NORITAKE CO.,LIMITED FY2027 Q1 Earnings Report

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Executive Summary

The key takeaway is that revenue and earnings increased, with the operating margin improving significantly year on year against a backdrop of improved gross margin and greater efficiency in selling, general and administrative expenses. Revenue was ¥39.68B (+18.6% YoY), Operating Income was ¥4.04B (+84.7%), Ordinary Income was ¥5.41B (+63.2%), and Net Income was ¥3.91B (+58.3%). Higher profitability in the Ceramics & Materials Business and improved profitability in the Industrial Equipment Business progressed simultaneously, enabling both revenue growth and margin expansion.

Factors Driving Performance Changes

【Revenue】Revenue was ¥39.68B, representing a +18.6% increase year on year. By segment, Ceramics & Materials posted the largest increase at ¥17.38B (+33.9%), becoming the core business and accounting for 43.8% of total revenue. Industrial Equipment generated ¥15.19B (+11.2%), while Engineering generated ¥7.10B (+4.4%); both secured revenue growth.

【Profit and Loss】Operating Income was ¥4.04B (+84.7%), and the operating margin improved by +365bp year on year to 10.2%. Gross margin increased to 29.9% from 28.4% in the previous year, while the SG&A ratio declined to 19.7%; both cost absorption accompanying revenue growth and cost efficiency improvements contributed. Ordinary Income was ¥5.41B (+63.2%), with non-operating income, including ¥0.65B in dividend income and ¥0.09B in foreign exchange gains, contributing to the increase. In extraordinary gains and losses, a gain on negative goodwill of ¥0.50B and an impairment loss of ¥0.42B nearly offset each other, resulting in a minor net impact. Net Income was ¥3.91B (+58.3%), resulting in higher revenue and earnings.

Segment Analysis

Ceramics & Materials drove company-wide earnings, with revenue of ¥17.38B (+33.9%), Operating Income of ¥2.80B (+66.3%), and a margin of 16.1%. Industrial Equipment showed a significant improvement in profitability, with Operating Income rising to ¥0.92B (+274.1%) against revenue of ¥15.19B (+11.2%), raising its margin to 6.1%. Engineering continued to improve steadily, with revenue of ¥7.10B (+4.4%), Operating Income of ¥0.32B (+23.3%), and a margin of 4.5%. Profit margins differ significantly among the segments, and the increasing reliance on Ceramics & Materials is the primary factor driving the company-wide margin higher.

Key Financial Indicators

【Profitability】The operating margin and net margin improved significantly year on year to 10.2% and 9.9%, respectively. Gross margin was 29.9%, representing an improvement of +143bp year on year.【Cash Flow Quality】Non-operating income accounted for only 3.9% of revenue, indicating that the earning power of the core business is not excessively supplemented by non-operating factors. In extraordinary gains and losses, the gain on negative goodwill of ¥0.50B and the impairment loss of ¥0.42B nearly offset each other, limiting the one-time impact on Net Income.【Investment Efficiency】ROE was 2.2% on a quarterly basis. While the improvement in net margin was a positive driver, total asset turnover remained low, indicating room for improvement in asset efficiency.【Financial Soundness】The Equity Ratio remained high at 71.8%, reflecting a conservative capital structure. Meanwhile, short-term borrowings increased to ¥17.12B (+30.2%), requiring monitoring because interest-bearing debt is concentrated in the short term.

Cash Flow Analysis

As the cash flow statement is not disclosed in this report, funding trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥17.53B, down from ¥19.57B in the previous year, while investment securities increased to ¥70.55B (+32.4% YoY). This was primarily attributable to higher fair-value valuations accompanying market gains and also contributed to an increase in comprehensive income. Meanwhile, accounts receivable and notes receivable were ¥32.86B, and inventories were ¥11.74B, both at high levels, indicating that working capital has increased alongside revenue growth. Short-term borrowings increased to ¥17.12B, suggesting that the expansion of working capital may be funded through short-term financing. Behind the revenue and earnings growth, trends in inventory and receivables management will determine future cash-generating capacity from a cash-efficiency perspective.

Earnings Quality

The operating margin, which indicates the earning power of the core business, improved to 10.2%; the primary driver of earnings growth was an improvement in recurring earning power. Non-operating income consisted mainly of ¥0.65B in dividend income and ¥0.09B in foreign exchange gains, accounting for 3.9% of revenue and showing no excessive reliance. Extraordinary gains and losses included a ¥0.50B gain on negative goodwill arising from the consolidation of Okura Toen Co., Ltd. and a ¥0.42B impairment loss. As the two items nearly offset each other, the one-time impact on Net Income was limited. The difference between Ordinary Income of ¥5.41B and Net Income of ¥3.91B was primarily attributable to income taxes of ¥1.49B; excluding the tax burden, continuity in the earnings structure was maintained.

Earnings Forecast and Guidance

Against the full-year forecast of revenue of ¥157.50B, Operating Income of ¥13.00B, Ordinary Income of ¥16.50B, and YoY growth of +10.2%/+17.0%/+8.6%, Q1 progress was 25.2% for revenue, 31.1% for Operating Income, and 32.8% for Ordinary Income. Operating and ordinary income are progressing at a pace exceeding the simple 25% run rate, indicating a strong start toward the full-year plan. The fact that revenue progress is below earnings progress suggests that the margin improvement effect accompanying revenue growth emerged ahead of schedule in Q1. The earnings forecast and dividend forecast were revised during the quarter, reflecting changes in the assumptions underlying the full-year outlook.

Shareholder Returns

The dividend forecast is ¥120.00 per share, implying a Payout Ratio of approximately 38.8% against the full-year forecast EPS of ¥309.01. As Noritake conducted a 1-for-2 stock split effective April 1, 2026, the previous-year dividend of ¥80 was based on the pre-split basis and cannot be compared directly. The conservative capital structure, reflected in an Equity Ratio of 71.8%, provides a foundation supporting future capacity for shareholder returns. The dividend forecast was revised during the quarter, and the change to the full-year dividend plan should be noted.

Risk Factors

1. Funding Structure Risk: Short-term borrowings increased to ¥17.12B (+30.2% YoY), with interest-bearing debt concentrated in the short term. Sensitivity of cash management to interest-rate resets and refinancing timing has increased.

2. Segment Concentration Risk: Ceramics & Materials accounts for 43.8% of revenue and 69.3% of Operating Income, indicating increased reliance on this business. The impact of supply-demand and pricing trends in this business on company-wide performance has grown.

3. Working Capital Expansion Risk: Accounts receivable and notes receivable of ¥32.86B and inventories of ¥11.74B indicate that working capital has expanded alongside revenue growth. Work-in-process inventories were high at ¥16.14B, and the efficiency of inventory management and receivables collection will affect future cash-generating capacity.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the operating margin and net margin exceed the industry median, placing the company’s profitability relatively high within the industry.

Growth and Capital Efficiency

The revenue growth rate significantly exceeds the industry median, positioning the company among the industry’s high-growth group.

※Source: Company analysis

Key Earnings Highlights

1. The earnings growth rate significantly exceeded the revenue growth rate, with operating leverage from improved gross margin and greater SG&A efficiency serving as the central feature of the results.

2. The 16.1% margin of the Ceramics & Materials Business significantly exceeds the company-wide margin of 10.2%. The increasing imbalance in the earnings structure within the business portfolio is a notable structural change.

3. Short-term borrowings and working capital, including receivables and inventories, expanded simultaneously. Changes in funding efficiency during a period of revenue growth will be an area to monitor going forward.

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 to take any specific investment action.

Sensitivity: ¥3,247–¥3,435 at ±1% for the cost of equity, and ¥3,337–¥3,342 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing gap 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 by AI based on XBRL earnings release 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, after consulting a professional as necessary.

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