TOYO DRILUBE CO.,LTD.

Business Details

The company's core operations center on the development, manufacturing, and sale of solid lubricant coatings (Drilube), composed mainly of molybdenum disulfide, fluororesin, graphite, and similar materials, along with coating processing for automotive equipment, optical equipment, and electrical/electronic equipment. The group structure comprises three domestic subsidiaries (Nagano, Oita, and Shin-ei), overseas subsidiaries (China, Thailand, Vietnam), and two affiliated companies (China). The regional composition of sales is Japan 69.2%, Thailand 16.9%, China 8.5%, and other 5.4% (FY2025, ending June 2025).

Recent Overview

Net sales increased, but operating profit declined 18.4% year on year due to higher manufacturing costs and increased upfront investment expenses

Net sales for the cumulative nine months of FY2026 (ending June 2026), covering July 2025 through March 2026, were ¥4,026 million (up 4.0% year on year). Sales to the automotive equipment industry increased 4.2% year on year on higher orders for interior and exterior parts, and sales to the optical equipment industry increased 12.4% year on year on greater adoption in digital camera components, while sales to the electrical/electronic equipment industry decreased 0.7% year on year due to lower orders for gaming console components. Operating profit fell sharply to ¥499 million (down 18.4% year on year), reflecting higher manufacturing costs such as labor costs and outsourced processing costs due to price inflation, compounded by increased depreciation and amortization (up approximately ¥18 million year on year) and higher upfront research and development expenses. Ordinary profit was ¥656 million (down 12.6% year on year), as improvement in foreign exchange gains/losses (a foreign exchange loss of ¥12 million in the same period of the prior year versus a foreign exchange gain of ¥3 million in the current period) partially offset the decline. The full-year earnings forecast remains unchanged at net sales of ¥5,200 million and operating profit of ¥622 million.

Key Products

Growth Drivers

• Sales recovery driven by increased orders for interior and exterior parts from the automotive equipment industry (up 4.2% year on year in cumulative Q3 sales)
• Increased orders from the optical equipment industry driven by strong demand in the high-end digital camera market (up 12.4% year on year in cumulative Q3 sales)
• Stable contribution to ordinary profit and net income from equity in earnings of affiliates accounted for by the equity method (¥123 million in cumulative Q3)
• Improved production capacity and efficiency through continued capital investment in tangible fixed assets (up ¥698 million from the end of the previous fiscal year as of end of Q3)
• Deepening penetration of Asian and ASEAN markets (strengthened collaboration with subsidiaries and affiliates in Thailand, China, and Vietnam)
• Reduced capital investment burden through utilization of national government subsidies (¥85 million recorded in cumulative Q3)

Risks

• Rising manufacturing costs, including labor costs and outsourced processing costs, due to price inflation, pressuring gross profit margin (gross profit margin for cumulative Q3 fell sharply to 34.7% from 38.1% in the same period of the prior year)
• Impact on the automotive industry from uncertainty in U.S. trade policy (tariffs) and uncertain global economic outlook
• Deterioration of the business environment due to expanding geopolitical risks, including tensions in the Middle East
• Intensifying competition in the internal combustion engine segment and structural changes in demand for existing products amid the advance of electrification in the automotive industry (although progressing more gradually than expected)
• Sluggish demand from the electronic equipment industry (including declining orders for gaming consoles)
• Foreign exchange risk (impact on foreign currency-denominated transactions through overseas subsidiaries and affiliates, and on foreign currency translation adjustments)
• Procurement risk for purchased materials such as rare earths and instability in the supply chain
• Profit pressure from increased upfront investment expenses such as depreciation and amortization and research and development expenses (depreciation and amortization for cumulative Q3 increased by approximately ¥18 million year on year)