YAMABIKO (6250) FY2026 Q1 Earnings Report

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Executive Summary

Although revenue and earnings increased, primarily driven by the expansion of small outdoor power equipment for the Americas, it is noteworthy that operating cash flow was substantially negative due to working capital requirements. Revenue was ¥493.5B (+12.7% YoY), Operating Income was ¥65.0B (+16.6%), Ordinary Income was ¥66.2B (+33.9%), and Net Income was ¥45.0B (+46.8%), with all profit measures growing faster than revenue. The Operating Income margin was 13.2%, improving by approximately +0.5pt year on year, supported by economies of scale from higher revenue and the recognition of foreign exchange gains.

Factors Affecting Business Performance

【Revenue】Revenue of ¥493.5B increased +12.7% year on year. By segment, the core Small Outdoor Power Equipment Business led growth, generating ¥391.0B in revenue (79.2% composition ratio, +15.3% YoY), of which Americas revenue was ¥327.2B (+16.4%), accounting for 66.3% of consolidated revenue. Agricultural Management Equipment generated ¥55.8B (largely unchanged), while General Industrial Machinery generated ¥41.0B (+12.6%).

【Profit and Loss】Operating Income of ¥65.0B (+16.6%) exceeded revenue growth, indicating that operating leverage was effective. Segment profit for the Small Outdoor Power Equipment Business was ¥88.6B (22.7% margin), driving company-wide earnings, while Agricultural Management Equipment generated ¥0.2B and General Industrial Machinery generated ¥1.5B, both remaining low-margin businesses. Despite higher revenue, General Industrial Machinery’s segment profit declined from ¥2.8B in the previous year to ¥1.5B. Ordinary Income of ¥66.2B increased +33.9%, as improvements in non-operating income and expenses, including a foreign exchange gain of ¥1.9B, were added to Operating Income. Extraordinary income and expenses consisted only of a ¥0.1B gain on the sale of investment securities, resulting in a minor impact on net income. Net Income of ¥45.0B (+46.8%) benefited from higher Operating Income and Ordinary Income, together with a relatively stable tax burden, supporting the conclusion that the company achieved both revenue and earnings growth.

Segment Analysis

The Small Outdoor Power Equipment Business is the company’s core business, with revenue of ¥391.0B (+15.3% YoY) and segment profit of ¥88.6B (22.7% margin). By region, the Americas, at ¥327.2B (66.3% composition ratio), were the largest growth driver, while Europe also expanded to ¥50.4B (from ¥41.0B in the previous year, +22.7%). Agricultural Management Equipment generated ¥55.8B in revenue, essentially unchanged, while segment profit remained low at ¥0.2B. General Industrial Machinery increased revenue to ¥41.0B (+12.6%), but segment profit deteriorated to ¥1.5B from ¥2.8B in the previous year, resulting in higher revenue but lower profit. Company-wide common expenses (adjustments) were negative ¥26.4B, absorbing part of the high profitability generated by the core business.

Key Financial Metrics

【Profitability】The Operating Income margin was 13.2% and the Net Income margin was 9.1% (+approximately 2.1pt year on year), maintaining a level calculated by deducting the SG&A ratio of 19.5% from the gross profit margin of 32.7%. 【Cash Flow Quality】Operating Cash Flow was negative ¥99.4B, and the OCF/Net Income ratio was negative 2.2x relative to Net Income of ¥45.0B, indicating that earnings for the quarter had not been converted into cash. 【Investment Efficiency】ROE was 3.6% (cumulative quarterly basis), with margin improvement serving as the primary driver under a conservative capital structure characterized by total asset turnover of 0.27x and financial leverage of 1.47x. EPS was ¥109.89 (¥74.64 in the previous year), and BPS was ¥3,026.78. 【Financial Soundness】The Equity Ratio was 67.8%. The Current Ratio was high, with current assets of ¥1,351.1B compared with current liabilities of ¥431.0B, indicating substantial short-term payment capacity; however, of interest-bearing debt of ¥258.7B, short-term borrowings accounted for ¥166.7B, indicating a bias toward short-term financing.

Cash Flow Analysis

Operating Cash Flow was negative ¥99.4B, deteriorating from negative ¥65.7B in the same period of the previous year. The main factors were an increase of ¥118.1B in trade receivables, an increase of ¥18.9B in inventories, and a decrease of ¥30.9B in trade payables. These working capital changes alone represented approximately ¥167.9B in cash outflow factors. Investing Cash Flow was negative ¥17.2B, primarily due to the acquisition of tangible and intangible fixed assets, with no significant change in the scale of investment itself. As a result, free cash flow was negative ¥116.7B, while Financing Cash Flow was positive ¥94.8B, mainly reflecting a net increase of ¥113.7B in short-term borrowings, thereby covering the funding shortfall. Although earnings were strong, cash-generating capacity temporarily declined due to increases in trade receivables and inventories. Progress in collections and inventory reduction toward the second half of the fiscal year will be a key focus for liquidity management.

Earnings Quality

The increase in Net Income to ¥45.0B was primarily based on the expansion of core Operating Income and improvements in non-operating income and expenses, including a foreign exchange gain of ¥1.9B. The impact of extraordinary income and expenses—a ¥0.1B extraordinary gain and a ¥0.04B extraordinary loss—was minor, indicating that most of the earnings increase resulted from improved recurring earning power. At the same time, Operating Cash Flow was negative ¥99.4B, substantially below Net Income, and the significant accrual component associated with increases in trade receivables and inventories warrants attention when assessing earnings quality. Non-operating income was centered on foreign exchange gains, while contributions from interest and dividend income were limited. Comprehensive Income was ¥57.0B, exceeding Net Income of ¥45.0B, primarily due to a ¥11.2B foreign currency translation adjustment. This difference reflects accounting fluctuations arising from the yen conversion of overseas assets and should be distinguished from the cash-generating capacity of the core business.

Earnings Forecast and Guidance

The full-year forecast is Revenue of ¥1,850.0B (+6.3% YoY), Operating Income of ¥210.0B (+6.5%), and Ordinary Income of ¥200.0B (+2.4%), with no revisions during the current quarter. Based on Q1 results, progress rates were 26.7% for Revenue, 31.0% for Operating Income, 33.1% for Ordinary Income, and 30.0% for Net Income (¥45.0B against a Net Income forecast of ¥150.0B), all exceeding the historically standard quarterly progress rate of approximately 25%. While progress on the profit front has been favorable, the year-on-year growth rates incorporated into the full-year plan are below the Q1 growth rates (Revenue +12.7%, Operating Income +16.6%), indicating that the plan assumes a slowdown in the pace of growth toward the second half of the fiscal year.

Shareholder Returns

The full-year dividend forecast is ¥110.0 per share. Based on average shares outstanding during the period of 40,908 thousand shares, total annual dividends are calculated at approximately ¥45.0B. The forecast Payout Ratio against the full-year Net Income forecast of ¥150.0B is approximately 30.0%. As no share repurchases were recorded during the current quarter, shareholder returns are evaluated solely on the basis of dividends. There has been no revision to the dividend forecast. Dividends paid in Q1 were ¥17.2B. Given that free cash flow for the quarter was negative ¥116.7B, the Q1 dividend was effectively funded through financing such as borrowings rather than Operating Cash Flow. Dividend sustainability will depend not only on achieving the full-year earnings plan but also on the normalization of working capital and recovery in Operating Cash Flow during the second half of the fiscal year.

Risk Factors

1. Geographic and business concentration risk: Americas revenue of ¥327.2B accounts for 66.3% of consolidated revenue, and dependence on the core Small Outdoor Power Equipment Business, which has a 22.7% margin, is high. A slowdown in North American demand or inventory adjustments at distributors could have a significant impact on company-wide earnings.

2. Working capital and cash conversion risk: Operating Cash Flow was negative ¥99.4B, and the OCF ratio to Net Income was negative 2.2x. The ¥118.1B increase in trade receivables, ¥18.9B increase in inventories, and ¥30.9B decrease in trade payables were sources of cash outflow. Delays in collections or inventory reduction could affect liquidity management.

3. Dependence on short-term financing: Of interest-bearing debt of ¥258.7B, short-term borrowings of ¥166.7B account for more than half. The increase in Financing Cash Flow was attributable to a net increase of ¥113.7B in short-term borrowings. Cash and deposits of ¥148.0B were below short-term borrowings, necessitating monitoring of refinancing conditions and interest rate trends.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the company’s Operating Income margin and Net Income margin exceed the industry median, demonstrating profitability at a high level within the industry.

Growth and Capital Efficiency

The Revenue growth rate exceeds the industry median but remains within the IQR upper bound of 13.9% and is not at an exceptional level.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. In addition to higher revenue and earnings, both the Operating Income margin and Net Income margin exceeded the industry median. The central feature of the earnings results is that the core Small Outdoor Power Equipment Business, with its high profitability (22.7% margin), drove growth.

2. Progress rates against the full-year forecast were 31.0% for Operating Income and 30.0% for Net Income, exceeding standard quarterly progress levels. However, Operating Cash Flow was negative ¥99.4B, showing a significant divergence from Net Income, while the working capital burden caused by increases in trade receivables and inventories was observed as a difference between earnings and cash flow.

3. Despite higher revenue, General Industrial Machinery’s segment profit declined from the previous year. Whether profitability improves will be a key point for monitoring going forward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,217–¥3,407 at Cost of Equity ±1%, and ¥3,303–¥3,320 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are 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 using only publicly available data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 responsibility, after consulting with a professional as necessary.

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AI Financial Analysis

Executive Summary

Yamabiko delivered a strong FY2026 Q1 profit performance, led by robust sales growth in its core small outdoor power equipment business, but cash conversion deteriorated materially as working capital absorbed cash. Revenue rose 12.7% YoY to ¥49.35bn. Operating income increased 16.6% to ¥6.50bn. Net income grew 46.8% to ¥4.50bn, outpacing operating profit growth. The operating margin expanded by 40bp to 13.2% from 12.7% in the prior-year quarter. Gross margin was 32.7%, versus 34.4% a year earlier, implying a 170bp gross-margin decline. The operating-margin gain despite lower gross margin indicates that SG&A grew more slowly than revenue, with SG&A rising 1.7% to ¥9.63bn. Ordinary income increased 33.9% to ¥6.62bn, aided by a swing from a ¥0.55bn foreign-exchange loss in the prior year to a ¥1.95bn FX gain this quarter. Net income also benefited from a small ¥0.10bn gain on sale of investment securities, although this was immaterial at 0.2% of net income. Operating cash flow was negative ¥9.94bn despite ¥4.50bn of net income. The principal cash-flow pressure was a ¥11.81bn increase in trade receivables, accompanied by a ¥1.89bn inventory increase and a ¥3.09bn reduction in trade payables. Free cash flow was consequently negative ¥11.67bn after ¥1.72bn of investing outflow. Financing cash flow of ¥9.49bn, mainly from a ¥11.37bn increase in short-term borrowings, partly funded the seasonal working-capital requirement. The current ratio of 313.5% and D/E of 0.47x provide substantial near-term balance-sheet capacity, although the funding mix has become more short-term oriented. FY2026 full-year guidance was maintained, and Q1 progress was ahead of a standard 25% run rate for revenue and profit. The central issue for the remainder of the year is whether receivables, inventories and related short-term borrowing reverse as sales are collected and seasonal demand normalizes.

Profitability Analysis

Annualized DuPont ROE is 14.5%, comprising a 9.1% net profit margin, 1.081x asset turnover and 1.47x financial leverage. The largest favorable earnings movement was margin expansion at the operating level, with the operating margin improving 40bp to 13.2%, while financial leverage remained moderate. The 9.1% net margin is below the 10% threshold commonly associated with excellent profitability but remains solid for a manufacturing company. Gross margin declined 170bp YoY, suggesting unfavorable product, regional, input-cost or currency-related gross-profit mix relative to the prior-year quarter. However, operating leverage was favorable: revenue grew 12.7% while SG&A increased only 1.7%, allowing operating income to rise 16.6%. This cost discipline appears to have offset the gross-margin compression in Q1. Small outdoor power equipment is the core business by operating-income contribution, generating ¥8.86bn of segment profit, or more than total consolidated operating income before unallocated costs. Its external revenue rose 15.3% to ¥39.10bn and segment profit rose 9.9% to ¥8.86bn, implying a modest segment-margin decline from 23.8% to 22.7%. Agricultural machinery revenue was broadly flat at ¥5.58bn, while segment profit improved from a ¥0.21bn loss to a ¥0.02bn profit. General industrial machinery revenue increased 12.6% to ¥4.10bn, but segment profit declined 48.2% to ¥0.15bn, indicating significant margin pressure. Unallocated general and technical administrative expenses fell ¥0.11bn to ¥2.64bn, contributing to consolidated margin improvement. The ordinary-income uplift was not wholly operating in nature, as the ¥1.95bn FX gain equaled 30.0% of operating income. Interest coverage remains very strong at 48.9x on EBIT and 56.8x on EBITDA, so interest costs are not currently constraining returns. The tax burden was 0.678, corresponding to a 32.2% effective tax rate and modestly reducing conversion of pre-tax earnings into net income. The current profitability profile is operationally sound, but sustaining the operating-margin gain will require that SG&A discipline continues and that gross-margin pressure does not deepen.

Growth Assessment

Revenue growth was broad-based geographically, with Americas sales up 16.0% to ¥32.72bn and European sales up 22.7% to ¥5.04bn. Japan sales increased 3.2% to ¥10.76bn, while sales to other regions declined 27.8% to ¥0.79bn. The Americas accounted for 66.3% of consolidated revenue, making North American demand the primary driver of near-term growth and earnings variability. Small outdoor power equipment represented 79.2% of revenue and remains the principal source of growth. The Q1 revenue progress rate against FY2026 guidance is 26.7%, modestly above the standard 25% pace. Operating-income progress is 31.0% and net-income progress is 30.0%, both more than 5 percentage points ahead of a standard Q1 pace. This early profit outperformance partly reflects the favorable ¥1.95bn FX gain, so it should not be extrapolated mechanically. Full-year guidance calls for 6.3% revenue growth to ¥185.0bn and 6.5% operating-income growth to ¥21.0bn, below the Q1 growth rate. Management has not revised guidance, which indicates that it has not yet treated the Q1 strength as sufficient grounds for a forecast increase. The agricultural-machinery return to a small segment profit is constructive, but its revenue was flat and the contribution remains small. The decline in general-industrial-machinery segment profit despite revenue growth is a negative mix and execution signal to monitor. Growth quality would improve if the Q1 sales increase converts into collections and if finished-goods inventory does not continue to rise faster than demand.

Financial Health

Liquidity is strong on reported balance-sheet ratios: the current ratio is 313.5%, the quick ratio is 223.9%, and working capital is ¥92.01bn. Current assets of ¥135.11bn substantially exceed current liabilities of ¥43.10bn, so there is no current-ratio warning or apparent near-term maturity mismatch at the aggregate balance-sheet level. Interest-bearing debt is ¥25.87bn, equivalent to D/E of 0.47x and debt/capital of 17.3%, both conservative. Debt/EBITDA is 3.42x, above the 2.5x investment-grade reference point but below the 4.0x high-yield warning level. Short-term debt is ¥16.67bn, or 64.4% of total debt, and increased 234.2% YoY from ¥4.99bn. This refinancing-risk alert reflects a greater reliance on short-dated financing to fund working capital, rather than an immediate solvency issue. Cash of ¥14.80bn covers 0.89x of short-term loans, so cash alone does not fully repay short-term debt. However, the large ¥48.94bn receivables balance and ¥38.62bn reported inventories, together with the strong quick ratio, provide substantial current asset coverage. Accounts receivable increased 39.0% YoY to ¥48.94bn, and accounts payable rose 45.3% to ¥13.01bn. The combination of sharply higher receivables and short-term loans indicates that collection timing is increasingly important to liquidity management. Capital adequacy was 67.8%, down from 70.8% a year earlier, principally reflecting liability growth faster than equity growth, but remains strong. Intangible assets are only 1.0% of total assets, and no goodwill or impairment was reported in the segment disclosure, limiting M&A-related balance-sheet risk. Product-warranty provisions total ¥16.61bn, including ¥6.05bn current and ¥10.55bn non-current, and warrant monitoring as a potential product-quality and future-cost exposure.

Notable B/S Changes

Short-term loans: +¥11.68bn (+234.2%) to ¥16.67bn - substantial increase in short-dated funding, consistent with financing of the Q1 working-capital build; refinancing dependence should be monitored. Accounts receivable: +¥13.74bn (+39.0%) to ¥48.94bn - receivable growth exceeded revenue growth and was the principal driver of negative operating cash flow. Accounts payable: +¥4.06bn (+45.3%) to ¥13.01bn - payable growth was significant, but Q1 cash flow nevertheless reflects a ¥3.09bn reduction in trade payables, adding to working-capital outflow. Total assets: +¥131.45bn (+7.8%) to ¥1,826.20bn - asset growth was concentrated in current operating assets, particularly receivables, increasing the importance of cash conversion. Total equity: +¥38.51bn (+3.2%) to ¥1,238.16bn - equity remains substantial and supports low leverage, although it grew more slowly than liabilities.

Cash Flow Quality

Cash-flow quality is the principal weakness in Q1. Operating cash flow was negative ¥9.94bn, compared with positive net income of ¥4.50bn, producing an OCF/net-income ratio of negative 2.21x and triggering the earnings-quality alert. EBITDA was ¥7.56bn, but OCF/EBITDA was negative 1.32x, triggering the low-cash-conversion alert. The divergence is primarily working-capital-driven rather than caused by a lack of reported accounting profit. Trade receivables absorbed ¥11.81bn of cash, the largest operating cash-flow outflow. Inventory increased by ¥1.89bn and trade payables decreased by ¥3.09bn, further worsening the cash cycle. Reported annualized DSO of 90 days exceeds the 60-day warning threshold, indicating slow collection or a quarter-end shipment-and-billing concentration; the 39.0% YoY increase in receivables raises the importance of this risk. Reported annualized DIO alerts of 177 days and 106 days both exceed their applicable warning thresholds, regardless of the reported inventory-day methodology. Inventory is concentrated in finished goods at ¥38.62bn, with raw materials of ¥21.62bn and work in process of ¥4.20bn also requiring production and demand discipline. The reported annualized cash conversion cycle of 232 days materially exceeds the 120-day warning threshold. These metrics are particularly important for an outdoor-equipment manufacturer because dealer channel inventory, seasonal retail demand and procurement lead times can delay conversion of reported sales into cash. The working-capital build was partly financed by ¥11.37bn of incremental short-term borrowing. Investing cash flow was negative ¥1.72bn, entirely consistent with the reported ¥1.73bn purchase of PPE and intangibles. Therefore, free cash flow was negative ¥11.67bn and cannot presently fund cash dividends and investment needs from internally generated Q1 cash. Cash-flow quality should be assessed over the full seasonal cycle, but continued receivable growth or lack of cash recovery in subsequent quarters would weaken the quality of the earnings expansion.

Dividend Sustainability

FY2026 guidance specifies a full-year dividend of ¥110 per share. Against guided EPS of ¥366.43, the implied dividend payout ratio is 30.0%, which is conservative and well below the 60% sustainability reference point. There were no reported share repurchases in Q1, so the dividend payout ratio is the appropriate shareholder-return measure. The annual cash dividend implied by ¥110 per share on 40.91 million average shares is approximately ¥4.50bn. Guided net income of ¥15.0bn provides around 3.3x accounting-earnings coverage of this implied dividend. Balance-sheet liquidity and low leverage also support the stated dividend level. However, Q1 free cash flow was negative ¥11.67bn, so current-period cash generation did not cover dividend requirements or investment outlays. The sustainability assessment therefore depends on seasonal working-capital release and operating-cash-flow recovery through the remainder of FY2026. With no dividend revision announced, the maintained policy appears supportable on full-year earnings guidance, but collection and inventory normalization are the key cash coverage conditions.

Risk Assessment

Business risks include Demand concentration: the Americas generated 66.3% of Q1 revenue, exposing results to North American consumer, dealer and professional-equipment demand conditions., Foreign-exchange sensitivity: a ¥1.95bn FX gain supported ordinary income; reversal or volatility in currency markets could materially affect reported earnings., Core-business margin risk: small outdoor power equipment segment profit grew slower than revenue, with segment margin declining by about 110bp., General industrial machinery execution risk: segment profit fell 48.2% despite 12.6% sales growth., Product-quality risk: total product-warranty provisions of ¥16.61bn equal approximately 3.4% of Q1 revenue, above the 3% warning threshold. This high-warranty alert may indicate elevated expected repair, replacement or service costs and can pressure margins and brand perception if claims rise., Manufacturing inventory risk: high reported inventory days of 177 and 106 under the respective reported methodologies indicate potential dealer-channel, finished-goods or production-planning risk if end-market demand slows..

Financial risks include Receivables risk: annualized DSO of 90 days is above the 60-day alert threshold, while receivables rose 39.0% YoY. Delayed customer collections would prolong negative operating cash flow and increase reliance on borrowing., Cash-conversion risk: OCF/net income of negative 2.21x and OCF/EBITDA of negative 1.32x show that Q1 earnings were not converted to cash., Working-capital-cycle risk: the reported 232-day annualized cash conversion cycle is well above the 120-day warning level, driven by receivables and inventory., Refinancing risk: 64.4% of debt is short term, and short-term loans increased ¥11.68bn YoY. Strong current liquidity and interest coverage mitigate immediate risk, but rollover dependence has risen., Funding risk: negative free cash flow of ¥11.67bn was partly financed with debt, making subsequent cash collection critical..

Key concerns include The most material near-term issue is whether receivables and inventories convert back to cash after the seasonal sales period., Gross-margin compression of 170bp could erode operating leverage if SG&A growth normalizes or demand weakens., The favorable FX swing supported Q1 ordinary-income and net-income growth, reducing the portion of outperformance attributable solely to recurring operations., Warranty provisions equivalent to 3.4% of revenue should be monitored for evidence of recurring product-quality costs., The maintained full-year forecast, despite Q1 progress ahead of the standard pace, suggests that management may anticipate normalization later in the year..

Investment Implications

Key takeaways include Q1 revenue, operating income and net income increased 12.7%, 16.6% and 46.8% YoY, respectively., Operating margin improved to 13.2%, supported by SG&A restraint, although gross margin declined to 32.7%., Small outdoor power equipment remains the earnings engine, generating ¥8.86bn of segment profit., Q1 progress against full-year guidance was 26.7% for sales, 31.0% for operating income and 30.0% for net income., Negative ¥9.94bn operating cash flow and negative ¥11.67bn free cash flow make working-capital normalization the critical validation point for earnings quality., Balance-sheet leverage is conservative, but the debt mix has shifted toward short-term borrowing..

Metrics to watch include Trade receivable balance, annualized DSO and operating cash flow recovery, Finished-goods inventory and reported inventory days, Short-term loans and cash/short-term-debt coverage, Core small-outdoor-power-equipment segment margin, General industrial machinery segment profitability, FX gains or losses relative to operating income, Warranty provisions and warranty expense trends, Progress versus maintained FY2026 revenue of ¥185.0bn and operating-income guidance of ¥21.0bn.

Regarding relative positioning, Profitability and capital structure are favorable for a diversified outdoor-equipment manufacturer: the 13.2% operating margin, annualized 14.5% ROE, 67.8% capital adequacy ratio and 0.47x D/E indicate a financially resilient operating platform. Relative weakness is concentrated in working-capital efficiency, as elevated receivable days, inventory days and a 232-day annualized cash conversion cycle have produced debt-supported negative Q1 free cash flow.