BRIDGESTONE CORPORATION FY2026 Q2 Earnings Report

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Executive Summary

For the cumulative Q2 period of the fiscal year ending December 2026, the Company achieved both revenue growth and significant profit growth, with the qualitative improvement in its earnings structure driven by price revisions and an improved cost mix being the key highlight. Revenue was ¥23,216.7B (+9.7% YoY), Operating Income was ¥2,802.3B (+70.4%), Profit Before Tax was ¥2,746.0B (+76.7%), and Net Income attributable to the consolidated group was ¥2,103.2B (+76.6%). The Operating Margin reached 12.1%, representing a substantial improvement from the previous year, while price pass-through and a more stable cost environment drove the increase in earnings.

Factors Affecting Performance

【Revenue】Revenue was ¥23,216.7B, representing a +9.7% YoY increase. According to the PDF materials, all segments achieved revenue growth, with the Americas (+11%), Asia, Oceania, India and China (+13%), and Europe, the Middle East and Africa (+11%) all recording double-digit growth. Improvements in pricing and mix were the primary drivers of revenue growth, with unit price factors contributing more than volume.

【Profit and Loss】Operating Income was ¥2,802.3B, an increase of +70.4% YoY. The gross margin improved to 39.7%, and the difference from the SG&A ratio of 27.7% resulted in an Operating Margin of 12.1%. Financial income of ¥115.5B and financial expenses of ¥178.1B were both minor, and Profit Before Tax of ¥2,746.0B was broadly consistent with Operating Income. Net Income of ¥2,103.2B can be explained by an effective tax rate of approximately 23.5% relative to Profit Before Tax, indicating that the impact of one-off gains and losses was limited. In conclusion, the Company achieved both revenue and profit growth.

Segment Analysis

The Americas was the core business, with revenue of ¥11,353B (approximately 49% of the total), while its profit margin was largely flat at 9.1% (+0.1pt YoY). Japan generated revenue of ¥6,344B but recorded the highest profit margin among all segments at 17.9% (+4.3pt), supported by strong performance from the new FINESSA product. Europe, the Middle East and Africa recorded the largest improvement in profit margin, at 7.4% (+3.0pt), reflecting progress in structural improvements resulting from business reorganization and restructuring. Asia, Oceania, India and China had the highest growth rate, with revenue increasing +13%, but its profit margin declined slightly to 11.2% (-0.7pt). Overall, the Americas is supporting performance through its scale, while Japan’s high profitability and improvements in Europe are driving profit growth.

Key Financial Indicators

Profitability: ROE 5.5%, Operating Margin 12.1%, Net Profit Margin 9.1% (Net Income/Revenue).
Cash Flow Quality: Operating CF/Net Income attributable to the consolidated group of 1.63x, FCF of ¥2,214.8B.
Financial Soundness: Equity Ratio of 64.1% (largely flat from 64.0% in the previous year), current ratio of approximately 278.5% (current assets of ¥3,024.7B ÷ current liabilities of ¥1,086.1B).

Cash Flow Analysis

Operating CF was ¥3,418.3B, equivalent to 1.63x consolidated Net Income, indicating sufficient cash backing for earnings. Investing CF was -¥1,203.4B, primarily due to capital expenditures of ¥1,308.1B. Financing CF was -¥1,581.5B, mainly reflecting dividend payments of ¥733.8B and share buybacks of ¥1,092.8B. FCF was ¥2,214.8B, sufficient to cover the combined ¥1,826.6B of dividends and share buybacks. Cash generation is therefore considered strong.

Earnings Quality

The difference between Profit Before Tax of ¥2,746.0B and consolidated Net Income of ¥2,103.2B was attributable to income taxes of ¥644.4B, resulting in an effective tax rate of 23.5%, which is not particularly abnormal. Other operating income of ¥143.9B and other expenses of ¥142.7B were nearly offsetting, and each represented less than 1% of revenue, indicating that the impact of one-off factors was limited. Operating CF exceeded Net Income, and earnings quality is considered sound from an accruals perspective as well.

Earnings Forecast and Guidance

Against the full-year forecast of Revenue of ¥4,500B and Net Income attributable to owners of the parent of ¥3,400B, the cumulative first-half progress rates were 51.6% for Revenue and 60.7% for Net Income attributable to owners of the parent (¥2,062.5B), indicating progress ahead of the standard 50% benchmark, particularly on the profit front. According to the PDF materials, although the Company expects an increase in raw material and other costs related to the situation in the Middle East of slightly more than ¥600B in the second half, the full-year plan remains unchanged from the announcement in February. The high first-half profit progress rate suggests that pricing and mix effects and cost normalization have progressed faster than planned.

Shareholder Returns

The interim dividend was ¥60 per share, while the full-year forecast is ¥125 (previous-year actual: ¥115). Based on forecast EPS of ¥270.87, the Payout Ratio is approximately 46.2%. Including share buybacks during the first half, total returns consisted of dividends of ¥733.8B and share buybacks of ¥1,092.8B, for a combined ¥1,826.6B. The Total Return Ratio relative to Net Income attributable to owners of the parent (¥2,062.5B) was approximately 88.5%. FCF of ¥2,214.8B exceeded total shareholder returns, indicating that they can be funded through internally generated cash. According to the PDF materials, progress under the ¥1,500B maximum share repurchase program had reached approximately 87% as of the end of July.

Catalysts

【Short Term】The extent of the impact from the increase in raw material costs attributable to the situation in the Middle East, expected to become apparent in the second half (slightly more than ¥600B in the second half), and progress on measures aimed at achieving the full-year plan.

【Long Term】Progress in transforming the business portfolio into a solutions company, the establishment of benefits from the restructuring of the European business, and progress in strengthening the earnings structure toward the 100th anniversary of the Company’s founding in 2031.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the Company

Risk Factors

1. Raw Material Price and Foreign Exchange Risk: The PDF materials confirm elevated market prices of TSR20 natural rubber at 218¢/kg and WTI at 93$/bbl. Cost increases associated with the situation in the Middle East are expected to exceed ¥600B in the second half and reach approximately ¥700B for the full year. The sustainability of margin improvements will depend on these changes in the operating environment.

2. Changes in Working Capital Efficiency: Inventories increased to ¥9,352.3B from ¥8,854.6B in the previous year, while accounts receivable also increased to ¥11,377.4B. According to the PDF materials, the CCC deteriorated slightly to 172 days (+1 day YoY), requiring monitoring from a cash-cycle perspective.

3. Demand Trend Risk: According to the PDF materials, North American replacement tire demand was PS92% and TB88%, confirming a decline in demand. The impact of U.S. tariffs was ¥250B on a cumulative first-half basis, in line with the plan, but attention should be paid to the possibility of an expansion of the impact from the second half onward.

Key Earnings Highlights

1. The Operating Margin of 12.1% (a substantial improvement from the previous year) indicates a structural improvement in profitability resulting from price revisions and a more stable cost environment. The profit margin of 17.9% in the Japan segment and the +3.0pt improvement in the Europe segment suggest that the profitability structure of each region is being strengthened.

2. The Net Income progress rate against the full-year forecast of 60.7% exceeds the standard 50% progress level, making the fact that first-half earnings momentum is ahead of plan a key earnings highlight.

3. The Total Return Ratio of approximately 88.5% is high; however, given FCF of ¥2,214.8B and the substantial ¥7,917.3B balance of cash and cash equivalents, shareholder returns are broadly funded by internally generated cash.

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 with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥3,043–¥3,221 at ±1% for the cost of equity, and ¥3,128–¥3,133 at ±0.1 for ω.

Notes:

• Net assets as of the quarter-end were used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated through an AI-integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. It does not recommend investment in any specific security. 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 professionals as necessary.

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