RYOBI (5851) FY2026 Q2 Earnings Report

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Executive Summary

The key feature of the current period was a decline in profit despite higher revenue, due to deteriorating profitability. Revenue increased to ¥15.677B (+2.0% YoY), securing top-line growth, while Operating Income fell to ¥0.445B (-25.4%), Ordinary Income to ¥0.483B (-20.7%), and Net Income to ¥0.399B (-16.3%). The Company failed to convert revenue growth into earnings growth, with the decline in gross margin being the primary cause of the earnings decline.

Factors Affecting Performance

【Revenue】Revenue increased 2.0% YoY to ¥15.677B. While the core Die-Casting Business drove growth with revenue of ¥14.333B (+6.2% YoY), Printing Equipment generated ¥0.825B (-37.9%) and Housing Equipment generated ¥0.508B (-5.5%), restraining overall Company growth.

【Profit and Loss】The gross margin declined from 12.4% in the prior year to 10.8%, and although the SG&A ratio improved from 8.5% to 7.9%, the Operating Income margin declined from 3.9% to 2.8%. Operating Income was ¥0.445B (-25.4% YoY), and Ordinary Income was ¥0.483B (-20.7%). Net Income was ¥0.399B (-16.3%); the smaller rate of decline than Operating Income was supported by extraordinary income of ¥0.106B, including a gain on the sale of investment securities of ¥0.102B. In conclusion, the results were characterized by higher revenue but lower profit, with the inability to convert revenue growth into earnings being the defining feature of the results.

Segment Analysis

The Die-Casting Business secured higher revenue of ¥14.333B (+6.2% YoY), but segment profit declined to ¥0.470B (-7.0% YoY), and its margin fell from 3.7% to 3.3%. Housing Equipment generated revenue of ¥0.508B (-5.5% YoY) and recorded a segment loss of ¥0.019B, shifting into the red from a prior-year profit of ¥0.002B. Printing Equipment generated revenue of ¥0.825B (-37.9% YoY) and recorded a segment loss of ¥0.004B, a significant deterioration from the prior-year profit of ¥0.094B. Company-wide profit is almost entirely supported by the Die-Casting Business, while losses in Housing Equipment and Printing Equipment are weakening the earnings mix.

Key Financial Indicators

【Profitability】The Operating Income margin of 2.8%, Net Income margin of 2.5%, and ROE (annualized) of 4.0% all declined from the prior year. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥0.749B, reaching 1.87 times Net Income of ¥0.399B, indicating solid cash-generation capacity relative to accounting earnings. 【Investment Efficiency】Capital expenditures of ¥0.671B were below depreciation and amortization of ¥0.971B, leaving CapEx/depreciation and amortization at 0.69 times. Free Cash Flow remained positive at ¥0.281B. 【Financial Soundness】The Equity Ratio was 57.2%, total assets were ¥34.561B, and net assets were ¥19.759B, indicating a stable financial base. Meanwhile, long-term borrowings declined by ¥1.041B (-28.4%) to ¥2.626B, reducing long-term debt; however, the short-term liability structure, comprising short-term borrowings of ¥2.781B and current maturities of long-term borrowings of ¥1.518B, remains relatively large.

Cash Flow Analysis

Operating Cash Flow was ¥0.749B, a significant increase from ¥0.428B in the prior year, and stood at 1.87 times Net Income of ¥0.399B. While trade receivables were a ¥0.051B source of funds, the increase in inventories was a ¥0.510B use of funds, indicating a heavy working capital burden. Investing Cash Flow was an outflow of ¥0.467B, of which capital expenditures accounted for ¥0.671B. Free Cash Flow, calculated as Operating Cash Flow less capital expenditures, remained positive at ¥0.281B, although this was partly supported by restrained investment. Financing Cash Flow was an outflow of ¥0.803B, with the principal uses of funds being repayment of long-term borrowings of ¥0.401B, a net decrease in short-term borrowings of ¥0.211B, and dividend payments of ¥0.159B. Cash and cash equivalents declined to ¥2.259B at period-end.

Earnings Quality

Of Net Income of ¥0.399B, extraordinary income of ¥0.106B, including a gain on the sale of investment securities of ¥0.102B, contributed to the increase. This temporary factor explains why the Net Income decline was limited to 16.3%, compared with a 25.4% decline in Operating Income. Non-operating income of ¥0.134B consisted primarily of dividend income of ¥0.034B and foreign exchange gains of ¥0.012B, indicating a certain degree of dependence on non-core income. Meanwhile, Operating Cash Flow of ¥0.749B exceeded Net Income, and there was no significant divergence between accounting earnings and cash-generation capacity. However, the increase in inventories is placing pressure on working capital, and trends in inventory and collection cycles should be closely monitored when assessing the quality of operating activities.

Earnings Forecast and Guidance

The full-year plan calls for Revenue of ¥34.000B (+10.0% YoY), Operating Income of ¥1.300B (+2.6% YoY), and Ordinary Income of ¥1.400B (-4.2% YoY). Cumulative first-half progress was 46.1% for Revenue, compared with 34.3% for Operating Income, 34.5% for Ordinary Income, and 33.4% for Net Income, meaning that profit progress was significantly below the standard 50% midpoint. Achieving the full-year plan will require profitability improvements in the second half, with the recovery of the Die-Casting Business margin and improved profitability in Housing Equipment and Printing Equipment being key focuses. The Company also revised its earnings and dividend forecasts during the current quarter.

Shareholder Returns

The Q2 dividend was ¥52.00 per share, an increase from ¥50.00 per share in the same period of the prior year. Based on cumulative first-half earnings, the Payout Ratio was approximately 41%, while coverage of total dividends of approximately ¥0.165B by Free Cash Flow of ¥0.281B was approximately 1.7 times. The full-year forecast dividend is ¥106.00 per share, and the forecast Payout Ratio based on forecast full-year EPS of ¥377.25 is approximately 28%. No share repurchases were confirmed, indicating that shareholder returns are centered on dividends.

Risk Factors

1. Structural pressure on profitability: The Company-wide gross margin declined from 12.4% in the prior year to 10.8%, while the margin of the core Die-Casting Business also declined from 3.7% to 3.3%. If raw material and energy costs remain elevated or delays in passing through price increases continue, they will place further pressure on the Operating Income margin of 2.8%.

2. Continuation of unprofitable segments: Printing Equipment experienced a significant revenue decline of -37.9% YoY and recorded a segment loss of ¥0.004B. Housing Equipment also recorded a loss of ¥0.019B, and losses in both businesses continue to make Company-wide profit dependent on the Die-Casting Business.

3. Short-term debt structure and working capital: The combined total of short-term borrowings of ¥2.781B and current maturities of long-term borrowings of ¥1.518B exceeds cash and deposits of ¥2.697B. In addition, inventories increased by ¥0.510B, creating a heavy working capital burden, and liquidity remains to a certain extent dependent on the collection of accounts receivable and refinancing conditions.

Industry Benchmark (For Reference; Company Analysis)

Profitability and Returns

The Company’s profitability is significantly below the industry median and ranks toward the lower end of the industry.

Growth and Capital Efficiency

The Revenue growth rate is also below the industry median, placing the Company at a relatively low level within the industry in terms of growth.

※Source: Company analysis

Key Takeaways from the Results

1. Despite higher revenue, Operating Income declined 25.4%, primarily due to the decline in gross margin, demonstrating that top-line expansion was not translated into bottom-line growth—a defining feature of the current period.

2. The core Die-Casting Business maintained revenue growth, but its margin declined. The shift of Housing Equipment and Printing Equipment into the red increased the concentration and vulnerability of the earnings mix.

3. First-half progress against the full-year plan was 46.1% for Revenue, while profit progress remained in the 33–34% range. The extent to which profitability can be improved in the second half will be the key determinant of whether the full-year plan is achieved.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥5,569–¥5,894 at Cost of Equity ±1%, and ¥5,712–¥5,739 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 solely from publicly disclosed data; this does not constitute 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 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 where necessary.

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