Sodick Co.,Ltd. FY2026 Q2 Earnings Report

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Executive Summary

The Company delivered strong results, with higher revenue and profit, significantly improved margins, driven by revenue growth centered on the Machine Tools Business and the absorption of fixed costs. Revenue was ¥469.2B (+23.5% YoY), Operating Income was ¥44.5B (+107.0%), Ordinary Income was ¥55.3B (+259.7%), and Net Income was ¥39.8B (+265.6%). SG&A expenses increased by only 17.8%, compared with a 23.5% increase in revenue, and operating leverage boosted the profit growth rate. However, the growth in Ordinary Income and Net Income also includes temporary factors such as foreign exchange gains and gains on the sale of fixed assets.

Factors Affecting Performance

【Revenue】Revenue of ¥469.2B represented a 23.5% YoY increase. The core Machine Tools Business grew significantly to ¥365.9B (+30.5%), driving consolidated growth. The Industrial Machinery Business continued to grow to ¥53.0B (+11.5%), while the Food Machinery Business was nearly flat at ¥27.1B (-0.4%), and the Other Businesses increased by only 0.9%. The higher proportion of external sales from machine tools and the improved segment mix contributed to an increase in the overall gross profit margin.

【Profit and Loss】Operating Income was ¥44.5B (+107.0%), and the Operating Income margin improved significantly to 9.5% from 5.7% in the same period of the previous year. Segment profit for the Machine Tools Business was ¥55.0B (+78.8%), with a 15.0% margin, leading the improvement in Company-wide profitability. The Industrial Machinery Business also improved its margin to 6.1%, while the Food Machinery Business saw profit decline by 17.2% and the Other Businesses decline by 78.3%, weakening in contrast. Ordinary Income was ¥55.3B, reflecting the addition of ¥4.2B in foreign exchange gains and other non-operating income to Operating Income. Net Income was ¥39.8B after the addition of extraordinary income, including ¥3.9B in gains on the sale of fixed assets. The Company achieved higher revenue and profit, primarily due to improved profitability in its core operations.

Segment Analysis

The Machine Tools Business accounted for the core of consolidated profit, with revenue of ¥365.9B (78.2% composition ratio, YoY +30.5%) and segment profit of ¥55.0B (15.0% margin). The Industrial Machinery Business generated revenue of ¥53.0B (11.3% composition ratio, YoY +11.5%) and profit of ¥3.2B (6.1% margin), showing continued improvement. The Food Machinery Business generated revenue of ¥27.1B (5.8% composition ratio, YoY -0.4%) and profit of ¥2.9B (10.8% margin, -17.2% YoY), representing a decline in profit. The Other Businesses generated revenue of ¥29.4B and profit of ¥0.1B (-78.3% YoY). Adjustments, including Company-wide expenses, expanded to negative ¥16.7B from negative ¥14.8B in the previous year. Absorbing head-office expenses as profit growth in the core businesses flows through to consolidated profit remains a challenge.

Key Financial Indicators

【Profitability】The Operating Income margin improved by approximately 3.8pt to 9.5% from 5.7% in the previous year, while the Net Income margin improved by 5.6pt to 8.5% from 2.9%, reflecting effective fixed-cost absorption accompanying revenue growth. 【Cash Flow Quality】Operating Cash Flow (OCF) of ¥100.2B was approximately 2.5 times Net Income of ¥39.8B, indicating strong cash conversion. The main contributing factors were the collection of trade receivables of ¥38.3B and an increase in contract liabilities of ¥39.9B. 【Investment Efficiency】Annualized ROE was 8.3%, while the total asset turnover ratio remained low, leaving room for improvement in capital efficiency. Capital expenditures of ¥14.5B remained within depreciation and amortization of ¥16.8B. 【Financial Soundness】The Equity Ratio was 59.6%, and cash and deposits totaled ¥512.0B, indicating a strong financial foundation.

Cash Flow Analysis

OCF was ¥100.2B, up 80.0% YoY, indicating strong cash generation substantially exceeding Net Income of ¥39.8B. The principal drivers of the increase were the collection of trade receivables of ¥38.3B and an increase in contract liabilities of ¥39.9B, while decreases in trade payables of ¥20.4B and an increase in inventories of ¥5.6B were negative factors. Investing Cash Flow was negative ¥7.5B, primarily due to capital expenditures of ¥14.5B, which were largely offset by proceeds from the sale of fixed assets and other items. Capital expenditures remained within depreciation and amortization of ¥16.8B, indicating a conservative level of investment. Free Cash Flow was substantial at ¥92.7B, while Financing Cash Flow was negative ¥51.5B, allocated to debt repayments, ¥10.0B in share buybacks, dividend payments, and other items. Cash and deposits increased from the previous year, expanding the Company’s financial flexibility.

Earnings Quality

Ordinary Income of ¥55.3B exceeded Operating Income of ¥44.5B by ¥10.8B, with non-operating income including foreign exchange gains of ¥4.2B, interest income of ¥1.9B, and dividend income of ¥1.5B contributing to the increase. In addition, extraordinary income of ¥5.8B, including gains on the sale of fixed assets of ¥3.9B, exceeded extraordinary losses of ¥0.5B, and the net amount of ¥5.3B lifted Net Income. Consequently, the Net Income growth rate (+265.6%) substantially exceeded the Operating Income growth rate (+107.0%), although part of the difference depended on non-recurring factors such as foreign exchange and asset sales. Meanwhile, OCF reached approximately 2.5 times Net Income, indicating limited accruals—the difference between accounting profit and cash earnings—and good underlying earnings quality. In assessing future performance, maintaining the Operating Income margin of the core Machine Tools Business will be key to sustainability.

Earnings Forecast and Guidance

The full-year earnings forecast is revenue of ¥970.0B (YoY +20.4%), Operating Income of ¥92.0B (YoY +117.8%), and Ordinary Income of ¥99.0B (YoY +89.3%). First-half progress rates were 48.4% for revenue, 48.4% for Operating Income, 55.9% for Ordinary Income, and 53.8% for Net Income (¥39.8B in the first half against the full-year forecast of ¥74.0B). Revenue and Operating Income are progressing at levels near the standard 50%. The progress rates for Ordinary Income and Net Income exceed that of Operating Income because the first half included temporary factors such as foreign exchange gains and gains on the sale of fixed assets. In the second half, the continuing profit-generation capacity of the core Machine Tools Business will determine the quality of full-year achievement. The earnings forecast was revised during the current quarter.

Shareholder Returns

The Q2 dividend was ¥20.00 per share, and the full-year forecast dividend is ¥35.00 (assuming a year-end dividend of ¥15.00). Against first-half dividend payments of ¥7.6B, the Payout Ratio based on Net Income of ¥39.8B was approximately 19%, indicating a comfortable level. In addition, the Company conducted ¥10.0B in share buybacks, bringing total cash-based returns, including dividends and share buybacks, to ¥17.6B in the first half. Returns represented a limited proportion of Free Cash Flow of ¥92.7B, leaving substantial capacity for further shareholder returns.

Risk Factors

1. Concentration of earnings in the Machine Tools Business: With external sales of ¥365.9B and segment profit of ¥55.0B, the business accounts for the core of consolidated profit. Restrictions on customers’ capital expenditures or delays in orders could have a significant impact on consolidated performance.

2. Inventory and working capital accumulation: Inventories of ¥137.3B and trade receivables of ¥167.8B are substantial, creating risks of inventory write-downs and cash being tied up during periods of demand fluctuations.

3. Slowing profitability in the Food Machinery and Other Businesses: The Food Machinery Business recorded revenue of -0.4% and profit of -17.2%, while the Other Businesses recorded profit of -78.3%, further increasing dependence on the Machine Tools Business.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Operating Income margin is nearly in line with the industry median, while the Net Income margin exceeds the industry median, indicating a relatively high level of profitability including non-operating and extraordinary gains and losses.

Growth and Capital Efficiency

The Revenue growth rate substantially exceeds the industry median, positioning the Company among the industry’s high-growth companies.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The Operating Income margin improved by approximately 3.8pt from 5.7% in the same period of the previous year to 9.5%. Operating leverage was evident, as the increase in SG&A expenses (+17.8%) was below the Revenue growth rate (+23.5%). Revenue growth and margin improvement in the Machine Tools Business were at the center of the structural improvement.

2. The growth rates of Ordinary Income and Net Income exceeded that of Operating Income, with the difference including non-recurring factors such as foreign exchange gains of ¥4.2B and gains on the sale of fixed assets of ¥3.9B. Operating Income trends should be prioritized when assessing underlying profitability.

3. OCF of ¥100.2B, approximately 2.5 times Net Income, was secured, resulting in substantial Free Cash Flow of ¥92.7B. With an Equity Ratio of 59.6% and cash and deposits of ¥512.0B, the Company has secured funding for dividends and share buybacks.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥1,799–¥1,905 at Cost of Equity ±1%, and ¥1,849–¥1,852 at ω±0.1.

Notes:

• Goodwill amortization of ¥7.2 per share has been added back to profit (to account for a non-cash expense and comparability with IFRS companies).
• As 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 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 stock price or a recommendation of any specific investment action, and does not predict or guarantee the future stock 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 the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and, where necessary, after consulting with a professional.

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