NAGAOKA INTERNATIONAL CORPORATION

Business Details

Manufactures and sells "Screen Internal" internal equipment that supports catalysts inside reaction towers at petroleum refining, petrochemical, and fertilizer plants. Customers are global process owners including Honeywell UOP, with the company utilizing its subsidiary in Dalian, China as a manufacturing base. The products require long-term durability and high precision under high-temperature, high-pressure, and highly corrosive environments, and obtaining certification from process owners serves as a barrier to entry. This core business accounted for approximately 64.4% of consolidated revenue in the cumulative nine months of FY2026 (ending June 2026).

Recent Overview

Revenue declined 12.2% YoY due to decreased sales to China and project delays; profit margin fell into the mid-20% range

For the cumulative nine months of FY2026 (ending June 2026), Energy-related Business revenue was ¥3,228 million (down 12.2% YoY), and segment profit was ¥811 million (down 28.4% YoY). In addition to a decrease in sales to China, manufacturing for non-China projects was delayed more than expected due to U.S. policy trends and Middle East conditions, lowering factory utilization rates. Increased fixed manufacturing cost burden combined with rising raw material prices and freight costs pushed down profitability. Additionally, for some already-ordered projects, customer financing issues and prolonged specification-change negotiations between end users and process owners caused temporary project suspensions, with manufacturing halts continuing. On the other hand, the order backlog increased 27.0% from the end of the previous fiscal year to ¥2,565 million. The proportion of new plant-oriented revenue fell sharply from 23.7% in the same period last year to 4.3%.

Key Products

Growth Drivers

• Business stabilization through continued acquisition of planned equipment renewal demand from existing plants (existing plant-oriented revenue accounted for 95.7% of revenue in the cumulative nine months of FY2026, ending June 2026)
• Expansion of order opportunities through broadening the range of products beyond those with competitive advantages in specific processes
• Strengthening cost competitiveness by utilizing the Dalian, China manufacturing base and optimizing manufacturing locations in light of geopolitical risks
• Reduced dependence risk on specific markets through global regional diversification, including the Middle East (26.4%), Americas (18.4%), China (29.9%), and Asia (15.8%)
• Improved profit margins through selective order intake of highly profitable projects and cost reduction
• Expectations for revenue recovery from the fourth quarter onward, supported by an order backlog of ¥2,565 million (up 27.0% from the previous fiscal year-end)

Risks

• Decline in plant capital investment due to China's economic slowdown and changes in the energy environment (China accounted for 29.9% of revenue in the cumulative nine months of FY2026, ending June 2026)
• Risk of customer project delays or suspensions due to geopolitical risks such as U.S. tariff policy (project suspensions and manufacturing halts continuing for some already-ordered projects)
• Risk of project suspension due to customer financing issues or prolonged negotiations over specification changes between end users and process owners
• Decline in factory utilization rates and increased fixed manufacturing cost burden due to delays in manufacturing for new plant-oriented projects (the proportion of new plant-oriented revenue fell sharply from 23.7% in the same period last year to 4.3%)
• Risk of declining profitability due to rising raw material prices and freight costs
• Risk of revenue concentration with specific process owners and risk of certification expiration or renewal issues with process owners
• Structural risk in which the long lead time from order receipt to revenue recognition means the order backlog level directly affects revenue in subsequent periods