HOSHIZAKI (6465) FY2026 Q1 Earnings Report

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Executive Summary

Revenue increased in all regions, securing higher revenue and profits, although profit margins declined slightly from the previous year, indicating some deceleration in the quality of earnings growth. Revenue was ¥1,355.5B (+14.7% YoY), Operating Income was ¥170.3B (+10.9%), Ordinary Income was ¥173.2B (+11.0%), and Net Income attributable to owners of the parent was ¥112.1B (+3.5%). The Operating Income margin declined by approximately 0.4pt from the previous year to 12.6%, while the increase in the effective tax rate and higher amortization of investment differences related to business combinations restrained Net Income growth.

Factors Affecting Earnings

【Revenue】Revenue was ¥1,355.5B, up +14.7% YoY. By region, the Americas recorded the strongest growth at ¥348.7B (+30.0%), driving consolidated growth, while Japan posted ¥650.2B (+7.1%), Asia ¥236.2B (+15.6%), and Europe ¥144.8B (+16.3%), with all regions recording revenue increases. By product, refrigerators grew significantly to ¥441.9B (+31.8%), while maintenance and repairs also increased to ¥192.3B (+14.9%), expanding recurring revenue.

【Profit and Loss】Operating Income increased to ¥170.3B (+10.9%), growing at a slower pace than revenue. Japan (17.6% margin) and Asia (18.3% margin) supported consolidated profits as highly profitable segments, while the Americas posted segment profit of ¥11.8B, down -38.9% YoY despite higher revenue, with its margin declining to 3.3%, weighing on the consolidated margin. Europe returned to profitability with a profit of ¥0.9B, although its margin remained at 0.6%. Compared with Ordinary Income of ¥173.2B (+11.0%), Net Income grew more slowly at ¥113.1B (+5.3%), as the increase in income taxes and other taxes exceeded the growth in pre-tax income and restrained Net Income growth. Extraordinary gains and losses resulted in a net gain of ¥1.1B, with a minimal impact. Overall, the Company recorded higher revenue and profits.

Segment Analysis

Japan generated revenue of ¥650.2B (+7.1%) and segment profit of ¥114.5B (+12.3%), with a margin of 17.6%, representing the core of consolidated profits. Asia generated revenue of ¥236.2B (+15.6%) and profit of ¥43.1B (+23.0%), with a margin of 18.3%, demonstrating higher profitability than Japan. The Americas recorded substantial revenue growth to ¥351.6B (+30.1%), while profit declined to ¥11.8B (-38.9%) and the margin fell to 3.3%, indicating that higher revenue has not translated into profits. Europe generated revenue of ¥144.8B (+16.3%) and profit of ¥0.9B, turning profitable from a loss in the previous year, although its margin remained low at 0.6%. From Q1, the Company changed its method of allocating amortization of goodwill and other assets to each segment. Continued monitoring of regional profit margins on an allocated basis is therefore necessary.

Key Financial Indicators

【Profitability】The Operating Income margin of 12.6% and Net Income margin of 8.3% both declined slightly from the previous year, with the SG&A expense ratio of 25.6% weighing on margins against a gross margin of 38.2%.【Cash Flow Quality】Accounts receivable of ¥921.5B and inventories of ¥360.4B are held, and the increase in working capital accompanying revenue growth could affect the pace of conversion into Operating Cash Flow.【Investment Efficiency】ROE was 2.7% (not annualized), EPS was ¥79.39 (¥76.48 in the previous year, +3.8%), and BPS was ¥2,803.51 (¥2,772.73 in the previous year).【Financial Soundness】The Equity Ratio was 71.2%. Current assets of ¥3,438.1B compared with current liabilities of ¥1,432.2B indicate substantial liquidity. Interest-bearing debt is extremely limited, with short-term borrowings of ¥70.5B compared with cash and deposits of ¥1,583.5B.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is unavailable, an accumulation of working capital can be observed from changes in the balance sheet. Accounts receivable and notes receivable reached ¥921.5B, while inventories reached ¥360.4B (including raw materials of ¥389.9B, work in process of ¥84.4B, and finished goods of ¥360.4B), with accounts receivable and inventories increasing alongside revenue growth. Accounts payable amounted to ¥400.2B, while contract liabilities (advances received) amounted to ¥477.8B, indicating changes in the balance between procurement and advances received accompanying business expansion. Cash and deposits were substantial at ¥1,583.5B, providing strong resilience to short-term increases in working capital. However, if the growth of accounts receivable and inventories exceeds the revenue growth rate, Operating Cash Flow generation may be pressured.

Quality of Earnings

The gap between Ordinary Income of ¥173.2B and Net Income of ¥113.1B was primarily attributable to income taxes and other taxes of ¥61.2B. As extraordinary gains and losses resulted in only a net gain of ¥1.1B, their impact on the earnings structure was minimal, and current-period profit is considered to largely reflect the underlying strength of the core business. Non-operating income and expenses resulted in a net gain of ¥2.9B. Interest income of ¥5.5B and foreign exchange gains of ¥3.1B were recorded, while interest expense of ¥7.4B was also recognized, resulting in a limited impact from financial income and expenses. Comprehensive income was ¥163.3B, exceeding Net Income of ¥113.1B, primarily due to foreign currency translation adjustments of ¥50.6B. Since these adjustments are largely unrealized gains arising from the translation of overseas subsidiaries into yen, evaluating recurring earnings power based primarily on Net Income is appropriate.

Earnings Forecast and Guidance

The full-year Company forecast remains unchanged at Revenue of ¥5,200.0B (+7.0% YoY), Operating Income of ¥556.0B (+7.1%), and Ordinary Income of ¥590.0B (+4.8%), with no revisions made as of Q1. Progress rates were 26.1% for Revenue, 30.6% for Operating Income, and 29.3% for Ordinary Income, all exceeding the 25% benchmark for simple linear progress. However, the full-year forecast itself remains unchanged, and it is not yet appropriate to incorporate an upward revision to the full-year outlook based solely on above-plan quarterly progress. Going forward, the trend in the Americas’ profit margin and the sustainability of Europe’s return to profitability will be key points for confirming achievement of the full-year forecast.

Shareholder Returns

The full-year dividend forecast remains unchanged at ¥115.00 per share. Based on the full-year EPS forecast of ¥271.72, the Payout Ratio is approximately 42.3%, below the 60% level generally regarded as an indicator of sustainability. Net Income attributable to owners of the parent for Q1 reached 29.3% of the full-year forecast, meaning that progress in earnings available to fund dividends is above the standard level. The Company holds ¥251.0B in treasury shares; however, there are no data regarding actual or planned share repurchases during the current period. Accordingly, the figure presented here is a Payout Ratio excluding share repurchases. Cash and deposits of ¥1,583.5B and the low level of interest-bearing debt provide financial support for dividend payments.

Risk Factors

1. Declining profitability in the Americas segment: While the Americas recorded substantial revenue growth of +30.1% YoY, segment profit declined to ¥11.8B (-38.9% YoY), and the profit margin fell to 3.3%. As higher revenue has not translated into profits, the impact of the cost structure or one-time expenses requires continued monitoring.

2. Increase in working capital: Accounts receivable and notes receivable of ¥921.5B and inventories of ¥360.4B have increased alongside revenue growth. If the pace of collections or inventory turnover slows, Operating Cash Flow generation could be constrained.

3. Amortization burden from goodwill and intangible assets: Goodwill of ¥761.0B and intangible fixed assets of ¥1,007.9B totaled ¥1,768.9B. Amortization of investment differences related to business combinations was ¥22.7B, equivalent to 13.4% of reported Operating Income. If the profitability of acquired businesses falls below plan, the Company may face an ongoing amortization burden and impairment risk.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Profitability exceeds the industry median, with both the Operating Income margin and Net Income margin positioned in the upper group.

Growth and Capital Efficiency

The Revenue growth rate is close to the upper bound of the industry IQR, indicating a high level of growth relative to the industry.

※Source: Compiled by the Company

Key Points in the Earnings Release

1. While Revenue increased by +14.7% and all regions recorded revenue growth, the Operating Income margin declined by approximately 0.4pt from the previous year. The fact that margin improvement has not kept pace with the momentum in revenue growth is a key point in the earnings release.

2. Japan and Asia maintained high profitability, with margins of 17.6% and 18.3%, respectively, while the Americas’ margin declined to 3.3% despite higher revenue. The profitability gap between regions represents a structural issue for the consolidated margin.

3. Operating Income progress against the full-year forecast was 30.6%, above the standard level, but the Company forecast remains unchanged. Progress must be monitored going forward together with the increasing trend in accounts receivable and inventories.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,812–¥2,976 at ±1% for the cost of equity, and ¥2,890–¥2,895 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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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 a professional as necessary.

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AI Financial Analysis

Executive Summary

Hoshizaki delivered a solid FY2026 Q1 revenue-led earnings result, although operating-margin dilution and slower net-income growth temper the headline strength. Revenue increased 14.7% YoY to ¥135.6bn. Operating income rose 10.9% to ¥17.0bn, and ordinary income increased 11.0% to ¥17.3bn. Profit attributable to owners rose only 3.5% to ¥11.2bn, reflecting a higher effective tax rate of 35.1%. Gross profit expanded 15.0% to ¥51.7bn. The gross margin improved modestly by approximately 10bp YoY to 38.2%. In contrast, the operating margin declined by approximately 40bp to 12.6% because SG&A increased 17.2%, faster than revenue growth. The reported operating margin remains within the good 8-15% profitability range. Japan remained the earnings base, generating segment profit of ¥11.5bn, up 12.3% YoY. Asia was also a material contributor, with segment profit increasing 23.0% to ¥4.3bn. The Americas recorded 30.7% revenue growth but segment profit fell 38.9%, indicating substantial margin pressure. Europe returned to a small reported segment profit of ¥0.1bn from a ¥0.6bn loss, while adjusted operating profitability was stronger after adding back JGAAP acquisition-related amortization and hyperinflation-accounting effects. Adjusted operating income increased 19.0% to ¥20.1bn, equivalent to a 14.9% adjusted margin, showing that reported JGAAP earnings carry a meaningful M&A-related amortization burden. The annualized reported ROE was 10.8%, a good level, supported by profitability and moderate leverage. Balance-sheet liquidity is exceptionally strong, with cash of ¥158.4bn against short-term loans of ¥7.1bn. Full-year guidance was maintained, and Q1 sales and profit progress are ahead of a straight-line quarterly pace. The central issue for subsequent quarters is whether Americas profitability and working-capital efficiency can improve while the company sustains growth in core refrigeration, maintenance, and repair revenues.

Profitability Analysis

Annualized DuPont ROE is 10.8%, comprising an 8.3% net profit margin, 0.929x asset turnover, and 1.40x financial leverage. This indicates that Hoshizaki's return profile is primarily supported by a healthy operating margin and efficient revenue generation from its asset base rather than aggressive balance-sheet leverage. Financial leverage of 1.40x is conservative and limits both financial risk and leverage-driven ROE enhancement. The annualized 8.3% net margin is good but below the 10% level generally associated with excellent profitability. Gross margin improved slightly to 38.2%, indicating that product mix, pricing, manufacturing efficiency, or procurement conditions were broadly supportive. However, SG&A grew 17.2% YoY versus 14.7% sales growth, producing approximately 40bp operating-margin compression to 12.6%. This SG&A trend is the main near-term profitability concern because it represents negative operating leverage despite strong sales growth. Reported operating income includes ¥22.7bn of acquisition-related investment-difference amortization, including goodwill and identifiable-intangible amortization, and ¥8.5bn of Turkish hyperinflation-accounting effects. Adding these items back produces adjusted operating income of ¥20.1bn and an adjusted operating margin of 14.9%, versus ¥16.9bn and 14.3% in the prior-year quarter. Under JGAAP, goodwill amortization reduces reported operating profit and net income; therefore, adjusted operating profit is useful for comparing the operating performance of acquired businesses with IFRS-reporting peers. The ¥31.2bn combined adjustment equals about 18.3% of reported operating income, making acquisition-accounting effects material to reported profitability. Japan's segment margin improved to 17.8% from 16.9%, while Asia improved to 18.5% from 17.2%. The Americas segment margin fell to 3.4% from 7.2%, and this regional decline was the largest adverse operating contributor. Europe improved from a negative 5.0% reported segment margin to a positive 0.7%, but its reported profitability remains low. Interest coverage of 23.1x confirms that financing costs are not a meaningful constraint on earnings.

Growth Assessment

Revenue growth of 14.7% was broad-based across the product and service portfolio. Refrigeration sales were the largest product category at ¥44.2bn, increasing 31.8% YoY, led by substantial growth in the Americas and Asia. Ice-machine sales grew 8.6% to ¥22.7bn, with Europe and Asia offsetting a modest Americas decline. Dishwasher sales increased 10.2% to ¥9.9bn. Dispenser sales rose 3.0% to ¥9.4bn, supported mainly by the Americas. Maintenance and repair revenue rose 14.9% to ¥19.2bn, providing a recurring aftermarket revenue stream equivalent to 14.2% of consolidated sales. Other revenue increased 11.0% to ¥17.0bn, while third-party sourced products declined 3.4% to ¥12.9bn. By region, Japan remained the core business, accounting for ¥63.2bn of external revenue, or 46.7% of group sales, and recorded 7.2% revenue growth. The Americas generated the fastest regional growth at 30.0% to ¥34.9bn, but the conversion of this growth into segment profit weakened materially. Asia grew 15.8% to ¥23.3bn and delivered the strongest reported regional segment margin at 18.5%. Europe increased revenue 16.0% to ¥14.2bn and returned to positive reported segment profit. Management's full-year plan calls for 7.0% sales growth to ¥520.0bn and 7.1% operating-income growth to ¥55.6bn. Q1 sales progress was 26.1% of the full-year target, slightly above the standard 25% Q1 pace. Operating-income progress was 30.6%, ordinary-income progress was 29.4%, and owner-attributable profit progress was 29.3%, all ahead of straight-line seasonality but not by more than the 10 percentage-point deviation threshold. The maintained forecast implies management sees the current earnings trajectory as supportable, although the lower reported operating margin and weaker Americas profit conversion warrant monitoring.

Financial Health

Financial health is strong. The current ratio is 240.1% and the quick ratio is 214.9%, both substantially above conventional liquidity thresholds. Working capital was ¥200.6bn, providing a sizable operating and refinancing buffer. Cash and deposits of ¥158.4bn were 22.45x short-term loans of ¥7.1bn. Interest-bearing debt represented only 1.7% of total capital, while the reported debt-to-equity ratio was 0.40x and remains well below the 2.0x aggressive-leverage warning level. Total liabilities represented 28.8% of total assets, and total equity represented 71.2%, demonstrating a highly equity-funded capital structure. All ¥7.1bn of interest-bearing debt is short term, triggering the refinancing-risk alert because the short-term debt ratio is 100%. The root cause is a debt maturity profile concentrated entirely in borrowings due within one year rather than term debt. In context, this maturity concentration is not a material funding-stress indicator given the ¥158.4bn cash balance, 240.1% current ratio, and 23.1x interest coverage. Its investment impact is limited under current conditions, but short-term borrowing should be monitored if acquisition spending, buybacks, or a decline in cash were to accelerate. Contract liabilities increased to ¥47.8bn, supporting near-term liquidity and indicating customer advances or obligations to deliver products and services. Treasury stock increased by ¥6.6bn YoY to negative ¥25.1bn, a 35.5% increase in the contra-equity balance. This indicates material capital deployment through share repurchases or related treasury-share transactions, which can support per-share metrics but reduces immediately available equity capital. Goodwill was ¥76.1bn, equal to 18.3% of equity and 13.0% of total assets, both within healthy M&A-risk benchmarks. Intangible assets were 17.3% of assets, remaining below the 20% concentration benchmark.

Notable B/S Changes

Cash and deposits: -¥18.7bn YoY (-10.6%) to ¥158.4bn - liquidity remains very strong, but cash deployment should be monitored alongside treasury-share activity and working-capital needs. Accounts receivable: +¥15.4bn YoY (+20.1%) to ¥92.2bn - growth exceeded revenue growth and is consistent with the 62-day annualized DSO warning. Total assets: +¥7.8bn YoY to ¥583.5bn - balance-sheet expansion was primarily accompanied by higher receivables and a stronger equity base. Treasury stock: -¥6.6bn YoY (-35.5%) to -¥25.1bn - indicates increased buyback or treasury-share activity, supporting per-share capital allocation while reducing equity. Total liabilities: +¥6.0bn YoY to ¥167.8bn - liabilities remain modest at 28.8% of total assets and do not compromise the conservative capital structure.

Cash Flow Quality

The balance-sheet cash position remains substantial at ¥158.4bn, equal to 27.1% of total assets, and provides ample coverage for operating requirements and short-term debt. Working-capital discipline is the principal cash-conversion issue. The high-receivable-days alert reflects annualized DSO of 62 days, above the 60-day warning threshold. The root cause is that trade receivables increased 20.1% YoY to ¥92.2bn, faster than the 14.7% increase in revenue. This may reflect sales-mix changes, regional collection timing, or slower collections, and it raises the amount of cash tied up in customer balances. The impact is a potential drag on near-term operating cash conversion if receivable growth is not subsequently collected in line with revenue. The high-inventory-days alert reflects annualized DIO of 91 days, marginally above the 90-day warning threshold. The root cause is inventory held at ¥36.0bn, including ¥36.0bn of finished goods, which creates a comparatively long cash commitment for a manufacturing business. The impact is increased inventory-carrying and obsolescence exposure, particularly if regional demand or product mix changes. Finished goods represent a material component of the working-capital investment and should be assessed alongside order trends and aftermarket demand. Accounts payable increased 10.4% to ¥40.0bn, less rapidly than receivables, limiting supplier-credit offset to the expansion in customer balances. The combination of elevated receivable and inventory days is a key working-capital risk even though liquidity remains ample.

Dividend Sustainability

Management's full-year dividend forecast is ¥115 per share. Against forecast EPS of ¥271.72, the implied dividend payout ratio is approximately 42.3%. This is below the 60% sustainability benchmark and leaves a meaningful earnings retention buffer. Q1 basic EPS was ¥79.39, representing 29.2% of the full-year EPS forecast, broadly consistent with the 29.3% progress in owner-attributable profit. Retained earnings stood at ¥319.9bn, supporting financial flexibility for dividends, acquisitions, investment, and treasury-share activity. The strong cash balance of ¥158.4bn and minimal short-term loans also support dividend capacity. Treasury stock increased by ¥6.6bn YoY, indicating that shareholder distributions may also include repurchases or treasury-share transactions; when combined with dividends, this should be evaluated as a total return ratio rather than a dividend payout ratio. The unchanged dividend outlook is consistent with management's maintained earnings forecast and conservative leverage profile.

Risk Assessment

Business risks include Americas profitability risk: regional revenue rose 30.0% to ¥34.9bn, but segment profit fell 38.9% to ¥1.2bn and margin compressed to 3.4% from 7.2%. Restoring margin conversion is important given the region's growth contribution., Working-capital risk: annualized DSO of 62 days and DIO of 91 days exceed warning thresholds, increasing cash tied up in receivables and inventory., Manufacturing demand and inventory-obsolescence risk: ¥36.0bn of finished goods heightens exposure to demand shifts, product-cycle changes, component costs, and regional forecasting errors., Currency and overseas-operating risk: FX gains were ¥3.1bn in Q1, while the group has substantial operations in the Americas, Europe, and Asia; currency movements can affect translated earnings and competitiveness., Turkey-related accounting risk: the €urope segment's reported results are affected by ¥8.5bn of hyperinflation-accounting effects, increasing volatility and reducing comparability of reported versus adjusted earnings., M&A integration risk: goodwill of ¥76.1bn and intangible assets of ¥100.8bn create ongoing acquisition-related amortization and require acquired businesses to sustain expected earnings..

Financial risks include Refinancing-risk alert: 100% of interest-bearing debt is short term. The immediate impact is low because cash covers short-term loans by 22.45x, but the maturity profile should remain disciplined., Tax-rate risk: the 35.1% effective tax rate constrained owner-attributable profit growth to 3.5%, versus 10.9% operating-income growth., Capital-allocation risk: the ¥6.6bn YoY increase in treasury stock reduces equity resources, although the group retains strong liquidity and capitalization..

Key concerns include Priority one is whether Americas margin pressure is temporary or reflects persistent pricing, cost, integration, or channel inefficiencies., Priority two is normalization of receivable and inventory days to protect cash conversion as revenue expands., Priority three is the sustainability of operating leverage, as SG&A growth of 17.2% exceeded revenue growth of 14.7%., Priority four is the continued gap between reported and adjusted profit caused by JGAAP goodwill and intangible amortization plus European hyperinflation-accounting effects..

Investment Implications

Key takeaways include Q1 revenue and operating profit grew at double-digit rates, and full-year guidance was maintained., Annualized ROE of 10.8%, a 12.6% reported operating margin, and conservative leverage demonstrate a sound profitability and capital structure profile., Adjusted operating income of ¥20.1bn and a 14.9% adjusted margin reveal stronger underlying operating performance than reported JGAAP operating profit alone., Japan and Asia are the principal profit engines, whereas Americas profit conversion is the most material near-term operating issue., Liquidity is robust, but elevated receivable and inventory days require attention to preserve cash efficiency..

Metrics to watch include Americas segment margin and segment profit recovery, Japan and Asia segment-profit growth and margin durability, SG&A growth relative to revenue growth, Annualized DSO of 62 days and annualized DIO of 91 days, Maintenance and repair revenue growth, given its recurring revenue characteristics, Reported versus adjusted operating-income growth and acquisition-related amortization burden, Treasury-stock movements and total shareholder-return intensity, Full-year progress versus ¥520.0bn sales, ¥55.6bn operating income, and ¥38.2bn owner-attributable profit guidance.

Regarding relative positioning, Hoshizaki is positioned as a financially conservative global commercial food-service equipment manufacturer with strong Japanese and Asian profitability, recurring maintenance and repair revenue, and ample liquidity. Relative operating quality is stronger on an adjusted basis than headline JGAAP operating income suggests, but the weak Americas margin and elevated working-capital days prevent an unqualified assessment of earnings quality.