RHEON AUTOMATIC MACHINERY CO.,LTD. FY2027 Q1 Earnings Report

Quick View

Executive Summary

In Q1 of the fiscal year ending March 2027, Revenue increased while Operating Income declined, whereas Ordinary Income and Net Income grew substantially, primarily due to the reversal of foreign exchange gains and losses. Revenue increased to ¥96.0B (+8.6% YoY), while Operating Income declined to ¥6.9B (-5.1% YoY), resulting in an Operating Margin of 7.2%, down from 8.3% in the prior year. The primary factor was an increase in the SG&A ratio (37.8%, versus 36.5% in the prior year), although the gross margin improved to 45.0% from the prior year. Meanwhile, Ordinary Income increased 17.3% to ¥8.3B, and Net Income increased 38.8% to ¥6.1B, supported by the recognition of a ¥0.8B foreign exchange gain in non-operating income (compared with a foreign exchange loss in the prior year).

Factors Affecting Performance

【Revenue】Revenue of ¥96.0B (+8.6% YoY) was driven by the Food Processing Machinery Manufacturing and Sales Business, a reported segment, which generated sales of ¥8,099M, including intersegment transactions (+10.5% YoY). By region, external customer sales in Europe increased substantially to ¥17.0B (+41.9%), followed by North America and South America at ¥54.1B (+6.2%) and Japan at ¥20.0B (+3.4%). Asia, by contrast, declined to ¥4.9B (-20.6%). The Food Manufacturing and Sales Business also expanded to ¥42.2B (+12.6%), although this was primarily attributable to the North America and South America Grocery Business; Japan Grocery recorded a modest decline to ¥1.1B (-4.1%).

【Profit and Loss】Operating Income declined 5.1% to ¥6.9B. Despite the improvement in the gross margin (45.0%, versus 44.8% in the prior year), the increase in the SG&A ratio (37.8%, versus 36.5% in the prior year, +approximately 1.3pt) exerted downward pressure. Headquarters general and administrative expenses, a segment adjustment item, increased to ¥7.3B (¥6.0B in the prior year, +22.2%), weighing on company-wide Operating Income. In non-operating income and expenses, the company recorded a foreign exchange gain of ¥0.8B (compared with a foreign exchange loss of ¥1.0B in the prior year), resulting in a return to growth for Ordinary Income, which increased 17.3% to ¥8.3B. Net Income increased 38.8% to ¥6.1B, while the effective tax rate remained broadly flat at approximately 27.0% compared with the prior year, with no significant divergence factor in the conversion from Ordinary Income to Net Income. In conclusion, this was a case of increased Revenue but decreased profit at the Operating Income level, while Ordinary Income and Net Income increased due to support from non-operating factors.

Segment Analysis

Among the reported segments, the Food Processing Machinery Manufacturing and Sales Business was the primary driver of both profitability and growth, generating sales of ¥8,099M (+10.5% YoY), segment profit of ¥1,637M (+58.4%), and a profit margin of 20.2%. By region, Japan maintained high profitability, with sales of ¥4,591M (+13.8%) and a profit margin of 27.2%. Asia also secured a high profit margin of 28.9%, despite sales of ¥489M (-20.6%). North America and South America recorded sales of ¥1,318M (+13.2%) and a profit margin of 10.0%, while Europe generated sales of ¥1,701M (+41.9%) but had a profit margin of only 6.7%; thus, even the regions with Revenue growth lagged behind Japan and Asia in terms of profitability. The Food Manufacturing and Sales Business recorded sales of ¥4,224M (+12.6%), but segment profit declined 41.0% to ¥267M, reducing the profit margin to 6.3%. The core North America and South America Grocery Business generated sales of ¥4,111M (+13.2%) but achieved a profit margin of only 6.3%. The substantial decline in the profit margin despite Revenue growth was one factor weighing on company-wide profitability.

Key Financial Indicators

【Profitability】The Operating Margin was 7.2%, down from 8.3% in the prior year, while the Net Profit Margin improved to 6.3% from 4.9%. The gross margin improved slightly to 45.0% from 44.8% in the prior year. 【Cash Flow Quality】Comprehensive Income was ¥12.9B, exceeding Net Income of ¥6.1B. Contributing factors included a ¥3.5B valuation difference on other securities, a ¥2.4B foreign currency translation adjustment, and a ¥0.9B adjustment related to retirement benefits. Non-operating income totaled ¥1.5B, including a ¥0.8B foreign exchange gain, meaning that non-operating factors accounted for a certain portion of Ordinary Income of ¥8.3B. 【Investment Efficiency】ROE was 1.4%, broadly consistent with the decomposition of Net Profit Margin of 6.3% × Total Asset Turnover of 0.175 × Financial Leverage of 1.26. Total Asset Turnover was low at 0.175, and in terms of capital efficiency, the decline in Operating Margin affected both profitability and turnover. 【Financial Soundness】The Equity Ratio remained high at 79.3% (79.1% in the prior year). Current Assets of ¥250.6B against Current Liabilities of ¥99.8B resulted in a Current Ratio of approximately 251%. Cash and deposits declined to ¥106.0B from ¥111.2B in the prior year, but cash and deposits remain ample relative to long-term borrowings of ¥5.2B, and the financial foundation remains solid.

Cash Flow Analysis

As the company did not disclose a statement of cash flows in this earnings report, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥106.0B, down 4.7% from ¥111.2B in the prior year. Investment securities increased to ¥28.9B (¥23.9B in the prior year, +21.2%), while construction in progress increased to ¥56.0B (¥51.6B in the prior year, +8.6%); the allocation of funds to investing activities is therefore considered one factor behind the decline in cash and deposits. In terms of working capital, accounts receivable and notes receivable declined to ¥35.1B (¥46.6B in the prior year, -24.6%), indicating progress in collections, while accounts payable and notes payable also declined to ¥10.5B (¥14.4B in the prior year, -27.1%), meaning that both the collection and payment sides contracted and effectively offset each other. Inventories were ¥68.1B, broadly flat compared with ¥67.5B in the prior year, with no significant cash tied up in inventory. Given the strong financial foundation represented by an Equity Ratio of 79.3% and cash of ¥106.0B, funding stability appears to have been maintained even amid an expansionary phase of investment activity.

Earnings Quality

Current-period earnings were supported by recurring factors, including Revenue growth centered on the machinery business and an improvement in the gross margin. However, the increase in Ordinary Income was substantially supported by the recognition of a ¥0.8B foreign exchange gain in non-operating income (compared with a ¥1.0B foreign exchange loss in the prior year), and therefore includes the impact of non-recurring fluctuations. Losses on disposal of fixed assets were immaterial at less than ¥0.01B, and disruption from extraordinary gains and losses was limited. Non-operating income totaled ¥1.5B (1.6% of Revenue), comprising a ¥0.8B foreign exchange gain, ¥0.4B in dividends received, and ¥0.1B in other income, indicating a relatively high degree of dependence on foreign exchange factors. The conversion of Ordinary Income of ¥8.3B into Net Income of ¥6.1B reflected ¥2.2B in income taxes and other taxes (effective tax rate of approximately 27.0%), with no special factors identified on the tax burden side. Comprehensive Income of ¥12.9B exceeded Net Income of ¥6.1B, indicating that valuation-related factors such as the valuation difference on other securities and the foreign currency translation adjustment were added to earnings, suggesting greater earnings volatility than would be indicated by Net Income alone.

Earnings Forecast and Guidance

Progress against the full-year company plan was 22.4% for Revenue (¥9.6B/¥42.9B), 12.3% for Operating Income (¥6.9B/¥56.2B), and 14.6% for Ordinary Income (¥8.3B/¥56.9B), with both Revenue and profit below the simple benchmark of 25% for even quarterly progress. Operating Income progress was particularly low relative to the other metrics, apparently reflecting the increase in the SG&A ratio and higher headquarters expenses. Ordinary Income progress was higher than Operating Income progress due to the contribution from non-operating income, namely the foreign exchange gain. No revisions were made to the earnings forecast or dividend forecast during the quarter.

Shareholder Returns

Under the company plan, the annual dividend is ¥60 (the previous fiscal year’s actual result was ¥27, a mid-period figure), resulting in a Payout Ratio of approximately 40.2% based on the company’s planned EPS of ¥149.14. Given the financial foundation represented by an Equity Ratio of 79.3% and cash and deposits of ¥106.0B, the dividend level does not impose an excessive burden relative to the earnings level. No revision was made to the dividend forecast during the quarter.

Risk Factors

1. Differences in profitability by business and region: The Operating Margin of the Food Manufacturing and Sales Business (North America and South America) was 6.3%, while the machinery business in Europe and North America and South America also remained at 6.7% and 10.0%, respectively. The gap relative to Japan (27.2%) and Asia (28.9%) is weighing on the company-wide profit margin.

2. Foreign exchange sensitivity: The increase in Ordinary Income during the period depended to a certain extent on the recognition of a ¥0.8B foreign exchange gain (compared with a ¥1.0B foreign exchange loss in the prior year), meaning that fluctuations in non-operating income and expenses affected the period-on-period increase or decrease in profit.

3. Changes in working capital payment terms: Accounts payable and notes payable declined 27.1% year on year, and any shortening of purchasing and payment terms could affect funding requirements.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Profitability, as measured by both Operating Margin and Net Profit Margin, is slightly below the industry median.

Growth and Capital Efficiency

The Revenue Growth Rate exceeds the industry median, indicating a relatively high pace of Revenue growth.

Source: Compiled by the Company

Key Points from the Earnings Report

1. The Operating Margin was 7.2%, down from 8.3% in the prior year and below the industry median of 8.7%. The primary factor was the increase in the SG&A ratio (37.8%, versus 36.5% in the prior year), and trends in profitability at the Operating Income level will be an important monitoring point going forward.

2. Ordinary Income and Net Income increased substantially by +17.3% and +38.8%, respectively. However, part of the increase was attributable to the recognition of a foreign exchange gain in non-operating income (compared with a foreign exchange loss in the prior year), and it should be noted that the direction differs from the trend in Operating Income.

3. The strength of the financial foundation, represented by an Equity Ratio of 79.3% and cash of ¥106.0B, remains intact. Although progress against the full-year plan for Operating Income was 12.3%, below the standard progress benchmark, financial strength has been maintained.

Theoretical Stock 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 5-year fade). It is not a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: ¥1,572–¥1,663 at ±1% for the Cost of Equity, and ¥1,617–¥1,617 at ±0.1 for ω.

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 / Interest Rate Reference Month: 2026-07 / This value does not forecast or guarantee the future stock price)

---

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

---End of Report---