KOMORI CORPORATION FY2027 Q1 Earnings Report

Quick View

Executive Summary

Although the company secured increases in revenue and earnings, the substantial growth in ordinary income was primarily attributable to higher non-operating income, including dividend income and foreign exchange gains. Operating margin, which indicates the earning power of the core business, remained at a low level of 2.3%. Revenue was ¥23.10B (+2.5% year on year), operating income was ¥0.54B (+6.5%), ordinary income was ¥0.91B (+45.1%), and net income attributable to owners of the parent was ¥0.53B (+23.2%). Gross margin improved to 37.0% (+58bp), but the SG&A ratio also rose to 34.7% (+49bp), largely offsetting the improvement at the operating level. Meanwhile, non-operating income of ¥0.44B, including dividend income of ¥0.21B and foreign exchange gains of ¥0.05B, lifted ordinary income. The effective tax rate remained high at 45.3%, although it improved from 60.0% in the previous year, and the tax burden continued to restrain net income growth to a certain extent.

Factors Affecting Earnings

【Revenue】Company-wide revenue was ¥23.10B, an increase of +2.5% year on year. By segment, on a total basis including intersegment transactions, Japan—the largest market, accounting for 60.6% of the total—was ¥19.60B, essentially flat (-0.2%), while maintaining high profitability. Europe rose significantly to ¥6.68B (+41.5%), and Greater China increased substantially to ¥3.52B (+75.8%), while North America declined to ¥1.23B (-40.8%). Stable performance in Japan and revenue growth in Europe and Greater China drove the company-wide increase in revenue, partly offset by the decline in North America.

【Profit and Loss】Gross margin improved to 37.0% (+58bp year on year), but the SG&A ratio also increased by +49bp to 34.7%, resulting in only a modest improvement in operating margin to 2.3% (+9bp). At the ordinary income level, non-operating income of ¥0.44B, including dividend income of ¥0.21B and foreign exchange gains of ¥0.05B, contributed to a substantial increase in ordinary income to ¥0.91B (+45.1%). Extraordinary income of ¥0.06B, including gains on the sale of investment securities of ¥0.06B, and extraordinary losses of ¥0.01B provided a net positive, temporary contribution. Against pretax income of ¥0.96B, income taxes and other taxes amounted to ¥0.44B, representing an effective tax rate of 45.3%. The heavy tax burden limited net income to ¥0.53B (+23.2%). Overall, the company recorded increases in both revenue and earnings for the period.

Segment Analysis

By segment, on a total basis including intersegment transactions, Japan was the largest and most profitable segment, with revenue of ¥19.60B (60.6% of total revenue, -0.2% year on year) and operating income of ¥2.07B (+2.8%, operating margin of 10.6%). Europe recorded substantial revenue growth to ¥6.68B (20.6% of total revenue, +41.5%), but remained loss-making, with an operating loss of ¥0.48B (+53.2% year on year, operating margin of -7.2%), indicating that revenue growth has not translated directly into improved profitability. North America reported lower revenue of ¥1.23B (3.8% of total revenue, -40.8%), while its operating loss widened to ¥0.16B (-297.5%, operating margin of -12.9%). Greater China grew sharply to ¥3.52B in revenue (10.9% of total revenue, +75.8%) and returned to profitability, posting operating income of ¥0.05B (+141.2%, operating margin of 1.4%). The Other category generated operating income of ¥0.08B (operating margin of 6.1%) on revenue of ¥1.33B (-23.6%). Stable domestic earnings and strong growth in Greater China supported the company overall, while improving profitability in Europe and North America remains a challenge in addressing disparities in regional earnings power.

Key Financial Indicators

【Profitability】Operating margin was 2.3% (2.2% in the previous year, +9bp), ordinary income margin was 3.9% (2.8%, +115bp), and net income margin was 2.3% (1.9%, +38bp). The improvement in gross margin (37.0%, +58bp) was almost entirely offset by the increase in the SG&A ratio (34.7%, +49bp), leaving only a modest improvement at the operating level. 【Cash Quality】The effective tax rate improved to 45.3% from 60.0% in the previous year but remained high. In addition, the increase in ordinary income includes volatile items such as foreign exchange gains and gains on the sale of investment securities. 【Investment Efficiency】ROE for the period was 0.4% (quarterly result), with the low operating margin serving as the primary constraint on capital efficiency. 【Financial Soundness】The equity ratio remained high at 69.3% (69.0% in the previous year), while the current ratio was approximately 299% and the quick ratio was approximately 246%, indicating exceptionally strong liquidity. Interest-bearing debt totaled ¥10.35B, comprising short-term borrowings of ¥1.31B, long-term borrowings of ¥0.04B, and bonds of ¥9.00B, while cash and deposits amounted to ¥45.96B, indicating a conservative financial position.

Cash Flow Analysis

As cash flow statement items were not disclosed, cash trends are assessed based on changes in the balance sheet during the period. Cash and deposits amounted to ¥45.96B, down ¥4.14B from ¥50.095B in the previous year, while inventories increased to ¥21.10B from ¥18.608B, an increase of ¥2.49B, suggesting that inventory accumulation may have placed pressure on cash. Accounts receivable and notes receivable amounted to ¥14.93B, down ¥2.81B from ¥17.738B in the previous year, indicating progress in collections. Short-term borrowings increased to ¥1.307B from ¥0.101B in the previous year, an increase of ¥1.206B, likely reflecting financing for working capital needs or seasonal factors. Against total interest-bearing debt of ¥10.35B, the company held cash and deposits of ¥45.96B, providing substantial financial flexibility.

Quality of Earnings

The increase in ordinary income was primarily driven by non-operating income of ¥0.44B, including dividend income of ¥0.21B and foreign exchange gains of ¥0.05B. Accordingly, the increase in ordinary income (+45.1%) has a more non-recurring character than the growth in operating income (+6.5%). Extraordinary income of ¥0.06B, including gains on the sale of investment securities of ¥0.06B, exceeded extraordinary losses of ¥0.01B and provided a slight net positive temporary contribution. Comprehensive income was ¥4.06B, substantially exceeding net income of ¥0.53B, primarily due to a ¥3.25B increase in valuation difference on available-for-sale securities. This divergence resulted from changes in the market value of held shares and should be distinguished from recurring business earnings power.

Earnings Forecast and Guidance

Progress against the full-year forecast was 18.6% for revenue (¥23.10B/¥124.00B), 5.7% for operating income (¥0.54B/¥9.50B), 9.9% for ordinary income (¥0.91B/¥9.20B), and 7.4% for net income (¥0.53B/¥7.20B), all below the 25% implied by simple pro rata allocation. Operating income progress was particularly low, likely reflecting seasonality weighted toward the second half and the timing of revenue recognition for percentage-of-completion projects. There was no revision to the earnings forecast during the quarter, but the dividend forecast was revised, highlighting a review of the shareholder return policy. The full-year forecast calls for a -14.2% year-on-year decline in ordinary income, and the sustainability throughout the year of the boost from non-operating factors in Q1 requires monitoring.

Shareholder Returns

The full-year dividend forecast is ¥50 per share, representing an expected increase from the previous year's actual dividend of ¥35. The payout ratio against forecast EPS of ¥135.69 is approximately 36.8%, which is not excessively high. The revision to the dividend forecast during the quarter is a point of interest in the company's shareholder return policy. Interest-bearing debt stood at only ¥10.35B against cash and deposits of ¥45.96B, and there is little concern regarding the availability of funds for dividends given the soundness of the financial base.

Risk Factors

1. Regional disparities in earnings power: Japan maintained high profitability, with an operating margin of 10.6%, while Europe recorded an operating loss of ¥0.48B (operating margin of -7.2%) despite revenue growth of +41.5%. North America also recorded an operating loss of ¥0.16B (operating margin of -12.9%) amid a revenue decline of -40.8%. Improving profitability in overseas segments remains a challenge.

2. Increase in working capital: Inventories increased to ¥21.10B, up ¥2.49B from the previous year, and prolonged retention of inventory and work in process could affect capital efficiency. On the other hand, accounts receivable declined by ¥2.81B, indicating improvement in collections.

3. High effective tax rate: The effective tax rate for the period was 45.3%, an improvement from 60.0% in the previous year, but the tax burden remained heavy and limited the positive impact on net income relative to the decline in pretax income (pretax income decreased -9.8% year on year).

Industry Benchmark (For Reference; Compiled by the Company)

Profitability was substantially below the industry median, with both operating margin and net income margin ranking in the lower tier of the industry.

Revenue growth was also below the industry median, indicating relatively moderate growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings

1. Operating margin remained at 2.3%, with the increase in the SG&A ratio (+49bp) almost offsetting the improvement in gross margin (+58bp). The increase in ordinary income (+45.1%) was highly dependent on non-recurring factors such as non-operating income and extraordinary income, leaving room for improvement in core earnings power.

2. By segment, Japan's high profitability (operating margin of 10.6%) supported company-wide earnings, while Europe and North America remained loss-making regardless of whether revenue increased or decreased. The disparity in earnings power between regions remains a structural challenge.

3. The increase in inventories (+¥2.49B year on year) is expected to affect capital efficiency, while the financial base remains strong, with an equity ratio of 69.3% and cash of ¥45.96B, supporting the dividend increase from the previous year's ¥35 to the forecast ¥50.

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 price or a recommendation of any specific investment action.

Sensitivity: ¥2,072–¥2,192 at cost of equity ±1%; ¥2,123–¥2,136 at ω ±0.1.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used; there is a timing difference relative to the full-year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not predict or guarantee future stock prices)

---

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. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility and, where necessary, after consulting with a professional.

---End of Report---