Japan Steel Works reports strong Q3 earnings, orders; shares surge 8.3%

Investing.com -- The Japan Steel Works, Ltd released today an impressive set of third-quarter earnings. Shares in the company rallied 8.3% in response.

The company reported a significant increase in operating profit (OP) to ¥8.7 billion for the third quarter of the fiscal year ending March 2025, up from ¥4.0 billion in the second quarter and ¥5.5 billion in the same quarter of the previous year.

Despite this strong performance, the company has maintained its full-year guidance due to expected provision charges in the fourth quarter.

The Japan Steel Works experienced a high cumulative progress rate of 77.4% towards its ¥22.0 billion OP target for the full year. However, it is preparing for provision charges related to new-generation pelletizers and twin-screw extruders in its Plastic Processing Machinery subdivision.

These charges are associated with strategic orders for prototypes expected in the fourth quarter. The company anticipates offsetting these losses through reduced cost of goods sold and by providing servicing.

In the Industrial Machinery Products division, The Japan Steel Works saw robust orders for defense and military equipment, totaling ¥44.7 billion in the third quarter, a significant increase from ¥8.5 billion in the second quarter. Orders for molding machines also remained strong, indicating resilience in the face of industry-wide challenges.

However, the company did not receive any new orders for battery separator film sheet machinery, reflecting the ongoing slump in the electric vehicle (EV) market.

The Materials & Engineering division is expected to surpass its ¥8.5 billion OP guidance for the fiscal year, with third-quarter operating profit reaching ¥2.5 billion. The company continues to receive strong orders for GTCC gas turbines and nuclear power reactor parts, with ¥16.1 billion worth of orders in the third quarter.

Jefferies analysts commented on the stock’s performance, stating, "We attribute the intraday rally to very strong quarterly earnings, and robust nuclear power & defense-related orders. The company is anticipating provisions for plastic processing machinery orders in Q4, hence it kept its FY3/25 profit guidance unchanged. No new orders for separator film-sheet systems showing the EV down-cycle."

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