ROHM (6963) FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, ROHM returned to operating profitability, while its net loss expanded due to a large impairment loss in the Semiconductor Devices Business. Revenue was ¥481.15B, up +7.3% year on year, and Operating Income was ¥10.86B, representing a return to profitability from an Operating Loss of ¥40.06B in the previous year. Ordinary Income was ¥19.22B, compared with an Ordinary Loss of ¥29.70B in the previous year. Meanwhile, Net Income attributable to owners of the parent was ¥-158.40B, with the loss expanding by ¥108.36B from ¥-50.04B in the previous year. The key point of these results is the divergence between the recovery in operating performance, driven by higher revenue and an improved gross margin, and the expansion of the net loss, primarily due to the ¥193.60B impairment loss.

Factors Driving Earnings Changes

【Revenue】Revenue was ¥481.15B, representing a year-on-year increase of +7.3%. By segment, ICs (LSI) recorded ¥218.39B (+7.1%), while Semiconductor Devices recorded ¥205.26B (+9.7%), showing the highest growth rate. Modules were the only segment to post a decline, with revenue of ¥31.59B (-3.0%). By region, Asia accounted for 56.5% of revenue and led the recovery in demand.

【Profit and Loss】Operating Income was ¥10.86B, improving by ¥50.93B from the Operating Loss of ¥40.06B in the previous year. The gross margin improved to 23.9% from 16.6% in the previous year, while Selling, General and Administrative Expenses also declined by ¥9.96B. By segment, ICs generated Operating Income of ¥24.53B, with an operating margin of 11.2%, making it the largest profit contributor. Semiconductor Devices, however, reported an Operating Loss of ¥22.70B, with an operating margin of -11.1%, constraining company-wide profitability. Ordinary Income was ¥19.22B, exceeding Operating Income, but Extraordinary Losses of ¥215.48B, including an impairment loss of ¥193.60B, substantially exceeded Extraordinary Gains of ¥25.35B. As a result, Profit Before Tax was ¥-170.90B and Net Income was ¥-158.40B. Although the Company recorded higher revenue and improved operating and ordinary income, Net Income fell into a substantial deficit due to the temporary impairment charge.

Segment Analysis

ICs (LSI) recorded revenue of ¥218.39B (+7.1%) and Operating Income of ¥24.53B, compared with an Operating Loss of ¥0.77B in the previous year, returning to profitability and becoming the main profit contributor with an operating margin of 11.2%. Semiconductor Devices posted the highest revenue growth rate, with revenue of ¥205.26B (+9.7%), but remained in an Operating Loss position of ¥22.70B, with an operating margin of -11.1%. This segment recorded an impairment loss of ¥191.65B. Modules maintained stable profitability, recording revenue of ¥31.59B (-3.0%) and Operating Income of ¥3.52B, with an operating margin of 11.1% and growth of +30.9%. Other Businesses recorded revenue of ¥25.90B (+3.5%) and Operating Income of ¥4.10B, achieving the highest operating margin among the reported segments at 15.8%. Overall, ICs drove profitability, while restoring the earnings performance of Semiconductor Devices remains a key challenge.

Key Financial Indicators

【Profitability】The Operating Margin improved to 2.3% from -8.9% in the previous year, but the Net Profit Margin deteriorated to -32.9% from -11.2%. ROE was -20.9%, compared with -5.4% in the previous year, resulting in a substantially negative figure due to the impact of the impairment loss.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥89.45B, substantially exceeding Net Income of ¥-158.40B. The difference in signs reflects the magnitude of the impairment loss, a non-cash item.【Investment Efficiency】Capital expenditures were ¥110.97B, equivalent to 1.95 times Depreciation and Amortization of ¥57.03B, indicating a phase of capacity expansion and replacement investment. However, funding from Operating Cash Flow was negative at ¥-21.52B.【Financial Soundness】The Equity Ratio was 59.1%, compared with 61.7% in the previous year. Cash and deposits totaled ¥419.11B, an increase of ¥222.51B from the previous year, indicating substantial liquidity. Interest-bearing debt consisted of ¥200.0B in bonds and ¥200.0B in total short- and long-term borrowings.

Cash Flow Analysis

Operating Cash Flow was an inflow of ¥89.45B, up +6.5% year on year, maintaining a level consistent with the improving trend in Operating Income and Ordinary Income. Investing Cash Flow was an inflow of ¥108.59B, resulting from proceeds from the sale of investment securities and other sources exceeding the ¥110.97B expenditure on capital investments. This represents a somewhat unusual structure for a normal business investment phase. Financing Cash Flow was ¥-20.81B, primarily due to dividend payments of ¥19.30B and other factors. Free Cash Flow, defined as Operating Cash Flow plus Investing Cash Flow, was ¥198.04B. However, because this figure includes a temporary cash inflow from the sale of investment securities, caution is warranted when assessing it as recurring investment capacity. Normal cash flow, calculated by deducting capital expenditures from Operating Cash Flow, was negative at ¥-21.52B, indicating that capital expenditures during the period were not funded solely by operating activities.

Earnings Quality

Ordinary Income of ¥19.22B exceeded Operating Income of ¥10.86B, primarily because non-operating income of ¥11.82B, centered on interest and dividend income, contributed to earnings. Accordingly, earnings sustainability is somewhat weaker than suggested by Operating Income alone. The largest factor affecting Net Income was Extraordinary Losses of ¥215.48B, particularly the ¥193.60B impairment loss, which was a temporary factor associated with a reassessment of asset values in the Semiconductor Devices Business. Extraordinary Gains of ¥25.35B, including a gain on the sale of investment securities of ¥1.97B and a gain on the sale of fixed assets of ¥2.42B, also constituted temporary items. Operating Cash Flow of ¥89.45B had the opposite sign to Net Income of ¥-158.40B, indicating that accounting Net Income was substantially distorted by the non-cash impairment loss. In addition, the change in the depreciation method for property, plant and equipment from the declining-balance method to the straight-line method resulted in an upward effect on segment profit from the change in accounting policy. Caution is therefore necessary when assessing the underlying improvement in business profitability.

Earnings Forecasts and Guidance

The Company’s forecast for the next fiscal year, ending March 2027, calls for Revenue of ¥510.00B (+6.0% year on year), Operating Income of ¥30.00B (+176.1%), Ordinary Income of ¥36.00B (+87.3%), and forecast EPS of ¥75.12. Compared with the current-period results of Revenue of ¥481.15B and Operating Income of ¥10.86B, the current Revenue represents 94.3% of the forecast and current Operating Income represents 36.2% of the forecast. The Company plans to raise the Operating Margin from 2.3% in the current period to approximately 5.9% on a forecast basis. Achieving this improvement will depend on maintaining the profitability of ICs and reducing losses in the Semiconductor Devices Business through improvements in utilization rates, pricing, and product mix.

Shareholder Returns

The annual dividend was ¥50 per share, consisting of ¥25 for Q2 and ¥25 for the year-end dividend, unchanged from the previous year’s annual dividend of ¥50, or ¥25 each. Because Net Loss attributable to owners of the parent was ¥158.42B, the earnings-based Payout Ratio has no meaningful interpretation for the current period. However, dividend payments of ¥19.30B were covered by Operating Cash Flow of ¥89.45B by approximately 4.6 times, indicating that dividends were paid within the range of Operating Cash Flow. No share repurchases were conducted, so shareholder returns are assessed solely on the basis of dividends. The Company has maintained its forecast for an annual dividend of ¥50 for the next fiscal year ending March 2027. Based on forecast Net Income of ¥29.0B, the forecast Payout Ratio is calculated at approximately 66.6%.

Risk Factors

1. Weak profitability in the Semiconductor Devices Business: While revenue of ¥205.26B accounted for 42.7% of company-wide revenue, the segment recorded an Operating Loss of ¥22.70B and an Operating Margin of -11.1%. The business recorded an impairment loss of ¥191.65B during the current period. If utilization rates and earnings recovery for the assets remaining after the impairment do not improve, the risk of further asset restructuring and additional loss recognition remains.

2. Working capital and inventory accumulation: Inventories were ¥40.90B, with the inventory composition including ¥92.33B in work-in-process inventory. The business has high sensitivity to long production lead times and fluctuations in demand. If semiconductor market conditions deteriorate again, inventory write-downs and cash tied up in inventory could occur simultaneously.

3. Progress in capital efficiency and asset-lighting: Property, plant and equipment decreased by ¥165.49B year on year, reflecting progress in reducing the balance sheet through impairment charges. Investment securities also declined by ¥193.50B as they were converted into cash. However, it remains uncertain whether cash generation on a similar scale can be repeated, and the recovery of capital efficiency depends on rebuilding the profitability of the Semiconductor Devices Business.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s profitability is substantially below the industry median, with its Net Profit Margin particularly underperforming due to the impact of the impairment loss.

Growth and Capital Efficiency

The Revenue Growth Rate exceeded the industry median, indicating relatively strong resilience in the recovery of the top line.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Operating profit and loss improved by ¥50.93B from the previous year, resulting in a return to profitability. However, the Operating Margin of 2.3% remains below the industry median of 7.6%, indicating that the earnings recovery is still in its early stages. ICs was the largest profit contributor, with Operating Income of ¥24.53B, while the Operating Loss of ¥22.70B in Semiconductor Devices was the primary constraint on company-wide profitability.

2. The ¥193.60B impairment loss was the primary cause of the expanded Net Loss. The current-period ROE of -20.9% and Net Profit Margin of -32.9% therefore present an overly pessimistic view of the Company’s ordinary earnings power. Operating Cash Flow of ¥89.45B had the opposite sign to Net Income, and the divergence reflects the scale of non-cash items.

3. The Company’s forecast for the next fiscal year calls for Operating Income of ¥30.0B (+176.1% compared with the current period) and plans to raise the Operating Margin to 5.9%. Reducing losses in the Semiconductor Devices Business and improving inventory turnover and the cash conversion cycle will be important progress indicators for achieving this target.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,647–¥1,740 for a ±1% change in the Cost of Equity, and ¥1,684–¥1,698 for a ±0.1 change in ω.

Notes:

• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed 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 summary data. 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, consulting professionals as necessary.

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