YAMABIKO CORPORATION FY2026 Q2 Earnings Report

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Executive Summary

The first half of FY2026 delivered higher revenue and higher income, with the significant improvement in the operating margin driven by price revisions, an improved product mix, and the absorption of fixed costs representing the most important point. Revenue was ¥1,037.8B (+13.7% YoY), Operating Income was ¥160.9B (+37.0%), Ordinary Income was ¥165.1B (+53.1%), and Net Income was ¥115.8B (+54.2%). Continued high profitability in the core Compact Outdoor Power Equipment Business and a sharp recovery in the General Industrial Machinery Business drove the increase in earnings, resulting in profit progress ahead of schedule against the full-year plan.

Factors Affecting Results

【Revenue】Revenue was ¥1,037.8B, representing a 13.7% YoY increase. By segment, the core Compact Outdoor Power Equipment Business accounted for the largest portion of the sales mix at ¥1,106.1B (+7.4%), while the General Industrial Machinery Business achieved high growth of ¥179.4B (+47.6%). The Agricultural Management Machinery Business remained flat at ¥208.1B (+0.4%). By region, the Americas accounted for more than 60% of total revenue at ¥680.3B, expanding from ¥556.5B in the previous year, with expanding demand serving as the primary driver of the revenue increase.

【Profit and Loss】Operating Income was ¥160.9B (+37.0%), and the operating margin improved to 15.5% from 12.9% in the previous year, an improvement of +264bp. Both the gross margin, at 35.5% (+120bp), and the SG&A ratio, at 20.0% (-150bp), improved simultaneously, resulting in operating leverage. Ordinary Income increased to ¥165.1B (+53.1%), further boosted by the recognition of ¥3.5B in foreign exchange gains, compared with a foreign exchange loss in the previous year. Net Income was ¥115.8B (+54.2%). Extraordinary items were minor, consisting of ¥0.1B in extraordinary income and ¥0.1B in extraordinary losses; the difference between Ordinary Income and Net Income was primarily attributable to income taxes and other taxes of ¥49.3B, representing an effective tax rate of approximately 29.9%. In conclusion, the company achieved higher revenue and higher income.

Segment Analysis

The Compact Outdoor Power Equipment Business generated revenue of ¥1,106.1B (+7.4%) and Operating Income of ¥194.5B (+23.1%), with an operating margin of 17.6%, making it the core contributor to company-wide profits. The General Industrial Machinery Business generated revenue of ¥179.4B (+47.6%) and Operating Income of ¥14.1B (+82.8%), with its operating margin improving to 7.8%, the largest improvement in both growth rate and margin expansion. The Agricultural Management Machinery Business was essentially flat, with revenue of ¥208.1B (+0.4%), while Operating Income doubled from a low base to ¥3.4B (+143.2%); however, its operating margin remained at 1.6%, indicating continued low profitability. By region, the Americas grew to ¥680.3B (+22.2% from ¥556.5B in the previous year), serving as the primary driver of company-wide growth, while other regions declined to ¥19.5B.

Key Financial Indicators

【Profitability】The operating margin of 15.5% improved significantly from 12.9% in the previous year by +264bp, while the net margin of 11.2% also improved from 8.2% by +293bp. Both the gross margin of 35.5% (+120bp) and the SG&A ratio of 20.0% (-150bp) contributed to the improvement.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥17.1B, representing approximately 0.15x Net Income of ¥115.8B, a low level primarily due to the ¥135.6B increase in accounts receivable accompanying revenue growth. The conversion of earnings into cash is lagging.【Investment Efficiency】ROE was 8.8%; EPS was ¥282.99 (+54.4% from ¥183.30 in the previous year), and BPS was ¥3,218.61. R&D expenses were ¥30.1B, equivalent to 2.9% of revenue.【Financial Soundness】The Equity Ratio remained high at 70.3% (70.8% in the previous year). With cash and deposits of ¥195.3B versus short-term borrowings of ¥106.3B, the company retains funding capacity, although short-term borrowings increased by +113% YoY.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥17.1B, improving from -¥20.5B in the previous year, but the cash conversion rate remained low relative to Net Income of ¥115.8B. This was primarily attributable to the significant working capital pressure from the ¥122.2B decrease in cash flow associated with trade receivables accompanying revenue growth; inventories also moved toward a slight increase of -¥0.7B. Investing Cash Flow was -¥25.9B as the company continued investing in property, plant and equipment and other assets, resulting in Free Cash Flow (OCF + Investing Cash Flow) of -¥8.7B. Financing Cash Flow was positive at ¥31.9B, with the increase in short-term borrowings (+¥53.3B) offsetting dividend payments (¥18.5B) and the shortfall from investing activities. Thus, during the first half, the expansion of working capital associated with business growth was supplemented by short-term funding.

Quality of Earnings

The difference between Ordinary Income of ¥165.1B and Net Income of ¥115.8B was primarily attributable to income taxes and other taxes of ¥49.3B, representing an effective tax rate of approximately 29.8%, with no particular anomalies. Extraordinary items were minimal, consisting of ¥0.1B in extraordinary income and ¥0.1B in extraordinary losses, indicating that current-period earnings were generated primarily by an improvement in recurring earning power rather than temporary factors. Foreign exchange gains of ¥3.5B were included in non-operating income of ¥8.1B, and the reversal from the foreign exchange loss in the previous year, which was included in non-operating expenses, contributed to the increase in Ordinary Income. This component should be noted as a non-recurring factor that could reverse depending on market conditions. Comprehensive Income was ¥135.8B, exceeding Net Income of ¥115.8B, primarily due to foreign currency translation adjustments of ¥21.7B, indicating that the valuation of overseas business assets had a positive impact on comprehensive performance.

Earnings Forecast and Guidance

The full-year plan calls for Revenue of ¥1,900.0B (+9.2% YoY), Operating Income of ¥230.0B (+16.6%), and Ordinary Income of ¥230.0B (+17.7%). First-half progress rates were 54.6% for Revenue, 69.9% for Operating Income, and 71.8% for Ordinary Income. Profit progress substantially exceeded revenue progress, indicating that the pace of first-half earnings growth was running well ahead of the full-year plan. The earnings forecast was revised during the current quarter, and the incorporation of a plan review based on first-half results should be noted as an update to management’s assessment of business performance.

Shareholder Returns

The interim dividend was ¥55 per share, and the full-year dividend forecast is ¥110, indicating an increase compared with the annual results including the previous year’s dividend forecast of ¥45, among other figures. Based on first-half Net Income of ¥115.8B and dividend payments of ¥18.5B, the Payout Ratio was approximately 16.0%. Based on the full-year forecast EPS of ¥403.27 and DPS of ¥110, the Payout Ratio is approximately 27.3%. First-half Free Cash Flow was -¥8.7B, and the fact that dividends were supplemented by funding, including the increase in short-term borrowings, rather than by cash generated from operating activities requires monitoring when assessing dividend sustainability.

Risk Factors

1. Working Capital Expansion Risk: Trade receivables increased to ¥487.6B (+38.5% YoY), while OCF remained at ¥17.1B, approximately 0.15x Net Income of ¥115.8B. If the collection cycle continues to lengthen, the impact on cash generation capacity may persist.

2. Short-Term Funding Dependence Risk: Short-term borrowings increased by +113% YoY, supplementing the expansion of working capital. If working capital compression does not progress, dependence on short-term liabilities may increase.

3. Polarization of Profitability Among Segments: The operating margin of the Agricultural Management Machinery Business was low at 1.6%, substantially below the 17.6% of the core Compact Outdoor Power Equipment Business. Delayed improvement in the low-profitability segment could dilute company-wide average profitability.

Industry Benchmark (Reference; Company Research)

Industry Benchmark (manufacturing)

Profitability and Returns

Profitability exceeds the industry median, placing the company in the upper-tier group.

Growth and Capital Efficiency

The revenue growth rate also exceeds the industry median, although the company is positioned around the middle of the upper range.

※Source: Company research

Key Points from the Earnings Results

1. From a profitability perspective, the Operating Margin of 15.5% and Net Margin of 11.2% improved significantly from the previous year, confirming the effects of price revisions, product mix improvements, and fixed-cost absorption. Whether this improvement is structural or temporary will become clearer as the Operating Margin trend develops from H2 onward.

2. OCF growth is lagging earnings growth, with the OCF/Net Income ratio remaining at approximately 0.15x. The primary factors are increases in trade receivables and inventories, making cash flow quality an important point of focus in the earnings data.

3. Progress against the full-year plan is ahead of revenue progress on the profit side (Operating Income progress of 69.9% versus revenue progress of 54.6%). Trends in working capital and the degree of OCF recovery in the second half will be key points in assessing the substance of full-year plan achievement.

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 of any specific investment action.

Sensitivity: ¥3,499–¥3,707 at Cost of Equity ±1%, and ¥3,591–¥3,614 at ω±0.1.

Notes:

• Because Net Income progress against the full-year forecast is 70%, exceeding the standard level of 50%, forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of schedule tend to outperform forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the quarter-end have been used, resulting in a timing gap relative to the full-year forecast.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not predict 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 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, with consultation with professionals as necessary.

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