RYOBI (5851) FY2026 Q1 Earnings Report

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Executive Summary

In Q1 FY2026, despite a decrease in revenue, the Company secured higher operating income as a result of reductions in selling, general and administrative expenses and improved profitability in its core die-casting business, thereby exiting the phase of declining revenue and profit. Revenue was ¥759.4B (down -2.7% year on year), operating income was ¥29.0B (up +4.1%), ordinary income was ¥28.4B (up +15.3%), and net income attributable to owners of the parent was ¥27.1B (up +54.6%). The increase in net income includes the boost from net extraordinary gains of ¥9.2B, including a ¥10.2B gain on the sale of investment securities; accordingly, the increase was amplified relative to the growth in operating income and ordinary income.

Factors Affecting Performance

【Revenue】Revenue was ¥759.4B, down 2.7% year on year. While the core die-casting business increased revenue to ¥693.4B (up +2.2%), printing equipment declined sharply to ¥40.1B (down -45.7%), becoming the primary cause of the Company-wide revenue decrease. Housing and construction equipment also declined to ¥25.6B (down -6.4%), and the declines in printing equipment and housing and construction equipment offset the revenue increase in die-casting.

【Profit and Loss】Operating income was ¥29.0B (up +4.1%). Although the gross margin declined by approximately 12bp from the previous year to 11.8%, selling, general and administrative expenses were reduced to ¥60.6B (down -6.9%), and operating leverage lifted the profit margin. Segment income in die-casting improved notably to ¥29.1B (up +29.6%), with a profit margin of 4.2% (3.3% in the previous year). In contrast, printing equipment income fell sharply to ¥0.6B (down -89.9%), and its profit margin deteriorated to 1.5% (7.9% in the previous year). Ordinary income increased to ¥28.4B (up +15.3%), while net income rose to ¥27.4B (up +40.9%). Net income benefited from ¥10.5B in extraordinary gains, primarily the ¥10.2B gain on the sale of investment securities, which accounted for approximately 24% of pre-tax income of ¥37.6B. Although revenue declined, operating income, ordinary income, and net income all increased, resulting in a decline in revenue but an increase in profit.

Segment Analysis

Die-casting drove Company-wide profit, with revenue of ¥693.4B (up +2.2%) and segment income of ¥29.1B (up +29.6%); it is the core business, accounting for approximately 91% of external revenue. Housing and construction equipment recorded revenue of ¥25.6B (down -6.4%), while its segment loss widened to ¥0.5B from a loss of ¥0.1B in the previous year. Printing equipment recorded revenue of ¥40.1B (down -45.7%) and segment income of ¥0.6B (down -89.9%), representing a substantial decline in both revenue and profit. Deteriorating fixed-cost absorption was reflected in the decline in its profit margin (7.9%→1.5%). Company-wide profit was lifted as the improvement in die-casting outweighed the deterioration in housing and construction equipment and printing equipment.

Key Financial Metrics

【Profitability】The operating margin of 3.8% (3.6% in the previous year) and net profit margin of 3.6% (2.2% in the previous year) both improved. However, the gross margin declined slightly to 11.8%, while annualized ROE and annualized ROIC remained low in terms of capital efficiency at 5.7% and 3.7%, respectively.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥7.0B, representing only 0.26x net income of ¥27.4B, indicating weak cash conversion. The primary factors were a ¥21.7B increase in inventories and a ¥34.2B decrease in trade payables.【Investment Efficiency】Capital expenditures of ¥38.1B were below depreciation and amortization expense of ¥48.7B, indicating that investment was below replacement levels and that the Company is in a phase of selective investment rather than capacity expansion.【Financial Soundness】The Equity Ratio improved to 56.5% (52.2% in the previous year). Including cash and deposits of ¥274.7B and long-term borrowings of ¥339.4B, the capital structure is generally stable.

Cash Flow Analysis

OCF was ¥7.0B, a significant improvement from negative ¥40.8B in the same period of the previous year, although the cash conversion ratio relative to net income of ¥27.4B remained low. In terms of working capital, inventories increased by ¥21.7B and trade payables decreased by ¥34.2B, putting pressure on OCF, while trade receivables decreased by ¥7.0B, indicating progress in collections. Investing Cash Flow was negative ¥22.2B, primarily reflecting capital expenditures of ¥38.1B. Financing Cash Flow was negative ¥24.8B, resulting from a combination of an increase in short-term borrowings and repayments of long-term borrowings. Free cash flow, comprising OCF and investing cash flow, was negative ¥15.2B, indicating that during the quarter the Company had not reached a structure in which investments and shareholder returns could be fully funded through internal funds alone.

Earnings Quality

Net income of ¥27.4B for the current period included ¥10.5B in extraordinary gains, primarily the ¥10.2B gain on the sale of investment securities, and ¥1.3B in extraordinary losses, including a ¥1.2B valuation loss on investment securities, resulting in a net temporary contribution of ¥9.2B. Excluding this temporary factor, recurring earnings power relative to pre-tax income of ¥37.6B should appropriately be assessed based on operating income of ¥29.0B and ordinary income of ¥28.4B. Their growth rates (+4.1% and +15.3%, respectively) were more moderate than the net income growth rate (+40.9%). Comprehensive income was ¥50.3B, exceeding net income of ¥27.4B, primarily due to foreign currency translation adjustments of ¥26.1B. The fact that OCF remained modest relative to net income suggests that conversion of current-period profit into cash flow was limited.

Earnings Forecast and Guidance

The full-year forecast remains unchanged at revenue of ¥3130.0B (up +1.3% year on year), operating income of ¥128.0B (up +1.1%), and ordinary income of ¥133.0B (down -9.0%). Q1 revenue progress was approximately 24.3% and operating income progress was approximately 22.7%, both slightly below the simple progress benchmark of 25%. While ordinary income is expected to decline year on year for the full year, it increased +15.3% year on year in Q1, suggesting that the plan may assume a reversal in performance toward the second half of the fiscal year. Maintaining die-casting profitability and a recovery in printing equipment will determine progress from the second half onward.

Shareholder Returns

The full-year dividend forecast remains unchanged at ¥104 per share. Assuming 31,809 thousand shares outstanding, total annual dividends are approximately ¥33.1B, resulting in a Payout Ratio of approximately 28.8% against the full-year net income forecast of ¥115.0B. Q1 OCF was ¥7.0B and free cash flow was negative ¥15.2B; on a standalone quarterly basis, investments and shareholder returns were not fully covered by operating cash flow. However, there has been no revision to the dividend forecast, and on a full-year plan basis the Payout Ratio remains below 60%.

Risk Factors

1. Dependence on the core die-casting business: The die-casting business accounts for approximately 91% of external revenue, creating a structure in which performance is significantly affected by raw material and energy prices as well as customer production trends, with a substantial impact on Company-wide earnings.

2. Rapid deterioration in the printing equipment business: Revenue declined 45.7% year on year and segment income declined 89.9%, while the profit margin fell from 7.9% to 1.5%. If deterioration in fixed-cost absorption continues, it may become a downside factor for consolidated profit.

3. Insufficient cash conversion from operating cash flow: OCF of ¥7.0B was only approximately 0.26x net income of ¥27.4B, primarily due to the increase in inventories and decrease in trade payables. If improvements in working capital are delayed, weak cash-generation capacity may persist.

Industry Benchmark (For Reference; Company Research)

Profitability and Returns

Both the Company’s operating margin and net profit margin are below the industry median, indicating that profitability is relatively low within the industry.

Growth and Capital Efficiency

The Company’s revenue growth rate is substantially below the industry median, indicating that top-line growth is lagging within the industry.

※Source: Company research

Key Points from the Earnings Results

1. Even amid declining revenue, reductions in selling, general and administrative expenses improved the operating margin to 3.8%. The structure in which improved die-casting profitability (profit margin of 4.2%, compared with 3.3% in the previous year) drove Company-wide profit was confirmed.

2. The +54.6% year-on-year increase in net income attributable to owners of the parent was supported by the ¥10.2B gain on the sale of investment securities. The difference in growth rates relative to recurring earnings improvement (operating income +4.1% and ordinary income +15.3%) should be noted when assessing earnings quality.

3. Q1 progress against the full-year plan for both revenue and operating income was slightly below the simple progress benchmark. The outlook indicates that a recovery in printing equipment and the maintenance of die-casting profitability will determine progress from the second half onward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥5,415–¥5,732 at ±1% in the cost of equity, and ¥5,553–¥5,581 at ±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 from 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 reference month: 2026-07 / A mechanical calculation 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 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 responsibility, after consulting with a professional as necessary.

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