Mitsubishi Steel Mfg. Co., Ltd. Q1 FY2027 Earnings Analysis: Upward Revision to H1 Forecast Driven by Early Resolution of Blast Furnace Issues and Strong Equipment Performance

Mitsubishi Steel Mfg. Co., Ltd. (Securities Code: 5632) reported significant year-on-year growth in both revenue and profit for the first quarter of the fiscal year ending March 31, 2027 (April 1, 2026 – June 30, 2026). This performance was driven by the faster-than-anticipated resolution of blast furnace issues and fire accidents from the previous fiscal year, combined with growth in the Equipment & Machinery and Formed Parts businesses, as well as improved non-operating income resulting from the depreciation of the yen.

This report provides a detailed analysis of the company's key performance highlights, the mechanisms behind the fluctuations, segment-specific performance, and the upward revision of the first-half earnings forecast based on the disclosed financial materials.

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1. Q1 FY2027 Earnings Summary

The consolidated results for the first quarter showed robust performance, exceeding the figures from the same period of the previous year across all major metrics.

• Net Sales : ¥40.6 billion (Up ¥2.5 billion / +6.6% YoY)
• Operating Profit : ¥1.4 billion (Up ¥0.6 billion / +75.0% YoY)
• Ordinary Profit : ¥1.3 billion (Up ¥1.1 billion / +550.0% YoY)
• Profit Attributable to Owners of Parent : ¥0.7 billion (Turned profitable with an increase of ¥0.8 billion from a loss of ¥0.1 billion in the same period last year)

Overall revenue growth was driven by the Springs business , which saw increased sales volumes in North America and Japan, and the Equipment & Machinery business , which experienced strong order intake. On the profit front, contributions from the overseas steel business and the Equipment & Machinery segment, coupled with foreign exchange gains, significantly improved non-operating income, leading to a return to profitability at the net income level.

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2. Analysis of Revenue and Operating Profit Fluctuations

The following waterfall chart data is essential for understanding the internal structure of the Q1 revenue and profit growth.

[Slide Commentary: Factors Affecting Revenue and Operating Profit]

The slide above details the causal relationships behind the increase in net sales from ¥38.1 billion to ¥40.6 billion and operating profit from ¥0.8 billion to ¥1.4 billion.

Factors for Revenue Fluctuation (+¥2.5 billion) :

1. Sales Volume : +¥0.4 billion (Increased shipments of springs and precision castings)
2. Contracted Volume : -¥0.3 billion
3. Price Improvement : +¥0.5 billion (Progress in price pass-through)
4. FX Impact : +¥1.4 billion (Translation gains due to yen depreciation)
5. Other : +¥0.5 billion

Factors for Operating Profit Fluctuation (+¥0.6 billion) :

• Positive Factors : Increased sales volume ( +¥0.4 billion ), price improvements ( +¥0.5 billion ), raw material costs (non-market improvements +¥0.6 billion ), and inventory valuation/other ( +¥0.7 billion ) provided significant profit boosts.
• Negative Factors : Despite headwinds from raw material market prices ( -¥1.3 billion ) and increased production costs/fixed costs ( -¥0.3 billion ), these were fully absorbed by the aforementioned improvements and volume growth, securing a final ¥0.6 billion increase in operating profit .

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3. Segment Performance

The status and performance of each business segment are as follows:

① Special Steel Products

• Net Sales : ¥17.6 billion (Down ¥1.1 billion YoY)
• Operating Profit : ¥0.1 billion (Up ¥0.1 billion YoY)
• Business Status : Domestic sales volume decreased to 74,000 tons (from 84,000 tons in the same period last year). While the lingering effects of the previous year's blast furnace issues and fire accident impacted the first half of Q1, normal operations resumed in late May , and the impact has since been resolved. Conversely, the overseas (Indonesian) business saw increased sales volume and improvements in pricing and costs, contributing to higher revenue and profit.

② Springs

• Net Sales : ¥19.4 billion (Up ¥1.7 billion YoY)
• Operating Profit : ¥0.8 billion (Flat YoY)
• Business Status : Revenue increased due to higher sales volumes at the North American subsidiary, FX impacts, and increased domestic sales of leaf springs and the launch of new mass-produced automotive springs. However, profit remained at the same level as the previous year due to temporary productivity declines at the North American subsidiary, material import restrictions in Canada, and cost increases related to Middle Eastern tensions.

③ Formed Parts

• Net Sales : ¥2.6 billion (Up ¥0.6 billion YoY)
• Operating Profit : ¥0.2 billion (Up ¥0.1 billion YoY)
• Business Status : The segment achieved revenue and profit growth as price pass-through for special alloy powders progressed following the rise in alloy raw material prices, which had previously faced a time lag. Additionally, sales volumes for precision castings increased.

④ Equipment & Machinery

• Net Sales : ¥2.8 billion (Up ¥1.0 billion YoY)
• Operating Profit : ¥0.3 billion (Turned profitable with an increase of ¥0.4 billion from a loss of ¥0.1 billion YoY)
• Business Status : Sales of protective equipment, gas turbine products, tower/vessel equipment for overseas chemical plants, and forging machinery grew significantly. The synergy between increased capacity utilization and improved productivity across various products led to a dramatic turnaround in profitability.

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4. Non-Operating Income/Expenses and Impact on Final Profit

Understanding the impact of foreign exchange fluctuations is essential when analyzing the process from operating profit to ordinary and net profit.

[Slide Commentary: Impact of Non-Operating and Extraordinary Items]

The slide above clearly illustrates how exchange rate fluctuations contributed to non-operating income and ordinary profit.

• Exchange Rate Trend : The yen depreciated significantly from ¥150 at the end of the previous fiscal year (FY26/3) to ¥162 at the end of Q1 FY27/3 (a substantial depreciation compared to ¥145 in the same period last year).
• Improvement in Non-Operating Income/Expenses : Improved by ¥0.5 billion, from a loss of ¥0.6 billion in the same period last year to a loss of ¥0.1 billion . This was primarily due to a turnaround in foreign exchange gains/losses, which shifted from a loss of ¥0.4 billion last year to a gain of ¥0.2 billion this period.
• Impact on Ordinary Profit : Combined with the growth in operating profit (+¥0.6 billion) and the improvement in non-operating items (+¥0.5 billion), ordinary profit saw a significant expansion to ¥1.3 billion (up ¥1.1 billion YoY).

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5. Revision of Earnings Forecast and Future Outlook

Following the strong Q1 performance, the company announced an upward revision to its first-half (cumulative Q2) earnings forecast.

[Slide Commentary: Revision of Earnings Forecast]

This slide shows the upward revision for the first half based on current progress and the management's rationale for maintaining the full-year forecast.

H1 FY27/3 Forecast Revisions :

• Net Sales : ¥80.5 billion ( Unchanged )
• Operating Profit : ¥2.0 billion → ¥2.8 billion ( +¥0.8 billion upward revision )
• Ordinary Profit : ¥1.4 billion → ¥2.2 billion ( +¥0.8 billion upward revision )
• Interim Profit Attributable to Owners of Parent : ¥0.7 billion → ¥1.2 billion ( +¥0.5 billion upward revision )

Rationale for Revision : The revision is due to the faster-than-expected resolution of blast furnace issues in the domestic Special Steel Products business and better-than-expected volume growth, pricing, and productivity improvements in the Formed Parts and Equipment & Machinery businesses.

Full-Year Forecast Maintained (Net Sales ¥166.0 billion, Operating Profit ¥6.4 billion, Ordinary Profit ¥5.1 billion, Net Profit ¥3.1 billion) : While the first-half forecast was increased, the full-year forecast remains unchanged from the initial plan. This reflects a cautious stance, considering the completion of ramp-up support for customer mass production in the Springs business, cost increases due to Canadian material import restrictions, and global macroeconomic uncertainties, including the situation in the Middle East.

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6. Topics: Strengthening Expansion into Aerospace

A key qualitative topic in the growth strategy is a major order received by the subsidiary, Mitsubishi Nagasaki Machinery Mfg. Co., Ltd.

They received an order for a "large ring rolling mill and a complete set of forging presses" —equipment used to manufacture large ring materials for rockets—from UACJ Corporation, a major aluminum product manufacturer. This project is part of an initiative adopted under the Japan Aerospace Exploration Agency (JAXA) public offering theme: "Innovation in rocket manufacturing processes to contribute to high-frequency launches."

This company is the only one in Japan with the equipment technology capable of producing ring materials exceeding 5 meters, the largest specification in the country. Combined with their "JIS Q 9100" certification (the quality management system standard for the aerospace industry), this order is a result of the high evaluation of their advanced engineering capabilities. Operations are scheduled to begin in 2029, marking a significant move toward strengthening their medium- to long-term technological foundation.

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7. Conclusion

Mitsubishi Steel's Q1 FY2027 results successfully combined recovery from previous operational issues with growth in high-value-added businesses such as Equipment & Machinery and Formed Parts. Benefiting from the tailwind of a weaker yen, the company has achieved an upward revision to its first-half profit forecast , and current earnings momentum remains strong.

Moving forward, while closely monitoring external risks such as regulatory impacts in overseas markets, cost increases, and Middle Eastern tensions—which led to the decision to maintain the full-year forecast—the company is expected to continue its growth through productivity improvements in the Springs business and focus areas such as high-performance products and the aerospace sector.