FUTABA CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

While business profitability continued to improve on higher revenue and a narrower operating loss, the net loss expanded from the previous year due to the recognition of extraordinary losses. Revenue was ¥108.4B (+4.1% year on year), operating income was ¥-3.4B, representing an improvement of ¥2.6B from the previous year’s ¥-6.0B, and ordinary income turned profitable at ¥1.7B, compared with ¥-9.5B in the previous year. However, as extraordinary losses of ¥15.4B were recognized, net income was ¥-14.6B, representing an expanded loss from ¥-5.5B in the previous year. The results reflected both an underlying improvement driven by a higher gross profit margin and control of SG&A expenses, and deterioration in final earnings due to temporary factors.

Factors Affecting Performance

【Revenue】Revenue was ¥108.4B, an increase of +4.1% year on year. By segment, Production Equipment recorded ¥66.1B, a slight decrease from ¥66.8B in the previous year, while Electronic Equipment increased to ¥42.3B from ¥35.4B, with growth in Electronic Equipment driving the overall result. By region, Japan recorded ¥4.7B, the Americas ¥13.7B, Europe ¥4.6B, and Asia and Other Regions ¥42.9B, with all regions exceeding the previous year.

【Profit and Loss】Gross profit was ¥19.9B, and the gross profit margin improved to 18.4% from 16.2% in the previous year, an improvement of +2.2pt. SG&A expenses were ¥23.3B, remaining only slightly above ¥23.0B in the previous year, while the operating margin improved to -3.1% from -5.8%, an improvement of +2.7pt. Non-operating income of ¥5.6B, comprising dividends received of ¥2.2B, foreign exchange gains of ¥0.8B, and interest income of ¥1.4B, contributed to ordinary income turning profitable at ¥1.7B. Meanwhile, due to the recognition of extraordinary losses of ¥15.4B, including impairment losses of ¥0.5B, profit before tax was ¥-13.7B and net income was ¥-14.6B. Although profitability at the operating level improved, temporary factors significantly pressured final earnings, resulting in both higher revenue and improved underlying earnings, and an expanded net loss due to extraordinary losses.

Segment Analysis

The reporting segments comprise Electronic Equipment and Production Equipment. Electronic Equipment generated revenue of ¥42.3B, compared with ¥35.4B in the previous year, an increase of +19.5%, while its segment loss narrowed to ¥-1.5B from ¥-4.1B in the previous year. Production Equipment generated revenue of ¥66.1B, compared with ¥68.8B in the previous year, a decrease of -3.9%, while its segment loss was ¥-1.9B, roughly unchanged from ¥-1.9B in the previous year. Both segments remained loss-making, but the narrower loss in Electronic Equipment contributed to the reduction in the Company-wide operating loss. Both segments recorded impairment losses on property, plant and equipment: ¥0.03B for Electronic Equipment and ¥0.26B for Production Equipment.

Key Financial Indicators

【Profitability】The operating margin was -3.1%, improving from -5.8% in the previous year but remaining negative. The gross profit margin was 18.4%, improving by +2.2pt from 16.2% in the previous year. The net profit margin was -13.5%, deteriorating from -5.3% in the previous year, as extraordinary losses weighed on the net profit margin.【Cash Flow Quality】Although profitability at the operating level is trending upward, accounts receivable of ¥110.3B and inventories of ¥29.7B indicate a large working capital base, requiring attention to the speed of cash conversion.【Investment Efficiency】ROE was -1.5%, primarily due to the deterioration in the net profit margin. With total assets of ¥1107.0B and net assets of ¥945.8B, the Company has a capital-rich structure, leaving room for improvement in asset efficiency.【Financial Soundness】The equity ratio was extremely high at 85.4%, and liquidity was sufficient, with current assets of ¥614.9B versus current liabilities of ¥67.9B. The Company held cash and deposits of ¥358.9B and investment securities of ¥194.0B, indicating a solid financial foundation.

Cash Flow Analysis

Although individual data from the cash flow statement is limited, changes in the balance sheet indicate that cash and deposits were ¥358.9B, almost unchanged from ¥361.9B in the previous year, suggesting that no significant cash outflow occurred. Investment securities increased to ¥194.0B from ¥173.3B in the previous year, indicating that a portion of surplus funds was allocated to securities investments. Accounts receivable declined to ¥110.3B from ¥115.4B in the previous year, suggesting somewhat improved collections, while inventories were ¥29.7B, roughly in line with the previous year, indicating no significant change in inventory levels. Although the operating loss is narrowing, the structure in which substantial working capital may affect capital efficiency remains in place. Ample cash and investment securities provide sufficient room for near-term liquidity management.

Earnings Quality

The return to profitability at the ordinary income level, with ordinary income of ¥1.7B, was driven by the accumulation of ¥5.6B in non-operating income, including dividends received of ¥2.2B, interest income of ¥1.4B, and foreign exchange gains of ¥0.8B. This represents a significant contribution from financial income separate from the improvement in the core business, which recorded an operating loss of ¥-3.4B. Meanwhile, extraordinary losses of ¥15.4B, including impairment losses of ¥0.5B, were temporary factors and the primary cause of the ¥-14.6B net loss. A divergence emerged between profitability at the ordinary income level and the expanded net loss caused by extraordinary losses, indicating that current-period earnings were significantly affected by the recognition of temporary expenses. Comprehensive income was ¥2.2B, creating a substantial divergence from net income of ¥-14.6B. Valuation-related factors, including ¥13.2B in valuation difference on securities and ¥4.2B in foreign currency translation adjustments, contributed to the increase, which should be taken into account when assessing the Company’s underlying earnings for the period.

Earnings Forecast and Guidance

The full-year earnings forecast is revenue of ¥450.0B (+4.7% year on year), operating income of ¥-13.0B, ordinary income of ¥-8.5B, and EPS of ¥-91.95. Q1 actual results represent progress of 24.1% against the full-year revenue forecast, broadly in line with the benchmark level of 25%. The operating loss represents approximately 26% progress against the full-year plan, within the expected range, while the net loss has reached approximately 37% of the full-year plan—roughly ¥-39B when back-calculated from EPS—indicating that the net loss has been front-loaded due to the early recognition of extraordinary losses. There were no revisions to the earnings or dividend forecasts this time.

Shareholder Returns

The dividend for the fiscal year ending March 2027 has not been determined, and the payout ratio and total return ratio cannot be calculated. The Company recorded a net loss for the period, and the decision regarding dividend payments is expected to be affected by future earnings trends. The Company holds substantial financial assets, including cash and deposits of ¥358.9B and investment securities of ¥194.0B, and therefore faces limited short-term financial constraints.

Risk Factors

1. Working capital stagnation risk: Accounts receivable of ¥110.3B and inventories of ¥29.7B, with total inventories including raw materials of ¥74.8B, represent substantial asset balances. Delays in collections or inventory turnover could lead to valuation losses or deterioration in capital efficiency.

2. Risk of continued segment losses: Although losses narrowed in both Electronic Equipment (¥-1.5B) and Production Equipment (¥-1.9B), both segments remain loss-making, and the pace of improvement may vary depending on utilization rates and competitive pricing conditions.

3. Risk of recurrence of extraordinary losses: The Company recorded extraordinary losses of ¥15.4B during the period, including impairment losses of ¥0.5B. Impairment losses resulting from declining profitability of operating assets also occurred in the previous year, and additional losses may be recognized in the future depending on the recoverability of assets.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s profitability is substantially below the industry median, with both its operating and net profit margins ranking in the lower tier of the industry.

Growth and Capital Efficiency

The revenue growth rate is slightly below the industry median but remains within the IQR.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Continued improvement in the profitability of the core business is noteworthy. The gross profit margin improved to 18.4% from 16.2% in the previous year, and the operating loss narrowed to ¥-3.4B from ¥-6.0B in the previous year. Losses also narrowed in both segments.

2. Ordinary income turned profitable at ¥1.7B, while the net loss expanded to ¥-14.6B due to the recognition of extraordinary losses of ¥15.4B. Improvement in the core business and deterioration in final earnings due to temporary factors occurred simultaneously, and the distinction between ordinary income and final earnings should be considered when assessing earnings quality.

3. The equity ratio was 85.4%, and the current ratio was also high, indicating a solid financial foundation. However, compared with the industry, both the operating margin and net profit margin were substantially below the median, making the pace of profitability recovery an important structural focus going forward.

Theoretical Share Price (Reference Value)

This 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). It is not a forecast of the market share price or a recommendation to undertake any specific investment action.

Sensitivity: 1,409円〜1,489円 at cost of equity ±1%, and 1,425円〜1,463円 at ω±0.1.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used; there is a timing difference relative to the full-year forecast.
• Because 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 release data. It is not a recommendation to invest 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 professionals as necessary.

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