SINKO INDUSTRIES LTD.

Business Details

Domestic business handled by Shinko Industries itself and domestic consolidated subsidiaries. The core business centers on the manufacture and sale of commercial AHU, FCU, and Heat Pump AHU, alongside Air Conditioning Equipment Construction & Maintenance and the Building Management Business. Piping and equipment construction companies (subcontractors) are the main customers, with focus on five priority targets: large buildings, data centers, industrial air conditioning, renewal projects, and individual air conditioning. In FY2026 (ending March 2026), the segment captured robust demand for Air Conditioning Equipment Construction & Maintenance, while a decline in central air conditioning equipment sales volume and increases in labor and logistics costs pressured profit.

Recent Overview

Net sales increased, but profit declined 6.8% YoY due to lower equipment sales volume and increased costs

In the full year of FY2026 (ending March 2026), the segment worked to capture robust demand for Air Conditioning Equipment Construction & Maintenance, achieving an increase in net sales to ¥51,332 million (up 3.1% YoY). On the other hand, a decline in equipment shipment volumes in the central air conditioning market led to lower equipment sales volume, and increases in labor and logistics costs pressured profit, resulting in segment profit (operating income) of ¥9,535 million (down 6.8% YoY). For the next fiscal year (FY2027 (ending March 2027)), the company aims to improve profitability through increased sales volume and price pass-through by strengthening sales promotion activities and project management. Equipment sales in the data center and individual air conditioning fields have been trending favorably, with performance expanding at a pace exceeding plan.

Key Products

Growth Drivers

• Expansion of data center investment: Domestic data center construction demand is rising against the backdrop of AI and cloud service expansion, increasing adoption of AHU with high airflow capacity and heat load processing capability. Equipment sales in the data center and individual air conditioning fields are expanding at a pace exceeding plan
• Expansion of the individual air conditioning market: Sales are growing in applications such as outside air processing for data centers and industrial uses. From FY2027 (ending March 2027), the company plans to launch new products targeting heat countermeasures
• Robust capture of demand for Air Conditioning Equipment Construction & Maintenance: Orders received by piping and equipment construction companies have remained at high levels amid work-style reforms in the construction industry and increases in construction unit prices
• Expansion of renewal demand: The arrival of the renewal period for AHU at buildings constructed during the period of rapid economic growth and in the 1980s-1990s is driving progress toward a stock business model
• DX and efficiency improvement of production processes: Operation of Phase 2 of the SIMA project will begin for some products from April 2026, promoting shorter manufacturing lead times and improved quality, while strengthening order response capability through increased production capacity
• Promotion of price pass-through: Strengthening efforts toward improved profitability through increased sales volume and price pass-through via sales promotion activities and enhanced project management, targeting the next fiscal year

Risks

• Decline in equipment shipment volumes in the central air conditioning market: Air conditioning equipment sales volume declined in the full year of FY2026 (ending March 2026), becoming a factor that pushed down net sales and profit. Recovery of sales volume remains a challenge for the next fiscal year
• Increased costs such as labor and logistics expenses: Increases in labor and logistics costs, among others, pressured segment profit in the full year of FY2026 (ending March 2026), contributing to the 6.8% YoY decline in profit
• Longer construction lead times and reconsideration of investment plans in the construction market: Effects of longer lead times for construction projects and reconsideration of investment plans have begun to appear amid trends in international trade policy and rising construction costs, requiring careful monitoring of future market trends
• Deteriorating availability and rising prices of raw materials: The tightening situation in the Middle East has caused deteriorating availability and rising prices of raw materials used in air conditioning equipment manufacturing, requiring a review of the supply chain
• Production capacity constraints: Increasing production capacity is necessary to support the business expansion targeted in the medium-term management plan, with risk of delay in investment execution and operational timing. The increase in tangible and intangible fixed assets for FY2026 (ending March 2026) expanded to ¥6,543 million, more than double the prior period
• Challenges in securing and developing human resources: Recruiting and developing personnel in the Air Conditioning Equipment Construction & Maintenance field is a challenge, with labor shortages and rising labor costs in the construction industry becoming pronounced