment manufactures and sells approximately 50 varieties of ingots using recycled raw materials collected domestically and internationally, while also sorting and processing approximately 150 varieties of recycled materials for sale to wire manufacturers, copper smelters, and others. In addition to domestic customers such as shipbuilders and housing equipment manufacturers, the segment is also expanding into the North American market through its U.S. subsidiary CMX Metals. This is the core segment, accounting for approximately 99% of consolidated group revenue.

Recent Overview

The combination of historically high copper prices and yen depreciation drove a significant improvement in revenue and profit despite declining sales volume

During the 9-month cumulative period of FY2026, ending March 2026 (September 2025 to May 2026), international copper prices traded near historic highs, driven by rapid data center construction, power grid reinforcement demand, and tight mine supply, with the average yen-based copper Cash price for the period rising 34.7% year-on-year. The weaker yen (which briefly exceeded ¥160 to the dollar) also pushed up domestic prices. As a result of ongoing review of low-profitability transactions, overall sales volume declined 12.3% year-on-year (ingots down 1.9%, recycled materials down 17.8%), but segment revenue rose to ¥72,863 million (up 18.4% year-on-year) and segment operating income turned positive at ¥3,213 million (compared with a loss of ¥465 million in the same period of the prior year).

Key Products

Growth Drivers

• Historic surge in international copper prices driven by rapid data center construction, power grid reinforcement demand, and tight mine supply (the average yen-based copper Cash price for the 9-month cumulative period of FY2026, ending March 2026, rose 34.7% year-on-year), pushing up average selling prices
• Further boost to domestic copper prices from the weaker yen (which briefly exceeded ¥160 to the dollar)
• Expansion of North American ingot sales volume through the U.S. subsidiary CMX Metals' acquisition of the California Metal-X business (January 2025)
• Structural increase in copper demand driven by the spread of electric vehicles and expansion of AI infrastructure
• Competitive advantage from the ability to purchase a wide range of raw materials in bulk by handling both ingots and recycled materials simultaneously
• Strengthened earnings base and improved profit margins through review of low-profitability transactions

Risks

• Earnings instability due to sharp fluctuations in non-ferrous metal prices and exchange rates (in FY2025, ended August 2025, gross profit declined significantly due to price volatility stemming from U.S. tariff policy)
• Increased costs due to sharp price increases in tin, bismuth, and other materials essential for ingot manufacturing, caused by China's tightened export controls
• Declining trend in domestic generation and circulation volumes of recycled materials, along with changes in the order environment for smelting companies (recycled material sales volume declined 17.8% year-on-year in the 9-month cumulative period of FY2026, ending March 2026)
• Risk of one-time costs related to the CMX acquisition and non-recurring expenses such as losses on trade receivables in the new circuit board business
• Increased working capital needs and rising interest-bearing debt due to soaring raw material prices (short-term borrowings at the end of Q3 FY2026, ending March 2026, stood at ¥12,108 million, up ¥4,408 million from the end of the previous fiscal year)
• Costs associated with price hedging, including derivative valuation losses (¥54 million recorded in the 9-month cumulative period of FY2026, ending March 2026)

Business Details

The Art & Craft business primarily sells precious metal ornaments, Buddhist statues, and Buddhist altar fittings, manufacturing and selling high value-added products through advanced casting techniques and meticulous finishing. Its strengths lie in the ability to faithfully reproduce prototypes through precision casting technology and the finishing quality achieved through metalworking techniques, and it also engages in planning-driven sales, including the development of gold products using character licenses. The segment also leverages e-commerce transactions to expand its sales channels. Although its share of consolidated group revenue is small, it is positioned as a segment that stably contributes to profit.

Recent Overview

Steady sales of gold products and the contribution from character products drove a 40.9% year-on-year increase in revenue

In the 9-month cumulative period of FY2026, ending March 2026 (September 1, 2025 to May 31, 2026), the Art & Craft business recorded revenue of ¥628 million (up 40.9% year-on-year, an increase of ¥182 million) and segment profit of ¥189 million (approximately 2.1 times the ¥89 million recorded in the same period of the prior year). Sales of gold products continued to perform steadily, and the contribution from character products also supported the expansion in results.

Key Products

Growth Drivers

• Steady demand for asset value in gold products and character products
• Revenue expansion driven by contribution from character products
• Increased sales driven by steady progress in new product development
• Expansion of sales channels through use of e-commerce transactions
• Value creation through an integrated system covering planning, manufacturing, and delivery
• Provision of high value-added products leveraging precision casting and metalworking techniques

Risks

• Extremely small share of consolidated group revenue, limiting the scope for business expansion
• Risk that fluctuations in precious metal prices affect manufacturing costs and product prices
• Difficulty in clearly distinguishing between made-to-order and forecast-based production, posing challenges for demand forecasting accuracy
• Risk that planning-driven products such as character merchandise are affected by changes in licensing and trends