FUJI ELECTRIC CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Revenue growth and improved profitability in both the Industry and Energy Businesses drove significant earnings growth through operating leverage. Revenue was ¥2,732.6B (+10.2% YoY), Operating Income was ¥250.2B (+38.3%), Ordinary Income was ¥256.1B (+47.8%), and Net Income attributable to owners of the parent was ¥206.9B (+89.4%). The gross margin was 28.8%, improving by +1.4pt from the previous year, while the Operating Income margin improved by +1.9pt to 9.2%, supported by improvements in pricing and product mix and greater efficiency in selling, general and administrative expenses. The increase in Net Income was affected by the recognition of extraordinary income of ¥69.8B, including a gain on the sale of investment securities of ¥69.7B; therefore, part of the earnings growth was attributable to temporary factors.

Factors Affecting Earnings

【Revenue】The primary drivers of revenue growth were the expansion of the Industry Business (revenue of ¥10.39B, YoY +19.0%) and Energy Business (¥82.49B, YoY +11.2%), with the two segments accounting for most of the overall revenue increase. Meanwhile, Semiconductors (¥54.40B, YoY ▲0.8%) and Food Distribution (¥26.12B, YoY ▲0.8%) were nearly flat but recorded lower revenue. Based on external revenue, the composition ratio was approximately 37.8% for Industry, 29.8% for Energy, 19.5% for Semiconductors, 9.3% for Food Distribution, and 3.6% for Other.

【Profit and Loss】The +38.3% increase in Operating Income was driven by a significant increase in Industry Operating Income to ¥8.53B (YoY +194.4%), with its margin improving to 8.2%, and by Energy, which became the primary earnings source with Operating Income of ¥12.11B (YoY +43.4%; margin of 14.7%). Semiconductors recorded lower Operating Income of ¥3.06B (YoY ▲37.3%; margin of 5.6%), with cyclical headwinds partially offsetting the improvement in the overall profit margin. The gross margin improved by +1.4pt, while the SG&A expense ratio declined by ▲0.5pt, reflecting progress in fixed-cost absorption accompanying revenue growth. Ordinary Income grew by +47.8% relative to Operating Income, as non-operating income, primarily dividend income of ¥1.66B, exceeded non-operating expenses such as interest expenses of ¥0.65B, resulting in an acceleration in the growth rate. Net Income was further boosted by the recognition of extraordinary income of ¥6.98B, including a gain on the sale of investment securities of ¥6.97B. In conclusion, the company achieved revenue and earnings growth, supported by both structural improvements in core profitability—gross margin and SG&A expense ratio—and temporary extraordinary income.

Segment Analysis

The Energy Business generated revenue of ¥82.49B (YoY +11.2%) and Operating Income of ¥12.11B (YoY +43.4%), with a margin of 14.7%, making it the largest contributor to total company profit, at approximately 44% of aggregate segment profit. Improved profitability on large-scale projects is believed to have contributed. The Industry Business recorded revenue of ¥103.89B (YoY +19.0%) and Operating Income of ¥8.53B (YoY +194.4%), with a margin of 8.2%, demonstrating substantial earnings growth against a backdrop of recovering operations and cost absorption. Semiconductors generated revenue of ¥54.40B (YoY ▲0.8%) and Operating Income of ¥3.06B (YoY ▲37.3%), with a margin of 5.6%; it was the only segment among the five to record lower earnings, and cyclical weakness in market conditions weighed on the overall company margin. Food Distribution recorded revenue of ¥26.12B (YoY ▲0.8%) and Operating Income of ¥2.69B (YoY ▲14.0%), while maintaining a margin of 10.3%, the highest level among the five segments. Other Businesses generated revenue of ¥15.05B (YoY +9.3%) and Operating Income of ¥0.88B (YoY +13.8%), with a margin of 5.8%.

Key Financial Indicators

【Profitability】The Operating Income margin improved by +1.9pt to 9.2% from 7.3% in the previous year, while the Net Income margin attributable to owners of the parent improved by +3.2pt to 7.6% from 4.4%. ROE was 2.6% on a quarterly basis, before annualization, driven by improvements in the Net Income margin and asset turnover. However, it should be noted that this figure includes the contribution of temporary extraordinary income.【Cash Quality】Operating Cash Flow (OCF) was ¥51.52B, equivalent to 2.49 times Net Income attributable to owners of the parent of ¥20.69B, indicating strong cash generation supporting earnings.【Investment Efficiency】Capital expenditures were ¥10.41B, or 0.69 times depreciation and amortization of ¥15.12B, indicating that renewal and growth investments remained restrained within the level of depreciation and amortization.【Financial Soundness】The Equity Ratio was 61.4%, up +1.5pt from 59.9% in the previous year, indicating that the capital base remains robust.

Cash Flow Analysis

Operating Cash Flow was ¥51.52B, a substantial increase from ¥11.14B in the previous year, generating cash equivalent to 2.49 times Net Income attributable to owners of the parent of ¥20.69B. In terms of working capital, a decrease in trade receivables contributed ¥85.15B of cash inflow, while an increase in inventories of ¥21.02B and a decrease in trade payables of ¥26.77B were factors reducing cash flow; an increase in contract liabilities of ¥14.81B contributed positively. Investing Cash Flow was negative ¥7.15B, with capital expenditures of ¥10.41B representing the primary cash outflow. Free Cash Flow (Operating Cash Flow + Investing Cash Flow) was positive ¥44.37B. Financing Cash Flow was negative ¥42.09B, primarily due to share repurchases of ¥21.01B and dividend payments. The level of Free Cash Flow was sufficient to fund capital expenditures and shareholder returns, indicating that cash generation during the quarter was relatively strong.

Earnings Quality

The increase in Net Income included both recurring improvements in earnings power and temporary factors. While the +47.8% YoY growth through Ordinary Income was supported by structural factors such as improvements in the gross margin and SG&A expense ratio, Profit Before Tax of ¥32.41B included an additional ¥6.98B of extraordinary income, including a gain on the sale of investment securities of ¥6.97B. This represented approximately 21.5% of Profit Before Tax. Adjusting approximately for the after-tax impact of this extraordinary income using the effective tax rate (income taxes and other taxes of ¥10.74B ÷ Profit Before Tax of ¥32.41B = approximately 33.1%) results in estimated Net Income attributable to owners of the parent, excluding extraordinary gains and losses, of approximately ¥16.1B, with a corresponding Net Income margin of approximately 5.9%. This represents a certain divergence from the reported Net Income margin of 7.6%. Comprehensive Income was ¥29.24B, including ¥27.75B attributable to owners of the parent. The difference from Net Income of ¥20.69B arose from other comprehensive income items such as foreign currency translation adjustments of ¥5.02B and valuation differences on securities of ¥2.78B. The gap between Net Income and Comprehensive Income was primarily attributable to valuation fluctuations in marketable assets.

Earnings Forecast and Guidance

The full-year company forecasts are Revenue of ¥1,300.0B (YoY +5.9%), Operating Income of ¥156.50B (YoY +14.6%), Ordinary Income of ¥157.00B (YoY +12.7%), and forecast EPS of ¥763.74. As of Q1, progress rates were 21.0% for Revenue, 16.0% for Operating Income, and 16.3% for Ordinary Income. Progress for Net Income attributable to owners of the parent was 18.6%, based on actual Net Income of ¥20.69B against the forecast of ¥111.5B. All were below the simple 25% benchmark. Although the earnings forecast was revised during the quarter, the dividend forecast was unchanged. Contract liabilities had accumulated to ¥93.59B, which may indicate a second-half weighting in light of seasonality and project progress.

Shareholder Returns

The company’s full-year dividend forecast is ¥107, an increase from the previous year’s actual dividend of ¥91. Based on forecast EPS of ¥763.74, the Payout Ratio is approximately 14.0% (¥107 ÷ ¥763.74), remaining conservative relative to the earnings level. Share repurchases during the quarter totaled ¥21.01B, a significant increase from ¥0.04B in the same period of the previous year. Combined with dividend payments of ¥16.09B during the quarter, total shareholder returns amounted to ¥37.10B. Given Operating Cash Flow of ¥51.52B and Free Cash Flow of ¥44.37B, shareholder returns during the quarter were funded within the range of cash flow generation.

Risk Factors

1. Cyclical slowdown in the Semiconductor segment: Revenue was ¥54.40B (YoY ▲0.8%), Operating Income was ¥3.06B (YoY ▲37.3%), and the margin was 5.6%. It was the only segment among the five to record lower earnings and partially offset the improvement in the company-wide Operating Income margin. The timing of a recovery in market conditions will determine future margin levels.

2. Dependence on extraordinary income: Extraordinary income of ¥6.98B, including a gain on the sale of investment securities, accounted for approximately 21.5% of Profit Before Tax of ¥32.41B. Excluding this income, the Net Income margin was approximately 5.9%, below the reported figure of 7.6%. If extraordinary income of a similar scale is not repeated in subsequent periods, Net Income growth may slow.

3. Lagging full-year progress and second-half weighting risk: Progress rates for both Revenue and earnings against the full-year forecasts were below the simple 25% benchmark, including Operating Income progress of 16.0%. Given the accumulation of contract liabilities of ¥93.59B, the company has a high degree of dependence on the recognition of Revenue and earnings in the second half.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin are slightly above the industry median.

Growth and Capital Efficiency

The Revenue growth rate is +3.6pt above the industry median and is positioned in the upper range of the IQR.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Improvements in the margins of both the Industry and Energy segments drove company-wide operating leverage, confirming structural profitability improvements of +1.4pt in the gross margin and ▲0.5pt in the SG&A expense ratio. Meanwhile, the slowdown in Semiconductors has continued, widening the performance gap between segments.

2. Operating Cash Flow reached 2.49 times Net Income attributable to owners of the parent, and Free Cash Flow was also ample at ¥44.37B. This indicates that capital expenditures and shareholder returns, including share repurchases, were funded within the range of cash flow generation.

3. Extraordinary income, including gains on the sale of investment securities, contributed to the increase in Net Income. The estimated Net Income margin excluding extraordinary gains and losses was approximately 5.9%, below the reported figure of 7.6%. Progress rates for the full year were also below the 25% benchmark for key indicators, making the sustainability of core earnings from the next quarter onward a key point to monitor.

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 5-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥6,467–¥6,865 at cost of equity ±1%; ¥6,637–¥6,699 at ω ±0.1.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical values may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest rate reference month: 2026-06 / This figure 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 available earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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