Executive Summary
Envalith met with Mr. Yamazaki (Executive Officer and General Manager, Machinery Systems Division), Mr. Fujimoto (General Manager, Business Administration, Machinery Systems Division) and Mr. Yagi (General Manager, IR & SR, Corporate Planning Office) on the occasion of the company's participation in CEATEC. Kurimoto has designated battery manufacturing equipment as a strategic growth area for its Machinery Systems business through 2030. The company is moving away from one-off equipment sales toward a solutions model that supports customers from early-stage R&D through mass-production ramp-up. Two initiatives reflect this strategy: a collaboration with Hitachi High-Tech on kneading technology that leverages physical AI, and membership in the Battery Association for Supply Chain (BASC). Based on concrete customer inquiries, the company is preparing for a resumption of investment from around 2027. In the near term, Pipe Systems and Chemical Products drove 1Q results. The guidance revision mainly reflects the 1Q beat, with the original plan maintained for 2Q onward. On capital policy, management intends to avoid dividend cuts and maintain the current payout level. It will not hold back on growth investment when opportunities for substantial business expansion arise.
Message from the Company
We believe it is important to position ourselves as a partner that supports customers from the early stages of R&D through the launch of mass production. We provide testing facilities and equipment, along with personnel to handle preparation, and use Hitachi High-Tech's operating software to set process conditions. This allows us to build the entire process, from test research through mass production, together with our customers.
Key Discussion Points
Battery Manufacturing Equipment Positioned as a Strategic Growth Area Toward 2030
Key customers are battery makers and automakers, followed by electrode material manufacturers. Sales to material manufacturers center on upstream processes, where crushers and dryers are the main products in addition to kneaders. Battery production is shifting from batch kneading toward continuous kneading. Batch processes rely heavily on operator skill, including manual material loading and discharge, while continuous processes enable stable production. Kurimoto's continuous kneaders are well placed to capture this technology shift, and overseas delivery track record and project scale already exceed those in Japan.
From One-Off Equipment Sales to Solutions Supporting Customers from R&D to Mass Production
The physical AI-based kneading technology developed with Hitachi High-Tech is intended to be bundled with equipment. It is also expected to provide ongoing support for optimizing kneading conditions after installation. This approach responds to customers' constraints in talent and funding. Kurimoto provides the testing environment and equipment, while Hitachi High-Tech supplies the software. The goal is an integrated support structure spanning the lab to the mass-production plant. The initiative began around May 2025, and the company is also considering applications beyond secondary batteries.
Strengthening the Earnings Base and Disciplined Capital Allocation
Pipe Systems is lifting profitability through the penetration of price revisions and the integration of upstream processes at the Kagaya and Sakai plants. Chemical Products has also passed higher raw material costs through to selling prices. Under the next Medium-Term Management Plan starting in FY2027, the company will prioritize and select among investment requests from each division, balancing them against capital policy. The basic shareholder return policy is to maintain the dividend level. Allocation between shareholder returns and growth investment will be a key focus in formulating the next MTP.
Envalith's Perspectives
Battery manufacturing is moving from batch to continuous processes. With its continuous kneaders, Kurimoto is positioned to ride this technology shift. Evaluation testing projects are concentrated in Japan, but actual delivery volumes are driven mainly by overseas customers, who make investment decisions faster. Despite concerns over a slowdown in the electric vehicle (EV) market, management highlights the broadening of demand, including stationary energy storage systems (ESS) for data centers.
The physical AI-based kneading technology is envisaged both as an equipment add-on and as post-installation optimization support. This could create a recurring revenue stream on top of equipment sales. The integration of Kurimoto's testing infrastructure into the Hitachi Group's Lab to Fab concept (linking R&D to manufacturing) is significant. It should also raise the likelihood of Kurimoto equipment being adopted at the mass-production stage. Management has not disclosed a monetization timeline, but the potential to expand into applications beyond secondary batteries is noteworthy as upside to business scale.
The latest upward revision largely adds only the 1Q beat, with the original plan maintained for 2Q onward. In Pipe Systems, the roughly 10% price increase applied to orders received from October 2024 is taking effect first in fast-turnover small-diameter pipes. The integration of upstream processes at the two plants, which began in July 2026, should improve production efficiency over the medium to long term. In the Machinery business, revenue recognition slipped, but the projects have not been lost and will be booked in subsequent quarters.
The current MTP (FY2024–FY2026) is running well ahead of plan on a P&L basis. However, operating cash flow was hit by compliance with the revised Subcontract Act, although the impact is temporary. Management expects operating cash flow to grow, supported by tailwinds from national resilience and the government's growth strategy. The company intends to be selective in its investments, using proceeds from the sale of cross-shareholdings while avoiding an excessive increase in interest-bearing debt. At the same time, management signaled the flexibility to invest aggressively when opportunities for substantial business growth arise.
We highlight the following five key risks: 1. Delays in battery investment timing due to changes in national EV policies 2. Earnings volatility in the Machinery business driven by percentage-of-completion revenue and shifts in customer acceptance timing 3. Payback from one-off positives in 1Q (stronger small-diameter pipe demand, inventory build ahead of plant integration, and pre-buying ahead of Chemical Products price hikes) 4. Fluctuations in raw material prices such as naphtha, and the procurement environment 5. Higher interest-bearing debt as investment expands
Q&A Highlights
- Q
What is the strategic positioning of battery equipment, and what is the customer mix?
AWithin Machinery Systems, it is positioned as one of the strategic growth areas we are pursuing toward 2030. Customers are mainly battery makers and automakers, followed by electrode material manufacturers; we currently have no sales to equipment makers. Sales to material manufacturers involve upstream processes, so crushers and dryers are the main products, and project sizes are large. Evaluation testing is overwhelmingly domestic. However, with the shift from batch to continuous processes, overseas delivery track record and project scale now exceed Japan's, as overseas customers make investment decisions faster.
- Q
What are your assumptions for a recovery in battery-related orders, and when do you expect it?
ANational policies and regulations are major factors, but we place the greatest weight on first-hand information from concrete customer inquiries. While an EV slowdown is widely discussed, ESS demand for data centers is growing, and customers believe EVs will inevitably grow in the future. We have information that investment will gradually resume from around 2027 and expand toward a peak around 2030, and we are preparing accordingly.
- Q
How will the kneading AI developed with Hitachi High-Tech be offered, and how will it be monetized?
AWe are considering both bundling it with equipment and providing ongoing support to optimize kneading conditions after installation. The aim is to become a partner that supports customers from early-stage R&D through mass-production ramp-up. We provide the testing site, equipment and personnel, while Hitachi High-Tech provides the software. We only started around May 2025, so monetization will take some time. We will steadily advance the initiative, including expansion into applications beyond secondary batteries.
- Q
What was the rationale for acquiring the powder equipment business from IHI?
AThe acquisition was not intended to generate synergies with our kneaders. It fills sizes missing from our existing vertical mill lineup and prevents competitors from taking market share. Its main purpose is to reinforce the product lineup and market share of our powder equipment business.
- Q
Why was the full-year upward revision small despite a strong 1Q?
AWe mainly added the 1Q beat and kept 2Q–4Q essentially unchanged from the original plan. Strength in pipes was driven mainly by three factors:
・ The roughly 10% price increase applied to orders from October 2024 took effect quickly in small-diameter pipes, which have short order-to-shipment lead times ・ Ahead of the upstream process integration at the Kagaya and Sakai plants, we built up inventory, which raised the utilization rate and improved fixed-cost absorption ・ Demand for seismic reinforcement of schools and hospitals may have emerged
In Chemical Products, there was pre-buying ahead of price increases effective for shipments from June 2026. Because these include one-off factors, they are not factored into the plan. The Machinery business was revised downward due to delays in percentage-of-completion revenue recognition and shifts in acceptance timing at customers' request.
- Q
What is your thinking on capital policy, including share buybacks?
AThe current MTP is ahead of plan on a P&L basis, but operating cash flow was temporarily hit by compliance with the revised Subcontract Act. We expect it to recover and continue growing from this fiscal year onward, supported by national resilience tailwinds. Under the next MTP, we will prioritize investment requests from each division and use proceeds from the sale of cross-shareholdings. We will maintain shareholder returns while monitoring the balance with interest-bearing debt. That said, we will not hold back on investment if opportunities for substantial business growth arise.
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