6814.T

• Overall 3-Year Performance Context

  • 3 consecutive years of record revenue and profit, driven by strong shipping market conditions (shipping/shipbuilding accounts for ~40% of total revenue), 20% yen depreciation over the period, and implemented inflation-aligned price adjustments to offset rising input and labor costs
  • The shipbuilding market is in an upcycle of its 20-25 year cycle, and management expects strong conditions to continue for the foreseeable future
  • Even with some mild yen appreciation projected, yen will remain at weak levels relative to historical averages

• FY2026 February Full Year Results

  • Consolidated revenue: 140.616 billion yen, 10.8% YoY increase; operating profit 16.246 billion yen, 23.3% YoY increase; operating margin 11.6%; net income attributable to parent shareholders 16.735 billion yen, 46.1% YoY increase; net margin 11.9% (first full-year net margin over 10%)
  • R&D spend 6.014 billion yen, 4.3% of revenue (consistent with target of 4.5-5% of revenue annually)
  • Return metrics: ROE 20.7%, ROIC 15.5%, equity ratio 63.2%, all improved YoY
  • Defense equipment, delayed by H1 system change issues, recovered in Q4 and hit full-year targets

• New Medium-Term Management Plan (3-year to FY2029 February)

  • Positioned as an investment phase to build growth foundations for the long-term NAVI NEXT 2030 vision (which was achieved ahead of schedule)
  • Core goals: Reduce business volatility from the cyclical marine sector by growing less cyclical businesses, use recent strong cash flow to fund targeted growth investments
  • Key financial targets: 150 billion yen revenue, operating margin ≥10%, ROE/ROIC ≥10%, total payout ratio ~40%. The 10% operating margin target is stated as a commitment to never return to single-digit margins, with a long-term target of 10-20% matching peer benchmarks (GARMIN has over 20% operating margin, global niche top manufacturers average 13-14%)
  • Priority investment areas: 1) Maintenance services (key driver of stable, high-margin, capital-efficient recurring revenue from the large base of existing vessels with Furuno equipment); 2) Low-share pleasure boat segment (target gradual share growth from ~10% via differentiated high-tech products, bundled hardware/software/service offerings); 3) Work boats (stable demand, low price competition, long project cycles); 4) Defense equipment (high long-term growth certainty backed by government budgets); 5) High-precision GNSS (global niche leading position); 6) New businesses
  • Strategic shift: Move from pure hardware one-time sales to bundled hardware/software/service offerings aligned with vessel lifecycles, growing recurring stock revenue from services
  • Key planned investments: Human capital (AI, cybersecurity talent, skill development), service infrastructure, PLM for improved product development efficiency, IT infrastructure for manufacturing productivity, DX and new product development

• FY2027 February Full Year Guidance:
  • Consolidated revenue: 148.5 billion yen, 5.6% YoY increase
  • Operating profit: 17.0 billion yen, 4.6% YoY increase; operating margin 11.4% (maintained at double-digit levels)
  • Net income attributable to parent shareholders: 13.0 billion yen, 22.3% YoY decrease, driven by the expiration of FY2026 one-off tax credits and subsidies that boosted the prior year bottom line, returning to normal tax levels
  • Marine business expected to maintain FY2026 sales volume levels, with moderate growth supported by continued strong newbuilding demand and yen depreciation benefits
  • Industrial business growth driven by defense equipment and GNSS; defense equipment revenue projected to rise to 7 billion yen from 5.5 billion yen in FY2026
  • Dividend: Maintain full-year dividend per share at 160 yen, even with projected net income decline, for a payout ratio of 38.9%
  • Does not include potential impacts from Middle East geopolitical tensions

1. Marine Business (Hakuyo Jigyo): Revenue of 121.1 billion yen, 11.5% YoY increase, contributing 91% of total consolidated revenue growth. Segment profit of 16.76 billion yen, 3.43 billion yen YoY increase. 20% domestic / 80% international revenue split. Growth was driven by strong new shipbuilding demand for commercial vessels, high sales of high-function sonar for pleasure and sports fishing boats in the Americas, expanding maintenance service revenue, and strong growth across Europe, Asia, and the Americas (29.2% YoY growth in the Americas).

2. Industrial Business: Revenue of 15.8 billion yen, 11.3% YoY increase, segment profit of 0.78 billion yen, 0.29 billion yen YoY increase. Breakdown: Defense equipment revenue 5.5 billion yen (22.6% YoY increase, up from historical 2 billion yen levels); ITS/GNSS revenue 8.8 billion yen.

3. Wireless LAN / Handy Terminal Business: Challenging low business environment, revenue of 3.3 billion yen.

• Marine/shipbuilding business is inherently cyclical, with volatility from shipping market cycles
  • Large-scale growth in defense equipment requires proportional increases in personnel and manufacturing capacity, creating organizational scaling challenges
  • Growing connected vessel trends increase cybersecurity threat exposure for onboard networks
  • The wireless LAN/handy terminal business continues to face weak market conditions post the GIGA School program boom, with the NEXT GIGA program not expected to drive demand for 2-3 years
  • Inventory levels have increased slightly, though raw material inventories remain stable, as the company prioritizes material security

Q: The medium-term plan lists ~25 billion yen for maintenance investment — what is this for, and what expansion plans do you have for maintenance services? / A: This was a misinterpretation of the slide: it is a 25 billion yen revenue target for maintenance by the end of the medium-term plan, not capital expenditure. The core strategy is to expand remote maintenance leveraging connected vessel data: pre-diagnose issues to complete repairs in one on-site visit, expanding service capacity without proportional resource increases. Management also sees growing customer demand for direct manufacturer maintenance of highly networked bridge systems and cybersecurity support, so Furuno will take back more direct service from third-party one-stop maintenance providers, leveraging proprietary product data.

Q: What is the growth outlook for defense equipment, given you are refreshing production systems and saw sharp Q4 growth? / A: FY2026 defense revenue hit 5.5 billion yen, and FY2027 is guided to 7 billion yen, with a large backlog stretching over multiple years with high visibility. The production system refresh was driven by outdated systems from when the business was much smaller (1-2 billion yen annual revenue), needed to support future growth. The business development model relies on winning development contracts that lead to repeat long-term business, so there is built-in upside to current projections. Furuno is also pushing to deploy defense-proven technology to commercial marine and other civilian segments, and has reallocated 8 senior leaders from core marine and land businesses to grow the aerospace/defense segment. The business will grow gradually aligned with Furuno's organizational and manufacturing capacity to maintain quality.

Q: Why is the medium-term revenue target of 150 billion yen conservative, when FY2027 guidance is already 148.5 billion yen? / A: The medium-term plan sets targets that are achievable to communicate clear goals to internal staff, while the company will aim for upside beyond the published target. The 10%+ operating margin target is a firm commitment to maintaining double-digit margins, not a cap, with a long-term target matching peer levels of 13-20%, with more detailed long-term targets to be published later this year.