NIKKATO CORPORATION

Business Details

The company's founding segment, manufacturing and selling ceramic products at the Sakai Plant and Higashiyama Plant. Main customers are manufacturers in electronic components, food, pharmaceuticals, paints, and other industries, providing consumable ceramic tools, fixtures, and machine parts used in production processes. Full-year sales for FY2026 (ending March 2026) were ¥8,215 million, accounting for approximately 72.4% of consolidated sales, making it the core business. The medium-term management plan "CONNECT30" sets a sales target of ¥10,000 million for FY2030.

Recent Overview

Sales and profit both improved significantly amid recovery in the electronic components market

In the full year of FY2026 (ending March 2026), the electronic components market, a major sales destination, showed a recovery trend, resulting in sales of ¥8,215 million, up 10.9% year-on-year. Alongside the increase in sales, factory utilization rates improved, and the cost of sales ratio improved by 3.6 percentage points year-on-year, leading to a substantial increase in segment profit of 86.0% year-on-year to ¥834 million. Capital expenditure decreased from ¥828 million in the previous fiscal year to ¥622 million, but investment in enhancing and rationalizing the production system and renewing existing facilities continued.

Key Products

Growth Drivers

• Increased orders driven by the continued recovery in the electronic components market (achieved +10.9% year-on-year sales growth for the full year of FY2026, ending March 2026)
• Decline in cost of sales ratio due to improved factory utilization associated with increased orders (improved by 3.6 percentage points year-on-year for the full year of FY2026, ending March 2026)
• Expanded sales of high-value-added Functional Ceramics products (achieved 46.6% year-on-year growth in FY2025, ended March 2025)
• Continuous investment in enhancing/rationalizing the production system and renewing existing equipment (¥622 million for the full year of FY2026, ending March 2026)
• Promotion of strategic investment toward the ¥10,000 million sales target for FY2030 under the medium-term management plan "CONNECT30"

Risks

• Risk of demand fluctuation due to deterioration in the electronic components market (the slowdown in the first half of FY2025, ended March 2025, directly impacted full-year results)
• Risk of rising cost of sales ratio due to elevated raw material and fuel prices (the cost of sales ratio worsened by 3.4 percentage points year-on-year in FY2025, ended March 2025)
• Risk of spillover to demand for electronic components due to economic deterioration in Asian countries caused by US trade policy (reciprocal tariffs)
• Geopolitical risk from Japan-China political tensions and China's economic stagnation (impact on the electronic components industry, a major customer base)
• Risk of valuation losses on inventories (a valuation loss on inventories of ¥126 million was recorded in FY2026, ending March 2026)

Business Details

Without owning manufacturing plants, the segment purchases and sells Heating Equipment such as various electric furnaces, vacuum furnaces, and heat treatment equipment, as well as Measuring Instruments & Others such as temperature sensors, stress measurement devices, and measurement control equipment. Main customers are manufacturers related to automobiles, heavy machinery, and steel, also capturing demand for production furnaces for superconducting tape wires, IT-related components, and semiconductor parts. Positioned to respond to customer needs by leveraging synergies with the Ceramics Business. Sales account for approximately 27.6% of consolidated sales, making it the second pillar of the company.

Recent Overview

Sales increased 17.0% year-on-year due to strong capital expenditure related to automobiles and heavy machinery, with profit margin also improving

In the Engineering Business for FY2026 (ending March 2026), capital expenditure trended favorably, particularly in automobile and heavy machinery related sectors, resulting in sales of ¥3,125 million, up 17.0% year-on-year. Segment profit reached ¥237 million, up 25.0% year-on-year, driven by the effect of increased sales as well as a significant improvement in profit margin for measuring instruments. Segment assets increased substantially from ¥1,827 million at the end of the previous fiscal year to ¥2,511 million.

Key Products

Growth Drivers

• Steady trend in capital expenditure demand centered on automobile, heavy machinery, and steel-related sectors
• Improved profitability driven by an improvement in the profit margin of measuring instruments
• The medium-term management plan CONNECT30 sets targets for expanding sales and improving profitability in the Engineering Business
• Low fixed costs and high asset efficiency due to the trading-company-type model without owning manufacturing plants
• Responding to customer needs by leveraging synergies with the Ceramics Business

Risks

• Risk of profit pressure when purchase prices rise, as the cost of sales ratio remains at a high level
• Risk of manufacturers curbing capital expenditure due to US trade policy (reciprocal tariffs)
• High dependence on demand from specific industries such as automobiles and heavy machinery, creating risk of direct impact from deterioration in those industries
• Risk of constraints on supply capacity and price negotiation power with suppliers due to the purchase-and-sale model without owning manufacturing plants
• Geopolitical risk (such as the situation in Ukraine and the Middle East) leading to changes in customers' capital expenditure plans