FUJI ELECTRIC (6504) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period of the fiscal year ending March 2026, the Company recorded increases in both revenue and operating income; however, net income declined as the improvement at the operating level was offset, warranting caution regarding the sustainability of the revenue and profit growth. Revenue was ¥8,510.5B (up +7.6% YoY), Operating Income was ¥740.3B (up +8.2%), and Ordinary Income was ¥742.1B (up +8.5%), with the growth rates for all three exceeding the revenue growth rate. Meanwhile, Net Income attributable to owners of the parent was ¥485.1B (down -12.5% YoY), representing a decline in contrast to the growth in Operating Income and Ordinary Income. The primary reason for the decline was that, while extraordinary income of ¥167.4B, including a gain on the sale of investment securities of ¥166.2B, was recorded in the same period of the previous year, extraordinary income amounted to only ¥14.9B in the current period.

Factors Affecting Performance

【Revenue】Revenue was ¥8,510.5B, up +7.6% YoY. By segment, Energy increased to ¥2,611.0B (up +10.4% YoY) and Industry increased to ¥3,212.6B (up +11.3% YoY), with both core segments driving growth, while Food Distribution declined to ¥796.2B (down -7.7% YoY). Semiconductors increased moderately to ¥1,726.5B (up +3.7% YoY).

【Profit and Loss】Operating Income was ¥740.3B (up +8.2% YoY), and the Operating Income margin was 8.7%, broadly flat versus the same period of the previous year, with a slight improvement. By segment, Energy maintained high profitability, with segment profit of ¥330.9B (profit margin 12.7%), making it the primary contributor to profit growth. In contrast, Semiconductors generated ¥149.9B (profit margin 8.7%), with the profit margin declining from the previous year, while Industry generated ¥197.5B (profit margin 6.1%), representing comparatively low profitability. Ordinary Income was ¥742.1B (up +8.5% YoY), almost at the same level as Operating Income, indicating that non-operating income and expenses were broadly balanced. On the other hand, Net Income attributable to owners of the parent was ¥485.1B (down -12.5% YoY). While extraordinary income of ¥167.4B, including a gain on the sale of investment securities of ¥166.2B, was recorded in the same period of the previous year, extraordinary income in the current period amounted to only ¥14.9B, mainly consisting of a gain on the sale of fixed assets of ¥14.3B. Extraordinary losses totaled ¥19.7B, including an impairment loss of ¥4.3B. The reversal of this temporary factor created the divergence between Ordinary Income and Net Income; in substance, the Company achieved revenue and operating profit growth, while final profit declined due to special factors.

Segment Analysis

Energy (30.7% of revenue, Operating Income of ¥330.9B and profit margin of 12.7%) and Industry (37.7% of revenue and profit margin of 6.1%) account for the core of revenue among the four reporting segments. Energy recorded substantial year-on-year growth in both revenue and profit and made the largest contribution to profit growth. Semiconductors (20.3% of revenue and profit margin of 8.7%) increased revenue, but its profit margin declined from the previous year, potentially reflecting changes in pricing and product mix. Food Distribution (9.4% of revenue and profit margin of 11.7%) was the only segment to report a revenue decline. In addition, the method of aggregating the classifications of the Energy and Industry segments was changed from Q1, and the year-on-year comparison is based on the revised classifications.

Key Financial Metrics

【Profitability】The Operating Income margin was 8.7%, the gross margin was 26.7%, and the SG&A expense ratio was 18.0%; the Operating Income margin improved slightly from the same period of the previous year. Meanwhile, the Net Income attributable to owners of the parent margin was approximately 5.7%, down from approximately 7.0% in the same period of the previous year, indicating that improvement at the operating level has not translated into an improvement in the final profit margin. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥799.1B, approximately 1.65 times Net Income attributable to owners of the parent of ¥485.1B, indicating sound cash backing for accounting profit. However, the OCF-to-EBITDA ratio was only 0.66x against EBITDA of approximately ¥1,204.8B (Operating Income + depreciation and amortization of ¥464.6B), as payments of income taxes and other taxes of ¥347.1B and an increase in inventories of ¥262.8B constrained cash conversion. 【Investment Efficiency】ROE was 6.4%, a relatively low level given the Company’s strong financial position, including an Equity Ratio of 57.5% (52.7% in the previous year). Under a DuPont decomposition, the low Net Income margin and the tax burden (effective tax rate of approximately 31.2%) were the primary factors suppressing ROE. 【Financial Soundness】The Equity Ratio rose 4.8pt from the previous year to 57.5%, strengthening the financial base. EBITDA coverage of interest-bearing debt, including bonds of ¥300.0B and long-term borrowings of ¥150.6B, was high, and the interest burden was limited.

Cash Flow Analysis

Operating Cash Flow was ¥799.1B, down -16.9% YoY. This reflected cash absorption from an increase in inventories of ¥262.8B and a decrease in trade payables of ¥134.6B, which partially offset cash inflows from the collection of trade receivables and contract assets of ¥474.6B and an increase in contract liabilities of ¥123.2B. Payments of income taxes and other taxes of ¥347.1B also increased from the previous year, exerting pressure on OCF. Investing Cash Flow was -¥678.4B, primarily reflecting capital expenditures of ¥564.5B, which exceeded depreciation and amortization of ¥464.6B (CapEx/depreciation and amortization of 1.22x), indicating continued capacity expansion and replacement investment. Financing Cash Flow was -¥77.6B, mainly reflecting dividend payments and related items, while share repurchases remained small at ¥0.2B. Free Cash Flow, calculated by deducting capital expenditures from OCF, was positive at ¥120.8B, indicating that the Company is able to fund growth investments with cash generated from operating activities.

Earnings Quality

The gap between Ordinary Income of ¥742.1B and Net Income attributable to owners of the parent of ¥485.1B for the current period is primarily explained by extraordinary items and the tax burden. Extraordinary income of ¥14.9B, including a gain on the sale of fixed assets of ¥14.3B, was offset by extraordinary losses of ¥19.7B, including an impairment loss of ¥4.3B, resulting in a net loss of ¥4.8B. In the same period of the previous year, extraordinary income of ¥167.4B, including a gain on the sale of investment securities of ¥166.2B, was recorded, and this reversal was the primary reason for the decline in Net Income in the current period. Non-operating income and expenses were broadly balanced, with non-operating income of ¥38.1B, including dividend income of ¥16.1B and foreign exchange gains of ¥4.9B, versus non-operating expenses of ¥36.3B, primarily interest expenses of ¥23.4B. Accordingly, there is no significant distortion in the recurring earnings structure. The effective tax rate was approximately 31.2%, and the high tax burden was also a factor depressing Net Income. Comprehensive Income was ¥903.2B, significantly exceeding Net Income of ¥507.0B, supported by valuation-related gains such as valuation difference on securities of ¥274.8B and foreign currency translation adjustments of ¥115.2B.

Earnings Forecast and Guidance

The cumulative Q3 progress rates against the Company’s full-year forecast were 71.8% for Revenue (¥8,510.5B/¥11,850.0B) and 57.6% for Operating Income (¥740.3B/¥1,285.0B). Compared with the standard historical progress rate of approximately 75% after nine cumulative months, Revenue is broadly in line with expectations, whereas Operating Income is more than 17 points below the standard pace, requiring Operating Income of ¥544.7B to be recorded in Q4. While cumulative Revenue growth of +7.6% is tracking above the full-year growth forecast of +5.5%, the pace of progress toward the profit growth forecast of +9.2% is comparatively moderate, making the trend in profit margins in the second half of the year key to achieving the full-year target. No revisions were made to the earnings or dividend forecasts during the quarter.

Shareholder Returns

The Company paid a dividend of ¥91.00 per share in Q2, while the year-end dividend remains undecided at this time. Based on Net Income attributable to owners of the parent of ¥485.1B and the Q2 dividend paid, the Payout Ratio is approximately 28%, indicating a conservative approach to returning profits to shareholders. Share repurchases were limited to ¥0.2B, and shareholder returns for the current period were effectively centered on dividends. In light of dividend payments included in Financing Cash Flow against Free Cash Flow of ¥120.8B, cash coverage of dividends depends partly on the trend in OCF, and potential improvements in working capital, such as inventory reduction, may affect the Company’s capacity for future shareholder returns.

Risk Factors

1. Increase in inventories: Inventories were ¥1,033.1B and absorbed ¥262.8B of cash in OCF. Inventory turnover days are estimated to be above 100 days on an annualized basis, and changes in demand trends or project progress could lead to inventory valuation losses or additional cash outflows.

2. Delay in progress toward the full-year profit forecast: The full-year progress rate for Operating Income was 57.6%, significantly below the standard rate of 75%. Profit must be recorded in Q4 at a pace exceeding that of the previous year, and the degree of achievement will depend on price pass-through, product mix, and the status of recording projects at the end of the fiscal year.

3. Reversal of extraordinary gains and losses: Extraordinary income, including a gain on the sale of investment securities of ¥166.2B recorded in the same period of the previous year, declined substantially in the current period and was the primary reason for the year-on-year decline in Net Income. The divergence between Ordinary Income and Net Income may continue to fluctuate depending on the level of extraordinary gains and losses.

Industry Benchmark (For Reference; Based on Our Analysis)

Profitability and Returns

Growth and Capital Efficiency

※Source: Based on our analysis

Key Points in the Financial Results

1. Revenue, Operating Income, and Ordinary Income all increased, with the Company achieving a Revenue growth rate above the industry median. Meanwhile, Net Income attributable to owners of the parent declined 12.5% year on year, primarily due to the reversal of extraordinary gains and losses. In assessing the overall quality of the results, it is necessary to distinguish between improvement at the operating level and changes in final profit.

2. OCF declined -16.9% year on year, with the increase in inventories and higher income tax payments weighing on cash generation. Capital expenditures continued at a level exceeding depreciation and amortization, and although positive Free Cash Flow was secured, working capital trends will be an important point of observation affecting future cash generation.

3. The progress rate of Operating Income against the Company’s full-year forecast remained at 57.6%, below the standard pace. The status of profit recognition in Q4 will be an important indicator in assessing whether the full-year plan can be achieved.

Theoretical Share Price (Reference Value)

Sensitivity: ¥5,680–¥6,018 at ±1% for the cost of equity, and ¥5,834–¥5,862 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).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly available data; this is not a forecast of the market share price or a recommendation of any specific investment action, and 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 our company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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