| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3021.7B | ¥2877.8B | +5.0% |
| Operating Income / Operating Profit | ¥150.7B | ¥123.2B | +22.3% |
| Profit Before Tax | ¥146.7B | ¥39.6B | +270.5% |
| Net Income / Net Profit | ¥95.6B | ¥31.9B | +200.0% |
| ROE | 1.3% | 0.4% | - |
FY2026 Q1 results were increased revenue and profit, with Revenue ¥3,021.7B (YoY +¥143.9B +5.0%), Operating Income ¥150.7B (YoY +¥27.5B +22.3%), Ordinary Income ¥144.2B (YoY +¥140.3B +3,642.1%), and Net income attributable to owners of the parent ¥85.7B (YoY +¥50.0B +140.5%). Gross margin improved to 31.0% (prior year 29.1%) up +1.9pt, and operating margin rose to 5.0% (prior year 4.3%) up +0.7pt. Volume and mix improvements in the Tire business and a halving of finance costs (prior year ¥109.2B → this period ¥50.8B) drove earnings. Operating Cash Flow was ¥100.6B, but inventory increase ¥153.5B and trade receivables increase ¥47.1B prevented funding of capital expenditure ¥249.9B, resulting in Free Cash Flow of -¥189.7B; the company covered funding needs with a net increase in short-term borrowings of ¥334.9B. Total assets were ¥1兆4,906B and Equity Ratio was 48.7%, maintaining financial soundness. Progress against full-year guidance was Revenue 23%, Operating Income 15%, Net Income 16%, indicating a back-loaded profile; full-year realization assumes full-year pass-through of price revisions and stabilization of raw material costs.
【Revenue】 Revenue was ¥3,021.7B (YoY +5.0%) and increased. By segment, Tires accounted for ¥2,599.2B (86.0% of total, YoY +6.3%) and remained the core, with volume growth and mix improvement driving sales. Sports was ¥321.8B (10.6%, -0.7%) slightly down, and Industrial & Others was ¥100.7B (3.3%, -6.6%) down. Tire revenue growth is estimated to be driven by expanded sales in overseas markets and FX effects, while Sports and Industrial & Others appear to be affected by softening demand and price competition. The 86% concentration in Tires indicates risk concentration in the business portfolio.
【Profitability】 Operating Income was ¥150.7B (YoY +22.3%), with operating margin improving to 5.0% (prior year 4.3%, +0.7pt). Cost of sales ratio declined to 69.0% (prior year 70.9%), expanding gross margin to 31.0%, but SG&A ratio rose to 25.4% (prior year 24.1%, +1.3pt), partly offsetting gross margin improvement. Non-operating items produced net -¥4.3B (financial income ¥46.5B, financial expenses ¥50.8B), a small net amount. Financial expenses halved from ¥109.2B in the prior year, normalizing interest burden and lifting Profit Before Tax. Other income/expenses were net -¥17.3B (other income ¥8.7B, other expenses ¥26.0B) and were recurring costs. Equity-method investment gains of ¥0.3B were immaterial. Profit Before Tax was ¥146.7B (prior year ¥39.6B, +270.5%). After corporate taxes of ¥51.0B (effective tax rate 34.8%), Net Income was ¥95.6B (prior year ¥31.9B, +200.0%), and Net income attributable to owners of the parent was ¥85.7B (prior year ¥35.6B, +140.5%). Net income margin improved to 3.2% (prior year 1.1%, +2.1pt). In conclusion, increased revenue and margin expansion in the Tire business along with halved finance costs drove the top-line and bottom-line growth.
The Tire business reported Revenue ¥2,599.2B (YoY +6.3%), Segment Profit ¥147.6B (YoY +35.0%), and segment margin 5.7%, accounting for approximately 88% of consolidated segment profit. Volume and mix improvements and raw material cost stability contributed to profit growth. The Sports business reported Revenue ¥321.8B (YoY -0.7%), Segment Profit ¥9.1B (YoY -47.3%), and margin 2.8%, experiencing profit decline due to soft demand and higher SG&A. The Industrial & Others business reported Revenue ¥100.7B (YoY -6.6%), Segment Profit ¥11.5B (YoY -22.6%), and margin 11.4%—high margin but lower revenue and profit. The profit margin gap among segments is significant; improving Sports profitability is a key challenge.
【Profitability】Operating margin 5.0% (prior year 4.3%, +0.7pt) and Net income margin 3.2% (prior year 1.1%, +2.1pt) improved. Expansion of gross margin to 31.0% (prior year 29.1%, +1.9pt) contributed, but SG&A ratio rose to 25.4% (prior year 24.1%, +1.3pt) and offset some benefits. ROE was 1.3% (annualized), indicating low capital efficiency that remains an issue. 【Cash Quality】Operating Cash Flow ¥100.6B was 1.05x Net Income ¥95.6B, meeting the benchmark, but inventory increase ¥153.5B and trade receivables increase ¥47.1B constrained cash generation. Free Cash Flow was -¥189.7B due to front-loaded capital expenditure. 【Investment Efficiency】Estimated ROIC was low at 1.3%. Inventory turnover days were 552 days (Inventories ¥3,155.6B ÷ annualized Cost of Sales ¥8,341.5B × 365), Days Sales Outstanding (DSO) were 261 days (Trade receivables ¥2,160.7B ÷ annualized Revenue ¥12,086.8B × 365), and Days Payable Outstanding were 298 days, indicating extremely low working capital efficiency. CCC was prolonged at 515 days, making inventory and receivables reduction an urgent priority. 【Financial Soundness】Equity Ratio was 48.7% (prior year 49.0%), debt-to-equity ratio 1.00x, remaining stable. Current ratio was 174% (current assets ¥7,009B / current liabilities ¥4,031B), ensuring short-term liquidity. Interest-bearing debt totaled ¥3,557B (short-term ¥1,447B, long-term ¥2,110B); after deducting cash ¥993B, Net interest-bearing debt was ¥2,564B, representing 0.34x of shareholders' equity, a low level.
Operating Cash Flow was ¥100.6B (prior year ¥94.5B, +6.5%) and 1.05x Net Income ¥95.6B, meeting the benchmark, but inventory increase ¥153.5B and trade receivables increase ¥47.1B tied up cash. Depreciation and amortization and others totaled ¥216.9B; gross operating cash subtotal was ¥237.8B, and after adjustments including working capital increases and corporate tax payments ¥126.7B, Operating Cash Flow was ¥100.6B. EBITDA was ¥367.6B (Operating Income ¥150.7B + Depreciation & amortization etc. ¥216.9B), giving an OCF-to-EBITDA ratio of 27.4%, low and indicating inadequate cash conversion. Investing Cash Flow was -¥290.3B, driven mainly by capital expenditures ¥249.9B and intangible asset acquisitions ¥58.3B. Proceeds from sale of property, plant and equipment ¥17.8B and sale of investment securities ¥0.7B were included; Free Cash Flow was -¥189.7B. Financing Cash Flow was +¥175.0B, with net increase in short-term borrowings ¥334.9B covering funding needs. After dividend payments ¥108.8B and lease liabilities payments ¥48.4B, net financing cash flow was ¥175.0B, and cash and cash equivalents increased only slightly to ¥993.4B (net increase ¥7.0B) after foreign exchange gains ¥21.7B.
Earnings quality is centered on recurring factors; one-off items had limited impact. Impairment losses were minor at ¥0.29B (prior year ¥1.25B), and non-operating items included recurring net other items -¥17.3B (other income ¥8.7B, other expenses ¥26.0B). Financial expenses of ¥50.8B halved from ¥109.2B in the prior year, reflecting normalization of the interest environment and effectiveness of FX hedges. Operating Cash Flow/Net Income was 1.05x, exceeding the benchmark for cash generation, but increases in inventory and receivables produced an accrual ratio of -0.1%, indicating generally good quality. Comprehensive income was ¥221.1B, 2.3x Net Income ¥95.6B, boosted by Other Comprehensive Income ¥125.5B (of which foreign currency translation gains ¥123.7B). FX movements are temporary; comprehensive income attributable to owners of the parent was ¥206.5B, 2.4x Net income attributable to owners of the parent ¥85.7B—valuation gains substantially exceeded cash and warrant caution since they lack cash backing.
Full-year guidance unchanged: Revenue ¥1兆3,200B, Operating Income ¥1,000B (YoY +21.1%), Net income attributable to owners of the parent ¥550B (YoY +9.2%), EPS ¥209.26, Dividend per share ¥42. Q1 progress rates vs. full year were Revenue 23% (standard 25% -2pt), Operating Income 15% (standard -10pt), Net income attributable to owners of the parent 16% (standard -9pt), indicating back-loaded performance. The lag in Operating Income and Net Income progress is presumed to reflect increasing effects of raw material cost stabilization and full-year impact of price revisions concentrated in the second half. Seasonality in the Tire business (summer/winter sales campaigns) is also a factor that will boost second-half sales. The DPS forecast of ¥42 corresponds to a payout ratio of 20.1% against EPS ¥209.26, a sustainable level, but Q1 Free Cash Flow -¥189.7B was covered by short-term borrowings, so second-half profit progression and working capital compression are prerequisites to secure dividend funding.
Q1 dividend payments ¥108.8B were interim dividends (based on prior year earnings), with full-year dividend guidance maintained at ¥42 (payout ratio 20.1%). There were no share buybacks (¥0.0B). Total Return Ratio equals the payout ratio at 20.1%, reflecting a policy that emphasizes internal reserves. Based on cash and cash equivalents ¥993B and annualized Operating Cash Flow ¥402B, dividend capacity appears ample, but Q1 Free Cash Flow -¥189.7B reflects front-loaded capex and working capital increases; improvement in cash conversion in the second half is key to dividend sustainability. A payout ratio in the 20% range balances with an Equity Ratio of 48.7%, and scope for dividend increases depends on profit growth and improvement in capital efficiency.
Working Capital Efficiency Risk: Inventory turnover days 552 days, DSO 261 days, CCC 515 days indicate extremely low working capital efficiency. Inventory increase ¥153.5B and receivables increase ¥47.1B pressured Q1 Operating Cash Flow and were covered by a net increase in short-term borrowings ¥334.9B. Prolonged CCC increases interest payment burden in a rising rate environment and raises refinancing risk. Compression of inventory and strengthening receivables collection to reduce working capital is urgent.
Business Portfolio Concentration Risk: The Tire business accounts for 86% of revenue and about 88% of segment profit, indicating portfolio concentration in Tires. Sensitivity to raw material (rubber, petroleum-based) price volatility and demand declines in major markets is high, and dependence on a single business is a risk. Strengthening profitability of Sports and Industrial & Others (Sports margin 2.8%, Industrial & Others 11.4%—a large gap) and diversifying the business mix are priorities.
Sustainability of Profit Improvement Risk: Gross margin improved to 31.0% (+1.9pt) but SG&A ratio rose to 25.4% (+1.3pt), with SG&A growth +10.5% > Revenue growth +5.0%, indicating deteriorating efficiency. The halving of financial expenses (prior year ¥109.2B → this period ¥50.8B) substantially lifted Profit Before Tax, but rising interest rates could reverse this benefit. Progress rates vs. full-year guidance (Operating Income 15%, Net Income 16%) assume back-loaded realization and depend on price revision pass-through, raw material cost stability, and seasonality. Controlling SG&A and stabilizing financial expenses are key to sustaining profitability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.0% | 6.8% (2.9%–9.0%) | -1.9pt |
| Net Profit Margin | 3.2% | 5.9% (3.3%–7.7%) | -2.8pt |
Both operating margin and net margin are below the industry median, indicating weaker profitability within manufacturing.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 5.0% | 13.2% (2.5%–28.5%) | -8.2pt |
Revenue growth rate is 8.2pt below the industry median, implying growth pace below peers.
※ Source: Company compilation
Confirm margin improvement trend and monitor second-half progress: Gross margin +1.9pt, Operating margin +0.7pt, Net margin +2.1pt confirm an improving trend. Financial expenses halving boosted Profit Before Tax, but SG&A ratio +1.3pt offset margin expansion. Q1 progress vs. full-year guidance shows Operating Income 15% and Net Income 16%, back-loaded; full-year realization depends on pass-through of price revisions, raw material cost stability, and seasonality. Second-half profit progression and sustainability of margin levels will be key for assessment.
Potential for working capital efficiency improvement and its role in capital efficiency: CCC 515 days, inventory turnover 552 days, DSO 261 days indicate very low working capital efficiency for a manufacturer. Inventory increase ¥153.5B and receivables increase ¥47.1B pressured Q1 Operating Cash Flow and Free Cash Flow -¥189.7B was covered by short-term borrowings ¥334.9B; this structure raises sustainability concerns. ROE 1.3% and estimated ROIC 1.3% are low; correcting working capital through inventory and receivables compression is the main driver for ROE improvement. Quarterly trends in inventory days, DSO, CCC, and short-term borrowing levels will be progress indicators.
Diversification of business portfolio and strengthening profitability of Sports & Industrial & Others: Tires account for 86% of revenue and 88% of segment profit, creating high sensitivity to raw material price and demand shifts. Sports reported low margin 2.8% and substantial profit decline (-47.3%), while Industrial & Others reported high margin 11.4% but declining revenue (-6.6%). Addressing the margin gap among segments (Tires 5.7%, Sports 2.8%, Industrial & Others 11.4%) and diversifying the portfolio are medium-term risk mitigation strategies. Progress in improving Sports profitability and resumption of growth in Industrial & Others are points to watch.
This report was auto-generated by AI analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; please consult a professional advisor if necessary.