ROHM COMPANY LIMITED FY2027 Q1 Earnings Report

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Executive Summary

The Q1 financial results for the fiscal year ending March 2027 marked a significant recovery in profitability, with substantial increases in Operating Income, Ordinary Income, and Net Income in addition to higher Revenue. Revenue was ¥1,357.4B (¥1,162.0B in the same period of the previous year, +16.8%), Operating Income was ¥96.3B (an increase of ¥94.4B from ¥1.9B, +4841.0%), Ordinary Income was ¥112.4B (up ¥87.6B, +352.6%), and Net Income attributable to owners of the parent was ¥90.1B (up ¥60.4B from ¥29.7B, +203.6%). In addition to higher Revenue, the main drivers of the increase in profit were improved gross margin and operating leverage resulting from SG&A expense control.

Factors Affecting Results

【Revenue】Revenue was ¥1,357.4B (+16.8% YoY). By segment, including intersegment sales, ICs were ¥625.0B (+13.2%, approximately 46% of the composition), while Semiconductor Devices (Discrete) were ¥600.6B (+24.2%, approximately 44% of the composition), leading the recovery in volume. Modules were ¥80.7B (+0.4%), and Other was ¥66.1B (+4.3%), both remaining broadly flat. By region, Asia was the largest market at ¥762.5B (+12.6% YoY), accounting for 56.2% of the total. Europe stood out in terms of growth at ¥107.2B (+41.6%), with its composition ratio rising from 6.5% to 7.9%.

【Profit and Loss】The Operating Income margin improved significantly to 7.1% from 0.17% in the same period of the previous year. Gross margin improved to 25.5% (22.2% in the previous year, +330bp), while the SG&A expense ratio declined to 18.4% (22.0% in the previous year, -357bp), resulting in a double margin improvement in addition to the effect of higher Revenue. Ordinary Income increased by a further +¥16.1B from Operating Income, as non-operating income of ¥25.8B, mainly consisting of ¥16.9B in interest income, exceeded non-operating expenses of ¥9.7B, including ¥4.1B in interest expense and ¥4.8B in foreign exchange losses. Extraordinary gains of ¥16.0B, including gains on sales of investment securities, and extraordinary losses of ¥15.2B, including impairment losses, largely offset each other, resulting in a small net gain of +¥0.8B. This represented only 0.9% of Net Income, indicating that the impact of temporary factors was limited. After deducting income taxes and other taxes of ¥23.1B (effective tax rate of 20.4%) from Profit Before Tax of ¥113.2B, Net Income was ¥90.1B. In conclusion, the Company achieved both higher Revenue and higher profit in the quarter.

Segment Analysis

Segment profit was led by ICs at ¥73.1B (+69.0% YoY, 11.7% margin), which accounted for the core of total Company profit. Modules remained stable at ¥10.2B (+18.2%, 12.6% margin). Although Semiconductor Devices (Discrete) recorded the strongest Revenue growth at +24.2%, its operating loss continued at -¥9.4B; however, the loss narrowed substantially from -¥62.6B in the same period of the previous year (+84.9%). Other recorded ¥9.0B (-11.3%), representing a modest decline in profit. Regional sales on a consolidated basis were ¥410.9B in Japan (+19.0% YoY, 30.3% composition), ¥762.5B in Asia (+12.6%, 56.2% composition), ¥76.6B in the Americas (+20.0%, 5.6% composition), and ¥107.2B in Europe (+41.6%, 7.9% composition). Although the concentration in Asia continues, growth in Europe is increasing its composition ratio. The narrowing of the Discrete segment’s loss was the primary inflection point in the improvement of the Company-wide margin, and progress toward a return to profitability will be key to future profitability.

Key Financial Indicators

【Profitability】The Operating Income margin improved substantially to 7.1% (0.17% in the same period of the previous year), while the Net Income margin, based on income attributable to owners of the parent, improved to 6.6% (2.6% in the same period of the previous year). ROE, based on a DuPont decomposition, was approximately 1.2%, calculated as Net Income margin of 6.6% × total asset turnover of 10.5% (quarterly Revenue / total assets) × financial leverage of 1.68x. This improved from approximately 0.4% in the same period of the previous year, although it should be noted that this is a quarterly figure and has not been annualized. 【Cash Quality】Although the Statement of Cash Flows was not disclosed, Cash and deposits increased to ¥4,559.0B (+8.8% YoY), while investment securities were reduced to ¥1,174.5B (-25.7%), indicating a shift in the asset composition toward cash. 【Investment Efficiency】Total asset turnover increased from 9.1% in the same period of the previous year to 10.5% on a quarterly basis, confirming an improvement in asset efficiency accompanying higher Revenue. 【Financial Soundness】The Equity Ratio remained high at 59.7% (59.1% in the same period of the previous year), and liquidity remained ample, with current assets of ¥8,037.3B compared with current liabilities of ¥1,927.2B. Cash and deposits of ¥4,559.0B exceeded interest-bearing debt of ¥4,000B, comprising short-term borrowings of ¥1,000B, long-term borrowings of ¥1,000B, and bonds of ¥2,000B, resulting in a net cash financial structure.

Cash Flow Analysis

As the Statement of Cash Flows was not disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits increased by +¥367.9B (+8.8%) to ¥4,559.0B from ¥4,191.4B in the same period of the previous year. At the same time, investment securities decreased by -¥405.6B (-25.7%) to ¥1,174.5B, indicating a shift in assets from securities to cash. Trade receivables increased to ¥994.2B (+20.4%), slightly exceeding the +16.8% growth in Revenue. DSO calculated based on quarterly Revenue increased modestly from approximately 64.7 days to approximately 66.6 days. Inventories, comprising finished goods, work in process, and raw materials, were ¥2,018.4B, essentially flat from ¥2,023.1B in the same period of the previous year (-0.2%). Maintaining inventory levels despite higher Revenue suggests a slight improvement in inventory efficiency. Trade payables increased to ¥339.8B (+43.2%), exceeding the +11.8% growth in purchases and cost of sales, indicating potential room for adjustment in payment terms. Retained earnings were ¥488.99B, essentially flat from ¥489.64B in the same period of the previous year, suggesting that dividend payments absorbed the cumulative profit generated during the period. Overall, cash liquidity expanded, securing funding capacity for both investment and shareholder returns.

Quality of Earnings

Current-period earnings were largely derived from recurring business activities, indicating good earnings quality. Non-operating income of ¥25.8B, primarily consisting of ¥16.9B in interest income, exceeded non-operating expenses of ¥9.7B (¥4.1B in interest expense and ¥4.8B in foreign exchange losses), increasing Ordinary Income by +¥16.1B. The positive contribution from net financial income indicates that the Company is appropriately capturing changes in the interest-rate environment. Extraordinary gains of ¥16.0B, including gains on sales of investment securities, and extraordinary losses of ¥15.2B, including losses on disposal and sale of fixed assets, largely offset each other, resulting in a net gain of +¥0.8B, or only 0.9% of Net Income. The divergence between Ordinary Income and Net Income is therefore primarily explained by the tax burden, with an effective tax rate of 20.4%. Comprehensive Income was ¥258.2B, significantly exceeding Net Income of ¥90.1B. This difference was mainly attributable to valuation-related Other Comprehensive Income items, including foreign currency translation adjustments of +¥63.8B and valuation differences on securities of +¥104.5B. Accordingly, evaluation based on Net Income and Ordinary Income is more appropriate as an indicator of the Company’s underlying earnings power for the period.

Earnings Forecast and Guidance

Progress against the full-year plan was 26.6% for Revenue (¥1,357.4B against a plan of ¥5,100B), 32.1% for Operating Income (¥96.3B against a plan of ¥300B), 31.2% for Ordinary Income (¥112.4B against a plan of ¥360B), and 31.1% for Net Income (¥90.1B against a plan of ¥290B, with forecast EPS of ¥75.12). All were ahead of the standard quarterly progress benchmark of 25%. During the quarter, there were no revisions to either the earnings forecast or the dividend forecast, and management has maintained its initial plan at this point. The early progress was supported by improved gross margin and SG&A expense control in Q1, while continued improvement in the Discrete segment’s profitability from the second half onward will be a key point to monitor for achievement of the full-year plan.

Shareholder Returns

The annual dividend forecast for the fiscal year ending March 2027 is ¥50, and no revision to the dividend forecast was made during the quarter. Based on 403,760 thousand issued shares less 17,721 thousand treasury shares, or 386,039 thousand shares, the expected annual dividend payout is approximately ¥19.30B. The Payout Ratio against the full-year Net Income forecast of ¥29.0B, based on income attributable to owners of the parent, is calculated at approximately 66.5%. The plan represents an increase from the dividend of ¥25 per share in the same period of the previous year. No information regarding share repurchases has been disclosed, and evaluation based on the Payout Ratio is appropriate for shareholder returns. Given Cash and deposits of ¥4,559.0B and the low level of interest-bearing debt, the Company has sufficient cash resources to fund dividends.

Risk Factors

1. Profitability of the Semiconductor Devices (Discrete) Segment: Revenue increased to ¥600.6B (+24.2%), but the operating loss continued at -¥9.4B, representing a margin of -1.6%. Although this was substantially narrower than -¥62.6B in the same period of the previous year (+84.9%), the segment has not yet returned to profitability.

2. Impact of Foreign Exchange Fluctuations: The Company recorded foreign exchange losses of ¥4.8B during the quarter. Asia accounted for a high 56.2% of regional sales, while foreign currency translation adjustments contributed +¥63.8B to Comprehensive Income. Foreign exchange sensitivity is therefore at a level that cannot be ignored in either the income statement or Comprehensive Income.

3. Absolute Inventory Level: Total inventories, comprising finished goods, work in process, and raw materials, remained at ¥2,018.4B, equivalent to approximately 1.5 times quarterly Revenue. Although inventories were essentially flat from the same period of the previous year and no sharp deterioration in inventory efficiency was identified, this level requires continued monitoring from the perspective of impairment risk in the event of demand fluctuations.

Industry Benchmark (Reference・Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin are slightly below the industry median, placing the Company in the middle to slightly lower tier of the industry in terms of profitability.

Growth and Capital Efficiency

The Revenue growth rate substantially exceeds the industry median, placing the Company among the higher-growth group in the industry.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The Operating Income margin recovered sharply from 0.17% in the same period of the previous year to 7.1%. This was driven by a double improvement consisting of +330bp in gross margin and -357bp in the SG&A expense ratio, representing a sign of structural profitability improvement beyond the effect of higher Revenue alone.

2. Progress against the full-year plan was 26.6% for Revenue and 32.1% for Operating Income, both exceeding the standard 25% benchmark. The Company is therefore ahead of the full-year plan at this point.

3. The Semiconductor Devices (Discrete) segment’s loss narrowed from -¥62.6B in the same period of the previous year to -¥9.4B. Continued improvement in profitability and the timing of a return to profitability will be key factors determining the future trend in the Company-wide Operating Income margin.

Theoretical Share Price (Reference Value)

The following is a mechanically calculated reference range based solely on publicly available 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: ¥1,679–¥1,774 at ±1% for the cost of equity, and ¥1,716–¥1,731 at ±0.1 for ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• 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 / Interest-rate reference month: 2026-07 / This value does not forecast 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 disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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