BRIDGESTONE (5108) FY2026 Q1 Earnings Report

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Executive Summary

For Q1 of the fiscal year ending December 2026, Revenue and profits increased, and reported Operating Income rose substantially; however, part of the increase was attributable to the temporary effect of reduced restructuring expenses compared with the previous year. Revenue was ¥1兆1,134B (+5.2% YoY), Operating Income was ¥1,258B (+41.7%), Profit Before Tax was ¥1,263B (+47.0%), and Net Income attributable to owners of the parent was ¥921B (+21.4%). Revenue increased in all regions—Japan, Asia, the Americas, and Europe—and the Operating Income margin expanded to 11.3% (8.4% in the previous year). However, Adjusted Operating Income excluding restructuring-related gains and losses was ¥1,222B (+9.7%).

Factors Affecting Results

【Revenue】Revenue was ¥1兆1,134B, up +5.2% YoY. Revenue increased in all regions: Japan +2.2%, Asia, Oceania, India, and China +9.0%, the Americas +4.1%, and Europe, the Middle East, and Africa +9.6%. The increase was supported by the weaker yen, higher replacement-tire sales, and an improved sales mix. The Americas were the largest region, accounting for 47.3% of external Revenue, although the growth rate was relatively moderate.

【Profit and Loss】Operating Income was ¥1,258B, up +41.7%, and the Operating Income margin expanded to 11.3% (8.4% in the previous year). However, Adjusted Operating Income excluding adjustment items was ¥1,222B, up +9.7%. Business and plant restructuring expenses, which amounted to ¥234B in the same period of the previous year, declined to ¥19B in the current period. In addition, ¥55B of income related to the restructuring of overseas in-house businesses was recorded. These were temporary factors that boosted reported Operating Income. The divergence between Profit Before Tax and Net Income was attributable to the recognition of ¥320B in income taxes and other taxes; the effective tax rate was approximately 25.3%, with no particular abnormalities. Revenue and profits increased.

Segment Analysis

The Japan segment generated Adjusted Operating Income of ¥537B and accounted for 43.3% of total reported segment income of ¥1,241B. With a profit margin of 17.7% (+3.5pt YoY), the segment is positioned as the core business and operates at the highest level of profitability. Higher replacement-tire sales and an improved selling-price mix drove the increase in profit.

Europe, the Middle East, and Africa recorded Adjusted Operating Income of ¥190B, up +109.1%, representing the highest growth rate. Its profit margin also improved to 8.3% (+3.9pt), confirming the emergence of restructuring and business-rebuilding benefits. Meanwhile, the Americas recorded Adjusted Operating Income of ¥379B, down -4.7%, with a profit margin of 7.1% (-0.7pt). Asia, Oceania, India, and China recorded ¥135B, down -7.6%, with a profit margin of 10.0% (-1.7pt), meaning that both regions reported lower profits. Improvements in Japan and Europe offset declines in the Americas and Asia, supporting consolidated profit growth.

Key Financial Metrics

Profitability: Operating Income margin 11.3% (8.4% in the previous year), Net Income margin attributable to owners of the parent 8.3%, ROE 2.5% (quarterly basis; approximately 10.0% on an annualized basis)
Cash flow quality: Operating Cash Flow (OCF) / Net Income attributable to owners of the parent of 2.07x, Free Cash Flow of ¥1,087B
Investment efficiency: Capital expenditures / depreciation and amortization of 0.85x (¥778B / ¥920B, a level centered on replacement investment)
Financial soundness: Equity Ratio 65.2% (63.7% in the previous year), Current Ratio 2.71x

Cash Flow Analysis

Operating Cash Flow was ¥1,908B, or 2.07x Net Income attributable to owners of the parent of ¥921B, indicating solid cash backing for earnings. A ¥386B decrease in trade receivables was a factor supporting cash flow, while inventories increased by ¥112B and trade payables decreased by ¥165B, leaving some cash outflow pressure from a working-capital perspective. Investing Cash Flow was △¥821B, primarily due to ¥778B in capital expenditures. Financing Cash Flow was △¥1,745B, with dividend payments of ¥727B and share repurchases of ¥497B as the main cash outflows. Free Cash Flow was ¥1,087B, sufficient to cover dividends, but below the combined ¥1,224B of dividends and share repurchases. Cash generation is assessed as standard to somewhat strong, although improving working-capital efficiency will be a key focus going forward.

Earnings Quality

Against Profit Before Tax of ¥1,263B, Net Income was ¥945B and Net Income attributable to owners of the parent was ¥921B. Income taxes and other taxes of ¥320B, corresponding to an effective tax rate of approximately 25.3%, are within the normal range. Of the ¥370B increase in Operating Income, the increase in Adjusted Operating Income was only ¥108B; the remainder was attributable to temporary factors, namely the reduction in restructuring expenses from ¥234B in the previous year to ¥19B in the current period and the recognition of ¥55B in income from overseas in-house business restructuring. Accordingly, caution is required when evaluating the reported Operating Income growth of +41.7% as a direct improvement in recurring earnings power. The growth in Adjusted Operating Income of +9.7% is a more representative indicator of underlying performance. Operating Cash Flow exceeded Net Income, and from an accruals perspective, there are no significant concerns regarding earnings quality.

Earnings Forecast and Guidance

The Q1 progress rates against the Full-Year forecast—Revenue of ¥4兆5,000B and Net Income attributable to owners of the parent of ¥3,400B—were 24.7% for Revenue and 27.1% for profit, with the profit progress rate slightly exceeding the standard progress rate of 25%. The Full-Year forecast remains unchanged, with no revision. The Full-Year forecast for Net Income attributable to owners of the parent represents only a +3.9% YoY increase, incorporating an assumption that profit growth will decelerate from the Q1 increase of +21.4% toward the second half of the fiscal year. Factors include an expected rise in raw-material and logistics-cost inflation associated with higher crude oil prices (estimated at approximately ¥700B gross per year), expected to occur primarily in the second half, as well as the impact of U.S. tariffs (approximately ¥550B gross per year).

Shareholder Returns

The Full-Year forecast dividend is ¥125 per share. Based on the Full-Year forecast EPS of ¥270.87, the forecast Payout Ratio is approximately 46.1%. Dividend payments to the parent company’s shareholders in Q1 amounted to ¥727B, while share repurchases amounted to ¥497B, bringing total shareholder returns to ¥1,224B, exceeding Q1 Free Cash Flow of ¥1,087B. The share repurchase program, with an upper limit of ¥1,500B, was reportedly approximately 51% complete as of the end of April and is being steadily implemented as part of the capital policy. While the sustainability of dividends alone is high, it should be noted that total shareholder returns including share repurchases are being funded not only by current-period Free Cash Flow but also by cash on hand and external financing.

Catalysts

【Short Term】The realization of raw-material, energy, and logistics costs expected to arise in the second half due to higher crude oil prices, as well as the impact of U.S. tariffs (approximately ¥550B gross per year). Demand trends and market-share movements in the Americas.

【Long Term】Progress in optimizing the capital structure through share repurchases, with an upper limit of ¥1,500B, and financing of ¥1,500B, including ¥1,200B already executed through corporate bonds and other instruments in April. The sustainability of restructuring and business-rebuilding benefits in Europe, and the pace of profitability recovery in Asia and the Americas.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin both exceed the industry median, positioning it among the industry’s higher performers in terms of profitability.

Growth and Capital Efficiency

The Revenue growth rate was slightly below the industry median, leaving the Company’s Revenue growth at a mid-range level within the industry.

※Source: Compiled by the Company

Risk Factors

1. Deterioration in working-capital efficiency: On an annualized basis, DSO is approximately 88 days, DIO approximately 121 days, and CCC approximately 137 days, all at warning levels. The ¥9,013B in inventories and ¥1兆681B in trade receivables represent significant cash tied up in working capital. Attention should be paid to the risk of cash flow pressure during demand fluctuations and inventory write-downs.

2. Regional profitability disparities: The Adjusted Operating Income margin in the Americas, the largest region, declined to 7.1% (-0.7pt YoY), while that of Asia, Oceania, India, and China also declined to 10.0% (-1.7pt). The consolidated earnings structure is supported by improvements in Japan and Europe. The pace of recovery in both regions will affect consolidated profitability.

3. Raw-material and geopolitical cost inflation: The cost impact of higher crude oil prices is estimated at approximately ¥700B gross per year, assuming WTI at $90, while the impact of U.S. tariffs is estimated at approximately ¥550B gross per year. These impacts are expected to arise primarily in the second half. Although sales exposure to the Middle East is limited at approximately 1.5%, indirect effects from cost inflation require close monitoring.

Key Takeaways from the Earnings

1. The improvement in the reported Operating Income margin to 11.3% (8.4% in the previous year) includes temporary factors: the reduction in business and plant restructuring expenses from ¥234B in the previous year to ¥19B in the current period, and the recognition of ¥55B in restructuring income in the current period. The Adjusted Operating Income margin, which indicates underlying earnings power, was 11.0% (10.5% in the previous year), representing a relatively modest improvement.

2. The Japan segment made the largest contribution to earnings as the core business, accounting for 43.3% of Adjusted Operating Income and achieving a profit margin of 17.7%, the highest level across all regions. Meanwhile, the Americas, the largest region by Revenue, had a declining profit margin of 7.1%, and the profitability gap between segments is widening.

3. From a working-capital perspective, CCC has lengthened to approximately 137 days. Although Operating Cash Flow is strong at 2.07x Net Income, opportunities to improve the turnover of inventories and trade receivables are observed as a structural issue.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,953–¥3,126 at ±1% for the Cost of Equity, and ¥3,035–¥3,042 at ±0.1 for ω.

Notes:

• Net assets as of the quarter-end were used (there is a timing difference from the Full-Year forecast).

(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; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through the integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. 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 discretion and responsibility, after consulting with a professional as necessary.

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AI Financial Analysis

Executive Summary

Bridgestone delivered a strong FY2026 Q1 result, with operating-profit growth materially outpacing revenue growth. Revenue increased 5.2% year on year to ¥1,113.4bn. Operating income rose 41.7% to ¥125.8bn. Net income attributable to owners increased 21.4% to ¥92.1bn, and basic EPS rose to ¥72.37 from ¥55.58. Gross profit increased 6.1% to ¥432.8bn, lifting the gross margin by 0.3 percentage points to 38.9%. The reported operating margin expanded by 2.9 percentage points to 11.3% from 8.4% a year earlier. This operating-margin recovery was driven primarily by a sharp reduction in adjustment expenses, particularly business and factory restructuring costs, rather than by gross-margin expansion alone. Adjusted operating income increased 9.7% to ¥122.2bn, which indicates that the underlying earnings improvement was more moderate than the 41.7% increase in reported operating income. Japan and Europe/Middle East/Africa were the principal regional contributors to adjusted operating-income growth. Operating cash flow was robust at ¥190.8bn, equivalent to 2.07 times net income attributable to owners. Free cash flow was also positive at ¥108.7bn after ¥77.8bn of capital expenditures. Receivables declined and supported operating cash generation, although inventory increased during the quarter. The balance sheet remains conservative, with a 65.2% equity ratio and debt-to-equity ratio of 0.51x. The current ratio is a strong 2.71x, indicating no near-term liquidity strain. Management maintained its full-year forecast of ¥4,500.0bn in revenue, ¥340.0bn in net income attributable to owners, EPS of ¥270.87, and DPS of ¥125. The Q1 net-income progress rate is 27.1%, modestly ahead of the 25% seasonal benchmark, while revenue progress is broadly in line at 24.7%. The principal operating issues to monitor are the elevated 88-day receivables cycle, 121-day inventory cycle, and 137-day cash conversion cycle, which expose cash conversion to demand and production-mix changes.

Profitability Analysis

Annualized DuPont ROE is 9.9%, comprising an 8.3% net profit margin, 0.789x asset turnover, and 1.51x financial leverage. The 8.3% net margin is within the good 5-10% benchmark range, while the 1.51x leverage factor confirms that returns are principally operational rather than debt-driven. The most important year-on-year change was operating profitability: reported operating margin expanded to 11.3% from 8.4%, a 290bp improvement. Gross margin rose only 30bp to 38.9%, whereas SG&A increased 4.5%, slower than revenue growth of 5.2%; this created modest positive operating leverage. More significantly, reported other expenses fell to ¥3.3bn from ¥24.4bn, as business and factory restructuring expenses declined to ¥1.9bn from ¥23.4bn. Consequently, the reported operating-income acceleration overstates the pace of recurring improvement. Adjusted operating profit grew 9.7% to ¥122.2bn, and its margin was 11.0%, versus 10.5% a year earlier, indicating a 50bp underlying improvement. The tax burden was normal at 0.729, corresponding to a 25.3% effective tax rate. The interest burden was 1.004 because finance income of ¥8.0bn slightly exceeded finance costs of ¥7.7bn, supporting pre-tax earnings. The modest ¥0.2bn equity-method income contribution is immaterial to group profitability. Annualized asset turnover of 0.789x remains consistent with a capital-intensive global tire manufacturer, supported by PPE equal to 32.6% of assets.

Growth Assessment

Top-line growth was broad based across the four reporting geographies. The Americas remained the largest revenue contributor at ¥526.2bn, representing 47.3% of consolidated revenue, but adjusted operating income declined 4.7% to ¥37.9bn; its adjusted operating margin compressed to 7.2% from 7.9%. Japan generated revenue of ¥236.6bn, up 2.2%, while adjusted operating income increased 26.3% to ¥53.7bn and adjusted margin improved to 22.7% from 18.4%. Asia-Pacific, India and China generated revenue of ¥125.1bn, up 9.0%, but adjusted operating income declined 7.6% to ¥13.5bn, reducing margin to 10.8% from 12.7%. Europe, Middle East and Africa delivered the strongest regional improvement: revenue rose 9.6% to ¥221.6bn and adjusted operating income more than doubled to ¥19.0bn, with margin expanding to 8.6% from 4.5%. Japan is therefore the core business by adjusted operating-income contribution, accounting for 44.0% of aggregate segment adjusted operating income. The regional dispersion shows that group earnings growth is not yet uniform, with Americas and Asia profitability requiring attention. FY2026 Q1 revenue represents 24.7% of the ¥4,500.0bn full-year revenue forecast, essentially consistent with the 25% Q1 benchmark. Net income attributable to owners represents 27.1% of the ¥340.0bn full-year forecast, 2.1 percentage points ahead of the standard progress rate. The maintained forecast implies management views the Q1 result as supportive but not sufficient to warrant a guidance revision. The forecast calls for 3.9% full-year net-income growth, considerably below Q1's 21.4% increase, consistent with the non-recurring benefit from lower restructuring charges not being extrapolated.

Financial Health

Financial health is solid. Current assets of ¥2,777.9bn exceeded current liabilities of ¥1,024.3bn by ¥1,753.6bn, producing a current ratio of 2.71x. Cash and cash equivalents of ¥642.9bn alone cover 62.8% of current liabilities, while receivables and cash together substantially exceed short-term obligations. Short-term bonds and borrowings were ¥72.2bn, well below cash balances and current assets, so there is no apparent short-term debt maturity mismatch. Total bonds and borrowings were ¥464.4bn, and reported debt-to-equity was a conservative 0.51x. Total liabilities declined by ¥118.2bn from year-end, while total equity increased by ¥16.3bn to ¥3,736.2bn. The equity ratio improved to 65.2% from 63.7%, reinforcing balance-sheet resilience. Lease liabilities total ¥335.3bn and should be included in assessing fixed financing commitments; these are supported by ¥307.4bn of right-of-use assets. Net defined-benefit liabilities were ¥127.8bn, equivalent to 3.4% of total equity and manageable relative to the capital base. Treasury stock became ¥214.7bn negative from ¥433.9bn negative at year-end, a ¥219.2bn movement; this was the largest notable balance-sheet change and materially affects the presentation of equity components. Goodwill of ¥165.8bn equals only 4.4% of equity and 2.9% of assets, limiting balance-sheet dependence on acquisition-value retention. Intangible assets account for 3.7% of total assets, also indicating limited M&A-related asset concentration.

Notable B/S Changes

Treasury stock: +¥219.2bn, from -¥433.9bn at FY2025 year-end to -¥214.7bn at FY2026 Q1 end (+50.5%) - the large movement materially changed equity-component presentation and should be monitored alongside future repurchases and capital-return actions. Accounts payable: -¥67.1bn, from ¥600.6bn to ¥533.5bn (-11.2%) - reduced supplier financing contributed to the working-capital cash outflow from payables. Cash and cash equivalents: -¥70.9bn, from ¥713.8bn to ¥642.9bn (-9.9%) - the reduction reflects dividends, buybacks, capital expenditure, and financing outflows, while liquidity remains strong. Total liabilities: -¥118.2bn, from ¥2,027.8bn to ¥1,909.6bn (-5.8%) - deleveraging and lower current liabilities supported the improvement in the equity ratio to 65.2%.

Cash Flow Quality

Cash-flow quality was high in FY2026 Q1. Operating cash flow increased 12.3% year on year to ¥190.8bn, exceeding net income attributable to owners of ¥92.1bn by 2.07x. This is well above the 0.8x quality-alert threshold and is consistent with the favorable accruals ratio of negative 1.8%. Depreciation and amortization of ¥92.0bn provided substantial non-cash support to operating cash flow. Receivables generated a ¥38.6bn cash inflow, improving from ¥32.6bn a year earlier. Inventories consumed ¥11.2bn of cash, although the outflow improved from ¥18.5bn in the prior-year quarter. Payables declined by ¥16.5bn, reducing the cash benefit otherwise available from working capital. After ¥77.8bn of capital expenditure, free cash flow was ¥108.7bn, covering the quarter's ¥72.7bn dividend payment but not both dividends and ¥49.7bn of share repurchases. Total shareholder distributions of ¥122.4bn exceeded free cash flow by ¥13.7bn in the quarter, although they were readily financeable from cash resources and operating cash flow. Manufacturing working-capital efficiency remains the key caution: DSO of 88 days exceeds the 60-day warning threshold, DIO of 121 days exceeds both the 90-day and 60-day warning thresholds, and the 137-day cash conversion cycle exceeds the 120-day warning threshold. High receivable days may reflect customer and channel terms across a global aftermarket and OEM footprint, but they increase collection and credit-risk sensitivity. High inventory days may reflect the broad SKU, regional manufacturing, and replacement-tire service requirements of the tire business, but they heighten the risk of inventory write-downs or cash absorption if demand weakens. The long cash conversion cycle means sustained free-cash-flow generation depends on preventing renewed inventory accumulation and maintaining collection discipline.

Dividend Sustainability

The full-year DPS forecast is ¥125, unchanged from the prior forecast. Based on forecast EPS of ¥270.87, the forecast dividend payout ratio is 46.1%, below the 60% sustainability benchmark. The forecast dividend is therefore covered by projected earnings with a material retention buffer. Q1 dividends paid to owners were ¥72.7bn and were covered by Q1 free cash flow of ¥108.7bn. The ¥49.7bn Q1 share repurchase lifts quarterly total shareholder distributions to ¥122.4bn, equivalent to a 132.8% total return ratio relative to Q1 net income attributable to owners. This quarterly total return ratio is above the 100% benchmark, but it should not be extrapolated mechanically because dividends and buybacks are not necessarily evenly distributed through the year. Financing capacity remains strong given the 65.2% equity ratio, ¥642.9bn cash balance, and 0.51x debt-to-equity ratio. Dividend sustainability is therefore supported by forecast earnings, positive free cash flow, and conservative leverage. The main constraint on capital returns would be a deterioration in the currently long working-capital cycle or a recurrence of restructuring cash costs.

Risk Assessment

Business risks include Working-capital risk is elevated: 88-day DSO, 121-day DIO, and a 137-day annualized cash conversion cycle create sensitivity to customer collection, dealer/channel demand, and inventory valuation., Americas profitability risk is material because the region accounts for 47.3% of revenue, while adjusted operating income declined 4.7% and adjusted margin fell 70bp to 7.2%., Asia-Pacific, India and China profitability declined despite 9.0% revenue growth, with adjusted margin falling 190bp to 10.8%; this indicates possible price/cost or mix pressure., As a global tire manufacturer, Bridgestone remains exposed to raw-material costs, including natural rubber and petrochemical-based inputs, energy costs, logistics costs, and currency movements., The tire industry is exposed to automotive production cycles, replacement-demand conditions, OEM pricing pressure, trade restrictions, product-quality claims, and recall risk..

Financial risks include Although liquidity is strong, the long cash conversion cycle could absorb cash rapidly if inventories rise or receivable collections slow., Lease liabilities of ¥335.3bn and defined-benefit liabilities of ¥127.8bn are recurring fixed obligations that should be considered alongside borrowings., Q1 shareholder distributions exceeded free cash flow when buybacks are included, making sustained buyback activity dependent on full-year cash conversion..

Key concerns include Reported operating-income growth of 41.7% was substantially amplified by the reduction of business and factory restructuring expenses to ¥1.9bn from ¥23.4bn; recurring adjusted operating-profit growth was 9.7%., Inventory days of 121 are above both stated warning thresholds. The root cause is likely the operational inventory requirement of a diversified global tire manufacturing and distribution network, but the impact is elevated obsolescence, pricing, and cash-release risk if replacement demand weakens., Receivable days of 88 are above the 60-day warning threshold. This suggests a relatively long collection cycle; while potentially structural for OEM and distributor terms, it raises exposure to customer credit conditions and can restrain operating cash flow., The 137-day cash conversion cycle is above the 120-day warning threshold. Its impact is to increase the amount of capital tied up in operations and make free cash flow more volatile through the cycle..

Investment Implications

Key takeaways include Revenue growth of 5.2%, adjusted operating-profit growth of 9.7%, and a 50bp adjusted operating-margin expansion indicate underlying operational improvement., The 290bp reported operating-margin expansion should be interpreted cautiously because it was heavily aided by sharply lower restructuring expenses., Japan was the largest adjusted operating-income contributor and Europe/Middle East/Africa delivered the strongest profit recovery, partly offsetting weaker profit trends in the Americas and Asia-Pacific, India and China., Operating cash flow and free cash flow were strong, while leverage and liquidity remained conservative., The maintained full-year forecast embeds a more normalized earnings trajectory than the Q1 reported growth rate..

Metrics to watch include Americas adjusted operating margin and volume/price-mix recovery, Asia-Pacific, India and China adjusted operating margin, Inventory days, receivable days, and cash conversion cycle, Free cash flow after capital expenditures and total shareholder distributions, Recurring adjusted operating profit relative to reported operating profit, Raw-material, energy, freight, foreign-exchange, and tariff effects.

Regarding relative positioning, Bridgestone presents a financially resilient profile for a capital-intensive global tire manufacturer, with a 65.2% equity ratio, 0.51x debt-to-equity, limited goodwill concentration, and strong Q1 cash conversion. Its 11.3% reported operating margin and 8.3% net margin are in the good benchmark range, but annualized ROE of 9.9% remains below the 10-15% level generally associated with stronger return positioning. The principal relative constraint is working-capital intensity, particularly the elevated inventory and receivable cycles.