Sodick (6143) FY2026 Q1 Earnings Report

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Executive Summary

In addition to higher revenue and earnings led by the core Machine Tools Business, foreign exchange gains and gains on the sale of fixed assets contributed to profit growth, causing the increase in net income to exceed the increase in operating income. Revenue was ¥21.62B (+14.9% YoY), operating income was ¥1.78B (+38.8%), ordinary income was ¥2.19B (+100.8%), and net income was ¥1.96B (+107.3%). While the gross margin improved from 35.1% to 36.7%, boosting the operating margin, the growth in ordinary income and net income was also supported by the ¥0.22B foreign exchange gain recorded as non-operating income and the ¥0.38B gain on the sale of fixed assets recorded as extraordinary income. Accordingly, part of the earnings increase includes non-recurring factors.

Factors Affecting Business Performance

【Revenue】Revenue was ¥21.62B, up +14.9% YoY. The core Machine Tools Business led company-wide growth, with external revenue of ¥16.67B (+22.6%). The Industrial Machinery Business maintained modest revenue growth at ¥2.41B (+1.7%), while the Food Machinery Business generated ¥1.33B (-13.2%) and Other Businesses generated ¥1.50B (-2.4%), both declining. Thus, growth was dependent on the Machine Tools Business.

【Profit and Loss】Operating income was ¥1.78B (+38.8%), and the operating margin improved to 8.2% from 6.8% in the same period of the previous year. The primary factor was an improvement in the gross margin resulting from a lower cost-of-sales ratio (35.1%→36.7%), while SG&A expenses increased by +15.4%, slightly exceeding the rate of revenue growth. Ordinary income was ¥2.19B (+100.8%), including a ¥0.22B foreign exchange gain in non-operating income. Pre-tax income of ¥2.57B benefited from ¥0.399B in extraordinary income, primarily the ¥0.38B gain on the sale of fixed assets, resulting in net income of ¥1.96B (+107.3%). This was a case of higher revenue and earnings driven by the Machine Tools Business, with temporary non-operating and extraordinary factors providing additional support.

Segment Analysis

The Machine Tools Business accounted for the core of consolidated earnings, with external revenue of ¥16.67B (+22.6% YoY), segment profit of ¥2.30B (+46.7%), and a margin of 13.8%. The Industrial Machinery Business maintained modest revenue and profit growth, with revenue of ¥2.41B (+1.7%), profit of ¥0.08B (+20.0%), and a margin of 3.2%. The Food Machinery Business experienced lower revenue and profit, with revenue of ¥1.33B (-13.2%) and profit of ¥0.21B (-34.4%), although its margin of 15.5% exceeded that of the Machine Tools Business. Other Businesses saw deteriorating profitability, with revenue of ¥1.50B (-2.4%) and profit of ¥0.02B (-55.3%). Company-wide earnings growth was highly concentrated in the Machine Tools Business, and the diversification benefits of the business portfolio were limited.

Key Financial Indicators

【Profitability】The operating margin improved to 8.2% from 6.8% in the same period of the previous year, while the net margin rose to 9.1% from 5.0%. However, the latter includes gains on the sale of fixed assets and foreign exchange gains, making its sustainability lower than that of the operating margin.【Cash Flow Quality】Accounts receivable of ¥17.26B and inventories of ¥13.68B (including products of ¥13.68B) indicate a structure in which funds remain tied up in inventory and receivables. From an asset-efficiency perspective, the low total asset turnover ratio is apparent.【Investment Efficiency】Annualized ROE was 8.5%. Since net income includes temporary factors, a more conservative level would be indicated when measured on the basis of operating income. Against total assets of ¥157.66B, net assets were ¥92.16B, resulting in an equity ratio of 58.5%. Although the capital base is substantial, there remains room to improve asset turnover efficiency.【Financial Soundness】Liquidity is high, with cash and deposits of ¥48.72B and current assets of ¥110.29B versus current liabilities of ¥39.11B. While long-term borrowings declined to ¥15.25B from the previous year, short-term borrowings increased, indicating a shortening of the debt maturity structure.

Cash Flow Analysis

Individual data from the cash flow statement were not disclosed, but changes in the balance sheet provide insight into fund flows. Cash and deposits were ¥48.72B, an increase of ¥3.66B from ¥45.06B in the same period of the previous year, indicating an accumulation of funds. Meanwhile, inventories increased to ¥13.68B from ¥12.17B in the previous year, while accounts receivable declined to ¥17.26B from ¥19.52B, indicating changes in the composition of working capital. Interest-bearing debt included a decline in long-term borrowings from ¥16.92B to ¥15.25B, while short-term borrowings increased from ¥4.01B to ¥5.98B, indicating progress toward a shorter borrowing-term structure. Contract liabilities (advances received) increased to ¥7.99B from ¥5.82B in the previous year, with advance funds associated with orders serving as part of the funding source.

Earnings Quality

The earnings increase for the current period reflects a combination of recurring business growth and temporary factors. The improvement in operating income was primarily based on the improvement in the gross margin, reflecting an enhancement in the business’s sustainable earning power. Meanwhile, the increase in ordinary income included a ¥0.22B foreign exchange gain, which depends on currency movements and can hardly be regarded as a recurring source of income. In addition, pre-tax income benefited from ¥0.399B in extraordinary income, primarily the ¥0.38B gain on the sale of fixed assets, meaning that part of net income of ¥1.96B consists of non-recurring income. Therefore, when assessing the net margin of 9.1%, it is appropriate to place greater emphasis on the operating margin of 8.2%, excluding these temporary factors. Comprehensive income was ¥3.03B, exceeding net income of ¥1.96B, with the ¥0.91B foreign currency translation adjustment being the primary cause of the difference. However, this difference resulted from the translation of overseas assets and does not represent the business’s operating results themselves.

Earnings Forecasts and Guidance

The full-year company plan calls for revenue of ¥88.50B (+9.8% YoY), operating income of ¥5.50B (+30.2%), and ordinary income of ¥6.00B (+14.7%). Q1 progress rates were 24.4% for revenue, 32.3% for operating income, and 36.5% for ordinary income. All exceeded the simple proportional benchmark of 25%; however, because progress in ordinary income includes non-operating factors such as foreign exchange gains, the operating income progress rate of 32.3% should be viewed as the indicator closer to underlying performance. No revisions were made to the earnings forecast or dividend forecast during the quarter.

Shareholder Returns

The company’s forecast for the annual dividend for the fiscal year ending December 2026 is ¥35 per share, comprising a regular dividend of ¥29 and an ¥6 commemorative dividend marking the 50th anniversary of the company’s establishment. Based on full-year forecast EPS of ¥100.70, the payout ratio is 34.8% on the basis of total dividends. When calculated using only the regular dividend of ¥29, excluding the commemorative dividend, the payout ratio is 28.8%, indicating that the recurring dividend burden is at a restrained level. Given cash and deposits of ¥48.72B, the company has ample capacity to fund dividends.

Risk Factors

1. Concentration of earnings in the Machine Tools Business: With external revenue of ¥16.67B and segment profit of ¥2.30B, this business forms the core of consolidated earnings. Changes in the capital investment cycle and competitive environment in this market could therefore have a significant impact on consolidated performance.

2. Working capital efficiency: Accounts receivable of ¥17.26B and inventories of ¥13.68B (products: ¥13.68B) are factors contributing to funds being tied up, creating the possibility that revenue growth could be absorbed by increases in working capital. The decline in revenue and earnings in the Food Machinery Business (revenue: -13.2% YoY; profit: -34.4% YoY) also weakens the diversification benefits of the business portfolio.

3. Shortening of the borrowing-term structure: Short-term borrowings increased by approximately 49% from ¥4.01B to ¥5.98B, while long-term borrowings decreased by ¥1.67B. Although total interest-bearing debt did not expand sharply, changes in the borrowing-term structure warrant close monitoring of future refinancing conditions.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

Profitability is above the industry median, representing a favorable position.

Growth and Capital Efficiency

The revenue growth rate exceeds the upper bound of the industry IQR, indicating high growth within the industry.

※Source: Company analysis

Key Takeaways from the Financial Results

1. The operating margin improved to 8.2% from 6.8% in the same period of the previous year, with the improvement in the gross margin (35.1%→36.7%) being the primary driver of earnings growth. SG&A expenses increased at a pace slightly exceeding revenue growth, resulting in an earnings growth structure more dependent on improvements in the cost ratio than on the absorption of fixed costs.

2. The growth in ordinary income and net income exceeded the growth in operating income, but included temporary factors such as the ¥0.22B foreign exchange gain and the ¥0.38B gain on the sale of fixed assets. In assessing progress toward the full-year forecast, it is appropriate to place greater emphasis on the operating income progress rate of 32.3%, which excludes these factors.

3. While the Machine Tools Business drove company-wide earnings growth, the Food Machinery Business and Other Businesses experienced declines in both revenue and earnings, confirming uneven growth across businesses. Contract liabilities (advances received) increased to ¥7.99B, indicating an accumulation of advance funds based on orders.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,601–¥1,694 for ±1% in the cost of equity, and ¥1,640–¥1,651 for ±0.1 in ω.

Notes:

• Because progress in net income against the full-year forecast (38%) exceeds the standard benchmark (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of plan tend to exceed their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• 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 (there is a time lag relative to the full-year forecast).

(Calculation model: Residual income model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this 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 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 as necessary.

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