Mazda Motor Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.24T
• Operating Income: ¥-53.88B
• Net Income: ¥-45.04B
• EPS: ¥-71.82

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: FY2026 Q2 was weak for Mazda, with losses at all profit lines and negative operating cash flow, but operating and net margins improved modestly versus last year on lower revenue. Revenue declined 6.5% YoY to 22,384.6, while gross profit was 3,485.5 and SG&A rose above gross profit, driving an operating loss of -538.8. Ordinary income was -212.9 and net income -452.8, with total comprehensive income at -325.1. Operating margin stood at -2.41% (operating income -538.8 on revenue 22,384.6). Based on the provided YoY rates, prior-year operating margin was approximately -2.83%, implying an operating margin expansion of about 42 bps YoY. Net margin was -2.02% vs an estimated -5.79% a year ago, a ~377 bps improvement, largely from narrower losses and some support from non-operating income (interest income 139.4). Gross margin was 15.6%, but EBITDA was only 46.96 (0.2% margin), underscoring weak operating leverage and limited buffer to fixed costs. Earnings quality is a concern: operating cash flow was -1,978.8, diverging sharply from net loss (-452.8), indicating cash burn worse than accrual losses despite the reported OCF/NI ratio. Liquidity is adequate on balance (current ratio 154.9%, quick ratio 103.7%) and debt-to-equity of 1.29x is manageable, but interest coverage is deeply negative (-9.92x), highlighting servicing risk if losses persist. Inventory is elevated at 6,983.6, tying up working capital and likely contributing to the OCF shortfall. ROE is -2.6% per DuPont (NPM -2.0%, asset turnover 0.556, leverage 2.29x), and ROIC is -3.7%, well below automotive cost of capital, signaling value destruction in the period. The effective tax rate appears distorted (-3.2%), consistent with loss-making quarters. With capex of 462.9 and absent investing CF disclosure, an estimated FCF of around -2,441.7 (OCF - capex) implies internal funding pressure without improved OCF. Forward-looking, margin stabilization depends on normalizing SG&A vs gross profit, inventory reduction to release cash, and maintaining pricing/mix as volumes soften. FX and cost normalization could help, but the current negative OCF and weak coverage mean execution risk remains elevated into 2H.

Profitability Analysis

ROE decomposition (DuPont): ROE -2.6% = Net Profit Margin (-2.0%) × Asset Turnover (0.556) × Financial Leverage (2.29x). The primary drag is the negative net margin, reflecting that SG&A (4,024.3) exceeds gross profit (3,485.5), producing operating losses despite modest non-operating income. Asset turnover at 0.556 is low for an auto OEM, indicating subdued volume/mix relative to the asset base and inventory build weighing on efficiency. Leverage at 2.29x is moderate, amplifying the negative margin into a negative ROE but not the principal cause. YoY, margins improved slightly (operating margin +~42 bps; net margin +~377 bps), suggesting some pricing/mix or cost benefits, but still negative. Business drivers: weaker top line (-6.5% YoY) and high fixed SG&A limited operating leverage; interest income (139.4) partly offset losses below the line. Sustainability: the small margin improvement could be sustained if volumes, mix, and FX hold, but sustainability is uncertain until SG&A is reset below gross profit consistently and inventory is normalized. Concerning trend: SG&A > gross profit is a red flag; the cost base is misaligned with current revenue, and EBITDA near breakeven offers little cushion against shocks.

Growth Assessment

Revenue contracted 6.5% YoY, indicating volume/mix pressure or pricing normalization. Operating income improved versus an implied deeper loss last year but remains negative, driven by cost pressure and weak operating leverage. Non-operating income (notably interest income of 139.4) cushioned ordinary income, but this is not a core growth driver. The improvement in net margin vs last year appears mostly from narrower losses rather than structural growth. With inventory elevated and OCF materially negative, near-term growth quality is weak; sales are not converting to cash. Absent disclosure on R&D and detailed SG&A components, it is unclear if cost efficiency programs are underway at scale. Outlook hinges on inventory drawdown, normalization of incentives, and FX tailwinds; however, cash burn suggests execution risk in 2H if demand remains soft.

Financial Health

Liquidity is adequate: current ratio 154.9% and quick ratio 103.7% exceed benchmarks; no liquidity warning. Solvency is moderate: debt-to-equity 1.29x is below the 1.5x conservative threshold but interest coverage is -9.92x, signaling earnings are insufficient to service interest from operations. Maturity profile risk appears manageable near term: cash and deposits (8,847.9) exceed short-term loans (329.4), and current assets (21,124.3) exceed current liabilities (13,633.7), limiting immediate refinancing pressure. However, continued negative OCF could erode this cushion. Long-term loans are 5,671.4, implying reliance on term funding; no off-balance sheet obligations were reported in the data provided. Working capital is positive at 7,490.5, but a large inventory balance (6,983.6) raises holding risk and potential markdowns if demand weakens.

Cash Flow Quality

OCF is -1,978.8 versus net income -452.8, indicating a material adverse divergence; while the numeric OCF/NI ratio reads 4.37x, this is not meaningful due to sign differences—cash generation quality is weak. Estimated FCF (OCF - capex) is approximately -2,441.7, implying that capex and operations are not self-funded this quarter. Financing CF of 758.2 only partially offsets cash burn, increasing reliance on liquidity reserves. Working capital appears the main drag (high inventories and likely receivables/payables swings), suggesting cash is tied up rather than generated. No clear signs of aggressive working capital pull-forward (e.g., payables stretching) can be confirmed from the limited data, but the magnitude of negative OCF despite a smaller net loss suggests inventory build/slow turns. Sustainability: without an OCF turnaround through inventory normalization and margin repair, cash burn would persist, pressuring balance sheet flexibility.

Dividend Sustainability

Dividend disclosures are unreported for the period; the calculated payout ratio of -76.7% is not meaningful due to negative earnings. On an estimated basis, FCF is negative (-2,441.7), implying any dividend would not be covered by internal cash generation this quarter. Given negative net income and negative OCF, near-term dividend sustainability would depend on balance sheet capacity rather than earnings/FCF support. Policy outlook cannot be assessed from the data; absent explicit guidance, conservative expectations are prudent until OCF recovers.

Risk Assessment

Business Risks:

• Demand softness leading to volume declines (-6.5% YoY revenue) and weak operating leverage
• Elevated inventory (6,983.6) risking markdowns and further cash absorption
• Pricing and incentive pressure in competitive global auto markets
• Product mix and regional exposure sensitivity (not disclosed by segment)
• Warranty/recall cost risk typical for auto OEMs (no details disclosed)

Financial Risks:

• Negative operating cash flow (-1,978.8) and estimated negative FCF (-2,441.7)
• Very weak interest coverage (-9.92x), heightening debt service risk if losses persist
• ROIC -3.7% below cost of capital, indicating value erosion
• Potential working capital volatility from receivables/payables cycles
• Leverage at 1.29x D/E limits, but does not preclude, further debt capacity

Key Concerns:

• SG&A exceeding gross profit, driving structural operating losses
• Reliance on non-operating income (interest income 139.4) to cushion ordinary income
• Tax rate volatility (-3.2% effective rate) complicating earnings predictability
• Data gaps (R&D, segment detail) hinder assessment of cost restructuring and growth investments

Investment Implications

Key Takeaways:

• Margins improved modestly YoY but remain negative at operating and net levels
• Cash burn is significant; OCF materially worse than accrual losses
• Liquidity is adequate short term, but interest coverage is deeply negative
• Inventory is high and a key lever for OCF recovery
• ROE (-2.6%) and ROIC (-3.7%) are below acceptable thresholds, signaling ongoing value pressure

Metrics to Watch:

• Operating margin trajectory and SG&A as a percentage of sales
• Inventory turns and working capital days
• Operating cash flow and FCF versus dividend/capex commitments
• Interest coverage and financing CF reliance
• FX sensitivity (USD/JPY, EUR/JPY) and pricing/incentive trends
• Capital allocation to electrification and product refresh (R&D/capex mix when disclosed)

Relative Positioning: Within auto OEM peers, Mazda currently screens weaker on cash conversion and coverage, with moderate leverage but inferior ROIC and profitability; near-term performance hinges on inventory normalization and cost alignment.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
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