YOTAI REFRACTORIES CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Although revenue increased this quarter, Operating Income and Ordinary Income remained roughly at the previous-year level, and profitability declined slightly. Revenue was ¥7.22B (+4.6% YoY), Operating Income was ¥0.58B (+1.3%), and Ordinary Income was ¥0.64B (-0.4%). Net Income increased substantially to ¥0.46B (+145.3% YoY), but this was largely attributable to a comparative effect resulting from the reversal of the ¥0.305B extraordinary loss recorded in the same period of the previous year; underlying earnings through the ordinary income stage were generally flat. As SG&A expenses increased faster than revenue, the Operating Income margin contracted from 8.3% in the previous year to 8.1%.

Factors Affecting Performance

【Revenue】Revenue increased 4.6% YoY to ¥7.22B. The core Refractories, etc. segment led growth, increasing to ¥6.04B (+5.2% YoY), while sales to the steel industry were ¥3.29B (+5.7%), accounting for 45.5% of the total. Engineering revenue grew modestly to ¥1.18B (+1.8%), indicating that the primary driver of overall growth was the expansion of the Refractories, etc. Business.

【Profit and Loss】The gross margin was 18.7%, essentially unchanged from the previous year; however, SG&A expenses increased 6.9% YoY, outpacing revenue growth, and the Operating Income margin declined from 8.3% to 8.1%. Segment profit in Refractories, etc. was strong at ¥1.04B (+8.5% YoY), while Engineering recorded a decline to ¥0.09B (-28.9%), and corporate expenses also increased 7.5%, weighing on consolidated profit. Ordinary Income was ¥0.64B (-0.4% YoY), essentially flat. The substantial increase in Net Income to ¥0.46B (+145.3% YoY) was primarily due to a temporary comparative effect from the absence of the ¥0.305B extraordinary loss recorded in the same period of the previous year. In conclusion, the earnings structure was characterized by higher revenue but lower profit at the Operating Income and Ordinary Income stages, while the substantial increase in Net Income was attributable to a nonrecurring factor.

Segment Analysis

The Refractories, etc. segment is the core contributor to consolidated earnings, with Revenue of ¥6.04B (+5.2% YoY), segment profit of ¥1.04B (+8.5%), and a profit margin of 17.2%. The Engineering segment generated Revenue of only ¥1.18B (+1.8%), while segment profit declined substantially to ¥0.09B (-28.9%), with its profit margin also falling to 7.6%. Corporate expenses increased to ¥0.55B (+7.5%), expanding the adjustment from the combined segment profit of ¥1.13B to consolidated Operating Income of ¥0.58B. The increase in profit from Refractories, etc. absorbed the decline in Engineering and the increase in corporate expenses, resulting in a significant difference in earnings contribution between the businesses.

Key Financial Indicators

【Profitability】The Operating Income margin was 8.1%, down from 8.3% in the same period of the previous year. The Net Income margin improved to 6.3%, but it should be noted that this includes the reversal effect of the extraordinary loss. 【Cash Flow Quality】Annualized DSO was 130 days, DIO was 179 days, and CCC was 281 days, indicating substantial working capital lock-up and a long period before revenue growth is converted into cash generation. 【Investment Efficiency】Annualized ROE was 5.3%, decomposed into a Net Income margin of 6.3% × total asset turnover of 0.663x × financial leverage of 1.26x; the low asset turnover is the primary factor constraining ROE. 【Financial Soundness】The Equity Ratio was 79.6%, the current ratio was 506.4%, the Debt/Capital ratio was 2.3%, and interest coverage was 437.6x, all indicating a high level of financial safety.

Cash Flow Analysis

As cash flow statement data have not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits increased to ¥6.31B from ¥5.75B in the previous year, indicating an increase in on-hand liquidity. Meanwhile, accounts receivable and notes receivable totaled ¥10.24B, while inventories—including raw materials, finished goods, and work in process—reached ¥11.54B; both remained at high levels. The long cash conversion period, reflected in annualized DSO of 130 days, DIO of 179 days, and CCC of 281 days, indicates a structure in which it takes time for sales expansion to translate into cash generation. Investment securities increased by ¥0.85B to ¥4.68B, indicating that a portion of funds had been allocated to financial assets. Overall, the financial foundation is sound, but the immobilization of funds in working capital remains an issue for capital efficiency.

Earnings Quality

While profit at the Ordinary Income stage was essentially flat, Net Income increased substantially by +145.3% YoY, and this divergence was attributable to the reversal effect of the ¥0.305B extraordinary loss recorded in the same period of the previous year. Non-operating income was ¥0.10B, primarily consisting of dividend income of ¥0.07B, equivalent to only 1.3% of Revenue and insufficient in scale to replace Operating Income. The ¥0.01B loss on disposal of fixed assets recorded in the current period was immaterial, and pretax income of ¥0.64B was broadly comparable with the level before deducting the previous year’s nonrecurring loss. Comprehensive income was ¥1.05B, exceeding Net Income of ¥0.46B by ¥0.59B, primarily due to a ¥0.58B increase in the valuation difference on other securities. As valuation gains arising from market price fluctuations boosted comprehensive income, they should be distinguished from recurring business earnings power.

Earnings Forecast and Guidance

The Full-Year forecast remains unchanged at Revenue of ¥30.00B (+1.4% YoY), Operating Income of ¥3.80B (+5.7%), and Ordinary Income of ¥3.90B (+3.4%). While the Q1 progress rate for Revenue was 24.1%, a standard level, the progress rates for Operating Income, Ordinary Income, and Net Income were 15.3%, 16.5%, and 17.5%, respectively, all 7.5–9.7 percentage points below the standard progress rate of 25%. The Full-Year forecast Operating Income margin of 12.7% requires an improvement of approximately 4.6 percentage points from the Q1 actual result of 8.1%; therefore, the company’s plan assumes an improvement in profit margins from Q2 onward.

Shareholder Returns

The Full-Year dividend forecast remains unchanged at ¥90 per share. Based on the period-average number of shares outstanding of 18,432,512 shares, the estimated annual total dividend is approximately ¥1.66B, resulting in a Payout Ratio of approximately 63.8% against the Full-Year Net Income forecast of ¥2.60B. This Payout Ratio is based solely on dividends and is not a Total Return Ratio including share repurchases. The conservative financial foundation, reflected in an Equity Ratio of 79.6% and a Debt/Capital ratio of 2.3%, supports dividend stability; however, as the Payout Ratio is somewhat high, achievement of the Full-Year earnings plan will determine future dividend capacity.

Risk Factors

1. Risk of prolonged working capital cycle: Annualized DSO of 130 days, DIO of 179 days, and CCC of 281 days all significantly exceed cautionary levels for the manufacturing industry. Working capital absorbs funds even during periods of sales expansion, making improvement in capital efficiency a key challenge.

2. Dependence on the steel industry: Sales to the steel industry of ¥3.29B account for 45.5% of consolidated Revenue, and trends in steel production and capital investment directly affect demand for refractories.

3. Earnings volatility in the Engineering Business: Segment profit declined by -28.9% YoY, and earnings are susceptible to fluctuations depending on project progress and cost composition. The gross margin of 18.7% is also somewhat low by industry standards, requiring monitoring of the ability to pass through costs.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The company’s profitability is slightly below the industry median but remains within the IQR.

Growth and Capital Efficiency

The Revenue growth rate is also slightly below the industry median but is positioned at a mid-range level within the IQR.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The Refractories, etc. segment forms the earnings base, accounting for 92.0% of consolidated segment profit. Growth in the segment’s Revenue and profit (+5.2%/+8.5%) drove consolidated performance, while the decline in Engineering and the increase in corporate expenses restrained consolidated profit growth.

2. The +145.3% YoY increase in Net Income includes a temporary factor arising from the reversal of the previous year’s extraordinary loss. It is important when interpreting the earnings results that Operating Income and Ordinary Income were essentially flat.

3. Despite the high level of financial safety reflected in an Equity Ratio of 79.6% and a Debt/Capital ratio of 2.3%, annualized ROE of 5.3% and working capital turnover, represented by CCC of 281 days, have room for improvement. Asset efficiency will be a key to enhancing profitability going forward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,761–¥1,859 at Cost of Equity ±1%, and ¥1,806–¥1,810 at ω±0.1.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• Net assets as of the quarter-end are used; there is a timing difference relative to the Full-Year forecast.
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

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

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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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