Mazda Motor Corporation FY2027 Q1 Earnings Report

Quick View

Executive Summary

In FY2026 Q1, operating income, ordinary income, and net income all turned profitable from losses in the same period of the previous year, primarily due to improved profitability in the North American business. Revenue was ¥12857.1B (¥10997.7B in the same period of the previous year, YoY+16.9%), operating income was ¥328.4B (a loss of ¥461.1B in the same period of the previous year, an improvement of ¥790.0B), ordinary income was ¥428.4B (a loss of ¥342.6B in the same period of the previous year), and net income attributable to owners of the parent was ¥296.3B (a loss of ¥421.0B in the same period of the previous year). In addition to higher revenue, positive operating leverage from an improved gross margin and a lower SG&A expense ratio drove the operating margin up to 2.6% (-4.2% in the same period of the previous year).

Factors Affecting Business Performance

【Revenue】Revenue was ¥12857.1B, representing a YoY increase of +16.9%. By region, North America recorded the largest growth, while Japan and Europe also posted double-digit revenue growth, indicating expanding demand across all major regions. The primary drivers of revenue growth were increased sales in the North American market and foreign exchange effects.

【Profit and Loss】The gross margin improved by +450bp to 19.8% (15.3% in the same period of the previous year), while the SG&A expense ratio declined by -231bp to 17.2% (19.5% in the same period of the previous year). As a result, operating income turned from a loss of ¥461.1B in the same period of the previous year to a profit of ¥328.4B. In non-operating items, non-operating income of ¥188.8B, including a foreign exchange gain of ¥57.3B, boosted ordinary income to ¥428.4B. Although the Company recorded extraordinary losses of ¥29.8B (including an impairment loss on investment securities of ¥15.6B), the impact on profit before tax of ¥398.9B was limited, and net income attributable to owners of the parent was ¥296.3B (a loss of ¥421.0B in the same period of the previous year). The conclusion is higher revenue and higher profit—a turnaround in profitability.

Segment Analysis

The North America segment generated income of ¥411.6B (profit margin of 5.0%) and drove the majority of company-wide profit, achieving substantial profit growth of +1395.9% from a loss of ¥41.6B in the same period of the previous year. The Japan segment remained in the red, with an operating loss of ¥139.0B (profit margin of -1.6%), but the loss narrowed by 78.4% from ¥642.2B in the same period of the previous year. The Europe segment remained profitable, generating income of ¥61.1B (profit margin of 3.4%, YoY+61.9%). Revenue increased in all three regions: North America ¥8309.4B (YoY+23.3%), Japan ¥8839.5B (up +18.0%), and Europe ¥1798.3B (up +13.3%). Profit margins ranked North America > Europe > Japan, with improved profitability in North America serving as the primary driver of the company-wide turnaround to profitability.

Key Financial Indicators

【Profitability】The operating margin improved to 2.6% (-4.2% in the same period of the previous year), and the net profit margin improved to 2.3% (-3.8% in the same period of the previous year), reflecting positive operating leverage from the higher gross margin and lower SG&A expense ratio. ROE was 1.5%, while EPS was ¥46.97 (¥-66.79 in the same period of the previous year), reflecting the turnaround in profitability.【Cash Flow Quality】Operating Cash Flow (OCF) was -¥405.5B, below net income of ¥296.3B, with deterioration in working capital, including an increase in inventories and a decrease in accounts payable, weighing on cash flow.【Investment Efficiency】Total asset turnover was approximately 0.29x, while the ratio of net income to total assets of ¥44342.9B (equivalent to ROA) was approximately 0.67%, indicating a low level of asset efficiency and limited earnings contribution relative to the asset base.【Financial Soundness】The equity ratio was 43.7%, the current ratio was 147.1%, and cash and deposits of ¥10743.3B were equivalent to 30.4 times short-term borrowings of ¥353.4B. While the Company has ample short-term liquidity, the weakness of OCF warrants attention when assessing future cash-generation capacity.

Cash Flow Analysis

OCF was -¥405.5B, an improvement from -¥1411.0B in the same period of the previous year, but remained negative. The primary factors were deterioration in working capital due to an increase in inventories (-¥507.9B) and a decrease in accounts payable (-¥211.5B). Although a decrease in trade receivables (+¥86.7B) provided some relief, inventory accumulation pressured cash generation. Investing Cash Flow (ICF) was -¥286.3B, of which capital expenditures accounted for ¥280.2B. The investment-to-depreciation ratio was 0.91x relative to depreciation and amortization of ¥308.0B, indicating a level primarily focused on replacement investment. Free Cash Flow (FCF), the sum of OCF and ICF, was -¥691.8B. Together with financing cash flow of -¥275.1B (including repayments of long-term borrowings), funding needs during the period were covered by drawing down cash on hand. Cash and cash equivalents at period-end remained at ¥12148.0B, and there are no immediate liquidity concerns.

Earnings Quality

Earnings quality was primarily supported by recurring earnings growth from improved gross profit in the core business and greater SG&A efficiency, while the impact of extraordinary gains and losses was limited. Extraordinary losses of ¥29.8B (including an impairment loss on investment securities of ¥15.6B and losses on the disposal and sale of fixed assets of ¥13.8B, among others) were recorded against extraordinary income of ¥0.3B, but these losses remained in the 7% range relative to profit before tax of ¥398.9B. Of non-operating income of ¥188.8B, the foreign exchange gain of ¥57.3B and financial income, including interest income, boosted ordinary income; these items are susceptible to market conditions and the interest-rate environment. The fact that OCF was below net income indicates that accrual effects arising from working-capital factors such as inventories and accounts payable were significant, meaning that the improvement reported in the income statement has not been fully reflected in cash flow.

Earnings Forecast and Guidance

Against the full-year plan, progress as of Q1 was 23.4% for revenue (¥12857.1B/¥55000.0B), 21.9% for operating income (¥328.4B/¥1500.0B), 30.6% for ordinary income (¥428.4B/¥1400.0B), and 32.9% for net income attributable to owners of the parent (¥296.3B/¥900.0B). Using 25%, the simple quarterly benchmark based on dividing the full year into four quarters, operating income is progressing slightly below pace, while ordinary income and net income are progressing ahead of pace. This difference is largely attributable to the boost from non-operating income (foreign exchange gains and financial income), which leaves uncertainty for the second half onward. Meanwhile, operating income in the core business could accelerate if the improvement in North American profitability continues. The Company has not revised either its earnings forecast or dividend forecast during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥55 per share. Based on the full-year net income forecast attributable to owners of the parent of ¥900B and forecast EPS of ¥142.67, the payout ratio is approximately 38.6% (¥55/¥142.67). The dividend forecast was not revised during the quarter. Although OCF was negative in Q1, the Company has ample cash on hand, with cash and deposits of ¥10743.3B, and there is no short-term impediment to securing funds for dividends. No disclosure regarding share repurchases has been identified, and shareholder returns are evaluated based on the payout ratio.

Risk Factors

1. Working Capital and Inventory Risk: Inventories amounted to ¥7537.2B, an increase of +8.3% YoY (¥6960.7B→¥7537.2B), putting pressure of -¥507.9B on OCF. If inventory optimization does not progress, recovery in cash-generation capacity may be delayed.

2. Quality Assurance Costs: The provision for product warranties was ¥1773.6B, equivalent to 13.8% of revenue and a high level. Quality- and recall-related costs could become a structural burden on profitability.

3. Foreign Exchange Sensitivity: The foreign exchange gain of ¥57.3B included in non-operating income was equivalent to 17.4% of operating income of ¥328.4B. If foreign exchange trends reverse, the impact on ordinary income and net income could become relatively significant.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Profitability was below the industry median, with both the operating and net profit margins positioned at the lower end of the industry.

Growth and Capital Efficiency

The revenue growth rate significantly exceeded the industry median, placing the Company at an advantage within the industry in terms of top-line expansion.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. Turning Point in Profitability: Operating income, ordinary income, and net income all turned profitable from losses in the same period of the previous year, while the operating margin improved from -4.2% to 2.6%. This represents a structural inflection point reflecting improvements in the cost structure and enhanced earnings power in North America.

2. Difference in Progress Pace: Progress toward the full-year plan is ahead of pace for ordinary income and net income, both exceeding 30%, while operating income is at 21.9%, below the quarterly benchmark of 25%. How improvements in the core earnings power accumulate in the second half will be a key focus.

3. Cash-Generation Capacity: OCF of -¥405.5B was below net income, and deterioration in working capital from increased inventories and decreased accounts payable will be a monitoring point in the process of converting earnings improvement into cash flow.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed 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: ¥2,671–¥2,827 at cost of equity ±1%; ¥2,736–¥2,755 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: 2026-06 / This value is not a forecast or guarantee of the future share price)

---

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, and after consulting a professional as necessary.

---End of Report---