TACHI-S CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Revenue and profit both increased, resulting in a higher-revenue, higher-profit quarter, with particularly significant growth from Operating Income downward. Revenue was ¥666.2B (¥639.4B in the same period of the previous year, YoY+4.2%), Operating Income was ¥20.1B (up +79.9%), and Ordinary Income was ¥26.0B (up +146.6%). Net Income attributable to owners of the parent was ¥14.7B, a substantial increase from ¥0.2B (¥19 million) in the same period of the previous year; however, it should be noted that the comparison base was extremely low. The primary drivers of the profit increase were an improvement in the gross profit margin (8.0%→10.8%, +2.8pt) and the positive impact of higher non-operating income, including foreign exchange gains and equity in earnings of affiliates. Meanwhile, the North America segment shifted to an operating loss despite higher revenue.

Factors Affecting Results

【Revenue】Revenue was ¥666.2B, representing a YoY increase of +4.2%. North America (+44.1%) and Asia (the integrated China segment, +23.3%) drove growth, while Japan (-1.9%) and Central and South America (-7.1%) recorded revenue declines, resulting in divergent regional performance.

【Profit and Loss】Operating Income was ¥20.1B (YoY+79.9%). The improvement in the gross profit margin (+2.8pt) exceeded the increase in SG&A expenses (+30.0%, ¥51.9B), resulting in operating leverage. Ordinary Income was ¥26.0B (YoY+146.6%), with non-operating income of ¥7.9B, including foreign exchange gains of ¥3.2B and equity in earnings of affiliates of ¥2.2B, added to Operating Income. An extraordinary loss of ¥2.8B, including ¥2.8B in business structure reform expenses, was recorded as a temporary factor, resulting in Profit Before Tax of ¥23.2B. Net Income attributable to owners of the parent was ¥14.7B, or -43.4% relative to Ordinary Income. This was attributable to income taxes of ¥8.2B, the net extraordinary loss, and ¥0.3B in Net Income attributable to non-controlling interests, and does not represent a level that materially impairs earnings quality. In conclusion, the Company recorded higher revenue and higher profit.

Segment Analysis

Segment profit varied significantly by region. Central and South America turned profitable, improving from an operating loss of -¥10.5B in the same period of the previous year to +¥4.8B (profit margin 1.9%), representing a notable recovery with a profit growth rate of +145.7%. In Japan, Revenue was ¥252.5B (-1.9%), while Operating Income was ¥4.7B (-36.2%, profit margin 1.8%, compared with 2.8% in the previous year), indicating deteriorating profitability. North America posted substantial revenue growth to ¥130.0B (+44.1%), but operating profit and loss declined to -¥0.7B from +¥0.1B in the previous year, with higher revenue and deteriorating profitability occurring simultaneously. In addition, China and Southeast Asia, which had been separately classified through the previous consolidated fiscal year, were integrated into the Asia segment beginning this fiscal year due to changes in the business management structure. The segment recorded Revenue of ¥77.9B (+23.3%) and Operating Income of ¥10.0B (profit margin 12.9%, compared with 22.1% in the previous year). Although it continues to make the largest contribution in absolute profit terms, its profit margin declined from the previous year. By region, the return to profitability in Central and South America and deteriorating profitability in North America were the primary drivers of changes in profit and loss during the current period.

Key Financial Indicators

【Profitability】Operating margin was 3.0% (1.8% in the previous year, +1.2pt), while the net profit margin, based on Net Income attributable to owners of the parent, was 2.2% (0.03% in the previous year, +2.2pt), and ROE was 1.4%, indicating a recovery in profitability led by improvement in the gross profit margin. 【Cash Quality】Comprehensive income was ¥53.2B, substantially exceeding Net Income attributable to owners of the parent of ¥14.7B. Most of the difference was attributable to foreign currency translation adjustments of +¥23.8B and other comprehensive income of equity-method affiliates of +¥13.1B, indicating that foreign exchange and OCI factors made a relatively significant contribution to the accounting improvement in profit during the current period. 【Investment Efficiency】The total asset turnover ratio was approximately 0.38x on a quarterly basis (Revenue of ¥666.2B / average total assets during the period of ¥173,635 million), while Return on Assets, based on Net Income attributable to owners of the parent, remained at approximately 0.8%. 【Financial Soundness】The Equity Ratio was 61.8%. Against cash and deposits of ¥455.0B, interest-bearing debt—comprising bonds of ¥40.1B and short-term borrowings of ¥0.5B—was low at approximately ¥40.6B in total. The interest coverage ratio (Operating Income / interest expense) was 12.8x, indicating a high level of debt-servicing capacity.

Cash Flow Analysis

As the disclosed items in the cash flow statement are not included, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥455.0B, remaining broadly flat compared with ¥456.8B at the end of the same period of the previous year. Meanwhile, accounts receivable and notes receivable increased to ¥499.7B (¥463.3B in the previous year, +7.9%), while inventories—comprising raw materials, work in process, and finished goods—increased to ¥169.2B (¥160.9B in the previous year, +5.2%), indicating an expansion in working capital accompanying higher revenue. Accounts payable and notes payable also increased to ¥342.3B (¥331.6B in the previous year, +3.2%), partially offsetting the increase. However, days sales outstanding calculated from Revenue and cost of sales were approximately 68 days (approximately 66 days in the previous year), inventory turnover days were approximately 26 days (approximately 25 days in the previous year), and accounts payable turnover days were approximately 52 days (approximately 51 days in the previous year). Accordingly, the cash conversion cycle was approximately 42 days, a slight extension from approximately 40 days in the previous year. Property, plant and equipment was ¥331.4B (¥330.3B in the previous year), remaining broadly flat, and no cash outflow from large-scale capital expenditure was identified. Overall, funding conditions remained stable, and the increase in working capital remained generally commensurate with revenue growth.

Earnings Quality

Profit for the current period was centered on recurring Operating Income of ¥20.1B, and the contributions of non-recurring and non-operating factors should be evaluated separately. The extraordinary loss was ¥2.8B, including ¥2.8B in business structure reform expenses, while extraordinary income was ¥0.1B. The resulting net amount of -¥2.8B represented approximately 18.8% of Net Income attributable to owners of the parent of ¥14.7B, a non-negligible but not extreme level. Non-operating income was ¥7.9B, primarily consisting of foreign exchange gains of ¥3.2B, approximately 15.7% of Operating Income, and equity in earnings of affiliates of ¥2.2B, approximately 11.0% of Operating Income. Since these items are susceptible to market conditions and foreign exchange rates, the sustainability of their contribution to Ordinary Income requires monitoring. The divergence of -43.4% between Ordinary Income of ¥26.0B and Net Income attributable to owners of the parent of ¥14.7B was attributable to income taxes of ¥8.2B (effective tax rate 35.3%), the net extraordinary loss, and ¥0.3B in Net Income attributable to non-controlling interests, with the tax burden being the primary factor. The significant gap between Comprehensive Income of ¥53.2B and Net Income indicates that changes in OCI, particularly foreign currency translation adjustments, had a substantial impact; these should be understood separately from the underlying recurring earning power of the business.

Earnings Forecast and Guidance

Progress toward the full-year plan was at a standard level for Revenue, at 24.7% (¥666.2B/¥2,700.0B), while Operating Income was 16.8% (¥20.1B/¥120.0B), Ordinary Income was 20.0% (¥26.0B/¥130.0B), and Net Income was 17.1% (¥14.7B/¥86.0B). Profit progress was therefore slower than Revenue progress. Factors include the continued operating loss in the North America segment, the increase in SG&A expenses (+30.0%), and the concentration of the extraordinary loss, comprising ¥2.8B in restructuring expenses, in Q1. The full-year Ordinary Income forecast calls for a decline of -5.9% from the previous fiscal year, contrasting with the significant increase of +146.6% in Q1 and incorporating an assumed normalization of profit growth toward the second half of the fiscal year. Neither the earnings forecast nor the dividend forecast was revised during the current quarter.

Shareholder Returns

The full-year dividend forecast is ¥115.00 per share, with no revision to the dividend forecast during the current quarter. The Payout Ratio against forecast EPS of ¥250.58 is approximately 45.9% (¥115.00/¥250.58). Given the financial position of cash and deposits of ¥455.0B and interest-bearing debt of approximately ¥40.6B, the planned dividend is readily fundable from the current level of cash on hand. However, the fact that full-year Operating Income progress remains at 16.8% warrants attention regarding the accumulation of profit in the second half of the fiscal year.

Risk Factors

1. Deterioration in North America segment profitability: North America Revenue increased to ¥130.0B, up +44.1% year on year, but operating profit and loss shifted to -¥0.7B from +¥0.1B in the previous year, and revenue growth has not been accompanied by improved profitability. Fixed-cost absorption and the cost structure during periods of revenue growth could dilute the Company-wide profit margin.

2. Gradual extension of the working capital cycle: Days sales outstanding increased slightly to approximately 68 days (approximately 66 days in the previous year), while the cash conversion cycle extended to approximately 42 days (approximately 40 days in the previous year). If receivables and inventories accumulate faster than revenue growth, cash efficiency will require monitoring.

3. Dependence on non-recurring and non-operating factors: Non-operating income of ¥7.9B, comprising foreign exchange gains of ¥3.2B and equity in earnings of affiliates of ¥2.2B, accounted for approximately 30.5% of Ordinary Income of ¥26.0B, creating a structure that is susceptible to fluctuations in foreign exchange rates and the performance of equity-method affiliates.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Earnings Highlights

1. Operating Margin improved to 3.0% from 1.8% in the previous year, but the gap with the industry median of 8.7% remains substantial. The extent to which the improvement in the gross profit margin (+2.8pt) becomes established is a key factor that will determine future profitability trends.

2. Full-year progress was 24.7% for Revenue, compared with 16.8% for Operating Income and 17.1% for Net Income, indicating weaker progress on the profit side. Profit accumulation in the second half of the fiscal year will be a key focus for achieving the full-year plan.

3. Despite revenue growth of +44.1%, the North America segment recorded an operating loss of -¥0.7B. The impact of the regional earnings mix on the Company-wide profit margin will remain an ongoing monitoring point.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed 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 of any specific investment action.

Sensitivity: ¥3,006–¥3,178 at ±1% for the cost of equity, and ¥3,087–¥3,092 at ±0.1 for ω.

Notes:

• Since forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets at the end of the quarter are used; there is a timing difference relative to the full-year forecast.
• Since 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 is not a forecast or guarantee of 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 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 professionals as necessary.

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