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Noritz has seen a revenue acceleration driven by domestic Japanese markets, with foreign markets faltering. Structural profitability could increase with the emergence of the commercial segment and with the significant cost-cutting plan. The company continues to be undervalued, and now an activist presence on top of a chance for better operational performance could drive stock performance.
Noritz is investing its large non-operating balance into industrial modernization and foreign market distribution, signaling potential profitability improvements despite tariff risks on tankless water heaters. The company has revised its sales expectations to 200 billion JPY for the full year, with operating income expected at 16 billion JPY, indicating soft end markets still. The US market faces potential tariff risks on imported tankless water heaters, but Noritz at least produced its boilers domestically in the US.
Noritz Corporation faces limited profitability domestically but maintains stock levels due to large cash balances and management plans addressing them. Despite domestic struggles, equity affiliate Kangaroo's expected profitability rise boosts net profit forecasts relative to operating profit forecasts. Overseas investments aim to enhance production and profitability, with North America and Australia offsetting China's declines in sales, reflecting solid markets to sink investments in.
Noritz's profits were down due to softer demand in the Japanese market and issues with its equity affiliate Kangaroo. The overseas business performed well, but the equity accounted loss from Kangaroo widened and the downsides of operating leverage in the domestic business led to steep profit declines. Noritz is unwinding cross-shareholdings, freeing up cash for investments, and has a stock with sufficient market support to allow for buybacks without running into problems with the TYO.