UNION TOOL CO.

Business Details

This is the domestic segment operated directly by Union Tool Co., Ltd. It manufactures and sells industrial cutting tools centered on PCB Drills (Carbide Drills for Printed Circuit Boards) and Carbide End Mills. The segment includes the Nagaoka Plant, the company's main production base for high value-added tools, and leverages in-house know-how for internal equipment manufacturing as a key strength. In addition to sales to domestic customers, the segment also handles internal transfers to overseas subsidiaries, functioning as the supply base for the entire group. Demand for high-quality products has remained solid against the backdrop of generative AI-related demand, supported by expanded production capacity.

Recent Overview

Achieved substantial growth with sales up 31.7% and operating profit up 68.7%, driven by generative AI demand.

In Q1 FY2026 (ending March 2026) (January–March 2026), demand for high-quality products remained solid against the backdrop of generative AI-related market demand. Expanded production capacity in response to growing demand for high-quality products contributed to results, with segment sales (including internal transactions) reaching ¥7,834 million (up 31.7% year on year) and segment profit (operating profit) reaching ¥2,072 million (up 68.7% year on year). As a subsequent event, the company disposed of treasury shares through a public offering (1,800,000 shares, total payment amount of ¥28,162 million) in April 2026, with proceeds to be allocated to the construction cost of the Nagaoka No. 6 Plant and equipment expansion funds for the Nagaoka Plant and Mitsuke Plant.

Key Products

Growth Drivers

• Increasing demand for tools used in package substrates and high-layer-count boards for AI servers and data centers, driven by the spread of generative AI
• Improved profitability through increased sales of high value-added, high-quality products (sales mix improvement)
• Expanded production capacity and secured supply through large-scale capital investment at the Nagaoka Plant (full-year plan of ¥10,469 million)
• Early equipment startup and strengthened inter-site collaboration leveraging in-house equipment manufacturing know-how
• Expansion of internal group transfers (supply to overseas subsidiaries) (¥4,219 million in Q1)
• Construction of the Nagaoka No. 6 Plant and equipment expansion utilizing proceeds from the public offering (maximum net proceeds of approximately ¥32,370 million)

Risks

• Risk of profit pressure due to increased cost burden associated with large-scale capital investment and production expansion
• Risk of sharp fluctuations in generative AI-related demand (market environment with high demand volatility)
• Impact of U.S. trade policy and tariff measures on the electronics industry
• Foreign exchange risk (Q1 actual rate of ¥159.88/USD versus full-year plan assumption of ¥145.00, a yen-appreciation assumption; export profitability would deteriorate if the yen strengthens further)
• Risk of impairment of fixed assets (potential future impairment risk associated with large-scale capital investment)
• Risk of delays in equipment startup (given the unprecedented scale and speed of the expansion plan)