HOSHIZAKI CORPORATION FY2026 Q2 Earnings Report

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Executive Summary

H1 results secured higher revenue and higher earnings, driven by the highly profitable businesses in Japan and Asia, while clearly highlighting the structural issue of declining profitability in the Americas weighing on the Company-wide operating margin. Revenue was ¥2736.5B (+14.7% YoY), Operating Income was ¥327.1B (+7.3%), and Ordinary Income was ¥340.5B (+6.9%). Net Income attributable to owners of the parent was ¥222.97B (+1.6%), while consolidated Net Income, including non-controlling interests, was ¥226.7B (+1.9%). The primary reasons for the slower growth in Operating Income and Net Income relative to revenue growth were deterioration in the Americas segment’s profit margin and increased amortization expenses for goodwill.

Factors Affecting Results

【Revenue】Revenue increased in all regions, with the growth of overseas businesses driving Company-wide growth: the Americas +29.3%, Asia +21.8%, Europe +10.5%, and Japan +6.2%. Revenue composition was Japan 46.2%, the Americas 27.3%, Asia 17.5%, and Europe 11.1%, with Japan remaining the largest segment. By product, refrigerators recorded the largest increase at ¥870.8B, while maintenance and repair revenue also expanded as recurring revenue increased to ¥393.7B (¥345.7B in the previous year).

【Profit and Loss】The Operating Income margin was 12.0%, down 0.8pt from 12.8% in the previous year. The gross margin also declined 0.5pt to 37.7% (38.2% in the previous year), while the SG&A expense ratio increased 0.3pt to 25.7% (25.4% in the previous year). The primary driver of the margin decline was the Americas segment: despite a +29.3% increase in revenue, Operating Income declined -16.8%, leaving the margin at 6.4%. Ordinary Income was supported by ¥32.5B in non-operating income, including ¥5.0B in foreign exchange gains and interest income, while interest expense increased to ¥12.2B (¥7.4B in the previous year), weighing on Net Income. Extraordinary items were limited, comprising ¥1.6B in extraordinary income and ¥0.5B in extraordinary losses, indicating limited impact from temporary factors. In conclusion, although revenue and earnings increased, this was a period in which profit margins retreated slightly.

Segment Analysis

Japan accounted for approximately 60% of segment profit (¥195.3B, a 59.7% composition ratio), and its margin improved to 15.5% from 14.8% in the previous year. Asia achieved Operating Income of ¥79.8B (+25.0%) and maintained the highest Company-wide profitability, with a margin of 16.6% (17.6% in the previous year), despite a slight decline in margin. Meanwhile, the Americas posted the highest growth, with revenue of ¥747.7B (+29.3%), but Operating Income declined substantially to ¥47.6B (-16.8%), and the margin fell to 6.4% (equivalent to approximately 9.9% in the previous year). One contributing factor was the increased allocation of amortization of intangible assets associated with business combinations (¥28.7B in amortization of investment difference). Europe increased revenue to ¥303.5B (+10.5%) and expanded its profit to ¥3.8B (+89.4%), but its margin remained thin at 1.2%, with the impact of hyperinflation accounting reflected in the profit level.

Key Financial Metrics

【Profitability】ROE was 5.4%, the Operating Income margin was 12.0% (12.8% in the previous year), and the Net Income margin, based on income attributable to owners of the parent, was 8.1% (9.2% in the previous year). All metrics declined slightly from the previous year.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥290.98B, equivalent to 1.31 times Net Income attributable to owners of the parent of ¥222.97B, indicating a healthy level of earnings conversion into cash.【Investment Efficiency】The total asset turnover ratio was 0.46x based on total assets at period-end. Trade receivables were ¥889.2B (¥767.4B in the previous year, +15.9%), while inventories were ¥356.7B (¥354.6B in the previous year, +0.6%), indicating that the increase in trade receivables was relatively large during the period of revenue growth.【Financial Soundness】The Equity Ratio was 70.7% (71.9% in the previous year). Against cash and deposits of ¥1694.1B, short-term borrowings were limited to ¥67.5B, maintaining a financial foundation close to a net debt-free position.

Cash Flow Analysis

Operating Cash Flow was ¥290.98B, a substantial increase of +114.9% YoY, and stood at 1.31 times Net Income attributable to owners of the parent of ¥222.97B, indicating strong cash-generating capacity underpinning earnings. By component, the increase in trade receivables resulted in a cash outflow of ¥115.3B, while the ¥14.9B increase in inventories also partially restrained cash generation through working capital. This was offset by a ¥50.2B increase in contract liabilities. Investing Cash Flow was -¥51.8B, including ¥54.0B in capital expenditures, which remained within depreciation and amortization expense of ¥62.0B. Financing Cash Flow was -¥306.9B, primarily due to ¥172.1B in share repurchases and dividend payments. Free Cash Flow was ¥239.1B, securing a sufficient level to cover shareholder returns comprising share repurchases and dividends.

Earnings Quality

Extraordinary income of ¥1.6B and extraordinary losses of ¥0.5B were both immaterial, meaning that most of current-period profit was derived from recurring business activities. Non-operating income was ¥32.5B, or 1.2% of revenue, and was relatively small. It comprised ¥5.0B in foreign exchange gains and interest income and other items, limiting the impact of one-time earnings enhancements. Comprehensive Income was ¥327.4B, including ¥329.5B attributable to owners of the parent, exceeding Net Income of ¥226.7B. The difference was primarily attributable to foreign currency translation adjustments of +¥102.7B arising from the translation of overseas subsidiaries into yen. As Operating Cash Flow exceeded Net Income at 1.31 times, earnings quality was generally stable; however, increases in trade receivables and inventories will be key points to monitor for future cash generation.

Earnings Forecast and Guidance

Progress against the Full-Year forecast was above the 50% H1 benchmark in all categories: Revenue was 52.6% (¥2736.5B/¥5200.0B), Operating Income was 58.8% (¥327.1B/¥556.0B), Ordinary Income was 57.7% (¥340.5B/¥590.0B), and Net Income attributable to owners of the parent was 58.4% (¥222.97B/¥382.0B). No revisions were made to the earnings forecast or dividend forecast during the quarter, and the forecasts were maintained based on progress in line with the initial plan. The fact that progress in profit metrics exceeded revenue progress suggests that the highly profitable businesses in Japan and Asia are tracking above plan.

Shareholder Returns

The interim dividend was ¥55 per share, and the Full-Year dividend forecast is ¥115. The Full-Year Payout Ratio is 41.9% (¥115/¥274.20) against forecast EPS of ¥274.20. Share repurchases of ¥172.1B were conducted during H1. Together with H1 dividend payments of ¥92.02B, total shareholder returns amounted to ¥264.08B, resulting in a Total Return Ratio of 118.4% relative to H1 Net Income attributable to owners of the parent of ¥222.97B. Given cash and deposits of ¥1694.1B and Free Cash Flow of ¥239.1B, H1 shareholder returns were conducted within the range of available funds and cash flow.

Risk Factors

1. Declining profitability in the Americas segment: While revenue increased substantially to ¥747.7B (+29.3%), Operating Income declined to ¥47.6B (-16.8%), and the margin fell to 6.4%. The increased allocation of amortization of investment difference associated with business combinations (¥28.7B) is a structural factor lowering the profit margin.

2. Increase in working capital: Trade receivables increased to ¥889.2B (¥767.4B in the previous year, +15.9%) and represented a ¥115.3B cash outflow factor in the calculation of Operating Cash Flow. Inventories also remained at a high level, essentially flat at ¥356.7B (+0.6%), and trends in collections and inventory management will affect future cash-generating capacity.

3. Amortization burden from goodwill and intangible assets: Goodwill of ¥754.0B and intangible fixed assets of ¥1000.5B were recorded, while goodwill amortization expense increased to ¥37.8B (¥8.1B in the previous year). Goodwill represented approximately 17.9% of net assets, and the continuation of the amortization burden is a factor restraining Net Income growth.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Income margin and Net Income margin exceed the industry median, indicating that profitability is relatively high within the industry.

Growth and Capital Efficiency

The Revenue growth rate also exceeds the industry median, placing the pace of revenue growth among the higher levels within the industry.

※Source: Compiled by the Company

Key Takeaways from the Results

1. The highly profitable businesses in Japan and Asia (margins of 15.5%/16.6%) are driving Company-wide profit, while the decline in the Americas margin (6.4%) is lowering the Company-wide Operating Income margin, resulting in a widening profitability gap between regions.

2. Progress against the Full-Year plan was 52.6% for Revenue, 58.8% for Operating Income, and 58.4% for Net Income, all exceeding the H1 benchmark of 50%. The pace as of H1 is therefore favorable toward achieving the plan in H2.

3. While shareholder returns, including ¥172.1B in share repurchases, were implemented, the Company maintained an Equity Ratio of 70.7% and a financial foundation close to a net debt-free position, demonstrating the coexistence of financial soundness and shareholder returns.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥3,031–¥3,208 at Cost of Equity ±1%, and ¥3,112–¥3,126 at ω±0.1.

Notes:

• Goodwill amortization of ¥54.7 per share is added back to profit (to account for a non-cash expense and comparability with IFRS companies).
• Net assets as of the quarter-end are used (there is a timing gap relative to the Full-Year forecast).

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast or guarantee future share prices)

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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. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting professionals as necessary.

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