RYOBI LIMITED FY2026 Q2 Earnings Report

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Executive Summary

The interim results showed a significant decline in earnings despite higher revenue, with the increase in revenue from the core Die-Casting Business and deteriorating profitability in the two non-core businesses creating a clear contrast. Revenue increased to ¥1,567.7B (+2.0% YoY), while Operating Income fell significantly to ¥44.5B (-25.4%) and Ordinary Income to ¥48.3B (-20.7%). Consolidated Net Income, including non-controlling interests, was ¥39.9B (-16.3%), while Net Income attributable to owners of the parent was ¥40.0B (-9.6%); the divergence between the two was attributable to income and losses attributable to non-controlling interests. The main factors behind the earnings decline were the deterioration in gross profit margin due to higher raw material and energy costs and delays in passing these costs on to customers in the core Die-Casting Business, as well as the Building and Construction Equipment & Power Tools Business and the Printing Equipment Business falling into operating losses.

Factors Affecting Earnings

【Revenue】Revenue increased to ¥1,567.7B, up +2.0% YoY. By segment, Die-Casting generated ¥1,433.3B (+6.2%), accounting for 91.4% of total Company revenue and driving growth. In contrast, Printing Equipment generated ¥82.5B (-37.9%), while Building and Construction Equipment & Power Tools generated ¥50.8B (-5.5%); declines in demand in the non-core businesses restrained overall growth.

【Profit and Loss】Operating Income was ¥44.5B (-25.4% YoY), and the Operating Margin declined to 2.8% from 3.9% in the previous year, a decrease of 1.1pt. The gross profit margin also declined to 10.8% from 12.4%, a decrease of 1.6pt, primarily due to higher raw material and energy costs and delays in passing these costs on to customers. Die-Casting posted Operating Income of ¥47.0B (-7.0%), representing higher revenue but lower earnings. Building and Construction Equipment & Power Tools recorded an Operating Loss of ¥1.9B, compared with Operating Income of ¥0.2B in the previous year, while Printing Equipment recorded an Operating Loss of ¥0.4B, compared with Operating Income of ¥9.4B in the previous year. Both segments therefore fell into the red. Ordinary Income, including a net positive contribution of ¥3.8B from non-operating income and expenses, was ¥48.3B (-20.7%). After recording Extraordinary Income of ¥10.6B, including a gain on the sale of investment securities of ¥10.2B, Profit Before Tax was ¥57.0B, and Net Income attributable to owners of the parent was ¥40.0B (-9.6%). In conclusion, the Company reported higher revenue but lower earnings.

Segment Analysis

The core Die-Casting Business generated revenue of ¥1,433.3B (+6.2% YoY) and Operating Income of ¥47.0B (-7.0%), resulting in higher revenue but lower earnings, with a margin of 3.3%. Building and Construction Equipment & Power Tools generated revenue of ¥50.8B (-5.5%) and recorded an Operating Loss of ¥1.9B, compared with Operating Income of ¥0.2B in the previous year, thereby falling into the red. Printing Equipment generated revenue of ¥82.5B (-37.9%) and recorded an Operating Loss of ¥0.4B, compared with Operating Income of ¥9.4B in the previous year, also becoming loss-making as a result of the significant revenue decline. Other businesses, including insurance agency operations and golf course management, generated revenue of ¥1.3B (+9.2%) and recorded an Operating Loss of ¥0.2B. Profitability disparities between segments have widened, clearly showing that the combined losses of the two non-core businesses (approximately ¥2.3B) reduced Company-wide Operating Income of ¥44.5B.

Key Financial Metrics

【Profitability】ROE was 2.0% on an interim-period basis, the Operating Margin was 2.8% versus 3.9% in the previous year, and the Net Profit Margin was 2.5% on a consolidated basis versus 3.1% in the previous year; all declined from the previous year. 【Cash Flow Quality】Operating Cash Flow (OCF) of ¥74.9B was 1.87 times Net Income attributable to owners of the parent of ¥40.0B, indicating solid cash-generation capability. However, OCF was only 0.53 times the EBITDA-equivalent amount, calculated as Operating Income plus depreciation (approximately ¥141.6B), indicating that higher inventories are slowing cash conversion. 【Investment Efficiency】Capital expenditures of ¥67.1B were approximately 69% of depreciation of ¥97.1B, slightly below the level required for maintenance and replacement. The total asset turnover ratio was approximately 0.45x, calculated using Revenue of ¥1,567.7B and average total assets of ¥3,446.7B. 【Financial Soundness】The Equity Ratio improved to 54.3% from 52.2% in the previous year, an improvement of 2.1pt. Long-term borrowings declined 28.4% to ¥262.6B from ¥366.7B in the previous year, while the current ratio was 168.6% (current assets of ¥1,681.7B ÷ current liabilities of ¥997.7B), indicating sound liquidity.

Cash Flow Analysis

Operating Cash Flow was ¥74.9B, up +74.8% from ¥42.8B in the previous year, and was 1.87 times Net Income attributable to owners of the parent of ¥40.0B, indicating solid cash-generation capability. Although inventories increased by ¥51.0B and changes in working capital reduced OCF, trade receivables declined by ¥5.1B, indicating progress in cash collection. Investing Cash Flow was -¥46.7B, primarily due to capital expenditures of ¥67.1B. Free Cash Flow was ¥28.1B, a significant improvement from the previous year (approximately -¥88.0B based on OCF less Investing Cash Flow), turning positive. Financing Cash Flow was -¥80.3B, with the main cash outflows consisting of ¥40.1B in repayments of long-term borrowings, a net decrease of ¥21.1B in short-term borrowings, and ¥15.9B in dividend payments, indicating a capital allocation policy prioritizing debt reduction.

Earnings Quality

Recurring earnings power is reflected in the decline in the Operating Margin to 2.8% from 3.9% in the previous year. Non-operating income totaled ¥13.4B, including ¥3.4B in dividend income and ¥1.2B in foreign exchange gains, while non-operating expenses totaled ¥9.6B, primarily consisting of ¥7.8B in interest expenses, resulting in a net positive contribution of ¥3.8B. Extraordinary Income of ¥10.6B, including a gain on the sale of investment securities of ¥10.2B, was recorded, while Extraordinary Losses of ¥1.9B, including an impairment loss on investment securities of ¥1.3B, were also recorded, resulting in a temporary net earnings uplift of ¥8.6B. This represented approximately 21.6% of Net Income attributable to owners of the parent of ¥40.0B, indicating that factors outside core earnings made a meaningful contribution to current-period profit. Comprehensive Income was ¥97.7B (¥-34.6B in the previous year), while Comprehensive Income attributable to owners of the parent was ¥98.6B, significantly exceeding Net Income of ¥40.0B. The primary factor was foreign currency translation adjustments of ¥50.8B, reflecting the increase in the yen-denominated value of overseas assets due to yen depreciation; this is a factor distinct from the Company’s recurring earnings power. OCF was 1.87 times Net Income, indicating strong consistency with accounting profit, although the increase in inventories remains a concern from an accruals perspective because it is placing a burden on working capital.

Earnings Forecast and Guidance

Progress against the full-year plan was 46.1% for Revenue (¥3,400B plan), 34.3% for Operating Income (¥130B plan), 34.5% for Ordinary Income (¥140B plan), and 33.4% for Net Income (¥120B plan, attributable to owners of the parent). Compared with the standard 50% interim-period progress level, earnings progress was more than 15pt behind plan. While Revenue remained firm, profitability was affected by the decline in the gross profit margin and losses in the non-core businesses during the first half. Achievement of the full-year plan will depend on the penetration of price pass-through, normalization of inventories, and improved profitability in loss-making segments during the second half. The Company has revised its earnings and dividend forecasts and expects full-year Operating Income to increase +2.6% YoY, while Ordinary Income is expected to decline -4.2% YoY.

Shareholder Returns

The interim dividend was ¥52 per share, an increase of ¥2 from ¥50 in the previous year. The revised full-year dividend forecast is ¥106. The interim Payout Ratio was 41.3% (¥52 ÷ ¥125.87), based on interim EPS of ¥125.87. Against Free Cash Flow of ¥28.1B, total interim dividends (approximately ¥1.65B based on ¥52 multiplied by the number of shares outstanding) provided 1.7x coverage, indicating a certain degree of capacity to fund the current dividend. However, with full-year earnings progress remaining in the low 33% range, earnings recovery in the second half will determine whether the full-year dividend plan can be achieved.

Risk Factors

1. Segment concentration risk: The Die-Casting Business accounts for 91.4% of Revenue (¥1,433.3B / ¥1,567.7B), resulting in a business structure highly exposed to trends in automobile production, aluminum prices, and foreign exchange fluctuations.

2. Deterioration in profitability of non-core businesses: Building and Construction Equipment & Power Tools (Operating Loss of ¥1.9B) and Printing Equipment (Operating Loss of ¥0.4B) both fell into the red, with their combined losses of approximately ¥2.3B reducing Company-wide Operating Income of ¥44.5B.

3. Changes in working capital and funding structure: Inventories increased by ¥51.0B, resulting in funds being tied up, while long-term borrowings were significantly reduced by -28.4% YoY (-¥104.1B), indicating a relative increase in dependence on short-term funding.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Margin and Net Profit Margin are below the industry median, placing the Company toward the lower end of the industry.

Growth and Capital Efficiency

The Revenue Growth Rate is also below the industry median, with revenue growth remaining modest compared with peers.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. While the core Die-Casting Business continued to grow revenue, both non-core businesses (Building and Construction Equipment & Power Tools and Printing Equipment) fell into the red, reducing the Company-wide Operating Margin to 2.8%. This is noteworthy as a structural change indicating widening profitability disparities within the business portfolio.

2. Approximately 21.6% of Net Income attributable to owners of the parent was driven by Extraordinary Income, including gains on the sale of investment securities. This must be assessed separately from trends in recurring earnings power, as reflected by the 2.8% Operating Margin.

3. First-half progress against the full-year plan was 34.3% for Operating Income and 33.4% for Net Income, below the standard interim-period progress level of 50%. Progress in price pass-through and inventory normalization during the second half will therefore be key points of focus in the financial results.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥5,569–¥5,894 at ±1% for the cost of equity, and ¥5,712–¥5,739 at ±0.1 for 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 time lag 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 / Interest Rate Reference Month: 2026-07 / This value does not 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 financial results summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available financial results data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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