JFE Systems, Inc.

Business Details

The sole reportable segment of the Group. Built on a foundation of SI services for the steel industry with JFE Steel as its main customer, the segment provides system planning, design, development, operation, and maintenance across four areas: DX, ERP Solutions, Infrastructure Services, and business systems. In April 2025, the organization was restructured into a six-division structure (Digital Manufacturing, ERP Solutions, Infrastructure, Industrial Solutions, Smart Solutions, and Steel). Over 90% of sales are domestic. Under the FY2025-FY2027 (ending March 2027) medium-term management plan, the company is pursuing a portfolio shift toward priority growth businesses.

Recent Overview

Significant decline in revenue and profit due to the completion of the steelworks system refresh project, with a return to revenue and profit growth expected in the following fiscal year

In FY2026 (ending March 2026), consolidated net sales fell 10.3% year on year to ¥57,411 million and operating income fell 16.4% year on year to ¥6,346 million, primarily due to a decrease in work volume following the completion of the steelworks system refresh project in the Steel Business. In addition, increased expenses for research and development, in-house system investment, and personnel recruitment and training aimed at strengthening the growth foundation put pressure on profits. The recording of a valuation loss of ¥281 million on investment securities related to unlisted shares held by the company also pushed down net income. On the other hand, the Infrastructure Division, ERP Solutions Division, and Digital Manufacturing Division maintained an expansionary trend. For FY2027 (ending March 2027), the company expects increased revenue and profit centered on priority growth businesses (net sales of ¥60,000 million, operating income of ¥6,600 million). In line with its policy targeting a dividend payout ratio of 50%, the company forecasts an annual dividend of ¥70 (interim ¥22, year-end ¥48).

Key Products

Growth Drivers

• Steady expansion of demand for core system renewal, cloud utilization, and security measures accompanying corporate DX promotion and operational efficiency improvements
• Promotion of a business portfolio shift toward priority growth businesses (DX, ERP Solutions, Infrastructure Services) under the FY2025-FY2027 (ending March 2027) medium-term management plan
• Sales expansion centered on proprietary products (J-CCOREs, Prociec) in the ERP Solutions Business
• Sales growth driven by increased demand in the Infrastructure Services Business (cloud, security, infrastructure operations)
• Recovery in performance from FY2027 (ending March 2027) onward once the rebound effect from the completion of the steelworks system refresh has run its course
• Strengthening of investment and financial strategies, including M&A, utilizing cash generated over the three-year medium-term period and cash on hand
• Continuation of capital expenditure and digital-related investment amid improving employment and income conditions and resilient corporate earnings

Risks

• Risk of customer concentration in sales to JFE Steel (accounting for more than half of net sales in the prior fiscal year)
• Sales in the Steel Business Division are expected to continue declining during the medium-term plan period
• Pressure to increase selling, general and administrative expenses due to increased research and development, personnel recruitment and training, and in-house system investment (SG&A expenses in the current fiscal year increased 7.8% year on year to ¥8,078 million)
• Risk of estimation errors in total development costs under software development contracts (a provision for loss on order of ¥22 million was newly recorded in the current fiscal year)
• Difficulty in securing and developing IT personnel and rising labor costs (increase in labor costs due to improved employee treatment)
• Risk of decline in the value of investment securities such as unlisted shares held by the company (a valuation loss of ¥281 million was recorded in the current fiscal year)
• Risk of impairment if the excess earning power underlying goodwill (balance of ¥269 million at the end of the current fiscal year) cannot be realized
• Increased complexity of liquidity management due to large-scale time deposit transactions (¥29,700 million deposited and ¥15,550 million withdrawn in the current fiscal year)