TOYOTA BOSHOKU CORPORATION FY2026 FY Earnings Report

Financial Highlights

• Net Sales: ¥2.04T
• Operating Income: ¥53.95B
• Net Income: ¥31.46B
• EPS: ¥130.30

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

Toyota Boshoku delivered a solid FY2026, with operating profitability improving despite modest topline growth and elevated tax costs dampening bottom-line conversion. Revenue rose 4.2% YoY to 2,037.1bn yen, while operating income increased 27.2% to 53.9bn yen. Gross profit was 207.4bn yen, translating to a gross margin of 10.2%. Operating margin expanded by roughly 48bps YoY to 2.6%, supported by lower other operating expenses and positive operating leverage. Net income attributable to owners of the parent increased 39.2% to 23.3bn yen, while consolidated net income reached 31.5bn yen. The consolidated net margin was approximately 1.5%, and the owners’ net margin was about 1.1%. The effective tax rate was high at 49.2%, compressing net profitability despite strong pre-tax gains. Finance income exceeded finance costs, resulting in an interest burden above 1.0 and supporting pre-tax profit growth. Cash generation was a highlight: operating cash flow of 142.9bn yen was 6.14x owners’ net income, and free cash flow was 67.5bn yen. The balance sheet strengthened with equity rising to 529.1bn yen and the equity ratio at 41.0%. Debt metrics remain conservative with estimated Debt/EBITDA around 1.8x and interest coverage above 20x. Regionally, Asia was the earnings anchor with a 14.0% margin and higher operating income, while North America remained loss-making but improved materially. SG&A increased 11.1% YoY, outpacing revenue growth and partially offsetting operating gains. Guidance implies another leg of earnings improvement, with operating income guided to 80bn yen and owners’ net income to 48bn yen. Dividend policy appears balanced: 86 yen total DPS against EPS of 130.3 yen implies a mid-60s payout ratio, covered 4.2x by free cash flow. Overall, FY2026 shows improving core profitability, strong cash flow quality, and healthier regional mix, with the near-term focus on sustaining Asia’s strength, normalizing the tax rate, and turning around North America.

Profitability Analysis

ROE decomposition (DuPont 3-factor): Net Profit Margin (owners) 1.1% × Asset Turnover 1.723 × Financial Leverage 2.23x = ROE ~4.4%. The largest driver of YoY improvement in ROE was the margin component: operating margin expanded by ~48bps to 2.6%, while asset turnover stayed efficient at ~1.72x and leverage was broadly stable. Operating improvements were supported by a sharp reduction in other operating expenses and positive finance income, which lifted EBT above EBIT. Sustainability: operating leverage from volume and mix in Asia appears repeatable, though tax rate normalization is required to translate EBT gains into ROE. Watch that SG&A grew 11.1% YoY vs revenue +4.2%, which, if persistent, would cap further operating margin expansion.

Growth Assessment

Revenue grew 4.2% YoY to 2,037.1bn yen, driven by Asia (+5.9%) and North/Central/South America (+11.1%), partly offset by China (-8.9%). Operating income rose 27.2% YoY to 53.9bn yen, as other operating expenses normalized and regional mix improved. Profit before tax increased 31.5% to 61.9bn yen, aided by net finance income. Net income attributable to owners grew 39.2% to 23.3bn yen, despite a high 49.2% effective tax rate. Segment performance shows Asia as the engine (14.0% margin), with Japan and Europe & Africa margins thin, and North America loss-making but improving. Guidance for the next fiscal year targets revenue of 2.12tn yen (+4% vs FY2026), operating income of 80bn yen (+48%), and owners’ net income of 48bn yen (+106%), implying continued recovery in loss regions and tighter cost control.

Financial Health

Liquidity is sound with current assets of 723.4bn yen vs current liabilities of 428.1bn yen, implying a current ratio of ~1.69. Capital structure remains conservative: equity is 529.1bn yen, total liabilities 653.3bn yen, and the equity ratio is 41.0%. Total borrowings were 189.3bn yen (CL 34.3bn, NCL 155.0bn); with estimated EBITDA around 106.9bn yen, Debt/EBITDA is ~1.8x (investment-grade territory). Interest coverage is strong at ~21.5x (EBIT/finance costs). Accounts receivable (297.8bn yen) and inventories (94.0bn yen) comfortably exceed accounts payable (224.1bn yen), suggesting no maturity mismatch issues. No off-balance sheet obligations were noted in the provided data.

Notable B/S Changes

Current provisions: +21.95bn (+307%) - large increase supports OCF; likely warranty/other provisions, monitor reversals and cash impacts. Property, plant & equipment: +28.17bn (+8.9%) - sustained investment to support growth and modernization. Total borrowings: +19.94bn (+11.8%) - funding structure slightly more leveraged but still conservative. Accounts payable: -10.80bn (-4.6%) - reduced supplier financing; watch CCC implications. Inventories: +6.88bn (+7.9%) - modest build consistent with revenue growth; monitor turnover. Other components of equity (OCI): +28.05bn (+47.2%) - FX translation and equity OCI gains strengthened equity. Equity (IFRS): +39.00bn (+8.0%) - increased retained earnings and OCI. Net defined benefit liability: -2.94bn (-5.4%) - improvement reduces long-term obligations. Cash and cash equivalents: +28.79bn (+11.5%) - supported by strong OCF and modest capex outflows.

Cash Flow Quality

OCF of 142.9bn yen vs owners’ net income of 23.3bn yen (OCF/NI = 6.14x) indicates high earnings quality. Free cash flow was 67.5bn yen after 65.0bn yen of capex, comfortably covering dividends of 15.4bn yen (FCF coverage 4.18x). Working capital movements were mixed: inventories rose modestly (-2.1bn yen cash impact), payables declined (-9.3bn yen), while receivables improved (+9.2bn yen). A significant increase in provisions (+22.9bn yen) supported OCF; this element is non-cash and may not recur at the same magnitude, so underlying cash conversion should be monitored next year. Accruals ratio of -10.1% corroborates strong cash-based earnings.

Dividend Sustainability

Total DPS was 86 yen (43 + 43), implying a payout ratio of roughly 66–69% vs EPS of 130.3 yen. Dividends were well covered by free cash flow (4.18x) and supported by a solid balance sheet (DOE ~3.4%). With capex of 65.0bn yen and strong OCF, the current dividend level appears sustainable under the base case. Future payout flexibility will depend on the pace of North America’s turnaround and tax rate normalization to lift owners’ earnings.

Risk Assessment

Business risks include Regional concentration: Asia as the primary earnings driver increases exposure to regional demand and supply chain conditions., Customer concentration in global OEMs, with potential volume/pricing resets tied to model cycles., Persistent losses in North/Central/South America could weigh on consolidated margins if improvements stall., Raw material and logistics cost volatility impacting low gross margin structure., FX fluctuations affecting translation and transaction margins across multi-regional footprint..

Financial risks include High effective tax rate (49.2%) suppresses net income conversion and could remain volatile by jurisdiction., Defined benefit obligations (52.1bn yen) introduce interest rate and actuarial risk., Increase in borrowings to 189.3bn yen raises refinancing and rate sensitivity, albeit from a conservative base..

Key concerns include SG&A growth (+11.1%) outpaced revenue growth (+4.2%), challenging margin expansion if not contained., North America remains loss-making (margin -1.8%) despite YoY improvement., Large provisions increase boosted OCF; cash conversion may normalize lower absent similar non-cash tailwinds..

Investment Implications

Key takeaways include Operating margin expanded to 2.6% on normalized other operating expenses and mix, despite a lower gross margin., Cash flow quality is strong with OCF/NI at 6.14x and FCF of 67.5bn yen., Balance sheet remains robust: equity ratio 41%, Debt/EBITDA ~1.8x, interest coverage >20x., Asia is the core earnings engine (14.0% margin); North America is improving but still negative., High effective tax rate is the primary drag on net profitability and ROE., Guidance implies further earnings uplift (OI 80bn yen, owners’ NI 48bn yen) if regional recovery continues..

Metrics to watch include North America segment margin trajectory and plant utilization., SG&A growth vs revenue growth and productivity initiatives., Effective tax rate normalization path and drivers by jurisdiction., Working capital metrics and provisions normalization impact on OCF., Capex discipline vs growth (Capex/Depreciation and returns on incremental capital)..

Regarding relative positioning, Within global auto interior suppliers, Toyota Boshoku exhibits conservative leverage and strong cash conversion but operates with structurally low margins; its competitive stance hinges on execution in North America and sustaining high-margin Asian operations while stabilizing tax and overhead burdens.