OKUMA Corporation FY2027 Q1 Earnings Report

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Executive Summary

The key features were double-digit revenue growth and a significant improvement in earnings growth, with an increase in the gross margin and improved selling, general and administrative expense efficiency, in addition to gains on the sale of investment securities pushing up net income. Revenue was ¥519.0B (+16.3% YoY), Operating Income was ¥44.0B (+175.1%), Ordinary Income was ¥49.3B (+129.0%), and Net Income was ¥49.8B (+235.5%). The operating margin improved to 8.5%, up +489bp from 3.6% in the previous year, while the gross margin improved to 33.7% (30.3% in the previous year) and the SG&A expense ratio declined to 25.2% (26.7% in the previous year), indicating progress in improving the earnings structure. However, Net Income includes a one-time gain of ¥17.5B on the sale of investment securities, and the degree of dependence on this gain warrants monitoring.

Factors Affecting Performance

【Revenue】Revenue of ¥519.0B increased +16.3% YoY. By sales composition to external customers, Japan accounted for 46.0%, the Americas for 34.8%, Europe for 14.9%, and Asia and Pacific for 4.2%. By segment (including intersegment transactions), Americas increased +36.6%, Japan increased +4.0%, and Europe increased +8.9%, while AsiaAndPacific declined -18.3%, indicating differences in supply and demand conditions across regions. The high growth in the Americas was the primary driver of overall revenue growth.

【Profit and Loss】Operating Income of ¥44.0B (+175.1%) was primarily attributable to the emergence of operating leverage resulting from an improved gross margin (+340bp) and restrained SG&A expense growth (+9.6% versus revenue growth of +16.3%). Ordinary Income of ¥49.3B included ¥5.3B in dividend income, ¥1.9B in interest income, and other net non-operating income (+¥5.3B). The ¥17.5B difference between Ordinary Income and Profit Before Tax of ¥66.8B was a one-time factor arising from gains on the sale of investment securities, recorded as extraordinary income. Net Income of ¥49.8B was after deducting ¥17.0B in income taxes and other taxes. Although the results showed higher revenue and earnings, part of Net Income depended on a one-time gain.

Segment Analysis

In terms of segment profit, Japan remained the largest profit contributor source (profit of ¥27.5B, profit margin of 7.1%), representing a substantial increase of +1,019.5% from ¥2.5B in the previous year. The Americas generated revenue of ¥180.9B (+36.6%) and profit of ¥19.6B (+412.8%), securing a profit margin of 10.9%, the highest level company-wide, and becoming the central segment for both revenue and profit growth. Europe, meanwhile, increased revenue to ¥78.0B (+8.9%) but recorded a loss of -¥1.7B, turning to a loss from a profit of +¥0.3B in the previous year. Asia and Pacific also recorded revenue of ¥45.8B (-18.3%) and a loss of -¥0.4B, turning to a loss from a profit of +¥1.7B in the previous year. The differences in profitability between regions are exerting downward pressure on the company-wide profit margin of 8.5%, making the recovery of profitability in Europe and Asia and Pacific a key focus going forward.

Key Financial Indicators

【Profitability】The operating margin improved significantly to 8.5% (3.6% in the previous year), while the Net Income margin improved to 9.6% YoY. However, the ¥17.5B gain on the sale of investment securities accounted for approximately 35% of Net Income, so the sustainability of core earnings power needs to be monitored continuously through trends in the gross margin and SG&A expenses in the core business. 【Cash Quality】Cash and deposits stood at ¥541.7B (+2.2% from the end of the previous fiscal year), indicating ample liquidity. Inventories were ¥874.2B, accounting for 25.0% of total assets and increasing +6.5% from the end of the previous fiscal year, while accounts receivable were ¥373.5B, down -18.6%, indicating a change in the composition of working capital. 【Investment Efficiency】ROE was 1.9% (note that this is the quarterly result and not an annualized figure), total assets were ¥3496.5B, and net assets were ¥2639.4B. Asset turnover remained low, leaving room for improvement in capital efficiency. 【Financial Soundness】The Equity Ratio remained high at 75.5%, and the financial foundation was conservatively structured, with cash and deposits of ¥541.7B exceeding long-term borrowings of ¥200.0B and bonds due for redemption within one year of ¥50.0B.

Cash Flow Analysis

As the cash flow statement was not disclosed, funds trends can be assessed based on changes in the balance sheet. Cash and deposits increased by +¥11.6B (+2.2%) from the end of the previous fiscal year to ¥541.7B, indicating an increase in cash on hand. Meanwhile, inventories increased by +¥53.1B (+6.5%) to ¥874.2B, and investment securities increased by +¥85.3B (+18.9%) to ¥536.6B, suggesting that the expansion of business investment and asset holdings absorbed part of the funds. Accounts receivable decreased by -¥85.4B (-18.6%) to ¥373.5B, indicating progress in cash collection, while accounts payable increased by +¥14.8B (+10.0%) to ¥161.9B. Treasury stock increased by +¥23.6B from the end of the previous fiscal year on a carrying-value basis to -¥251.4B, suggesting that share repurchases may have been conducted and that funds flowed externally through financing activities. Overall, liquidity was maintained while the company sought to balance the accumulation of operating assets with shareholder returns.

Earnings Quality

Ordinary Income was ¥49.3B, consisting of Operating Income of ¥44.0B plus ¥5.3B in net non-operating income (¥8.3B in non-operating income, including ¥5.3B in dividend income and ¥1.9B in interest income, less ¥3.0B in non-operating expenses), and this portion is considered relatively stable earnings. In contrast, the ¥17.5B difference from Profit Before Tax of ¥66.8B represented extraordinary income from gains on the sale of investment securities. As this accounted for approximately 35% of Net Income of ¥49.8B, the quality of earnings for the period had a relatively high degree of dependence on one-time factors. Non-operating income was limited to 1.6% of revenue and was composed primarily of dividend income and interest income, making it stable. The effective tax rate was 25.5%, calculated as ¥17.0B in income taxes and other taxes divided by Profit Before Tax of ¥66.8B, a normal level with no unusual tax-related factors observed. Increases in inventories and investment securities warrant attention as potential future drivers of changes in accruals (valuation- and inventory-related gains and losses).

Earnings Forecast and Guidance

Progress against the full-year plan was 19.96% (approximately 20.0%) for revenue, calculated as ¥519.0B/¥2,600B; 16.9% for Operating Income, calculated as ¥44.0B/¥260.0B; 18.6% for Ordinary Income, calculated as ¥49.3B/¥265.0B; and 24.9% for Net Income, calculated as ¥49.8B/¥200.0B. Compared with the quarterly progress benchmark of 25%, progress for both Operating Income and Ordinary Income was below the benchmark. Operating Income in particular was approximately -8.1pt behind, while progress for Net Income was relatively high due to the recognition of extraordinary income. During the quarter, the company revised its earnings forecast and dividend forecast, and maintained a full-year plan for revenue growth of +10.2% and Operating Income growth of +67.7%. The somewhat slower pace of core business progress relative to the plan requires confirmation in light of order intake and operating trends in the second half.

Shareholder Returns

The dividend forecast is ¥120 per share, and the Payout Ratio calculated using the company’s planned EPS of ¥340.65 is approximately 35.2%, a reasonable level. During the quarter, the dividend forecast was revised, with the revised plan pointing toward an increase from the previous fiscal year’s DPS actual result (a level of ¥50 as of the same period of the previous year). The carrying value of treasury stock increased by +¥23.6B from the end of the previous fiscal year, suggesting that share repurchases may have been conducted. With cash on hand of ¥541.7B and interest-bearing debt limited to ¥200.0B in long-term borrowings and ¥50.0B in bonds, a sufficient funding base for shareholder returns combining dividends and share repurchases appears to be in place.

Risk Factors

1. Deterioration in profitability of the Europe and Asia and Pacific segments: Europe recorded revenue of ¥78.0B (+8.9%) but operating income (loss) of -¥1.7B (profit margin of -2.2%), while Asia and Pacific recorded revenue of ¥45.8B (-18.3%) and operating income (loss) of -¥0.4B (profit margin of -0.8%). Both regions turned unprofitable, becoming factors weighing on the company-wide profit margin.

2. Increase in inventories and working capital efficiency: Inventories were ¥874.2B, accounting for 25.0% of total assets, and increased +¥53.1B (+6.5%) from the end of the previous fiscal year. It is necessary to monitor inventory quality and turnover to determine whether inventory accumulation is outpacing revenue growth (+16.3%).

3. Price volatility risk of investment securities: Investment securities increased +¥85.3B (+18.9%) from the end of the previous fiscal year to ¥536.6B, while valuation and translation differences, etc., were ¥522.1B and represented a significant component of net assets. This structure makes net assets and comprehensive income susceptible to market fluctuations.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The operating margin was approximately in line with the industry median, while the Net Income margin exceeded the industry median, partly due to the contribution of extraordinary income.

Growth and Capital Efficiency

The revenue growth rate significantly exceeded the industry median and ranked among the higher growth rates within the industry.

※Source: Compiled by the Company

Key Points in the Financial Results

1. Structural improvement in profitability was confirmed. The gross margin improved by +340bp and the SG&A expense ratio improved by -150bp, while the operating margin recovered from 3.6% in the previous year to 8.5%. The progress in cost discipline and improvement in the earnings structure are positive changes identifiable from the financial results data.

2. Attention should be paid to the degree of dependence on one-time factors in Net Income. The ¥17.5B gain on the sale of investment securities accounted for approximately 35% of Net Income of ¥49.8B, meaning that a certain portion of the earnings increase for the period was attributable to factors outside the core business.

3. Regional differences in profitability affected company-wide performance. While the Americas drove both revenue and profit growth, Europe and Asia and Pacific became loss-making, and progress against the full-year plan (approximately 20% for revenue and approximately 17% for Operating Income) was below the standard quarterly progress benchmark of 25%.

Theoretical Share Price (Reference Value)

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

Sensitivity: 4,169円〜4,412円 at ±1% for the cost of equity, and 4,281円〜4,292円 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 end of the quarter are used (there is a timing gap 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 / Interest rate reference month: 2026-07 / This value does not forecast 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 available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional as necessary.

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