TOMOKU CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Although revenue declined in Q1, Operating Income, Ordinary Income, and Net Income all increased, resulting in earnings that demonstrated improved profitability despite lower revenue. Revenue was ¥487.1B (-4.4% YoY), Operating Income was ¥15.3B (+8.0%), Ordinary Income was ¥16.3B (+21.5%), and Net Income attributable to owners of the parent was ¥10.0B (+31.6%). Revenue growth and earnings growth in the core Corrugated Cardboard Business, together with improved gross margin through the containment of costs and SG&A expenses (17.2%→18.5%), drove the increase in Operating Income. Improvements in non-operating income and expenses and the recognition of ¥3.6B in extraordinary income further boosted Ordinary Income and Net Income, while the effective tax rate increased to 49.1% (41.2% in the previous year), partially offsetting the improvement in the net profit margin.

Factors Affecting Earnings

【Revenue】Revenue was ¥487.1B, a 4.4% YoY decline. The core Corrugated Cardboard Business (65.8% of total segment revenue) secured revenue growth at ¥331.1B (+5.3%), but Transportation and Warehousing fell substantially to ¥95.0B (-24.0%) and Housing to ¥77.1B (-9.9%). The revenue declines in these two segments offset the growth in Corrugated Cardboard, resulting in lower company-wide revenue.

【Profit and Loss】Operating Income increased to ¥15.3B (+8.0%), and the Operating Margin improved to 3.1% (2.8% in the previous year). The gross margin rose to 18.5% (17.2% in the previous year), and, together with the containment of the SG&A ratio at 15.4%, drove the increase in earnings. Ordinary Income was ¥16.3B (+21.5%), supported by improved non-operating income and expenses, including a foreign exchange gain of ¥1.0B. Net Income attributable to owners of the parent was ¥10.0B (+31.6%), with the recognition of ¥3.6B in extraordinary income, including a gain on the sale of shares in a subsidiary, contributing to the increase as a temporary factor. The increase in the effective tax rate to 49.1% (41.2% in the previous year) partially restrained the growth. In conclusion, the Company achieved higher earnings despite lower revenue.

Segment Analysis

Corrugated Cardboard is the core business, accounting for 65.8% of segment revenue. It generated revenue of ¥331.1B (+5.3%), Operating Income of ¥30.5B (+15.2%), and a profit margin of 9.2%, contributing the majority of company-wide earnings and serving as the main driver of growth in both revenue and earnings. Transportation and Warehousing recorded a substantial revenue decline to ¥95.0B (-24.0%), but Operating Income was ¥3.8B (-1.3%) and the profit margin was 4.0%, broadly maintaining the previous-year level; relative to the extent of the revenue decline, deterioration in profitability was limited. Housing generated revenue of ¥77.1B (-9.9%) and an Operating Loss of ¥16.5B (profit margin of -21.4%, with the loss widening YoY), constituting a structural earnings dilution factor that significantly depressed company-wide Operating Income of ¥15.3B. The increase in earnings from Corrugated Cardboard absorbed the widening Housing loss, enabling the Company to secure higher company-wide Operating Income.

Key Financial Indicators

【Profitability】The Operating Margin was 3.1%, improving from 2.8% in the previous year, while the Net Profit Margin, based on Net Income attributable to owners of the parent, also increased to 2.1% (1.5% in the previous year). The gross margin improved to 18.5% (17.2% in the previous year), and the restrained growth in SG&A expenses was the primary driver of the earnings increase.【Cash Flow Quality】Cash and deposits were ¥145.6B, down 39.2% YoY. The days sales outstanding were approximately 56 days, inventory turnover days were approximately 64 days, and accounts payable days were approximately 53 days. Accordingly, the cash conversion cycle was approximately 67 days on an annualized basis, with the accumulation of working capital constraining cash generation.【Investment Efficiency】ROE was 1.0% (quarterly basis, not annualized). The capital-intensive asset structure, with tangible fixed assets accounting for 45.1%, is depressing the asset turnover ratio, which was 0.22x, while financial leverage was approximately 2.1x.【Financial Soundness】The Equity Ratio improved to 46.6% (45.6% in the previous year). Short-term payment capacity was sound, with a Current Ratio of 161.0% and a Quick Ratio of 112.5%. Against interest-bearing debt of ¥685.6B, the D/E ratio (interest-bearing debt/equity) was 0.67x and interest coverage was 5.44x, indicating sufficient debt-servicing capacity.

Cash Flow Analysis

As figures from the statement of cash flows have not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥145.6B, down ¥94.0B (-39.2%) from ¥239.6B in the same period of the previous year. In terms of working capital, accounts receivable and notes receivable increased to ¥298.1B (+6.7%), while inventories increased to ¥279.8B (+11.4%), indicating further funds tied up in working capital. Meanwhile, accounts payable and notes payable declined to ¥231.2B (-5.6%), suggesting that changes in procurement and payment terms may have affected cash management. Long-term borrowings increased to ¥482.3B (+9.2%), while current portion of long-term borrowings declined to ¥68.9B (-47.9%), indicating progress toward smoothing the repayment schedule. Intangible fixed assets increased substantially to ¥8.8B (+143.1%), suggesting increased allocation of funds toward system investments and other initiatives. Despite the improvement in Operating Income, cash on hand declined due to the accumulation of working capital and investment and repayment activities. Improving working capital efficiency will therefore be a key issue for enhancing future cash-generation capacity.

Quality of Earnings

Improvement in earnings at the Ordinary Income level was supported by improved profitability in the Corrugated Cardboard Business and improved non-operating income and expenses. Non-operating income of ¥4.5B consisted of ¥1.7B in interest and dividend income, ¥1.0B in foreign exchange gains, and ¥1.8B in miscellaneous income, representing a limited approximately 0.9% of revenue. Meanwhile, the contribution of ¥3.6B in extraordinary income (gain on the sale of shares in a subsidiary) to Net Income of ¥9.99B was approximately 36%, indicating that a temporary factor significantly boosted final earnings; this warrants attention from a quality-of-earnings perspective. The effective tax rate increased to 49.1% (41.2% in the previous year). The divergence between the growth rates of Ordinary Income (+21.5%) and Net Income (+31.6%) was affected by both the recognition of extraordinary income and the increase in the tax burden. Comprehensive Income was ¥12.2B (¥6.5B in the previous year), exceeding Net Income of ¥10.0B, as positive contributions from foreign currency translation adjustments of +¥1.4B and valuation differences on available-for-sale securities of +¥2.0B exceeded the negative impact of adjustments related to retirement benefits of -¥1.3B.

Earnings Forecast and Guidance

The Q1 progress rates against the Full-Year plan (Revenue of ¥2,205.0B, Operating Income of ¥127.0B, Ordinary Income of ¥119.0B, and Net Income of ¥81.0B) were 22.1% for Revenue, 12.0% for Operating Income, 13.7% for Ordinary Income, and 12.3% for Net Income attributable to owners of the parent. Compared with the standard quarterly progress pace of 25% based on simple proportional allocation, all profit indicators were more than 10pt below the benchmark. In particular, the Housing segment’s loss and the substantial revenue decline in Transportation and Warehousing weighed on progress. The Company has not revised either its earnings forecast or dividend forecast for the quarter, and the Full-Year plan remains unchanged. Whether the Corrugated Cardboard Business can maintain its trend of revenue and earnings growth into the second half and whether profitability in the Housing Business improves will be key to achieving the plan.

Shareholder Returns

The Full-Year dividend forecast is ¥170 per share, and no revision to the dividend forecast was made during the quarter. Based on the Company’s forecast EPS of ¥491.02, the forecast Payout Ratio is 34.6% (¥170÷¥491.02), calculated using a single forecast-based figure. Given the Company’s financial soundness, including an Equity Ratio of 46.6% and a Current Ratio of 161.0%, there appears to be no significant obstacle to securing funds for dividends, assuming achievement of the Full-Year plan. However, the Net Income progress rate remains at only 12.3%, highlighting the importance of accumulating earnings in the second half.

Risk Factors

1. Continued losses in the Housing segment: The segment recorded revenue of ¥77.1B (-9.9%) and an Operating Loss of ¥16.5B (profit margin of -21.4%, with the loss widening from the previous year), creating a significant dilution effect on company-wide Operating Income of ¥15.3B.

2. Substantial revenue decline in the Transportation and Warehousing segment: Revenue fell sharply to ¥95.0B (-24.0%), creating a risk that increased fixed-cost burdens and lower capacity utilization could affect the profit margin, currently 4.0%.

3. Declining liquidity on hand and accumulation of working capital: Cash and deposits declined 39.2% YoY to ¥145.6B, while accounts receivable (¥298.1B) and inventories (¥279.8B) increased. Monitoring of capital efficiency is therefore necessary in light of the cash conversion cycle of approximately 67 days on an annualized basis.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company’s Operating Margin and Net Profit Margin are both below the manufacturing industry median, placing its profitability relatively low within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate is 11.0pt below the industry median, indicating that the Company is in a revenue-decline phase compared with other companies in the industry that are experiencing revenue growth.

※Source: Compiled by the Company

Key Takeaways from the Earnings

1. Despite lower revenue, the Company secured increases of +8.0% in Operating Income, +21.5% in Ordinary Income, and +31.6% in Net Income. Improvement in the gross margin (17.2%→18.5%) and cost control indicate an improvement in the earnings structure.

2. The Housing segment’s loss (Operating Loss of ¥16.5B, profit margin of -21.4%) continues to structurally depress the company-wide profit margin. The segment’s progress toward a return to profitability will determine the extent of improvement in the overall margin.

3. Full-Year progress rates were 22.1% for Revenue, 12.0% for Operating Income, and 12.3% for Net Income, below the standard quarterly progress pace of 25%. The degree of recovery in the second half will be a key point to monitor in assessing achievement of the Full-Year plan.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥5,843–¥6,183 at ±1% for the cost of equity, and ¥6,002–¥6,014 at ±0.1 for ω.

Notes:

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

(Calculation model: Residual Income Model / Interest rate reference month: 2026-06 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on 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, and you should consult a professional as necessary.

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