Sodick Co.,Ltd. FY2026 Q2 Earnings Report

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Executive Summary

Revenue and profits both increased substantially, resulting in higher revenue and higher earnings as expanding demand for the core Machine Tools Business and margin improvements boosted performance. Revenue was ¥46.92B (+23.5% YoY), Operating Income was ¥4.45B (+107.0%), Ordinary Income was ¥5.53B (+259.7%), and Net Income was ¥3.98B (+265.6%). In addition to higher revenue, positive operating leverage from an improved gross margin (37.5%, versus 35.1% in the previous year) and a lower SG&A ratio (28.1%, versus 29.5% in the previous year), together with foreign exchange gains and extraordinary income, supported growth in lower-line earnings.

Factors Affecting Performance

【Revenue】Revenue increased substantially to ¥46.92B (+23.5% YoY). The core Machine Tools Business led company-wide growth, with revenue of ¥36.69B (+30.5% YoY; 78.2% of total revenue), while the Industrial Machinery Business also grew to ¥5.30B (+11.5% YoY). The Food Machinery Business was essentially flat at ¥2.71B (-0.4% YoY).

【Profit and Loss】Operating Income improved substantially to ¥4.45B (+107.0% YoY), and the Operating Margin improved to 9.5% (5.7% in the previous year). Operating Income in the Machine Tools Business was ¥5.50B (+78.8% YoY; 15.0% margin), accounting for the core of company-wide profits, while the Industrial Machinery Business expanded its profit to ¥0.32B (+127.7% YoY). Ordinary Income was ¥5.53B (+259.7% YoY), including an additional ¥0.42B in foreign exchange gains and ¥0.03B in equity-method investment gains. Net Income was ¥3.98B (+265.6% YoY), also supported by ¥0.58B in extraordinary income, including a ¥0.39B gain on the sale of fixed assets. This was a higher-revenue, higher-earnings result, primarily driven by improved profitability in the core business.

Segment Analysis

The Machine Tools Business led company-wide growth and profitability improvement, with revenue of ¥36.69B (+30.5% YoY), Operating Income of ¥5.50B (+78.8% YoY), and a 15.0% margin. In addition to the contribution from Prima Additive (now AltForm), which became a consolidated subsidiary in the previous year, the integration of the linear motor business for external customers into the Machine Tools Business also contributed to revenue growth. The Industrial Machinery Business achieved higher revenue and earnings, with revenue of ¥5.30B (+11.5% YoY) and Operating Income of ¥0.32B (+127.7% YoY), while its margin also improved to 6.1%. Although revenue in the Food Machinery Business was essentially flat at ¥2.71B (-0.4% YoY), Operating Income was ¥0.29B (-17.2% YoY), and it maintained the highest margin among the four businesses at 10.8%. The higher-margin Machine Tools Business was the primary driver of the 383bp improvement in the company-wide margin, indicating that the business portfolio is becoming increasingly weighted toward this business.

Key Financial Indicators

【Profitability】The Operating Margin was 9.5%, improving 3.8pt from 5.7% in the previous year, while the gross margin also improved to 37.5% (35.1% in the previous year). The Net Profit Margin rose significantly to 8.5% (2.9% in the previous year), reflecting the impact of higher revenue as well as improvements in the cost structure.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥10.02B, approximately 2.5 times Net Income of ¥3.98B, indicating solid cash backing for earnings. Free Cash Flow was ample at ¥9.27B, while capital expenditures of ¥1.45B remained below depreciation and amortization of ¥1.68B.【Investment Efficiency】ROE was 4.2%, and the Equity Ratio was 59.6% (58.1% in the previous year), indicating that capital efficiency remained low despite higher earnings. EPS improved to ¥79.26 (¥21.52 in the previous year), while BPS improved to ¥1,909.80 (¥1,786.89 in the previous year).【Financial Soundness】The capital structure is conservative, with total assets of ¥160.28B, net assets of ¥95.54B, and an Equity Ratio of 59.6%. Cash and deposits were substantial at ¥51.20B, while the repayment profile of interest-bearing debt was diversified, consisting of long-term borrowings of ¥13.62B and bonds of ¥8.81B.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥10.02B (+80.0% YoY), demonstrating cash generation substantially exceeding Net Income of ¥3.98B. The increase in contract liabilities of ¥3.99B and progress in the collection of trade receivables (+¥3.83B) contributed to the increase, while an increase in inventories (-¥0.56B) and a decrease in trade payables (-¥2.04B) partially offset it. Investing Cash Flow was -¥0.75B; proceeds from the sale of fixed assets and other items partially offset capital expenditures of ¥1.45B, indicating a restrained level of investment. Financing Cash Flow was -¥5.15B, reflecting shareholder returns and balance-sheet adjustment activities, including ¥1.00B in share repurchases, debt repayments, and dividend payments. Resulting Free Cash Flow reached ¥9.27B, while cash and deposits increased to ¥51.20B as the Company continued shareholder returns and reduced interest-bearing debt.

Earnings Quality

Recurring earnings power was supported not only by Operating Income of ¥4.45B from the core business, but also by non-operating income such as foreign exchange gains of ¥0.42B, interest income of ¥0.19B, and dividend income of ¥0.15B, which contributed to higher Net Income. Meanwhile, extraordinary income of ¥0.58B, primarily consisting of a ¥0.39B gain on the sale of fixed assets, accounted for approximately 14.7% of Net Income of ¥3.98B, indicating a certain degree of one-off impact. Extraordinary losses were small at ¥0.05B, and the difference between Ordinary Income of ¥5.53B and Net Income of ¥3.98B was primarily attributable to the ¥2.09B tax burden, including income taxes. Operating Cash Flow (OCF) reached approximately 2.5 times Net Income, indicating favorable accrual quality (the difference between accounting earnings and cash), and overall earnings quality can be assessed as high.

Earnings Forecast and Guidance

The first-half progress rates against the Full-Year forecasts (Revenue of ¥97.00B, Operating Income of ¥9.20B, and Ordinary Income of ¥9.90B) were 48.4% for Revenue, 48.4% for Operating Income, and 55.9% for Ordinary Income. Compared with the 50% benchmark for a half-year period, Revenue and Operating Income were broadly in line with the standard pace, while Ordinary Income was progressing slightly ahead of schedule. Earnings forecasts were revised during the current quarter, and the incorporation of an upward revision to the Full-Year outlook provides support for the view that performance may exceed expectations. Contract liabilities had accumulated to ¥10.20B, equivalent to approximately 21.7% of first-half revenue, providing support for revenue recognition from the second half onward.

Shareholder Returns

The Q2 dividend was ¥20 per share (¥14 in the same period of the previous year), and the Full-Year dividend forecast is ¥35. No revision was made to the dividend forecast during the current quarter, and the initial plan remains in place. Against first-half dividend payments of ¥0.76B, share repurchases of ¥1.00B were conducted during the period, resulting in total shareholder returns of approximately ¥1.76B when dividends and share repurchases are combined. Return coverage against Free Cash Flow of ¥9.27B was sufficient, and the current shareholder return policy is considered sustainable in light of the Company’s cash generation capacity.

Risk Factors

1. Business Portfolio Concentration Risk: The Machine Tools Business accounts for 78.2% of revenue and the majority of segment profit, resulting in a structure highly sensitive to the supply-demand cycle of the business and trends in capital investment.

2. Foreign Exchange Risk: Non-operating income includes foreign exchange gains of ¥0.42B, equivalent to approximately 9.5% of Operating Income of ¥4.45B. If foreign exchange assumptions change, earnings may be affected through non-operating income and expenses.

3. Working Capital Volatility Risk: Inventories stood at ¥13.73B, while trade payables decreased (-¥2.04B). The management of inventories and trade payables accompanying the expansion of orders may affect future cash flow stability.

Industry Benchmark (For Reference; Based on Our Analysis)

Profitability and Returns

The Operating Margin is broadly in line with the industry median, while the Net Profit Margin exceeds the industry median, indicating that the Company’s overall profitability, including non-operating and extraordinary income and expenses, is favorably positioned within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate substantially exceeds the industry median and indicates high growth near the upper end of the IQR.

※Source: Based on our analysis

Key Takeaways from the Financial Results

1. The margin improvement in the Machine Tools Business (15.0%) raised the company-wide Operating Margin by 383bp, with the shift toward a higher-value-added business mix representing a turning point in the earnings structure.

2. Contract liabilities increased to ¥10.197B (¥5.821B in the same period of the previous year), and the accumulation of orders can be monitored as a leading indicator supporting revenue from the second half onward.

3. ROE remained low at 4.2% despite higher earnings. In contrast with the conservative capital structure reflected in an Equity Ratio of 59.6%, the trend in capital efficiency will be an important financial indicator going forward.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥1,799–¥1,905 at ±1% for the cost of equity, and ¥1,849–¥1,852 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥7.2 per share has been added back to earnings (as a non-cash expense and to improve comparability with IFRS companies).
• 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 have been used (there is a timing difference from the Full-Year forecast).

(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 earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by our 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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