ShinMaywa Industries,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Revenue and profit increased, driven by higher revenue from the Special-Purpose Truck and Aircraft businesses and improved profitability in the Aircraft segment. Ordinary Income and Net Income expanded at a pace exceeding the growth in Operating Income. Revenue was ¥627.1B (up +8.7% YoY), Operating Income was ¥20.5B (up +43.6%), Ordinary Income was ¥27.4B (up +82.5%), and Net Income was ¥18.8B (up +104.6%). The primary reason Ordinary Income growth significantly exceeded Operating Income growth was the boost from foreign exchange gains of ¥7.0B (¥0.2B in the previous year).

Factors Affecting Performance

【Revenue】The core Special-Purpose Truck Business led overall performance with revenue of ¥280.0B (approximately 44% of total revenue, YoY+9.2%). The Aircraft Business posted substantial revenue growth to ¥97.9B (approximately 15% of total revenue, YoY+22.0%), while the Parking Systems Business remained solid at ¥110.5B (YoY+5.6%). In contrast, the Industrial Machinery and Environmental Systems Business declined to ¥52.7B (YoY-3.2%), and Other Businesses decreased to ¥49.9B (YoY-2.0%), resulting in mixed segment performance. By region, Japan was the largest contributor at ¥510.8B (YoY+6.4%). North America expanded sharply to ¥64.6B (YoY+54.4%), primarily due to growth in aircraft-related business, while Asia declined to ¥35.9B (YoY-5.8%).

【Profitability】The gross profit margin improved to 16.1% from 15.5% in the previous year, a +0.6pt improvement. The SG&A expense ratio was 12.8%, essentially unchanged from 13.0% in the previous year, and the Operating Income margin improved to 3.3% from 2.5%. By segment, the Aircraft Business achieved substantial profitability improvement, with Operating Income of ¥9.9B (YoY+219.1%, margin 10.1%), while the Special-Purpose Truck Business also contributed to profit growth with Operating Income of ¥14.5B (YoY+21.5%, margin 5.2%). Conversely, the Industrial Machinery and Environmental Systems Business posted an expanded operating loss of ¥4.9B (¥0.4B loss in the previous year), weighing on company-wide profit. Non-operating income expanded to ¥10.8B (¥3.5B in the previous year), supported by the recording of ¥7.0B in foreign exchange gains, causing Ordinary Income to increase to ¥27.4B (+82.5%), exceeding the growth in Operating Income. Extraordinary losses were limited to ¥0.1B, indicating a limited impact from one-time factors. After Profit Before Tax of ¥27.3B and income taxes of ¥8.5B (effective tax rate of approximately 31%), Net Income reached ¥18.8B (+104.6%). The Company finished the quarter with higher revenue and profit.

Segment Analysis

The Special-Purpose Truck Business was the largest profit-contributing segment, with revenue of ¥280.0B (YoY+9.2%) and Operating Income of ¥14.5B (YoY+21.5%, margin 5.2%), reflecting both higher revenue and an improved profit margin. The Aircraft Business posted revenue of ¥97.9B (YoY+22.0%) and Operating Income of ¥9.9B (YoY+219.1%, margin 10.1%), representing a substantial improvement in profitability and serving as the primary driver of profit growth. The Parking Systems Business remained stable, with revenue of ¥110.5B (YoY+5.6%) and Operating Income of ¥9.2B (YoY+8.0%, margin 8.3%). Meanwhile, the Industrial Machinery and Environmental Systems Business posted revenue of ¥52.7B (YoY-3.2%), while its operating loss expanded to ¥4.9B (¥0.4B loss in the previous year), offsetting the Company’s operating leverage. The Fluid Business remained low-margin, with revenue of ¥51.2B (YoY+11.2%) and Operating Income of ¥0.6B (margin 1.2%). By region, North America expanded sharply to ¥64.6B (YoY+54.4%), primarily due to growth in aircraft-related business, while Asia declined to ¥35.9B (YoY-5.8%).

Key Financial Metrics

【Profitability】The Operating Income margin improved to 3.3% from 2.5% in the same period of the previous year, a +0.8pt improvement. The Net Income margin also improved to 3.0% from 1.6%, a +1.4pt improvement. ROE was 1.5%, above the approximately 0.7% estimated level for the same period of the previous year, supported by improved profitability in the Aircraft segment.【Cash Quality】Operating Cash Flow (OCF) of ¥18.5B was nearly equal to Net Income of ¥18.8B (98.6% ratio). However, an increase in inventories, primarily work in process, constrained cash generation, indicating that cash-generation capacity has not kept pace with profit growth.【Investment Efficiency】Quarterly Net Income-based ROA, before annualization, was only 0.65% against total assets of ¥2870.3B, indicating room for improvement in asset efficiency.【Financial Soundness】The Equity Ratio rose to 43.5% from 42.2% in the same period of the previous year, a +1.3pt increase. Although cash and deposits declined to ¥333.0B (from ¥360.6B in the previous year), current assets of ¥1892.0B exceeded current liabilities of ¥1110.8B, providing sufficient short-term liquidity.

Cash Flow Analysis

Operating Cash Flow was ¥18.5B, turning positive from -¥62.0B in the same period of the previous year. The subtotal, comprising Profit Before Tax of ¥27.3B plus depreciation and amortization of ¥14.0B and other items, reached ¥59.5B. However, the ¥90.5B increase in inventories, primarily work in process, absorbed funds, while the ¥169.4B decrease in trade receivables offset this impact and supported the return to positive Operating Cash Flow. Investing Cash Flow was -¥25.5B, as capital expenditures of ¥19.6B exceeded depreciation and amortization of ¥14.0B, indicating continued expansion of production capacity. Financing Cash Flow was -¥21.9B, mainly due to dividend payments of ¥19.2B. As a result, Free Cash Flow was -¥7.0B, indicating that investments and dividends were not fully funded solely by cash generated from operating activities. This is also reflected in the decline in cash on hand to ¥333.0B from ¥360.6B in the previous year.

Earnings Quality

Ordinary Income growth of +82.5% significantly exceeded Operating Income growth of +43.6%, primarily due to the increase in foreign exchange gains to ¥7.0B from ¥0.2B in the previous year. Foreign exchange gains accounted for approximately 25.5% of Ordinary Income of ¥27.4B, indicating a relatively greater dependence on temporary non-operating fluctuations, which is an important consideration when assessing earnings quality. Extraordinary losses were limited to ¥0.1B, and extraordinary income or loss factors contributed almost nothing to profit growth for the current period. Comprehensive Income was ¥14.4B, below Net Income of ¥18.8B. Negative other comprehensive income items, including foreign currency translation adjustments of -¥3.1B and valuation differences on securities of -¥1.7B, resulted in a gap of approximately ¥4.4B from Net Income.

Earnings Forecasts and Guidance

The full-year forecast calls for Revenue of ¥3100.0B (YoY+8.8%), Operating Income of ¥170.0B (YoY+4.1%), Ordinary Income of ¥155.0B (YoY-5.0%), and EPS of ¥158.75. Q1 progress rates were 20.2% for Revenue, 12.1% for Operating Income, 17.7% for Ordinary Income, and 17.9% for Net Income attributable to owners of the parent. In particular, Operating Income progress was below the simple quarterly allocation benchmark of 25%. Ordinary Income is planned to decline year-on-year for the full year, suggesting that the uplift from foreign exchange gains in the current period is not assumed to continue throughout the full year. Although the earnings forecast was revised on this occasion, the dividend forecast was not revised.

Shareholder Returns

The Company’s forecast annual dividend is ¥58.00, corresponding to a Payout Ratio of approximately 36.5% based on forecast EPS of ¥158.75. As of Q1, there has been no revision to the dividend forecast, and no share buyback has been disclosed. Free Cash Flow was -¥7.0B for the current period, below dividend payments of ¥19.2B, meaning that dividend cash coverage depends on the potential improvement in Operating Cash Flow over the full year.

Risk Factors

1. Expansion of losses in the Industrial Machinery and Environmental Systems Business: The segment’s operating loss expanded to -¥4.9B from -¥0.4B in the same period of the previous year, while revenue also continued to decline to ¥52.7B (YoY-3.2%). This is a factor offsetting company-wide Operating Income growth.

2. Dependence on non-operating income (foreign exchange gains): Foreign exchange gains of ¥7.0B accounted for approximately 25.5% of Ordinary Income of ¥27.4B, representing a substantial increase from ¥0.2B in the same period of the previous year. A reversal in foreign exchange trends could become a source of volatility in Ordinary Income.

3. Increase in working capital (work in process): Work in process increased 20.5% to ¥329.1B from ¥273.2B in the same period of the previous year, while the total ¥90.5B increase in inventories constrained Operating Cash Flow. Free Cash Flow was -¥7.0B, making the conversion of inventory into sales and the progress of collections key factors for cash flow improvement.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Points from the Earnings Report

1. The Operating Income progress rate was 12.1%, below the simple quarterly allocation benchmark of 25% against the full-year plan. The back-loaded nature of the plan is an important point to monitor in assessing progress in subsequent quarters.

2. Improved profitability in the Aircraft segment (Operating Income +219.1%, margin 10.1%) was the primary driver of profit growth, while expanded losses in the Industrial Machinery and Environmental Systems Business weighed on company-wide profit, highlighting the clear divergence among segments.

3. Ordinary Income growth (+82.5%) exceeded Operating Income growth (+43.6%), primarily due to increased foreign exchange gains. The greater dependence on non-operating factors is an important consideration when evaluating earnings quality.

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 five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,817–¥1,923 at Cost of Equity ±1%, and ¥1,868–¥1,869 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 end of the quarter are used (there is a timing difference from 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: 2026-06 / This value does not predict 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 discretion and responsibility, after consulting a professional as necessary.

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