YODOKO (5451) FY2026 Q3 Earnings Report

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Executive Summary

The Company’s results reflected profit compression without revenue growth, as declining revenue in the core steel sheet-related business coincided with higher SG&A expenses. Revenue was ¥1,489.7B (down -5.0% YoY), Operating Income was ¥95.0B (down -14.5%), Ordinary Income was ¥134.8B (down -22.2%), and Net Income attributable to owners of the parent was ¥94.4B (down -16.5%). Although the gross profit margin improved to 17.7% from the previous year, the Operating Income margin declined to 6.4% as SG&A expenses increased by +16.7%. In addition, the decline in gains on sales of marketable securities recorded in the previous year amplified the decline in Ordinary Income.

Factors Affecting Performance

【Revenue】Revenue was ¥1,489.7B, down -5.0% YoY. The steel sheet-related business, which accounted for 88.4% of the composition and generated segment revenue of ¥1,410.3B, declined by -5.6% and led the Company-wide revenue decrease. Meanwhile, the Roll Business generated revenue of ¥24.1B (up +19.5%), and the Real Estate Business generated ¥11.8B (up +8.3%); however, their scale was small and their impact on the overall results was limited. The Grating Business recorded revenue of ¥21.6B (down -13.3%).

【Profit and Loss】The gross profit margin improved to 17.7% from 16.3% in the previous year due to lower cost of sales. However, SG&A expenses increased significantly to ¥168.2B (up +16.7%), causing the Operating Income margin to contract to 6.4% from 7.1% in the previous year. Ordinary Income was ¥134.8B (down -22.2%), with the ¥20.9B gain on sales of marketable securities, down from ¥40.2B in the previous year, acting as a downward factor. Net Income was ¥94.4B (down -16.5%). In conclusion, the Company posted lower revenue and lower profit, with the benefit of improved gross profitability offset by higher fixed costs and lower non-operating income.

Segment Analysis

The steel sheet-related business recorded revenue of ¥1,410.3B (down -5.6%) and segment profit of ¥95.2B (down -14.6%), with its profit margin declining to 6.8% from 7.5% in the previous year. It accounted for 88.4% of total segment profit. The Real Estate Business maintained high profitability, with a 60.3% profit margin despite revenue of only ¥11.8B, and segment profit of ¥6.7B (up +7.7%). The Roll Business recorded revenue of ¥24.1B (up +19.5%) and returned to profitability with segment profit of ¥1.6B. The Grating Business recorded revenue of ¥21.6B (down -13.3%) and segment profit of ¥0.2B (down -85.1%), representing a substantial decline in profit and continued deterioration in profitability. The decline in the core business’s profit margin can be identified as the primary driver of Company-wide earnings.

Key Financial Indicators

【Profitability】The Operating Income margin was 6.4%, down from 7.1% in the same period of the previous year, while the Net Income margin was 6.3%, down from 7.2%. Although the gross profit margin improved to 17.7% from 16.3% in the previous year, the SG&A ratio rose to 11.3%, offsetting the improvement at the operating level. 【Cash Flow Quality】Cash and deposits were ample at ¥602.4B, while liquid assets including investment securities of ¥462.8B supported financial flexibility. 【Investment Efficiency】Annualized ROE was 6.0%, below the generally favorable level of approximately 8% for a ratio composed of the Net Income margin, asset turnover, and financial leverage. 【Financial Soundness】The Equity Ratio was extremely high at 83.1%, and liquidity was strong, with current assets of ¥1,546.6B against current liabilities of ¥249.2B. Short-term borrowings were only ¥1.5B, indicating low dependence on interest-bearing debt.

Cash Flow Analysis

As the cash flow statement has not been disclosed, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits increased to ¥602.4B from ¥580.9B in the same period of the previous year, suggesting the accumulation of funds through business operations. Inventories decreased to ¥224.7B from ¥244.4B in the same period of the previous year, indicating progress in inventory reduction, while accounts receivable declined slightly to ¥427.1B from ¥439.3B. Short-term borrowings decreased substantially to ¥1.5B, further reducing dependence on interest-bearing debt. Net assets increased to ¥2,180.7B against total assets of ¥2,624.7B, reflecting the accumulation of retained earnings and the maintenance of a stable financial foundation.

Earnings Quality

Ordinary Income for the current period of ¥134.8B included ¥4.34B in non-operating income, comprising a ¥20.9B gain on sales of marketable securities and ¥11.3B in dividends received. This represented an additional ¥3.94B relative to Operating Income of ¥95.0B from the core business. The gain on sales of marketable securities decreased from ¥40.2B in the same period of the previous year, which caused the decline in Ordinary Income to exceed the decline in Operating Income. Extraordinary income was ¥2.5B, consisting of gains on sales of fixed assets, while extraordinary losses were ¥1.2B, consisting of losses on disposal and sales of fixed assets; the net impact was minor, and their significance as temporary factors was limited. Comprehensive Income was ¥138.3B, exceeding Net Income of ¥98.9B, with other comprehensive income—centered on valuation differences on investment securities of ¥34.4B—providing an uplift. Since the earnings composition combines core operating earnings and investment income, it is important to evaluate the quality of earnings by examining the trend in Operating Income separately.

Earnings Forecast and Guidance

The full-year forecast is revenue of ¥1,990.0B, Operating Income of ¥116.0B, Ordinary Income of ¥170.0B, and EPS of ¥79.49. The progress rates through the cumulative Q3 period were 74.9% for revenue, 81.9% for Operating Income, and 79.3% for Ordinary Income, exceeding the standard 75% progress level for earnings. This lead in earnings progress means that Operating Income of only ¥20.97B is required in Q4, suggesting a reasonably high likelihood of achieving the full-year plan. However, the current-period Ordinary Income includes gains on sales of marketable securities, and subsequent quarterly progress will need to confirm whether achievement of the full-year forecast reflects improvement in the core business or dependence on investment income.

Shareholder Returns

The Q2 dividend was ¥20.00 per share, and the full-year dividend forecast is ¥60.00 per share. The forecast Payout Ratio calculated using forecast Net Income attributable to owners of the parent of ¥115.0B and the weighted-average number of shares outstanding during the period of 144,660,987 shares is approximately 75.5%, exceeding the generally accepted sustainability benchmark of less than 60%. Nevertheless, given the conservative financial structure consisting of cash and deposits of ¥602.4B and interest-bearing debt of ¥1.5B, the Company has substantial financial capacity to make dividend payments. The sustainability of future dividends will depend on securing a recurring level of Ordinary Income that does not rely on gains from the sale of investment securities.

Risk Factors

1. Declining profitability in the core business: The steel sheet-related business accounts for 88.4% of total segment profit, but its revenue declined by -5.6% and segment profit declined by -14.6%. Accordingly, demand and pricing trends in this business have a significant impact on Company-wide profit.

2. Funds tied up in working capital: Annualized DIO is 97 days and the CCC is 147 days, indicating a structure that requires time for inventory and receivables turnover. During periods of slowing demand, the risks associated with inventory valuation and funding burdens are likely to increase.

3. Dependence on temporary investment income: The ¥20.9B gain on sales of marketable securities corresponds to 22.2% of Net Income of ¥94.4B. As core business profit declines, Ordinary Income and Net Income are partly supported by this gain, which may increase earnings volatility.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

The Operating Income margin is below the industry median, while the Net Income margin slightly exceeds the industry median, including non-operating income.

Growth and Capital Efficiency

The Revenue growth rate is significantly below the industry median, placing the Company among peers with a notably declining revenue trend.

※Source: Company analysis

Key Points from the Financial Results

1. While the gross profit margin improved by approximately 1.4pt from the previous year to 17.7%, the Operating Income margin contracted to 6.4% as SG&A expenses increased by 16.7% YoY. Cost management and recovery in revenue from the core business will therefore be key areas of focus going forward.

2. The progress rates for Operating Income and Net Income against the full-year forecast both exceeded 80%, surpassing standard progress levels. Progress toward achieving the plan itself is therefore favorable.

3. The strength of the financial foundation—cash and deposits of ¥602.4B, interest-bearing debt of ¥1.5B, and an Equity Ratio of 83.1%—supports resilience to raw material market conditions and demand fluctuations. However, the high dependence of the earnings composition on gains from sales of marketable securities should be noted when assessing earnings quality.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,323–¥1,396 at ±1% for the cost of equity, and ¥1,354–¥1,362 at ±0.1 for ω.

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 / This is a mechanically calculated value based solely on publicly disclosed data and does not constitute a forecast of the market share price or a recommendation of any specific investment action, nor does it 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 discretion and responsibility, in consultation with a professional as necessary.

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