YOKOGAWA ELECTRIC (6841) FY2026 Q3 Earnings Report

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Executive Summary

Yokogawa Electric's cumulative results for the Q3 of the fiscal year ending March 2026 showed increases in both revenue and profit; however, growth in operating income lagged revenue growth, while the appreciation of the yen put pressure on profit margins. Revenue was ¥4,343.1億（+6.2% YoY）, operating income was ¥604.2億（+3.5%）, ordinary income was ¥619.9億（+2.0%）, and net income attributable to owners of the parent was ¥448.4億（+15.9%）. While the acquisition of large-scale projects in the Control Business and the execution of its substantial order backlog drove revenue growth, a revision of foreign exchange assumptions toward a stronger yen（¥145→¥150）reduced operating income. The full-year forecast was revised upward, with revenue raised to ¥5,950.0億 and operating income to ¥870.0億.

Factors Affecting Business Performance

【Revenue】Revenue was ¥4,343.1億, representing a +6.2% increase YoY. The core Control Business（IndustrialAutomationAndControl）led overall performance, with revenue of ¥4,070.0億（+6.1% YoY）, supported by the acquisition of large-scale projects in the Japanese market and the execution of its order backlog. The Test and Measurement Business expanded orders due to demand related to AI data centers and achieved revenue of ¥237.3億（+5.8% YoY）.

【Profit and Loss】Operating income was limited to ¥604.2億（+3.5% YoY）, and the operating margin declined from the previous year to 13.9%. The gross margin was 46.5%; according to the PDF materials, this represented a deterioration of approximately 119bp YoY, primarily due to foreign exchange effects（▲¥65億 on operating income）and higher project costs. Ordinary income was ¥619.9億（+2.0% YoY）, showing only slightly higher growth than operating income, while net income rose significantly to ¥448.4億（+15.9% YoY）. The divergence between ordinary income and net income was largely attributable to the decline in the tax burden ratio（29.6% in the previous year→22.1% in the current period）. Extraordinary losses of ¥24.6億（primarily ¥19.9億 in losses on disposal of fixed assets）were temporary factors associated with facility renewals and site restructuring. In conclusion, both revenue and profit increased.

Segment Analysis

The Control Business（IndustrialAutomationAndControl）is the core business, with revenue of ¥4,070.0億, operating income of ¥555.7億, and a profit margin of 13.7%; it accounts for 93.7% of total company revenue. The primary drivers of the increases in revenue and profit were this Control Business, with the acquisition of large-scale projects in Japan and steady execution of the order backlog driving performance. The Test and Measurement Business recorded revenue of ¥237.3億, operating income of ¥51.4億, and a profit margin of 21.6%, demonstrating the highest profitability among all company businesses, supported by expanding demand related to AI data centers. New Businesses and Other recorded revenue of ¥35.9億 and an operating loss of ¥2.8億（profit margin: ▲7.9%）, and appear to be in the initial investment phase. Among the segments, the profit margin of the Test and Measurement Business significantly exceeds that of the Control Business, confirming a qualitative difference in the earnings structure.

Key Financial Indicators

Profitability: ROE of 9.1% and operating margin of 13.9%.
Cash quality: Cash and deposits were ¥1,929.8億. Although Operating Cash Flow（OCF）data was outside the disclosed scope, accounts receivable of ¥2,475.1億 accounted for 32.6% of total assets, indicating the accumulation of working capital.
Financial soundness: The Equity Ratio was 67.8%. The current ratio was approximately 239.7%, calculated as current assets of ¥5,204.3億/current liabilities of ¥2,171.3億, representing a high level.
Other: Contract liabilities（advances received）of ¥653.5億 and interest income of ¥22.1億 were the main sources of non-operating income.

Cash Flow Analysis

As the detailed cash flow statement（Operating Cash Flow・investing cash flow・financing cash flow）was not disclosed in the earnings data, trends are reviewed based on changes in the balance sheet. Cash and deposits increased to ¥1,929.8億 from ¥1,887.5億 in the previous year. Meanwhile, short-term borrowings surged to ¥202.0億 from ¥3.3億 in the previous year, while long-term borrowings declined to ¥40.4億 from ¥240.3億, indicating a shift toward shorter-term interest-bearing debt. Treasury stock increased to ¥362.7億 from ¥232.5億 in the previous year, reflecting the acquisition of treasury stock（cumulative ¥171億, 558.6万 shares）in financing activities. Cash generation is assessed as standard, but changes in working capital（increase in accounts receivable）and the borrowing composition require monitoring.

Earnings Quality

Net income of ¥448.4億 diverged from ordinary income of ¥619.9億, primarily due to the ¥133.3億 corporate income tax burden（effective tax rate of approximately 22.1%, compared with approximately 29.6% in the previous year）. Non-operating income of ¥42.9億 was limited to 1.0% of revenue, primarily consisting of dividend income of ¥12.6億 and interest income of ¥22.1億, which are recurring in nature. Of the ¥24.6億 in extraordinary losses, ¥19.9億 in losses on disposal of fixed assets was a temporary factor associated with facility renewals, while impairment losses were limited to ¥0.3億. Comprehensive income of ¥688.1億 significantly exceeded net income of ¥470.4億, primarily due to foreign currency translation adjustments of ¥160.8億, reflecting the increase in the yen-converted value of overseas assets resulting from the yen's depreciation.

Earnings Forecast and Guidance

Progress against the full-year forecast was 73.0% for revenue, 69.5% for operating income, and 71.3% for ordinary income; compared with the standard progress rate of 75%, operating income is progressing somewhat slowly. The company revised its full-year forecast upward, raising operating income from ¥830億 to ¥870億, an increase of +¥40億, and net income from ¥545億 to ¥595億, an increase of +¥50億. The upward revision reflects an increase in gross profit associated with higher revenue（+¥180億）, although the revision of foreign exchange assumptions toward a stronger yen（¥145→¥150）has had a negative impact of ▲¥65億 on operating income. The order backlog totaled ¥4,658億, an increase of +¥376億 YoY. The order backlog/revenue ratio was approximately 78.3% against the full-year forecast revenue of ¥5,950億, indicating high visibility for future revenue.

Shareholder Returns

The year-end dividend forecast was revised upward from ¥32 to ¥46, bringing the expected annual dividend to ¥78（¥64 in the previous year）. Based on forecast EPS of ¥233.15, the Payout Ratio is approximately 33.5%. In addition, the company had conducted share repurchases totaling ¥171億（558.6万 shares）by the end of December 2025, resulting in a Total Return Ratio of 55.3% when dividends and share repurchases are combined. The dividend-only Payout Ratio of 33.5% indicates ample capacity for shareholder returns, while the Total Return Ratio of 55.3% reflects an active shareholder return policy including share repurchases.

Catalysts

【Short Term】The focus will be on the progress of revenue recognition from the substantial order backlog（¥4,658億）in Q4 and whether the full-year operating margin level of 16.5% can be achieved.

【Long Term】Expansion of orders and revenue in the Energy & Sustainability area of the Control Business and the capture of demand related to AI data centers in the Test and Measurement Business are attracting attention as medium- to long-term growth drivers.

Industry Benchmark（For Reference; Compiled by the Company）

Industry Benchmark（manufacturing）

Profitability and Returns

Both the company's operating margin and net profit margin significantly exceed the industry median, placing its profitability at a high level within the industry.

Growth and Capital Efficiency

The revenue growth rate also exceeds the industry median, and the company is maintaining relatively high growth within the industry.

※Source: Compiled by the Company

Risk Factors

1. Working Capital and Collection Risk: Accounts receivable of ¥2,475.1億 accounted for 32.6% of total assets, indicating a risk of funds being tied up due to the long acceptance and collection periods associated with control and engineering projects.

2. Foreign Exchange Risk: The revision of the full-year foreign exchange assumption from ¥145 to ¥150 has had a negative impact of approximately ¥65億 on operating income, and a foreign exchange loss of ¥7.7億 was also recorded. Given the business structure's high proportion of overseas projects, fluctuations in the yen exchange rate will continue to affect business performance.

3. Sharp Increase in Short-Term Borrowings: Short-term borrowings surged to ¥202.0億 from ¥3.3億 in the previous year, resulting in a shift in the composition from long-term borrowings of ¥40.4億. As cash and deposits of ¥1,929.8億 substantially exceed short-term borrowings, this is not yet at a level that raises immediate liquidity concerns; however, the shorter maturity structure of liabilities requires monitoring.

Key Points from the Earnings Results

1. Although profitability remains above the industry average, the operating margin declined from the previous year due to the revision of foreign exchange assumptions toward a stronger yen. Excluding foreign exchange effects, operating income is estimated to have increased +7.1% YoY, confirming an underlying trend of profit growth in the business.

2. The order backlog of ¥4,658億（+¥376億 YoY）is equivalent to approximately 78% of forecast full-year revenue, representing a structural characteristic that provides a certain level of support for the revenue outlook from the next fiscal year onward.

3. In addition to a Payout Ratio of 33.5%, the Total Return Ratio of 55.3%, including share repurchases, indicates an intensified shareholder return policy in parallel with profit growth. Together with financial soundness（Equity Ratio of 67.8%）, this merits attention from the perspective of shareholder return capacity.

Theoretical Share Price（Reference Value）

Sensitivity: ¥2,149–¥2,277 at ±1% for the cost of equity, and ¥2,207–¥2,218 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）.
• As 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 using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices）

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This report is an earnings analysis document automatically generated by AI through an integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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