KYOWAKOGYOSYO CO.,LTD.

Business Details

Manufactures and sells bolts through an integrated production system covering everything from cold forging and hot forging of raw materials to heat treatment. The construction machinery segment accounts for approximately 95.8% of net sales and is the mainstay business, with sales to Komatsu Ltd. and Komatsu Logistics Corp. accounting for approximately 37% of net sales. The company also operates in the Automotive-Related Parts, Bolts for Industrial Machinery, and other segments. Group subsidiary Kyowa Work Style Co., Ltd. handles plating processing, and affiliate Netsuren Komatsu Co., Ltd. handles high-frequency hardening processing, forming a complementary manufacturing process structure within the group.

Recent Overview

In FY2026 (ending March 2026)... for the fiscal year ending April 2026, both net sales and profit increased significantly year on year, but a sharp profit decline is projected for the following fiscal year

For the fiscal year ending April 2026, the company achieved net sales of ¥10,828 million (up 3.5% year on year) and operating profit of ¥1,088 million (up 32.9% year on year), a substantial profit increase. The construction machinery segment led this growth, and thorough cost management also improved the gross profit margin (from 19.0% in the prior period to 20.4% in the current period). On the other hand, for the fiscal year ending April 2027, the company forecasts net sales of ¥10,740 million (down 0.8% year on year) and operating profit of ¥720 million (down 33.8% year on year), a substantial profit decline. This is due to concerns over stagnating demand in the construction machinery industry stemming from the slowdown in the Chinese economy and the impact of additional U.S. tariffs. Net assets expanded to ¥17,223 million (up ¥1,567 million year on year) due to increased holdings of investment securities and securities.

Key Products

Growth Drivers

• Top-line growth driven by recovery in the construction machinery segment (fiscal year ending April 2026: ¥10,373 million, up 3.7% year on year)
• Improvement in gross profit margin (from 19.0% in the prior period to 20.4% in the current period) through thorough cost management, along with reduced SG&A expenses (from ¥1,172 million in the prior period to ¥1,125 million in the current period)
• Boost to ordinary profit from increased non-operating income such as interest and dividends received (from ¥113 million in the prior period to ¥168 million in the current period)
• Strengthened financial base through increased holdings of securities and investment securities (investment securities: ¥3,380 million, securities: ¥5,199 million)
• Steady demand for bolts for construction machinery underpinned by infrastructure investment demand in major advanced economies

Risks

• Risk of declining demand in the construction machinery industry, the company's main customer base (operating profit is projected to decline 33.8% in the fiscal year ending April 2027 due to the impact of the Chinese economic slowdown and additional U.S. tariffs)
• Risk of sales concentration in Komatsu Ltd. and Komatsu Logistics Corp. (combined accounting for approximately 37% of net sales)
• Risk of rising manufacturing costs due to surging raw material prices and energy costs
• Declining sales trend in the automotive-related segment (¥102 million in the fiscal year ending April 2026, down 2.4% year on year)
• Continued gap between the ROE target (8.0% or higher) and the actual result of 5.2%, despite an improving trend (a renewed decline is expected in the following fiscal year)
• Changes in liquidity due to a decrease in cash and cash equivalents (from ¥5,049 million in the prior period to ¥4,089 million in the current period) and increased allocation to time deposits