| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥11134.3B | ¥10581.5B | +5.2% |
| Operating Income | ¥1258.0B | ¥887.7B | +41.7% |
| Profit Before Tax | ¥1262.9B | ¥859.0B | +47.0% |
| Net Income | ¥944.8B | ¥777.9B | +21.4% |
| ROE | 2.5% | 2.1% | - |
FY2026 Q1 (Jan–Mar 2026) delivered revenue ¥11,134.3B (YoY +¥552.8B +5.2%), Operating Income ¥1,258.0B (YoY +¥370.3B +41.7%), Ordinary Income ¥1,263.9B (YoY +¥403.7B +47.0%, disclosed as Profit Before Tax), and Net Income attributable to owners of parent ¥921.1B (YoY +¥162.2B +21.4%), achieving higher sales and substantial profit growth. Operating margin expanded to 11.3% from 8.4% a year ago (+2.91pt), with gross margin 38.9% (+0.33pt) and SG&A ratio 27.9% (-0.20pt), indicating improved earnings structure. Revenue growth was driven by price/mix improvement and favorable FX (USD/JPY 157 vs 153 prior year), and robust growth in EMEA (Revenue +9.6%) and Asia (Revenue +9.0%). Major drivers of the profit surge were maintained prices and higher share of value-added tires, normalization from prior-year large restructuring charges (about ¥234B) to a small level going forward (about ¥22B), and recovery of profitability in Europe (Operating Income +109.1%). By region, Japan contributed the largest operating profit of ¥537.5B (margin 22.7%), while the Americas delivered revenue +4.1% but Operating Income -4.7% with softness in profitability. Operating Cash Flow was ¥1,908.0B (2.02x Net Income), Free Cash Flow was ¥1,087.1B, demonstrating strong cash generation. Returned ¥1,224.3B to shareholders (dividends ¥727.4B + buybacks ¥496.9B). Treasury shares outstanding were reduced by 50.5% YoY via cancellation, improving capital efficiency.
[Revenue] Revenue was ¥11,134.3B (+5.2% YoY), a record high. By region, EMEA was ¥2,215.6B (+9.6%), Asia & Oceania / India / China ¥1,250.7B (+9.0%), Americas ¥5,261.8B (+4.1%), and Japan ¥2,365.9B (+2.2%) — all segments posted revenue growth. In North America, demand slowed due to cold weather, but product launches and a multi-brand strategy achieved share gains in PS/TB (Passenger car & Light truck), surpassing demand. Europe continued strong sales of premium (high-diameter) tires. Japan saw increased retail tire sales and improved selling price mix. Weaker yen (USD/JPY 157 vs 153) was a tailwind. In the PS/LT segment, sales of high-inch tires (≥18") reached 104% driving continued mix improvement. Gross margin improved to 38.9% (+0.33pt), supported by price preservation and moderation of raw material costs.
[Profitability] Operating Income was ¥1,258.0B (+41.7%), with operating margin 11.3% (+2.91pt). SG&A was ¥3,104.1B (+4.5%), growing less than revenue (+5.2%), reducing the SG&A ratio to 27.9% from 28.1% (-0.20pt), confirming positive operating leverage. One-off factors: the prior year included restructuring charges of about ¥234B (mainly restructuring of overseas tire plants, e.g., Americas) recorded in other expenses; in this period restructuring charges were about ¥19B and restructuring gains about ¥55B (mainly related to restructuring of in-house overseas operations), yielding a net positive impact of about ¥36B (≈4% of Net Income) — limited in scale. Profit Before Tax (equivalent to Ordinary Income) was ¥1,262.9B (+47.0% YoY), Net Income ¥921.1B (+21.4%), with net margin improving to 8.3% from 7.2% (+1.10pt). Effective tax rate was 25.3% (Income taxes ¥320.0B / Profit Before Tax ¥1,262.9B), a standard level. The gap between Ordinary Income and Net Income is mainly explained by corporate tax expense. Profit from discontinued operations was ¥1.9B (similar to prior year), immaterial. In conclusion, steady price/mix, cost control and normalization from prior-year large one-offs drove revenue and profit growth.
The core business is Japan, with Operating Income ¥537.5B (approx. 42.8% contribution, estimate), margin 22.7% — the highest profitability across the company — and a primary driver of the revenue and profit upturn.
Segment results:
The contrast between high profitability in Japan (22.7%) and lower profitability in the Americas (7.2%) is notable; improving Americas profitability is a future focus. Europe’s V-shaped recovery drove margin to 8.6% as restructuring benefits materialize.
Profitability: ROE 2.5% (prior 2.1%, +0.4pt), Operating margin 11.3% (prior 8.4%, +2.91pt), Net margin 8.3% (prior 7.2%, +1.10pt). Gross margin 38.9% (+0.33pt), SG&A ratio 27.9% (-0.20pt) — overall earnings structure improving.
Cash quality: Operating CF / Net Income 2.02x (healthy, >1.0x), FCF ¥1,087.1B. Operating CF significantly exceeds Net Income; accrual ratio estimated -1.8% (Operating CF ¥1,908.0B - subtotal before working capital changes ¥2,292.8B ≒ Net Income ¥944.8B, difference divided by Net Income) indicating strong cash backing of earnings.
Investment efficiency: Capex / Depreciation 0.85x (Capex ¥777.8B / Depreciation ¥919.8B, depreciation using CF statement value), indicating maintenance-level investment; growth investments are selective.
Financial soundness: Equity Ratio 65.2% (prior 63.7%, +1.5pt), Current Ratio ~2.7x (Current assets ¥27,778.9B / Current liabilities ¥10,242.9B). Interest-bearing debt (bonds & borrowings) ¥464.4B (current ¥72.2B + non-current ¥392.2B), lease liabilities ¥335.3B; Net Debt (interest-bearing debt + lease liabilities - cash & cash equivalents) approx. ¥169.6B, very low. Debt/EBITDA 0.21x (interest-bearing debt ¥464.4B / est. EBITDA ¥2,177.8B (Operating Income ¥1,258.0B + depreciation & amortization ¥919.8B)), Interest Coverage ~266.8x (EBIT ¥1,258.0B / interest expense ¥47.1B) — strong. Cash & Cash Equivalents ¥6,429.4B (11.4% of total assets) — liquidity risk limited.
Operating CF was ¥1,908.0B (+12.3% YoY), 2.02x Net Income ¥944.8B, indicating strong cash backing of earnings. Subtotal before working capital changes was ¥2,292.8B; working capital resulted in net cash outflow of -¥384.8B (AR collection +¥385.6B, inventories increase -¥111.6B, AP decrease -¥164.8B, other VAT payable increase +¥182.4B, etc.). After corporate tax payments -¥382.7B and interest paid -¥47.1B, Operating CF was generated. Operating CF / EBITDA was approx. 0.88x (Operating CF ¥1,908.0B / est. EBITDA ¥2,177.8B), indicating solid cash conversion.
Investing CF was -¥820.9B, mainly Capex -¥777.8B (Capex/Depreciation 0.85x — maintenance level) and intangible asset acquisition -¥120.3B.
Financing CF was -¥1,745.3B, driven by dividends paid -¥727.4B, share buybacks -¥496.9B, repayment of short-term borrowings -¥223.0B, and lease liabilities repayments -¥208.8B.
FCF was ¥1,087.1B (Operating CF ¥1,908.0B - Capex ¥777.8B - intangible asset acquisitions ¥120.3B gives an estimated ~¥1,010B but the actual includes other investing items), covering shareholder returns (dividends + buybacks ¥1,224.3B) — a slight shortfall of about ¥137B, absorbable given ample liquidity and low leverage. Cash & Cash Equivalents at period end ¥6,429.4B (opening ¥7,138.1B → change -¥708.7B including FX effects and investments) — ample buffer.
Cash generation assessment: Strong (Operating CF/Net Income >2.0x, FCF ¥1,087B secured, liquidity ¥6,429B, Debt/EBITDA 0.21x — extremely low leverage — indicating substantial financial capacity).
Earnings quality is high. The gap between Profit Before Tax ¥1,262.9B and Net Income ¥921.1B is mainly corporate tax expense ¥320.0B (effective tax rate 25.3%). One-off items are limited (net adjustment approx. ¥36B ≈ 4% of Net Income). Prior year recorded business/plant restructuring charges about ¥234B in other expenses; this period recorded restructuring charges ¥19B and restructuring gains ¥55B (related to overseas in-house operations, mainly EMEA), resulting in a net positive. Disaster losses were immaterial (about ¥0.4B in other expenses).
Non-operating income included financial income ¥80.2B (0.7% of revenue), small in impact. Financial costs ¥77.0B largely offset financial income, net +¥3.2B. Equity-method income ¥1.7B; composition of non-operating items is standard.
Operating CF exceeds Net Income by 2.02x, indicating good accrual quality. Working capital-driven one-off cash outflow -¥384.8B exists, but this reflects mixed movements of AR collection and inventory/AP changes and does not undermine cash backing of profit. Comprehensive income ¥1,424.2B vs Net Income ¥944.8B — difference ¥479.4B mainly due to translation differences on foreign operations +¥460.4B (yen depreciation → asset increase and other equity component increase) and changes in fair value of cash flow hedges -¥1.5B, all attributable to equity adjustments without profit recognition.
Recurring earnings growth is the main profit driver, and Operating CF exceeding Net Income supports high earnings quality.
Full Year guidance: Revenue ¥45,000B, Net Income attributable to owners of parent ¥3,400B, EPS ¥270.87 (post 2-for-1 stock split basis), Dividend ¥60 (post-split basis). No revisions from the February announcement.
Progress ratios: Revenue 24.7% (Q1 ¥11,134B / FY ¥45,000B), Net Income 27.1% (Q1 ¥921B / FY ¥3,400B). Versus standard progress (Q1 = 25%), revenue is -0.3pt and net income +2.1pt — roughly in line to slightly ahead. Given Q1 outperformance (Operating margin 11.3% vs 8.4% prior year +2.91pt), the full-year guidance can be regarded as conservative.
No forecast revisions, but the PDF materials note “No change to full-year outlook; however, Middle East developments are fluid and will be monitored.” Middle East share of revenue is about 1.5% and limited, but a crude oil price rise (assumed WTI ¥90USD/bbl) could increase raw material, energy and logistics costs by gross ~¥700B/year, mainly expected from Q2 onward (particularly in H2). US tariff impact estimated gross ~¥550B/year (unchanged from February assumption). Countermeasures include business cost reduction, supply-chain optimization and strengthened sales measures.
While progress aligns with a normal pace, cost inflationary pressures are expected to increase in H2; maintaining price/mix and effective cost measures will be key to achieving full-year guidance. Order backlog and contract liability data are not disclosed, making quantitative visibility of future revenue from orders difficult.
Dividend policy: Full-year DPS forecast ¥60 (post 2-for-1 split effective Jan 1, 2026). Payout ratio against forecast EPS ¥270.87 is about 22% — sustainable. Q1 dividend payment to owners ¥727.4B mainly relates to the prior fiscal year-end dividend (prior year-end DPS ¥115 pre-split, paid post-split on a split-adjusted basis; estimated pre-split equivalent about ¥630B). Coverage versus FCF is 1.5x, so dividends are within earnings and cash flow.
Share buybacks: Capital policy announced in February (share buyback limit ¥1,500B, funding with bonds etc. ¥1,500B) is progressing. Q1 executed buybacks ¥496.9B, with progress about 51% as of end-April (PDF). Treasury shares outstanding reduced via cancellation from -¥4,339.3B to -¥2,147.1B YoY (improvement ¥2,192.3B, -50.5% YoY), improving capital efficiency.
Total return: Q1 dividends + buybacks totaled ¥1,224.3B, about ¥137B more than FCF ¥1,087.1B, but absorbable given cash on hand ¥6,429.4B and low leverage (Debt/EBITDA 0.21x). Annualized total return ratio estimated 0.89x relative to FCF (Q1 ¥1,224B ×4 ÷ est. annual FCF ¥5,500B), indicating flexible but prudent returns within capital capacity. Dividends are stable; share buybacks are executed flexibly.
Capital policy objective: Use debt while maintaining top industry credit ratings to lower WACC and expand ROIC-WACC spread to enhance shareholder value. Issued bonds and similar instruments raising ¥1200B in April (PDF).
[Short term]
[Long term]
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating margin | 11.3% | 6.8% (2.9%–9.0%) | +4.5pt |
| Net margin | 8.5% | 5.9% (3.3%–7.7%) | +2.6pt |
Positioning: Both operating and net margins materially exceed the median, indicating the company is a high-profitability manufacturer.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth (YoY) | 5.2% | 13.2% (2.5%–28.5%) | -8.0pt |
Positioning: Revenue growth is below the sector median, placing the company in stable-growth territory relative to high-growth manufacturing peers; high profitability compensates.
※ Source: Company aggregation
Raw material price risk (natural rubber, synthetic rubber, petroleum-based feedstocks): With Middle East tensions, crude oil price could rise (assumption WTI 90USD/bbl → gross ~¥700B/year cost increase estimated, mainly impacting H2). Energy and logistics cost pass-through and delayed price recovery or slowing mix improvement could press margins. Q1 saw WTI average ~73USD/bbl, but sustained 90USD/bbl would surface in H2.
Geopolitical & tariff risks: US tariff impact estimated gross ~¥550B/year (unchanged since February). Middle East developments may affect production, logistics and supply chains (region ~1.5% of revenue — limited direct exposure, but indirect effects via oil prices are broad). Tariffs and geopolitical factors could increase costs or reduce sales opportunities, pressuring results.
Working capital efficiency risk (high DSO, DIO, CCC): Estimated Days Sales Outstanding ~350 days, Days Inventory Outstanding ~483 days, Cash Conversion Cycle ~547 days (PDF quality-alert values, annualized estimates) — prolonged trends. Concurrent delays in receivables collection, inventory build-up and shortened payables could strain cash flows and increase working capital funding needs. Q1 saw working capital cash outflow -¥384.8B; stringent inventory and credit management are required ahead of H2.
Price & mix-led structural improvement in earnings is taking hold: Operating margin 11.3% (+2.91pt), gross margin 38.9% (+0.33pt), SG&A ratio 27.9% (-0.20pt) — profitability steadily improving. Mix shift to high-inch/premium tires and cost control produced tangible results; Ordinary Income quality is high. Operating CF at 2.02x Net Income indicates robust cash generation, suggesting Q1 strength may be structural rather than transitory. European V-shaped recovery (Operating Income +109.1%, margin 8.6%) and Japan’s high margins (22.7%) are company-level drivers.
Americas profitability improvement and working capital efficiency are keys: Americas revenue +4.1% but Operating Income -4.7% (margin 7.2%, -0.7pt). Despite share gains from new products and multi-brand strategy, pace of profitability recovery is pivotal. Working capital shows high DSO/DIO/CCC (quality alert) and significant room for efficiency gains; stricter inventory and credit controls and optimization of payable terms are essential to lift ROIC and ROE. Q1 confirmed inventory increase -¥111.6B and AP decrease -¥164.8B, producing approx. -¥277B cash outflow related to working capital — H2 improvement is necessary.
Capital policy and flexibility in shareholder returns: Share buyback authorization ¥1,500B (progress ~51%) and bond issuance ¥1,200B support maintaining top industry ratings while improving capital efficiency. FCF ¥1,087B vs dividends + buybacks ¥1,224B — proactive returns but absorbable given cash ¥6,429B and Debt/EBITDA 0.21x. H2 execution of measures against raw material cost increases (gross ¥700B estimate) and tariff impacts (¥550B) and sustaining price & mix improvements will determine ability to meet full-year guidance and continue shareholder returns.
This report is an earnings analysis document automatically generated by AI integrating XBRL financial statement data and PDF earnings presentation materials. It does not constitute an investment recommendation for any specific security. Industry benchmarks are reference information compiled by the firm from public financial statements. Investment decisions should be made at your own responsibility; consult professional advisors as needed.
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