【Kurita Water Industries Q1 FY2027 Deep Dive】Orders Surge 77.1% YoY to ¥165.7 Billion; Performance Trends Driven by Structural Reform and CSV Business Expansion

Kurita Water Industries Ltd. (Securities Code: 6370) released its financial results briefing materials for the first quarter of the fiscal year ending March 31, 2027 (April 1, 2026 – June 30, 2026) on August 7, 2026. This report provides a comprehensive analysis of key topics from the disclosed materials, offering a detailed look at the company's performance trends, segment-specific status, future growth strategies, and full-year outlook.

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1. Q1 Consolidated Performance Summary and Background of Disclosure Changes

In the first quarter of FY2027, Kurita Water Industries reported orders of ¥165.7 billion (+77.1% YoY) , net sales of ¥99.9 billion (+14.3% YoY) , and business profit of ¥8.8 billion (+7.8% YoY) . The company achieved strong top-line growth, supported by a significant increase in large-scale equipment orders for the semiconductor and electronics industries, as well as growth in the chemicals business within the General Water Treatment segment and the positive impact of a weaker yen.

Notably, there has been a significant change in the disclosure of financial data starting this quarter. On May 13, 2026, the company entered into a share transfer agreement for the "Pentagon Technologies Group" (overseas precision cleaning business), which was completed on June 30, 2026. Consequently, the overseas precision cleaning business has been classified as a "discontinued operation," and all profit and loss items—from net sales to business profit and profit before tax—are now presented on a "continuing operations" basis.

The slide above summarizes the performance for Q1 FY2027. This slide is critical as it allows for a clear view of the earning power of the core business (orders, sales, and business profit) from continuing operations, alongside the growth in operating profit and quarterly profit, which include special factors such as the share transfer.

While business profit from continuing operations stood at ¥8.8 billion (+7.8% YoY) , operating profit surged to ¥14.3 billion (+58.5% YoY) , and profit attributable to owners of the parent reached ¥14.3 billion (+154.4% YoY) . This sharp increase is primarily due to the ¥5.5 billion gain recorded under "other income/expenses" related to the sale of Pentagon Technologies . The figures reflect both the steady profitability of the core business and the one-time gains resulting from the portfolio restructuring.

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2. Analysis of Factors Affecting Consolidated Business Profit

The breakdown of the ¥0.6 billion increase in business profit (to ¥8.8 billion) highlights both the strengths of the company's revenue structure and current cost challenges.

• Revenue Growth Effect (+¥2.9 billion): Both the Electronics and General Water Treatment segments contributed to profit growth through increased sales.
• Change in Cost of Sales (-¥1.9 billion): Results varied by segment. While the General Water Treatment segment improved its cost-to-sales ratio through the expansion of high-margin CSV business, the company-wide ratio deteriorated due to additional costs for specific equipment projects in the Electronics segment and a higher proportion of lower-margin equipment sales.
• Increase in SG&A Expenses (-¥0.7 billion): SG&A expenses rose, primarily due to higher personnel costs.
• Foreign Exchange Impact (+¥0.3 billion): The weaker yen had a positive impact on profits.

As a result, organic profit growth (+¥0.3 billion) combined with the foreign exchange effect (+¥0.3 billion) secured a total business profit increase of ¥0.6 billion compared to the same period last year.

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3. Segment Performance Details

(1) Electronics Segment: Explosive Growth in Equipment Orders and Profitability Challenges

The Electronics segment saw significant progress in securing large-scale equipment projects in East Asia (South Korea, Taiwan, etc.), the U.S., and China.

This slide illustrates the performance of the Electronics segment, clearly highlighting Kurita's current presence and challenges in the semiconductor and electronics industries.

Most notable is the surge in orders. Total segment orders reached ¥97.9 billion, up from ¥33.5 billion in the same period last year (+192.2% YoY, +¥64.4 billion) . The "Equipment" category accounted for the vast majority of this, jumping from ¥6.9 billion to ¥70.1 billion (+¥63.2 billion) .

However, while net sales grew steadily to ¥45.9 billion (+23.3% YoY) , business profit fell to ¥4.1 billion (-10.9% YoY) , and the business profit margin dropped to 8.9% (down 3.3 percentage points YoY) . The decline in profit is attributed to additional construction costs for specific large-scale projects and a shift in the sales mix toward lower-margin equipment compared to higher-margin "service contracts" and "chemicals." While the backlog of orders is a leading indicator for future service and maintenance demand, short-term profitability management remains a challenge.

(2) General Water Treatment Segment: A Driver of Profitability

The General Water Treatment segment performed very solidly. Orders were ¥67.7 billion (+12.8% YoY) , net sales were ¥54.0 billion (+7.6% YoY) , and business profit was ¥4.7 billion (+30.6% YoY) , with the business profit margin improving to 8.8% (+1.5 percentage points YoY) .

Growth was driven by domestic equipment projects, the expansion of the "chemicals" business in North America and Japan, and the growth of the "CSV business." Concerns regarding the impact of Middle Eastern tensions did not materialize as expected, and the weaker yen provided a tailwind for both orders and sales.

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4. Core Growth Strategy: Evolution of CSV Business and Global Expansion

Central to Kurita's medium-to-long-term growth story is the "CSV (Creating Shared Value) Business," which simultaneously creates environmental value—such as water conservation, CO2 reduction, and waste reduction—and economic value for customers.

This slide shows the trend in CSV business sales and the expansion of the number of models. It is a vital indicator for measuring the shift in the company's business model from "simple equipment/chemical sales" to "customer-centric, contract-based service solutions."

In Q1 FY2027, consolidated CSV business sales reached ¥16.7 billion (+35.8% YoY, +¥4.4 billion) , tracking well toward the full-year target of ¥68.0 billion. By segment, Electronics contributed ¥4.2 billion (+¥1.8 billion) , and General Water Treatment contributed ¥12.5 billion (+¥2.6 billion) . The service business ratio of the CSV business to total sales has reached 94% in General Water Treatment, indicating the successful construction of a stock-based revenue foundation. Furthermore, the number of CSV business models has expanded to 134 , ensuring a wider variety of proposals for customers.

Regionally, the company achieved year-on-year sales growth in all regions : Japan (¥48.4 billion, +¥2.9 billion), Asia (¥25.0 billion, +¥4.0 billion), North/South America (¥14.8 billion, +¥2.9 billion), and EMEA (¥11.7 billion, +¥2.7 billion), demonstrating a steadily strengthening global business foundation.

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5. Shareholder Returns and Upward Revision of Full-Year Forecasts

The company has revised its full-year earnings forecast to reflect performance progress and the results of structural reforms related to discontinued operations.

(1) Revisions to Full-Year Forecasts

• Orders: ¥470.0 billion (unchanged)
• Net Sales: ¥425.0 billion (unchanged)
• Business Profit: ¥61.5 billion (unchanged, 14.5% margin)
• Operating Profit: ¥65.5 billion ( upward revision of ¥5.0 billion from initial forecast )
• Profit Attributable to Owners of the Parent: ¥50.7 billion ( upward revision of ¥8.7 billion from initial forecast )
• ROE: 14.9% ( up 2.5 percentage points from the initial 12.4% forecast )

While the core business metrics (orders, sales, business profit) remain in line with initial plans, the completion of the Pentagon Technologies share transfer resulted in a gain that pushed "other income/expenses" to +¥4.0 billion (a ¥5.0 billion positive variance) compared to the initial forecast of -¥1.0 billion. This has led to significant upward revisions in operating profit, net profit, and ROE.

(2) Strengthening Shareholder Returns (Share Buybacks)

Based on a board resolution from May 14, 2026, the company is conducting a share buyback program with a limit of 5 million shares and ¥35.0 billion . As of July 31, 2026, the company had acquired 1.85 million shares for ¥16.1 billion , demonstrating a proactive stance toward improving capital efficiency and returning value to shareholders.

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6. Summary and Future Outlook

In summary, the Q1 FY2027 results show that Kurita Water Industries is solidifying its future growth foundation through large-scale equipment orders in the advanced semiconductor sector (a 77.1% YoY increase in total company orders) while steadily improving margins in General Water Treatment through the expansion of its CSV business. The company has also demonstrated a clear management policy of pursuing asset efficiency through the divestment of non-core businesses (Pentagon Technologies) and utilizing the proceeds to enhance shareholder returns (¥35 billion in buybacks) and improve ROE (to 14.9%).

Key points to watch moving forward include whether the surge in large-scale equipment orders in the Electronics segment will be successfully converted into sales and profit, and whether the company can control additional costs and improve profitability on specific projects as planned. The continued accumulation of stock-based service contracts remains the key to the company's sustainable growth.