SUZUKI CO.,LTD. FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 of FY2026 (Jul 2025–Mar 2026), Revenue was ¥296.2B (YoY +¥50.8B +20.7%), Operating Income was ¥44.4B (YoY +¥12.5B +39.2%), Ordinary Income was ¥46.6B (YoY +¥15.1B +48.1%), and Quarterly Net Income attributable to owners of the parent was ¥29.9B (YoY +¥9.4B +46.0%), achieving double-digit revenue and profit growth across top-line and all profit stages. Operating margin improved to 15.0% (up +2.0pt from 13.0% a year ago) and net margin to 10.1% (up +1.8pt from 8.3%), indicating marked profitability improvement. The core Parts Business generated Revenue of ¥226.5B (+23.5%) and Operating Income of ¥46.2B (+27.1%), driving consolidated results. Progress against the full-year plan is 74% for Revenue, 78% for Operating Income, 79% for Ordinary Income, and 80% for Net Income, exceeding the standard Q3 progress benchmark (75%), indicating a high probability of plan achievement.

Drivers of Performance

[Revenue] Revenue of ¥296.2B (+20.7%) was led by the core Parts Business, which recorded Revenue of ¥226.5B (+23.5%), representing 76.5% of consolidated sales. By region: Japan ¥193.2B (prior ¥160.0B), China ¥64.1B (prior ¥44.0B), Thailand ¥29.6B (prior ¥32.9B), Other ¥9.3B (prior ¥8.5B), with notable growth in Japan and China. By segment: MachineryAndAppliances ¥54.9B (+9.7%), Die ¥17.0B (+6.8%), Rental ¥2.8B (+1.2%), with all segments securing revenue growth. The high growth of the Parts Business clearly led consolidated revenue expansion.

[Profitability] Cost of goods sold was ¥230.6B (prior ¥193.5B), yielding gross profit of ¥65.6B and a gross margin of 22.1% (up +1.0pt from 21.1% a year ago). SG&A was ¥21.1B (prior ¥19.9B, +6.3%), which was far below the gross profit growth (+26.6%), producing effective operating leverage and resulting in Operating Income of ¥44.4B (+39.2%) and an Operating Margin of 15.0% (up +2.0pt from 13.0%). Non-operating income included interest income ¥0.2B, dividend income ¥0.3B, and foreign exchange gains ¥1.2B (foreign exchange losses of ¥0.6B were recorded in non-operating expenses), totaling ¥2.3B of non-operating income; after subtracting non-operating expenses such as interest expense ¥0.2B, Ordinary Income was ¥46.6B (+48.1%). Extraordinary items were nearly offset: extraordinary gains ¥0.2B (gain on sale of investment securities ¥0.1B, gain on sale of fixed assets ¥0.1B) and extraordinary losses ¥0.2B (loss on retirement of fixed assets ¥0.2B), leaving Profit Before Tax ¥46.6B. Income taxes were ¥12.8B (effective tax rate 27.4%), and Net Income attributable to non-controlling interests was ¥3.9B, resulting in Net Income attributable to owners of the parent ¥29.9B (+46.0%). In summary, strong growth in the core Parts Business, gross margin improvement, and restrained SG&A growth produced operating leverage that drove higher revenues and profits.

Segment Analysis

The Parts Business maintained high profitability with Operating Income ¥46.2B (+27.1%) and a margin of 20.4%, serving as the primary source of consolidated Operating Income. The Machinery and Appliances Business recorded Operating Income ¥6.6B (+20.1%) with a margin of 12.0%; while growth is healthy, margins are in the high single-digit to low double-digit range. The Die Business posted Operating Income ¥2.5B (+45.1%) with a margin of 14.8%, showing significant year-on-year improvement. The Rental Business delivered Operating Income ¥0.7B (+10.0%) with a margin of 25.9%, small but highly profitable. Corporate adjustments were △¥11.6B (prior △¥12.3B), representing allocations for head-office costs and R&D, slightly lower than a year ago. Overall, Parts contributes the bulk of profit, while other segments’ steady profit growth supports expansion of consolidated margins.

Key Financial Metrics

[Profitability] Operating Margin 15.0% (prior 13.0%) and Net Margin 10.1% (prior 8.3%) show significant margin improvement. ROE 10.4% (exceeding prior 9.2%) is mainly driven by improved net margin. Gross Margin 22.1% (prior 21.1%) reflects product mix improvement and yield enhancement. SG&A Ratio 7.1% (prior 8.1%) shows SG&A growth of +6.3% lagging Revenue growth of +20.7%, demonstrating scale benefits. [Cash Quality] Days Sales Outstanding (DSO) is 101 days (Accounts receivable ¥81.5B ÷ Revenue ¥296.2B × 365 days × 9 ÷ 12), indicating a lengthening trend and suggesting delayed collections. Of Inventories ¥55.1B, Work in Process ¥27.2B accounts for 49.4% of inventories, raising concerns about retention due to production lead times and backlog response. [Investment Efficiency] Total Asset Turnover is 0.628x (Revenue ¥296.2B ÷ Total Assets ¥471.4B; prior 0.617x), a slight increase. Investment securities rose significantly to ¥61.6B (prior ¥25.7B, +139%), contributing to total asset growth. [Financial Soundness] Equity Ratio 68.9% (Net Assets ¥324.6B ÷ Total Assets ¥471.4B), Current Ratio 195% (Current Assets ¥231.9B ÷ Current Liabilities ¥118.9B), Interest-bearing debt ¥10.9B (Short-term borrowings ¥9.1B + Long-term borrowings ¥1.8B) against cash ¥81.4B resulting in net cash, and Interest Coverage 206x (Operating Income ¥44.4B ÷ Interest Expense ¥0.2B), indicating an extremely solid financial base.

Cash Flow Analysis

Although the cash flow statement disclosure is unavailable, balance sheet movements indicate cash trends: Cash and deposits increased to ¥81.4B (prior ¥68.1B, +¥13.4B), short-term borrowings decreased to ¥9.1B (prior ¥12.7B, △¥3.6B), and long-term borrowings decreased to ¥1.8B (prior ¥5.8B, △¥4.0B), reducing interest-bearing debt. However, accounts receivable increased to ¥81.5B (prior ¥71.9B, +¥9.6B) and inventories rose to ¥55.1B (prior ¥43.0B, +¥12.1B), expanding working capital; longer collection periods and WIP retention associated with revenue growth are constraining cash conversion. Accounts payable increased to ¥77.1B (prior ¥58.1B, +¥19.0B), temporarily offsetting cash outflows through deferred supplier/outsourcing payments. Investment securities increased to ¥61.6B (prior ¥25.7B, +¥35.9B), reflecting active excess cash deployment that contributes to other comprehensive income but increases market exposure risk. Net Assets increased to ¥324.6B (prior ¥279.0B, +¥45.6B), supported by retained earnings accumulation and a large rise in valuation difference on available-for-sale securities of ¥39.8B (prior ¥15.0B), with total comprehensive income ¥61.0B largely driven by valuation items. The net cash position and reduced interest-bearing debt improve financial robustness, but working capital expansion and longer DSO are factors that constrain growth in Operating Cash Flow.

Quality of Earnings

Recurring earnings quality is high: Operating Income ¥44.4B is primarily due to core business improvement, and non-operating income ¥2.3B (0.8% of sales) is minor, indicating low structural dependence on non-core items. Extraordinary gains ¥0.2B and extraordinary losses ¥0.2B nearly offset, so one-off items affect Net Income attributable to owners of the parent (¥29.9B) by less than 0.1%, i.e., negligible. Net foreign exchange impact was about ¥0.6B (non-operating FX gain ¥1.2B less FX loss ¥0.6B), approximately 1.4% of Operating Income ¥44.4B, not materially distorting core earnings. The gap between Ordinary Income ¥46.6B and Net Income ¥29.9B is attributable to income taxes ¥12.8B (effective tax rate 27.4%) and Net Income attributable to non-controlling interests ¥3.9B; tax burden is within a normal range. Comprehensive Income ¥61.0B exceeded Net Income ¥33.8B (parent + non-controlling) due to Other Comprehensive Income ¥27.2B (foreign currency translation adjustments ¥2.6B, valuation difference on available-for-sale securities ¥24.8B, etc.), indicating significant contribution from valuation items; while noteworthy, core business profits are steadily accumulating.

Forecasts & Guidance

Full-year plan: Revenue ¥401.0B (+20.3%), Operating Income ¥56.7B (+32.1%), Ordinary Income ¥58.8B (+39.8%), Net Income attributable to owners of the parent ¥37.3B, EPS ¥259.82, Dividend ¥60. Progress of Q3 cumulative (9 months) results versus full-year plan is Revenue 74% (¥296.2B ÷ ¥401.0B), Operating Income 78% (¥44.4B ÷ ¥56.7B), Ordinary Income 79% (¥46.6B ÷ ¥58.8B), Net Income 80% (¥29.9B ÷ ¥37.3B), outperforming the standard Q3 progress benchmark of 75% across profit stages. If robust demand in the core Parts Business and gross margin improvements continue, the probability of achieving the full-year plan is high. No forecast revisions have been made as of Q3, but progress suggests an upward bias.

Shareholder Returns

The interim dividend was ¥45, and the dividend payout ratio for Q3 cumulative Net Income attributable to owners of the parent ¥29.9B (on a share base of 14.36 million shares equals ¥208.01 per share) is approximately 22%, a low level. With a projected year-end dividend of ¥60, the annual total is expected to be ¥105, implying a payout ratio of about 40% against full-year Net Income forecast ¥37.3B (EPS ¥259.82), which is within a sustainable range. Given cash ¥81.4B, net cash position, and low interest cost (interest expense ¥0.2B), dividend payment capacity is ample. No share buyback information is available; shareholder returns are evaluated solely on dividends. Normalization of working capital (DSO reduction and WIP compression) would further expand the scope for future dividend increases.

Risk Factors

1. Segment concentration risk: The Parts Business accounts for 76.5% of Revenue and the majority of Operating Income, making results sensitive to demand swings of major customers and market deterioration. Low portfolio diversification increases the risk of single-business exposure.

2. Working capital efficiency deterioration: DSO 101 days and WIP ratio 49.4% are above industry norms, pressuring the cash conversion cycle due to prolonged collection periods and long production lead times. Inventory quality deterioration (stagnation/obsolescence) or collection delays could lead to one-off charges or discount demands.

3. Valuation volatility risk of investment securities: Active deployment to investment securities (¥61.6B, +139% YoY) lifts comprehensive income but creates downside risk in market downturns via valuation losses and reduced net assets. Valuation difference on available-for-sale securities ¥39.8B represents 12.3% of net assets, increasing sensitivity to market volatility.

Industry Benchmark (Reference; Company Analysis)

Profitability & Returns

Profitability is well above the industry median, positioning the company in the upper tier.

Growth & Capital Efficiency

Revenue growth rate far exceeds the industry median, distinguishing the company as a high-growth firm.

※Source: Company aggregation

Key Points from the Results

1. The core Parts Business drove high growth with Revenue +23.5% and Operating Income +27.1%, and an Operating Margin of 15.0% (6.1pt above the industry median 8.9%), indicating top-tier profitability within the manufacturing sector. Gross margin improvement of +1.0pt and restrained SG&A growth produced clear operating leverage, and the full-year progress rate (Operating Income 78%) is on an accelerated path.

2. The financial base is strong with Equity Ratio 68.9%, net cash ¥70.5B (Cash ¥81.4B − Interest-bearing debt ¥10.9B), and Interest Coverage 206x, supporting a sustainable payout ratio of 40% (full-year forecast basis). However, high DSO 101 days and WIP ratio 49.4% indicate room to improve working capital efficiency; normalization would further enhance cash generation and shareholder return capacity.

3. Aggressive increase in investment securities (+139%) boosts comprehensive income but raises the share of valuation differences to 12.3% of net assets, increasing sensitivity of net assets and comprehensive income to market movements. Core earnings quality is high and extraordinary items and FX impacts are minor; the business improvement is driving performance.

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This report is an AI-generated financial analysis document automatically created by analyzing XBRL financial disclosure data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial disclosures. Investment decisions are your responsibility; consult professional advisors as needed.