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Introduction & Market Context
Tsugami Corporation (TSE:6101), a leading Japanese machine tool manufacturer, has reported substantial growth in its first half of fiscal year 2024, according to the company’s latest financial presentation. The results show significant improvement across key metrics, with the company raising its full-year outlook amid strong demand for its products.
The company, which specializes in precision machine tools for IT, automotive, and other industrial applications, has demonstrated resilience and growth despite various market challenges, with particularly strong performance in its Chinese operations.
First Half Performance Highlights
Tsugami delivered impressive results for the first half of FY2024, significantly outperforming both its previous outlook and year-over-year comparisons. Revenue reached 49.7 billion yen, representing a 23.6% increase compared to the same period last year and exceeding the previous outlook by 7.1%.
The company’s profitability metrics showed even stronger improvement, with operating profit surging 66.9% year-over-year to 9.9 billion yen, resulting in an operating profit ratio of 19.9%. Profit attributable to owners of parent more than doubled, jumping 119.6% to 4.8 billion yen compared to the first half of FY2023.
As shown in the following financial results summary:
Basic earnings per share for the first half reached 101.96 yen, compared to 45.73 yen in the same period last year, representing a substantial improvement in shareholder value creation.
Financial Position and Cash Flows
Tsugami’s balance sheet showed continued strengthening, with total assets increasing from 111.4 billion yen in September 2023 to 118.3 billion yen in September 2024. The company’s equity position improved significantly, with total equity rising from 69.3 billion yen to 78.7 billion yen over the same period.
The following balance sheet summary illustrates the company’s financial position:
Cash flow from operations decreased from 6.2 billion yen in the first half of FY2023 to 1.8 billion yen in the current period, primarily due to increases in trade receivables and inventories. The company reported profit before tax of 9.8 billion yen, up from 6.4 billion yen in the previous year. Notable cash flow activities included income of 3.6 billion yen from the partial sale of shares in Chinese subsidiaries and associates, partially offsetting capital investments in China and India.
Revised Full-Year Outlook
Based on the strong first-half performance, Tsugami has revised its full-year outlook upward. The company now forecasts revenue of 97.0 billion yen for FY2024, representing a 15.6% increase year-over-year and 7.8% above its previous outlook of 90.0 billion yen.
Operating profit is expected to reach 18.5 billion yen, up 41.3% from FY2023 and 23.3% higher than the previous forecast. Profit attributable to owners of parent is projected at 8.0 billion yen, a 48.8% increase from the previous year and 23.1% above the earlier outlook.
The revised earnings per share forecast stands at 169.76 yen, compared to the previous outlook of 137.43 yen and FY2023 actual of 112.57 yen.
Strategic Investments and Expansion
Tsugami is actively investing in capacity expansion and R&D to support future growth. The company’s capital investment and R&D plans highlight its strategic priorities:
Key strategic investments include:
1. Expansion of the Precision Nakatsu facility in China with a total investment of 2.5 billion yen, expected to increase production capacity by approximately 20%.
2. A new factory in India with a total investment of 3.6 billion yen, featuring 58,900 square meters of land area and casting production capacity of 500 tons per month.
3. Plans for a new facility at the Nagaoka Factory in Japan, with an approximate investment of 2.3 billion yen. Construction is scheduled to begin in July 2025, with operations expected to commence in April 2027.
Shareholder Returns and Dividends
Tsugami has demonstrated a commitment to increasing shareholder returns, with a consistent pattern of dividend growth. The company has announced a forecast dividend of 54 yen per share for FY2025, up from 48 yen in FY2024 and 46 yen in FY2023.
The company’s shareholder return policy is illustrated in the following chart:
The dividend payout ratio is expected to be 31.8% for FY2025, down from 42.6% in FY2024 but higher than the 20.8% recorded in FY2022. Total dividends are forecast to reach 2.57 billion yen in FY2025.
In May 2024, Tsugami also canceled 2 million treasury shares, further enhancing shareholder value. The company’s key indicators show positive trends in book value per share and return on equity:
Revenue Distribution and Order Trends
Tsugami’s revenue is diversified across business segments and geographic regions, with China representing the largest market. The company’s revenue by business segment shows the relative contributions of IT, automotive, and other sectors:
Geographic distribution of revenue highlights the company’s global footprint, with significant presence in China, Asia, Europe, USA, and domestic Japanese markets:
Order trends indicate strong business momentum, with both domestic and foreign demand contributing to the company’s growth:
As Tsugami continues to execute its growth strategy through capacity expansion and product development, the company appears well-positioned to capitalize on demand across its key markets and business segments. The substantial upward revision to its full-year outlook reflects management’s confidence in sustained performance through the second half of fiscal year 2024.
Full presentation:
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