Torishima Pump Mfg.Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

In Q1, the Company secured a substantial increase in earnings despite a decline in revenue, driven by improved profitability and the recognition of temporary extraordinary income, with operating income, ordinary income, and net income all turning profitable. Revenue was ¥166.3B (-16.3% YoY), while operating income was ¥11.8B (¥2.1B in the same period of the previous year, YoY +463.9%), ordinary income was ¥11.2B (turning profitable from a loss of ¥-2.7B in the previous year, YoY +513.7%), and consolidated net income, including non-controlling interests, was ¥13.8B (turning profitable from a loss of ¥-3.1B in the previous year, YoY +547.6%). The primary drivers of the earnings increase were an improvement in the gross profit margin resulting from a lower cost-of-sales ratio (35.4%, up +11.7pt from 23.7% in the previous year) and the recognition of ¥6.4B in gains on the sale of investment securities as extraordinary income. Net income attributable to owners of the parent was also ¥13.8B (¥-3.2B in the previous year, YoY +530.3%), while EPS was ¥52.08 (¥-12.03 in the previous year).

Factors Affecting Earnings

【Revenue】Revenue was ¥166.3B, representing a decline of -16.3% YoY. Segment information has been omitted (the Pump Business accounts for more than 90% of total revenue and profit/loss and is therefore treated as a single segment), making it impossible to identify the factors behind changes by business. However, given the nature of the individually ordered project business, variations in the timing of quarterly revenue recognition are believed to have had an impact. Progress against the full-year Company forecast (¥1,039.0B, +11.8% YoY) was limited to 16.0%, below the standard quarterly progress level of approximately 25%. Nevertheless, the high level of work in process of ¥171.6B indicates potential for revenue recognition from the second half onward.

【Profitability】The gross profit margin improved by 11.7pt to 35.4% (23.7% in the previous year), and the operating income margin improved by 6.0pt to 7.1% (1.1% in the previous year), despite the SG&A ratio rising by 5.7pt to 28.3% (22.6% in the previous year). Non-operating income included ¥1.6B in dividend income, while non-operating expenses totaled ¥3.3B, including a foreign exchange loss of ¥1.7B, resulting in ordinary income of ¥11.2B. The Company recorded ¥6.4B in gains on the sale of investment securities as extraordinary income, resulting in profit before tax of ¥17.6B. After corporate income taxes of ¥3.7B, consolidated net income was ¥13.8B (¥-3.1B in the previous year). Revenue declined, but profit increased substantially, resulting in lower revenue and higher earnings.

Segment Analysis

As the Pump Business accounts for more than 90% of the Group’s total revenue and operating income/loss, detailed segment disclosure has been omitted. The business structure is close to a single-business model, making it impossible to decompose and assess changes in the earnings structure by business.

Key Financial Metrics

【Profitability】The operating income margin was 7.1%, improving by 6.0pt from 1.1% in the same period of the previous year, while the consolidated net income margin was 8.3%, turning profitable from -1.6% in the same period of the previous year. ROE was 2.2%; it was negative in the same period of the previous year due to the recognition of a loss. 【Cash Quality】Cash and deposits increased by 101.3% to ¥369.1B from ¥183.3B in the same period of the previous year, while accounts receivable were ¥340.8B (¥445.2B in the previous year, -23.4%) and work in process was ¥171.6B (¥142.8B in the previous year, +20.2%), indicating a high level of working capital and cash tied up characteristic of a project-based business. 【Investment Efficiency】Total assets expanded to ¥1,328.5B (¥1,202.2B in the previous year), while quarterly revenue remained at ¥166.3B, indicating that asset turnover continues to be low. 【Financial Soundness】The equity ratio was 46.8%, down 3.2pt from 50.0% in the same period of the previous year. This was primarily due to a lengthening of the funding maturity profile resulting from an increase in long-term borrowings (¥269.1B, ¥157.7B in the previous year, +70.6%). However, interest coverage based on operating income was 19.1x, indicating substantial capacity to bear interest costs.

Cash Flow Analysis

Because the statement of cash flows has not been disclosed, cash trends are assessed based on changes in the balance sheet. Cash and deposits increased by ¥185.8B (+101.3%) YoY to ¥369.1B. The main sources of funding and cash inflows were the ¥111.4B (+70.6%) increase in long-term borrowings and the ¥2.16B (+25.8%) increase in contract liabilities (advances received). Meanwhile, accounts receivable declined by ¥104.4B (-23.4%), suggesting that the collection of receivables contributed to the increase in cash. On the other hand, work in process increased by ¥28.8B (+20.2%), indicating that funds remain tied up as projects progress. Overall, borrowing and the collection of receivables substantially strengthened cash liquidity, but the accumulation of work in process remains a factor restricting funds from a working capital perspective.

Quality of Earnings

Current-period earnings comprise both recurring and temporary factors. Operating income of ¥11.8B reflects a recurring improvement in the Company’s underlying earnings power through the improvement in the gross profit margin. However, the ¥6.4B extraordinary gain that increased profit before tax, consisting of gains on the sale of investment securities, was non-recurring and accounted for approximately 46% of consolidated net income of ¥13.8B. Non-operating income and expenses consisted of items affected by foreign exchange and financial income and expenses, including ¥1.6B in dividend income and a ¥1.7B foreign exchange loss, and differ in nature from the earnings of the core business. Comprehensive income was ¥23.4B, exceeding net income attributable to owners of the parent of ¥13.8B by ¥9.6B. The difference was attributable to unrealized valuation gains, including +¥8.3B in valuation difference on securities and +¥3.2B in foreign currency translation adjustments. Comprehensive income therefore includes items with greater volatility than realized earnings. Accordingly, the increase in earnings was supported by both a substantive improvement at the operating level and temporary gains, and operating income provides a useful basis for assessing recurring earnings power.

Earnings Forecast and Guidance

Q1 progress against the full-year Company forecast was 16.0% for revenue (¥166.3B/¥1,039.0B), 20.7% for operating income (¥11.8B/¥57.0B), 23.3% for ordinary income (¥11.2B/¥48.0B), and 19.4% for net income attributable to owners of the parent (¥13.8B/¥71.0B), all below the simple one-quarter benchmark of 25%. For the full year, the Company plans revenue growth of +11.8% and operating income growth of +13.9%, while forecasting a -7.8% decline in ordinary income. This direction differs from the substantial increase in ordinary income in Q1 (+513.7% YoY). No revisions were made to the earnings forecast or dividend forecast during the quarter. The accumulation of work in process suggests that revenue and profit recognition may be weighted toward the second half.

Shareholder Returns

The Company plans an annual dividend of ¥68, representing an increase of +119.4% from the previous year’s actual dividend of ¥31. Based on the Company’s forecast EPS of ¥269.79, the payout ratio is approximately 25.2% (¥68/¥269.79), remaining a relatively conservative level compared with earnings. No revision was made to the dividend forecast as of the end of the quarter. Given the substantial cash and deposits of ¥369.1B and high interest coverage of 19.1x based on operating income, the Company appears to have sufficient capacity to implement its planned dividend. No disclosure regarding share repurchases has been identified.

Risk Factors

1. Working capital lock-up risk: Accounts receivable of ¥340.8B and work in process of ¥171.6B indicate a high level of working capital associated with individually ordered projects, making the timing of cash generation highly dependent on revenue recognition and progress in acceptance inspections.

2. Quality assurance cost risk: The provision for product warranties was ¥14.0B, equivalent to 8.4% of revenue, and trends in warranty expenses could become a factor causing fluctuations in the gross profit margin.

3. Foreign exchange risk: The Company recorded a foreign exchange loss of ¥1.7B during the quarter, and foreign exchange sensitivity associated with overseas transactions is affecting ordinary income through non-operating income and expenses.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

The operating income margin is slightly below the industry median, while the net income margin exceeds the median partly due to the contribution of extraordinary income.

Growth and Capital Efficiency

The revenue growth rate is substantially below the industry median and interquartile range, with the Company’s revenue decline standing out within the industry.

※Source: Compiled by the Company

Key Points in the Financial Results

1. The gross profit margin improved to 35.4% from 23.7% in the same period of the previous year, an improvement of 11.7pt. Improved pricing and cost conditions and project profitability drove the recovery in the operating income margin to 7.1% from 1.1% in the previous year. Whether this improvement is temporary or structural can be assessed through trends in the gross profit margin in subsequent quarters.

2. Gains on the sale of investment securities of ¥6.4B contributed to consolidated net income of ¥13.8B as extraordinary income. When assessing recurring earnings power, it is useful to examine operating income and ordinary income.

3. Full-year progress was below the standard 25%, at 16.0% for revenue and 23.3% for ordinary income. However, the accumulation of contract liabilities (advances received) of ¥105.4B and work in process of ¥171.6B provides an indication of potential revenue and profit recognition in the second half.

Theoretical Share 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 of any specific investment action.

Sensitivity: ¥2,460–¥2,606 at cost of equity ±1%; ¥2,527–¥2,538 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a timing gap 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: 2026-07 / 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 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 a professional advisor as necessary.

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