SHIBAURA MACHINE CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Revenue declined sharply due to a slowdown in demand for the core molding machinery business, while deteriorating fixed-cost absorption caused operating income to fall from the black into the red. Revenue was ¥21.12B (¥30.98B in the previous year, -31.8% YoY), operating income was ¥-0.65B (¥0.92B in the previous year, -170.7%), ordinary income was ¥-0.26B (¥1.02B in the previous year, -125.5%), and net income attributable to owners of the parent was ¥-0.02B (¥0.87B in the previous year, -102.2%). Although the gross margin improved to 36.1% from 30.7% in the previous year, SG&A expenses (¥8.27B, SG&A ratio of 39.2%) remained high relative to the decline in revenue, causing the operating margin to deteriorate by approximately 610bp, from +3.0% in the previous year to -3.1%.

Factors Affecting Results

【Revenue】Revenue of ¥21.12B declined 31.8% YoY. Of total external segment revenue of ¥21.64B, the core MoldingMachinery segment declined significantly to ¥13.79B (63.7% composition ratio, YoY -43.4%), becoming the primary cause of the company-wide revenue decline. In contrast, MachineTools generated revenue of ¥5.17B (23.9% composition ratio, YoY +16.5%), while ControlSystems generated ¥2.13B (9.8% composition ratio, YoY +7.9%), both securing revenue growth. The contrasting performance reflects demand adjustments in molding machinery against resilience in the other businesses.

【Profit and Loss】The gross margin improved to 36.1% from 30.7% in the previous year, but the SG&A ratio rose to 39.2% from 27.7%, and the deterioration in fixed-cost absorption outweighed the benefit of gross-margin improvement. Operating income fell into the red at ¥-0.65B, while non-operating income of ¥0.48B (including dividend income of ¥0.18B and foreign exchange gains of ¥0.12B) partially offset the loss, limiting the ordinary loss to ¥-0.26B. Extraordinary items were immaterial, comprising extraordinary income of ¥0.00B and extraordinary loss of ¥0.02B, indicating limited impact from temporary factors. Against pretax income of ¥-0.28B, income taxes and other taxes were ¥-0.26B (excess tax-effect-related refund), reducing the net loss to ¥-0.02B. The divergence between ordinary income and net income was primarily attributable to tax effects. In conclusion, the company recorded lower revenue and lower profit, with operating income falling into the red.

Segment Analysis

Segment profitability differences are pronounced. MoldingMachinery (molding machinery, 63.7% composition ratio) recorded revenue of ¥13.79B (YoY -43.4%) and an operating loss of ¥-0.93B (¥0.25B profit in the previous year, margin -6.8%), falling into the red and becoming the largest factor weighing on company-wide earnings. MachineTools (machine tools, 23.9% composition ratio) remained solid, recording revenue of ¥5.17B (YoY +16.5%) and operating income of ¥0.36B (margin 6.9%), thereby supporting company-wide earnings. ControlSystems (control machinery, 9.8% composition ratio) achieved revenue growth to ¥2.13B (YoY +7.9%) but remained loss-making, with an operating loss of ¥-0.13B (margin -6.0%). Other businesses secured operating income of ¥0.04B on revenue of ¥0.55B (margin 7.8%), remaining profitable despite their small scale. While machine tools are the only stable source of earnings, the structure in which weakness in molding machinery, which has a high composition ratio, determines company-wide profitability is clear.

Key Financial Indicators

【Profitability】The operating margin declined to -3.1% from 3.0% in the previous year, the net margin (on a net income attributable to owners of the parent basis) declined to -0.1% from 2.8%, and ROE fell to virtually zero at -0.0%. Although the gross margin improved to 36.1% from 30.7% in the previous year, the increase in the SG&A ratio (39.2%, versus 27.7% in the previous year) was the primary cause of the deterioration in the operating margin. 【Cash Quality】Comprehensive income was ¥0.60B, exceeding the net loss of ¥-0.02B, due to a foreign currency translation adjustment of +¥0.28B and valuation difference on available-for-sale securities of +¥0.42B. The divergence between net income and comprehensive income is attributable not to the profitability of the underlying business but to valuation-related factors. 【Investment Efficiency】Asset efficiency declined because the company recorded a loss for the period against total assets of ¥173.51B. Improving asset utilization efficiency will therefore be a future challenge. 【Financial Soundness】The equity ratio declined slightly to 67.7% from 68.3% in the previous year but remained high. The current ratio calculated from current assets of ¥124.10B and current liabilities of ¥45.82B was approximately 270.9%, while cash and deposits of ¥34.14B provided substantial liquidity.

Cash Flow Analysis

Cash and deposits declined to ¥34.14B from ¥37.89B in the previous year, a decrease of ¥3.75B (-9.9%), suggesting an expansion in the uses of funds. Inventories increased to ¥18.59B from ¥14.17B in the previous year, an increase of ¥4.42B (+31.2%). Work in process was reported at ¥40.74B and had accumulated substantially, suggesting that delays in production, shipment, and acceptance, particularly for molding machinery, may have increased the burden on working capital. Meanwhile, contract liabilities (customer advances) increased to ¥13.20B from ¥10.46B in the previous year, an increase of ¥2.74B (+26.2%), with advance funds related to future revenue recognition providing a certain degree of support for liquidity. Interest-bearing debt consists mainly of short-term borrowings of ¥10.23B, while long-term borrowings were extremely small at ¥0.02B, indicating a conservative overall asset and liability structure. Even as operating income turned negative, investment securities of ¥12.59B and substantial cash and deposits provided a financial buffer.

Quality of Earnings

The net loss of ¥-0.02B for the period resulted from non-operating income of ¥0.48B (including dividend income of ¥0.18B, foreign exchange gains of ¥0.12B, and interest income of ¥0.07B) partially offsetting the operating loss of ¥-0.65B. Extraordinary items were immaterial, comprising extraordinary income of ¥0.00B and extraordinary loss of ¥0.02B, and the impact of temporary factors on earnings was limited. The divergence between ordinary income of ¥-0.26B and net income of ¥-0.02B was attributable to income taxes and other taxes of ¥-0.26B (excess tax refund). Attention is warranted because fluctuations in tax effects improved the appearance of net income beyond the underlying reality. Non-operating income was equivalent to approximately 2.3% of revenue and consisted primarily of recurring income such as dividends and interest. However, its contribution was relatively large during the loss-making period, acting to obscure the weakness of core earnings. Comprehensive income of ¥0.60B exceeded net income, with the difference attributable to asset-valuation factors such as foreign currency translation adjustments and valuation differences on securities. These should be viewed separately from income generated by business activities.

Earnings Forecast and Guidance

Against the full-year plan (revenue of ¥137.00B, operating income of ¥4.20B, ordinary income of ¥3.10B, and net income of ¥2.00B), Q1 progress was 15.4% for revenue, while operating income, ordinary income, and net income were all negative, substantially below the simple quarterly-equal-progress benchmark of 25%. On a net income basis, progress was equivalent to -1.0%, calculated as ¥-0.019B/¥2.00B. Achieving full-year profitability will depend on a recovery in molding machinery shipments and margin improvement toward the second half of the fiscal year. As of the current quarter, no revisions were made to the earnings forecast or dividend forecast.

Shareholder Returns

The annual dividend forecast is ¥140 (¥70 in the previous year). Based on the average number of shares outstanding during the period of 23,647 thousand shares, the expected total return amount is estimated at approximately ¥3.31B. The payout ratio against the full-year net income plan of ¥2.00B is approximately 165.6%, a high level. Under the planned profit level, dividends cannot be funded solely from earnings and are structured to be funded by internal reserves, including cash and deposits of ¥34.14B and retained earnings of ¥78.64B. No disclosure regarding share repurchases was made, and shareholder returns consist solely of dividends.

Risk Factors

1. Slowdown in molding machinery demand: Revenue in the MoldingMachinery business, which accounts for 63.7% of the company, declined sharply by 43.4%, and operating income fell into the red at ¥-0.93B. The company has a high degree of business concentration, and demand trends in this segment determine company-wide earnings.

2. Working capital accumulation: Inventories increased 31.2% YoY (+¥4.42B), including accumulated work in process of ¥40.74B. Delays in production, shipment, and acceptance may place pressure on working capital and affect cash-generation capacity.

3. Risk of failing to achieve the full-year plan: As of Q1, revenue progress was only 15.4%, while all profit items showed negative progress. Achieving full-year profitability requires both accelerated shipments and margin improvement during the second half, making achievement difficult based on the current progress.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the operating margin and net margin were substantially below the industry median, placing profitability in the lower tier of the industry.

Growth and Capital Efficiency

The revenue growth rate was substantially below the industry median, with the company’s revenue decline standing out within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The sharp decline in the core molding machinery segment, with revenue down 43.4% and operating income falling into the red at ¥-0.93B, was the primary cause of the company-wide operating loss of ¥-0.65B. Machine tools, with operating income of ¥0.36B, were the only profitable source. The widening profitability gap across the business portfolio is a structural feature warranting attention.

2. Q1 progress against the full-year plan was low, with revenue at 15.4% and all profit items negative. The earnings plan is weighted toward the second half, making progress during the period an important observation point for assessing earnings trends.

3. The company forecasts an annual dividend of ¥140, resulting in a payout ratio of approximately 165.6% against the full-year net income plan of ¥2.00B. The equity ratio of 67.7% and cash and deposits of ¥34.14B support shareholder returns, but monitoring sustainability is useful if returns exceeding earnings continue.

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). It is not a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: ¥3,854–¥4,066 at cost of equity ±1%, and ¥3,927–¥3,977 at ω ±0.1.

Notes:

• Net income is substantially compressed relative to operating income due to tax burdens, acquisition-related expenses, and non-controlling interests (net income ÷ operating income 48%). This value reflects that compression at face value; if the factors are temporary, normalized earnings power may be higher.
• Because 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, resulting in 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 / Interest Rate Reference Month: 2026-06 / This value 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 is not a recommendation to invest 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 professionals as necessary.

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