Tokai Rika Forecasts Lower FY2026 Profit Amid Rising Material Costs and Middle East Impact

Tokai Rika announced that it expects a decline in profitability for the fiscal year ending March 2027 (FY2026), mainly due to rising raw material costs and the impact of production disruptions linked to the situation in the Middle East. The company forecasts operating profit of JPY 30 billion, representing a year-over-year decline of 15.8%. Net profit is also expected to decrease by 32.1% year-over-year to JPY 20 billion. Despite lower profit expectations, the company projects sales growth of 0.8% year-over-year to JPY 650 billion, which would mark its second consecutive year of record sales performance.

The company stated that reduced vehicle production by automakers affected by the situation in the Middle East is expected to create downward pressure of approximately JPY 200 million per month on operating profit. During a press briefing held on May 15, President Hiroyoshi Ninoyu explained that automakers are implementing substitute production measures to minimize operational disruptions. According to the company, the overall annual impact from the regional instability is expected to remain limited to several billion yen due to these mitigation efforts and production adjustments across the automotive supply chain.

Tokai Rika also highlighted the financial burden caused by surging prices of precious metals used in resin materials and connectors. The company estimates that these material cost increases will reduce annual profits by approximately JPY 6 billion. Rising costs across automotive components and materials continue to pressure suppliers globally, especially companies involved in electronics and connector manufacturing. The company noted that cost inflation remains one of the largest risks affecting profitability expectations for the upcoming fiscal year.

Tokai Rika FY2026 Financial Forecast Summary

The company plans to invest JPY 33 billion in plants and equipment during FY2026, reflecting an increase of JPY 400 million compared with the previous fiscal year. The investment will primarily support high production requirements, factory automation initiatives, and labor-saving measures. Tokai Rika expects annual capital expenditure to remain above JPY 30 billion for the third consecutive year as the company continues strengthening manufacturing efficiency and operational resilience amid evolving industry conditions.

Frequently Asked Questions

Why is Tokai Rika expecting lower profits in FY2026?
Tokai Rika expects lower profits in FY2026 mainly due to rising raw material prices and production disruptions linked to the Middle East situation. The company stated that increasing costs of precious metals used in resin materials and connectors are expected to reduce profits by around JPY 6 billion annually. In addition, reduced production by automakers is estimated to create monthly downward pressure on operating profit. Despite these challenges, the company still forecasts record-level sales growth supported by stable automotive demand and substitute production measures.

What are Tokai Rika’s investment plans for FY2026?
Tokai Rika plans to invest JPY 33 billion in plants and equipment during FY2026 to support production expansion and operational efficiency improvements. The investment will focus on automation, labor-saving initiatives, and maintaining high manufacturing output levels. The company expects annual capital expenditure to exceed JPY 30 billion for the third consecutive year. These investments are intended to strengthen production capabilities, improve manufacturing resilience, and support long-term growth despite profitability pressures caused by rising costs and supply chain uncertainties.