YAMAKI (3598) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period, the Company recorded a “decrease in revenue and decrease in profit,” as opposed to a result characterized by increased revenue and decreased profit, as its core business fell into an operating loss due to lower domestic sales and a higher SG&A ratio, while foreign exchange gains secured an ordinary-income profit. Revenue was ¥7.46B (¥8.03B in the same period of the previous year, YoY -7.1%), while Operating Income was ¥-0.06B (¥0.07B in the previous year, YoY -78.0%), falling from profitability into the red. Ordinary Income was ¥0.06B (down 28.0%), and Net Income was ¥0.04B (down 71.7%). The ¥0.16B foreign exchange gain offset the deterioration in operating profit, indicating that the decline in core earnings power was the primary cause of the overall deterioration in performance.

Factors Affecting Performance

【Revenue】Revenue was ¥7.46B, down 7.1% year on year. Domestic sales, which account for 85.5% of total Company revenue, declined to ¥6.38B (down 6.8%), making the decline in the core business the primary cause of the Company-wide revenue decrease. Manufacturing increased revenue to ¥0.92B (up 10.6%), and overseas sales increased to ¥0.17B (up 12.6%); however, the increase in revenue did not translate into profit due to losses recognized in connection with the reorganization of Thai Yamaki.

【Profit and Loss】Gross profit was ¥2.17B, and the gross margin was 29.1%, maintaining approximately the same level as the 29.2% recorded in the same period of the previous year. Meanwhile, SG&A expenses were ¥2.23B, and the SG&A ratio rose to 29.9% from 28.4% in the same period of the previous year. As fixed-cost reductions failed to keep pace with the decline in revenue, Operating Income fell into a loss of ¥-0.06B, compared with ¥0.07B in the previous year. Foreign exchange gains of ¥0.16B accounted for most of non-operating income of ¥0.20B and supported Ordinary Income of ¥0.06B. The Company also recorded extraordinary income, including a ¥0.01B gain on the sale of fixed assets, resulting in Net Income of ¥0.04B; however, the Company remains highly dependent on factors outside its core business. In conclusion, this was a result of decreased revenue and decreased profit.

Segment Analysis

Domestic sales, despite being the core business, saw Revenue decline to ¥6.38B (down 6.8% year on year) and segment profit fall to ¥0.06B (down 56.3%), representing a substantial contraction in profit. Manufacturing recorded Revenue of ¥0.92B (down 10.6%) and a segment loss of ¥0.07B. Although this improved from the ¥0.10B loss in the same period of the previous year, the business remained in the red. Overseas sales increased Revenue to ¥0.17B (up 12.6%) but recorded a segment loss of ¥0.07B, deteriorating from the ¥0.02B profit in the same period of the previous year. The ¥0.07B loss at Thai Yamaki, transferred from Manufacturing to Overseas Sales as part of the reorganization, accounted for most of the Overseas Sales segment loss. The widening loss in Overseas Sales despite increased revenue symbolizes the structure of increased revenue but decreased profit for the segment as a whole.

Key Financial Indicators

【Profitability】The Operating Income margin was -0.8% (0.8% in the previous year), and the Net Income margin was 0.5% (1.6% in the previous year), with both deteriorating from the previous year. The gross margin remained almost flat at 29.1%, but the SG&A ratio of 29.9% exceeded it, causing the operating loss. ROE (annualized) remained at only 1.2%.【Cash Flow Quality】Finished-goods inventories were ¥3.27B and showed an increasing trend year on year. The accumulation of inventories amid declining revenue indicates a risk of funds becoming tied up. Accounts receivable declined to ¥1.47B from ¥1.99B in the same period of the previous year, suggesting that working capital contracted due to collections or the impact of lower sales.【Investment Efficiency】With operating losses continuing, the generation of returns from invested capital remains limited, and the Company is unable to absorb interest expenses of ¥0.06B through Operating Income.【Financial Soundness】The Equity Ratio improved to 39.3% from 37.5% in the previous year, while total assets contracted to ¥10.66B from ¥11.31B. Long-term borrowings increased to ¥0.86B, while short-term borrowings were reduced, indicating that the funding structure remains dependent on short-term financing.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is not available, fund movements can be assessed from changes in the balance sheet. Cash and deposits were ¥1.96B, down from ¥2.47B in the same period of the previous year. Accounts receivable declined by ¥0.51B to ¥1.47B, contributing to cash collection, while accounts payable also declined by ¥0.16B to ¥0.38B, reducing the scope for financing through trade payables. Given the accumulation of finished-goods inventories and the operating loss, the Company’s ability to generate cash from business activities appears limited. Short-term borrowings declined by ¥0.49B to ¥3.00B, while long-term borrowings increased by ¥0.08B to ¥0.86B, indicating some progress in shifting from short-term to long-term financing. Overall, although dependence on external funding remains, the bias toward short-term financing is gradually easing.

Quality of Earnings

Net Income of ¥0.04B was recorded after foreign exchange gains and extraordinary income offset the operating loss, meaning that earnings quality cannot be described as being driven by the core business. Foreign exchange gains accounted for ¥0.16B of non-operating income of ¥0.20B, directly contributing to the conversion of Ordinary Income into a profit of ¥0.06B. Extraordinary income of ¥0.01B, including a ¥0.01B gain on the sale of fixed assets, was a temporary factor contributing to pre-tax income of ¥0.07B. Given that Operating Income itself was ¥-0.06B, recurring earnings power has already deteriorated, and Ordinary Income could easily reverse depending on foreign exchange movements. Comprehensive income was ¥-0.03B, creating a gap from Net Income of ¥0.04B, primarily due to foreign currency translation adjustments of ¥-0.10B. This indicates that changes in the asset values of overseas businesses are affecting earnings quality.

Earnings Forecast and Guidance

The full-year forecast is Revenue of ¥10.00B (down 7.2% year on year), Operating Income of ¥-0.19B, Ordinary Income of ¥-0.07B, and EPS of ¥-7.05. Cumulative Revenue reached a progress rate of 74.6%, broadly consistent with the assumed full-year rate of revenue decline. Meanwhile, cumulative Operating Income was ¥-0.06B compared with the full-year forecast of ¥-0.19B, implying a plan to incur approximately ¥0.13B in additional losses in Q4. Cumulative Ordinary Income was a profit of ¥0.06B, whereas the full-year forecast is a loss of ¥0.07B, suggesting an assumption that the foreign exchange gains supporting cumulative results will not continue. During the quarter, the Company revised its earnings forecast and dividend forecast, indicating a downward revision.

Shareholder Returns

The Q2 dividend was ¥0 per share, and the full-year forecast dividend is also ¥0, indicating that the no-dividend policy remains in place. The Payout Ratio is 0%. No share repurchase has been disclosed, and there is no data available for calculating the Total Return Ratio. Given that Operating Income is in the red and the Company expects a net loss attributable to owners of the parent for the full year, the continuation of a no-dividend policy is consistent with prioritizing the preservation of cash on hand.

Risk Factors

1. Continued revenue decline in the core business: Domestic sales, which account for 85.5% of total Company revenue, declined 6.8% year on year. A delay in demand recovery in this business would directly lead to insufficient absorption of fixed costs and a prolonged operating loss.

2. Deterioration in overseas business profitability: Although Revenue in Overseas Sales increased 12.6%, the segment recorded a loss of ¥0.07B, most of which was attributable to losses following the reorganization of Thai Yamaki. Increased revenue has not translated into improved profitability.

3. Dependence of earnings on foreign exchange and temporary factors: The Ordinary Income profit depends heavily on the ¥0.16B foreign exchange gain, while Operating Income itself is in the red. Ordinary Income may deteriorate if foreign exchange rates reverse. In addition, extraordinary income, including gains on the sale of fixed assets, accounts for approximately 30% of Net Income, requiring attention to earnings sustainability.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (retail)

Profitability and Returns

The Company is below the industry median in both Operating Income margin and Net Income margin, placing its profitability in the lower tier of the industry.

Growth and Capital Efficiency

While many companies in the industry are experiencing revenue growth, the Company recorded a decline in revenue and is also disadvantaged within the industry in terms of growth.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. The full-year Revenue progress rate is 74.6%, in line with the Company’s plan; however, the full-year Operating Income forecast assumes a further expansion of the loss from the cumulative period, making Q4 performance a key area of focus.

2. While the gross margin of 29.1% has been maintained at approximately the previous year’s level, the SG&A ratio has risen to 29.9%, resulting in an operating loss. Reviewing the fixed-cost structure will therefore be a key focus going forward.

3. The earnings data indicate a discrepancy between reported profit indicators and the earning power of the core business, as the Ordinary Income profit depends on foreign exchange gains while Operating Income itself remains in the red.

Theoretical Share Price (Reference Value)

Sensitivity: ¥192–¥203 at cost of equity ±1%; ¥194–¥199 at ω±0.1.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value will be below book value per share.
• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

（Calculation model: Residual Income Model（Ohlson-type, explicit 5-year fade） / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices）

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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