TAZMO (6266) FY2026 Q1 Earnings Report

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Executive Summary

In FY2026 Q1, the Company posted a significant decline in revenue and earnings, primarily due to a sharp slowdown in the Surface Treatment Equipment Business. Revenue was ¥59.7B (-20.6% YoY), Operating Income was ¥0.9B (-92.9%), Ordinary Income was ¥1.9B (-84.1%), and Net Income was ¥1.1B (-87.2%). While the gross profit margin declined to 27.2% from 34.7% a year earlier, SG&A expenses increased by 10.2%, accelerating the deterioration in operating leverage and the contraction in profit margins.

Factors Affecting Performance

【Revenue】Revenue was ¥59.7B, down -20.6% YoY. By segment, the Process Equipment Business remained broadly flat at ¥48.2B (-1.0% YoY; 80.8% of total), while the Surface Treatment Equipment Business declined to ¥9.5B (-60.7%; 15.9% of total), accounting for most of the consolidated revenue decrease. The Precision Molds and Resin Molding Business generated ¥2.8B (-13.7%). Within the Process Equipment Business, Semiconductor Equipment and Cleaning Equipment recorded higher revenue, while Conveyance Equipment declined, indicating variability in the timing of project recognition.

【Profit and Loss】Operating Income was ¥0.9B (-92.9%), and the operating margin fell sharply to 1.4% from 16.1% a year earlier. As the gross profit margin declined from 34.7% to 27.2% and SG&A expenses increased by 10.2%, the absorption of fixed costs weakened. Ordinary Income was ¥1.9B, supported by non-operating income of ¥1.2B, including a ¥0.6B foreign exchange gain and ¥0.5B interest income, which exceeded Operating Income. Net Income was ¥1.1B, with the high effective tax rate of 40.9% limiting earnings recovery. No extraordinary gains or losses were recorded, and the gap between Ordinary Income and Net Income was primarily attributable to the tax burden. Overall, the results represent a decline in both revenue and earnings.

Segment Analysis

The Process Equipment Business maintained its scale, with revenue of ¥48.2B (-1.0% YoY), but segment profit plunged to ¥0.6B (-92.0%), and its profit margin deteriorated significantly from 15.7% to 1.3%. The Surface Treatment Equipment Business recorded revenue of ¥9.5B (-60.7%) and profit of ¥0.1B (-96.3%), making it the largest contributor to the Company-wide earnings decline. The Precision Molds and Resin Molding Business generated revenue of ¥2.8B (-13.7%) and posted an operating loss of ¥0.0B, turning from a profit in the prior year to a loss. All three segments experienced lower earnings, with the sharp decline in the Surface Treatment Equipment Business and deteriorating profitability in the Process Equipment Business weighing particularly heavily on overall performance.

Key Financial Metrics

【Profitability】The operating margin contracted sharply to 1.4% from 16.1% a year earlier, while the net profit margin declined to 1.9% from 11.5%. Annualized ROE remained at 1.7%, primarily due to the sharp decline in the net profit margin.【Cash Flow Quality】Non-operating income of ¥1.2B exceeded Operating Income of ¥0.9B, indicating that the composition of Ordinary Income depended more on foreign exchange gains and interest income than on core operating earnings. Inventory was ¥151.5B, accounting for 32.9% of total assets, and is a key item to monitor for capital tied up in operations.【Investment Efficiency】ROIC remained at a low level, with the sharp contraction in profit margins, rather than deterioration in asset turnover, being the primary driver of lower earnings efficiency.【Financial Soundness】The Equity Ratio was 58.1%, and the current ratio was equivalent to 282.3%, indicating a solid financial position. Cash and deposits of ¥154.7B substantially exceeded short-term borrowings of ¥37.1B. Long-term borrowings increased to ¥54.7B, and part of the interest-bearing debt appears to have been raised to meet funding needs.

Cash Flow Analysis

Although the cash flow statement was not directly disclosed, the balance sheet trends indicate that cash and deposits declined to ¥154.7B from ¥162.7B a year earlier, while contract liabilities (advances received) increased to ¥47.8B (+30.7% YoY), with advances received for large projects providing a certain degree of support for working capital. Long-term borrowings increased to ¥54.7B (+17.8%), and short-term borrowings rose to ¥37.1B (+13.5%), indicating an expansion in total interest-bearing debt. Inventory remained high at ¥151.5B, suggesting that working capital efficiency may be affecting cash generation in combination with the decline in profitability. Property, plant and equipment increased to ¥81.8B (+4.7%), indicating continued capital investment, primarily in machinery and equipment.

Earnings Quality

Of Ordinary Income of ¥1.9B, non-operating income of ¥1.2B, including a ¥0.6B foreign exchange gain and ¥0.5B interest income, exceeded Operating Income of ¥0.9B, indicating that factors outside the core business boosted the earnings level. No extraordinary gains or losses were recorded, and no temporary factors were identified; however, the high dependence on foreign exchange gains warrants attention when assessing earnings quality. The effective tax rate was high at 40.9%. As income taxes and other taxes of ¥0.8B were recorded against profit before tax of ¥1.9B, the conversion rate to Net Income was constrained. Comprehensive Income was ¥2.2B, exceeding Net Income of ¥1.1B, primarily due to foreign currency translation adjustments of ¥1.1B. The difference between Net Income and Comprehensive Income was attributable to foreign exchange factors and does not indicate sustainable earnings power.

Earnings Forecast and Guidance

The full-year company forecasts remain unchanged at Revenue of ¥355.0B (+0.2% YoY), Operating Income of ¥36.0B (-24.5%), and Ordinary Income of ¥35.0B (-30.1%). The Q1 progress rate was 16.8% for Revenue and 2.4% for Operating Income, both substantially below the standard 25% progress benchmark. Against the company’s assumed full-year operating margin of 10.1%, the Q1 actual operating margin was only 1.4%; achieving the full-year target will depend on a recovery in the Surface Treatment Equipment Business and improved profitability in the Process Equipment Business. The earnings forecast had not been revised as of the current quarter.

Shareholder Returns

The full-year dividend forecast remains unchanged at ¥34.00 per share, implying a forecast Payout Ratio of 19.9% based on forecast full-year EPS of ¥170.65. As there has been no revision to the dividend forecast and no new disclosure regarding share repurchases, shareholder returns are evaluated based solely on the Payout Ratio. Dividend sustainability will depend on the achievement of forecast full-year profit attributable to owners of the parent of ¥25.0B, particularly the recovery in Operating Income from Q2 onward.

Risk Factors

1. Sharp decline in the Surface Treatment Equipment Business: Revenue declined to ¥9.5B (-60.7% YoY), and segment profit fell to ¥0.1B (-96.3%). Delays in project recognition and fluctuations in demand could have a significant impact on consolidated performance.

2. Inventory and working capital accumulation: Inventory of ¥151.5B accounts for 32.9% of total assets, creating risks of valuation losses and lower capital efficiency if projects are delayed or specifications are changed. Contract liabilities expanded to ¥47.8B (+30.7%), and variability in acceptance timing may increase fluctuations in quarterly performance.

3. Declining profitability and tax burden: The operating margin was 1.4%, while the effective tax rate was high at 40.9%. Even if profit before tax recovers, the tax burden may constrain the conversion to Net Income. In addition, dependence on non-operating income, including the ¥0.6B foreign exchange gain, remains high, making the extent of recovery in core operating earnings a key focus going forward.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the operating margin and net profit margin were substantially below the industry median, placing the Company in the lower tier of the industry in terms of profitability.

Growth and Capital Efficiency

While many companies in the industry secured revenue growth, the Company recorded a significant decline in revenue, placing it in the lower tier of the industry in terms of growth.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The earnings decline was attributable to both the sharp decline in the Surface Treatment Equipment Business and the deterioration in the Process Equipment Business’s profit margin. The gross profit margin declined by 750bp, while SG&A expenses increased by 10.2%, causing the operating margin to contract sharply from 16.1% to 1.4%.

2. Q1 progress toward the full-year Operating Income forecast of ¥36.0B was only 2.4%, substantially below the standard 25% progress benchmark. Accelerated profit generation from Q2 onward will be necessary to achieve the company’s plan.

3. Financial soundness remains at a reasonable level, with an Equity Ratio of 58.1% and cash and deposits of ¥154.7B. However, the accumulation of ¥151.5B in inventory and the increase in contract liabilities warrant close monitoring as potential drivers of future capital efficiency and quarterly performance volatility.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥1,778–¥1,884 at Cost of Equity ±1%, and ¥1,830–¥1,831 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 solely from publicly disclosed data; this does not constitute a forecast of the market 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 responsibility, after consulting with a professional advisor as necessary.

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