YODOKO (5451) FY2027 Q1 Earnings Report

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Executive Summary

In Q1, the core business experienced declines in both revenue and earnings, while net income increased mainly due to gains on the sale of fixed assets. Revenue was ¥515.1B (-2.4% YoY), Operating Income was ¥38.5B (-8.2%), and Ordinary Income was ¥50.0B (-2.4%). Net income attributable to owners of the parent was ¥37.1B (+9.1%), boosted by extraordinary income of ¥9.8B, including a ¥9.4B gain on the sale of fixed assets. This contrasts with the decline in the profitability of the core business. The decline in revenue and earnings in the main steel sheet-related business was the primary driver of the overall results.

Factors Affecting Performance

【Revenue】Revenue was ¥515.1B, down -2.4% YoY. The steel sheet-related business, which accounts for 95.1% of external revenue, declined to ¥489.7B (-2.2%), driving the company-wide revenue decline. Revenue declined in the Roll Business to ¥7.2B (-16.1%) and in the Grating Business to ¥6.8B (-1.2%), while the Real Estate Business secured revenue growth of ¥4.6B (+4.8%).

【Profit and Loss】Gross profit was ¥97.2B, with a gross margin of 18.9%, improving from 18.5% in the same period of the previous year. However, selling, general and administrative expenses increased to ¥58.6B, up +5.5% YoY, causing the SG&A ratio to rise to 11.4% from 10.5% in the same period of the previous year. As a result, Operating Income was ¥38.5B (-8.2%), with an operating margin of 7.5%, indicating that the improvement at the gross profit level did not translate through to the operating income level. Supported by non-operating income of ¥12.0B, including ¥5.8B in dividend income received, Ordinary Income remained at ¥50.0B (-2.4%). However, net income increased to ¥37.1B (+9.1%) due to extraordinary income of ¥9.8B, including a ¥9.4B gain on the sale of fixed assets. The core business experienced declines in both revenue and earnings, while the increase in net income resulted from temporary factors; overall, the results should be evaluated as a decline in both revenue and earnings.

Segment Analysis

The steel sheet-related business was the primary cause of the company-wide earnings decline, with revenue of ¥489.7B (95.1% composition ratio) and segment profit of ¥38.0B (7.8% margin, down from 8.4% in the previous year). The Roll Business recorded earnings growth, with revenue of ¥7.2B (-16.1%) but profit of ¥0.8B (+181.5%). The Real Estate Business contributed steadily as a highly profitable segment, with revenue of ¥4.6B (+4.8%) and profit of ¥2.2B (47.8% margin). Profit in the Grating Business contracted to ¥0.03B (0.4% margin), reflecting a vulnerable structure that could become loss-making even with small fluctuations in raw material and logistics costs.

Key Financial Indicators

【Profitability】The operating margin was 7.5%, down from 8.0% in the same period of the previous year. The net profit margin improved to 7.8%, but this includes the impact of the gain on the sale of fixed assets. Annualized ROE was 7.3%, slightly below the general benchmark of 8%. 【Cash Quality】Annualized DSO was 78 days, annualized DIO was 90 days, and annualized CCC was 138 days, highlighting the accumulation of working capital. Inventory turnover substantially exceeding the 30–45-day standard for the steel and nonferrous metals industries remains a challenge. 【Investment Efficiency】Investment securities were ¥403.1B, accounting for 15.4% of total assets. Dividends and interest received constituted the core of non-operating income. 【Financial Soundness】The Equity Ratio was extremely high at 83.7%, and the current ratio was also at a high level, indicating limited short-term liquidity risk.

Cash Flow Analysis

Although cash flow statement disclosures are not included, an examination of funding trends based on changes in the balance sheet shows that cash and deposits were ¥607.5B, slightly down from ¥620.6B in the same period of the previous year. Short-term investment securities declined significantly to ¥29.6B from ¥111.1B in the same period of the previous year. Accounts receivable and notes receivable increased to ¥439.7B from ¥404.0B in the same period of the previous year, while inventories declined slightly to ¥209.1B. The accumulation of working capital, reflected in annualized DSO of 78 days, annualized DIO of 90 days, and annualized CCC of 138 days, suggests that the speed of converting earnings into cash may be slowing. Accounts payable and notes payable declined to ¥137.7B from ¥148.2B in the same period of the previous year, and the reduction in trade payables could increase short-term cash constraints.

Earnings Quality

While Operating Income, which reflects recurring earnings power, declined to ¥38.5B (-8.2%), net income increased to ¥37.1B (+9.1%). This divergence resulted from temporary factors, primarily extraordinary income of ¥9.8B, including a ¥9.4B gain on the sale of fixed assets. Non-operating income of ¥12.0B consisted of ¥5.8B in dividends received, ¥2.5B in interest received, and ¥1.1B in other non-operating income. This amount was equivalent to 31.2% of Operating Income, indicating that the structure in which non-operating income supplements Ordinary Income remains in place. Extraordinary losses were small at ¥0.4B, and their impact on net income was limited. Comprehensive income was ¥50.8B, exceeding net income of ¥37.1B, with an ¥11.2B increase in valuation difference on securities contributing to the result. However, this is a valuation component exposed to market fluctuations and does not represent recurring earnings power. Overall, it should be noted that the increase in net income for the current period did not result from improvements in the core business and remained highly dependent on temporary gains from asset sales.

Earnings Forecast and Guidance

The full-year earnings forecast calls for revenue of ¥2,120.0B (+8.5% YoY), Operating Income of ¥129.0B (+8.7%), and Ordinary Income of ¥149.0B (-14.9%). Q1 progress rates were 24.3% for revenue and 29.9% for Operating Income, with Operating Income progressing at a pace above the standard progress rate of 25%. However, operating earnings declined and the SG&A ratio increased during the quarter. Maintaining the gross margin and controlling the increase in SG&A expenses will therefore be key to achieving the full-year earnings growth plan. Ordinary Income is forecast to decline -14.9% from the previous year. Although the Q1 progress rate of 33.6% is high, the sustainability of non-operating income requires confirmation. Both the earnings forecast and the dividend forecast were revised during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥62.00 per share, an increase from the previous year's annual dividend of ¥20 (actual amount before the interim and year-end dividends were combined). The Payout Ratio against forecast full-year EPS of ¥82.37 is approximately 75.3%, above the general sustainability benchmark of 60%. However, given the strength of the financial base, including an Equity Ratio of 83.7% and cash and deposits of ¥607.5B, short-term dividend sustainability is considered high. The dividend forecast was revised during the quarter, and updates to the earnings plan and capital allocation policy will be closely watched. The number of treasury shares was 13,022,710 shares, but the amount of treasury share repurchases during the current period was not disclosed; therefore, the Total Return Ratio has not been calculated.

Risk Factors

1. Business concentration risk: The steel sheet-related business accounts for 95.1% of external revenue, creating a structure in which steel market conditions, demand for construction and capital investment, and fluctuations in the spread between raw material prices and selling prices can have a significant impact on overall performance.

2. Working capital efficiency risk: Annualized DIO of 90 days and annualized CCC of 138 days substantially exceed the 30–45-day standard for the steel and nonferrous metals industries. Potential inventory valuation losses and increased cash constraints during periods of slowing demand are areas of concern.

3. Earnings quality risk: The increase in net income depends on temporary factors, including the ¥9.4B gain on the sale of fixed assets, while Operating Income, which reflects the profitability of the core business, declined -8.2% YoY. Although the gross margin improved to 18.9%, the increase in the SG&A ratio has put pressure on Operating Income.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The operating margin is slightly below the industry median, while the net profit margin exceeds the industry median, although it includes temporary factors.

Growth and Capital Efficiency

The revenue growth rate is substantially below the industry median, indicating a notable growth disadvantage within the manufacturing sector.

※Source: Compiled by the Company

Key Takeaways from the Earnings Report

1. The core business experienced declines in both revenue and earnings, and the operating margin declined YoY. Although the gross margin improved, the pace of increase in SG&A expenses (+5.5%) exceeded the decline in revenue (-2.4%), revealing negative operating leverage as a structural issue.

2. The increase in net income was driven by the temporary factor of a gain on the sale of fixed assets and should be evaluated separately from the declining trends in Operating Income and Ordinary Income, which reflect recurring earnings power.

3. Financial soundness is high, with an Equity Ratio of 83.7%, but the accumulation of working capital, indicated by annualized CCC of 138 days, suggests room for improvement in terms of cash generation and capital efficiency.

Theoretical Share Price (For Reference)

Sensitivity: ¥1,345–¥1,419 for ±1% in the cost of equity, and ¥1,377–¥1,384 for ±0.1 in ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used; there is a timing difference relative to the full-year forecast.
• Because 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 Base Month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict 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 discretion and responsibility, after consulting a professional as necessary.

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