YASKAWA Electric (6506) FY2027 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥285.60B
• Operating Income: ¥22.06B
• Net Income: ¥19.33B
• EPS: ¥73.21

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

Yaskawa Electric’s FY2027 Q2 cumulative results show stronger sales and cash generation, but weaker operating profitability. Revenue rose 9.8% year on year to ¥2,855.98億. Operating income fell 5.5% to ¥220.58億. The operating margin declined approximately 124 basis points to 7.7%. Gross margin slipped approximately 26 basis points to 35.4%, while the SG&A-to-revenue ratio was broadly stable at 27.4%. A ¥27.17億 adverse swing in net other operating income and expenses further weighed on operating profit. Motion Control was the core earnings contributor, with ¥159.73億 of segment operating income, up 32.8%. Robotics operating income fell 43.3% to ¥59.74億, despite broadly flat sales. Profit attributable to owners nevertheless increased 4.1% to ¥189.88億. Equity-method income increased to ¥19.92億 from ¥1.65億, helping profit before tax rise despite the operating decline. Operating cash flow increased to ¥456.28億, or 2.40 times profit attributable to owners. Inventory absorbed ¥28.75億 of cash, and the approximately 216-day annualized inventory holding period remains a material efficiency concern. Cash flow after all investing activities was positive ¥159.86億, even as capital expenditure increased to ¥272.86億. The balance sheet remains liquid, with a 2.42x current ratio and cash exceeding current bonds and borrowings. Goodwill increased 43.5% year on year but represents only 2.1% of equity. First-half operating profit reached 38.4% of the ¥575億 full-year forecast, below the usual 50% halfway mark. Meeting that forecast requires a substantially stronger second-half operating margin; the quality of the Robotics recovery and working-capital conversion will be decisive.

Profitability Analysis

Three-factor DuPont analysis gives a 6.65% margin on profit attributable to owners × 0.678x annualized asset turnover × 1.64x financial leverage, consistent with approximately 7.4% annualized ROE. Against the prior first half, the profit margin fell from about 7.01%, while annualized asset turnover improved from approximately 0.641x; leverage was broadly unchanged. Better asset utilization thus offset weaker margins rather than producing a meaningful ROE improvement. Gross profit rose 8.9% on 9.8% revenue growth, and SG&A rose 9.6%: SG&A growth did not outpace revenue. Gross margin compressed about 26 basis points and operating margin about 124 basis points. The larger operating-margin decline reflects the swing from ¥17.45億 of net other operating income to ¥9.71億 of net other operating expenses. The 0.731 tax burden and 1.177 pretax-profit-to-operating-profit factor indicate that below-operating contributions supported bottom-line profitability. In particular, equity-method income rose ¥18.27億 year on year. Its future contribution should be assessed separately from improvement in manufacturing operations.

Growth Assessment

Motion Control generated ¥1,372.86億 of revenue (+21.7%) and ¥159.73億 of operating income (+32.8%), at an 11.6% margin; it contributed approximately 61% of the operating income reported across the four segments. Robotics generated ¥1,184.04億 of revenue (-0.7%) and ¥59.74億 of operating income (-43.3%), at a 5.0% margin. System Engineering generated ¥207.78億 of revenue (+11.2%) and ¥34.80億 of operating income (+79.5%), at the highest segment margin, 16.7%. Other operating segments generated ¥91.28億 of revenue (-3.5%) and ¥5.75億 of operating income (-38.5%), at a 6.3% margin. Segment operating income totals ¥260.02億 before a ¥39.44億 reconciliation to consolidated operating income. Revenue reached 47.6% of the ¥6,000億 full-year forecast, close to the standard 50% halfway pace; operating income reached only 38.4%, and profit attributable to owners reached 40.0% of their respective ¥575億 and ¥475億 forecasts. Both profit progress rates are more than 10 percentage points below the halfway benchmark. The forecasts imply second-half revenue of ¥3,144.02億 and operating income of ¥354.42億: an 11.3% second-half operating margin versus 7.7% in the first half. The disclosed forecast has been revised; achieving it depends particularly on improved Robotics profitability and recovery in consolidated operating margins.

Financial Health

Current liabilities, derived from total less noncurrent liabilities, are ¥1,969.66億. Current assets of ¥4,758.27億 therefore imply a 2.42x current ratio and ¥2,788.61億 of working capital. Cash of ¥660.83億 exceeds ¥432.18億 of current bonds and borrowings plus ¥39.59億 of current lease liabilities, limiting near-term maturity-mismatch risk. Total bonds and borrowings are ¥1,093.02億, approximately 0.21x total equity; lease liabilities add ¥160.42億. The supplied 0.64x debt-to-equity measure corresponds approximately to total liabilities divided by equity, rather than interest-bearing borrowings divided by equity. Equity attributable to owners represents 59.8% of assets. Goodwill increased ¥32.27億 to ¥106.39億 but remains 2.1% of total equity; intangible assets are 4.1% of assets. The ¥37.36億 acquisition cash outflow makes integration and subsequent goodwill performance relevant, although goodwill concentration is low. Net defined benefit liabilities are ¥261.33億.

Notable B/S Changes

Goodwill: +¥32.27億 (+43.5%) to ¥106.39億 — acquisition-related value retention warrants monitoring, though goodwill is only 2.1% of equity. Contract liabilities: +¥89.38億 (+31.9%) to ¥369.52億 — a larger customer-funded liability balance supports near-term cash but entails future delivery obligations. Investments accounted for using the equity method: +¥20.67億 (+37.5%) to ¥75.80億 — affiliate performance has become more consequential to reported profit.

Cash Flow Quality

First-half operating cash flow of ¥456.28億 rose from ¥158.04億 a year earlier and equaled 2.40x profit attributable to owners. The negative 3.2% accruals ratio also supports current-period cash earnings quality. Cash flow benefited from a ¥71.28億 receivables release and ¥121.24億 of other working-capital changes, partly offset by a ¥28.75億 inventory build; persistence of the other working-capital benefit merits monitoring rather than assuming it recurs. Inventory of ¥2,181.08億 was 25.9% of assets and increased 3.5% year on year. On annualized first-half flows and closing balances, receivable days were approximately 103, inventory days 216 and payable days 60, yielding a roughly 259-day annualized cash conversion cycle. DSO exceeds the 60-day warning threshold, pointing to slow collection and potential cash-flow volatility. DIO exceeds both the 60-day manufacturing benchmark and 90-day warning threshold, raising carrying-cost and obsolescence exposure. The resulting cycle exceeds the 120-day warning threshold and ties substantial cash to the production and sales cycle; period-end balances can also make these day-count estimates sensitive to seasonality. Capital expenditure was ¥272.86億, up 51.9% year on year and equivalent to 9.6% of first-half revenue. Operating cash flow less capital expenditure was ¥183.42億; after all investing cash flows, including acquisitions, the surplus was ¥159.86億.

Dividend Sustainability

The ¥36 interim dividend represents approximately 50.6% of first-half profit attributable to owners when calculated using issued shares as in the supplied payout measure. The ¥72 full-year dividend forecast represents 39.3% of forecast EPS of ¥183.11. First-half cash dividends paid of ¥88.61億 were covered 1.80x by the ¥159.86億 surplus after all investing activities, or 2.07x by operating cash flow less capital expenditure. Share repurchases were only ¥0.01億 and do not materially change cash returns. The current cash coverage supports the dividend, while forecast delivery and the substantial inventory balance remain important to its longer-term funding.

Risk Assessment

Business risks include High priority: Robotics’ 43.3% operating-income decline and 5.0% margin could persist even if consolidated revenue grows, obstructing the forecast second-half margin recovery., High priority: Approximately 216 annualized inventory days expose an industrial-automation manufacturer to demand-cycle reversals, component obsolescence and inventory carrying costs., Medium priority: Industrial automation demand is sensitive to customers’ factory-capital-spending cycles, trade restrictions and component supply or input-cost changes., Medium priority: Foreign-currency movements can affect overseas operations and reported equity; currency-translation differences contributed ¥91.35億 to first-half other comprehensive income..

Financial risks include High priority: Approximately 103 annualized receivable days and a 259-day annualized cash conversion cycle leave cash generation sensitive to collections and inventory reduction., Medium priority: ¥272.86億 of first-half capital expenditure and ¥37.36億 of acquisition spending increase the cash required before shareholder distributions., Lower priority: Goodwill rose 43.5%, creating integration and impairment exposure, although it remains only 2.1% of equity..

Key concerns include Operating income is 11.6 percentage points behind the standard halfway forecast pace; the implied second-half operating margin is 11.3%, versus 7.7% in the first half., The rise in equity-method income helped offset declining operating profit, so bottom-line growth is not evidence of broad-based operating improvement., The large favorable other working-capital movement supported operating cash flow and should not automatically be extrapolated..

Investment Implications

Key takeaways include Motion Control is the core profit engine, but Robotics is the principal drag on consolidated margins., Strong first-half cash conversion and liquidity contrast with a long manufacturing cash conversion cycle., Full-year profit delivery requires a pronounced second-half improvement rather than continuation of the first-half margin..

Metrics to watch include Robotics revenue, operating margin and order-driven production levels, Progress toward the implied 11.3% second-half operating margin, Annualized inventory days, receivable days and cash conversion cycle, Operating cash flow excluding large working-capital releases, Capital expenditure, acquisition integration and goodwill movements.

Regarding relative positioning, The 7.7% operating margin is below the supplied 8–15% ‘good’ range, and approximately 7.4% annualized ROE is below its 8% concern threshold. Liquidity is stronger: the 2.42x current ratio exceeds the 1.5x healthy benchmark. Working-capital efficiency is weaker than the supplied manufacturing benchmarks.