Mazda Motor Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.24T
• Operating Income: ¥-53.88B
• Net Income: ¥36.00B
• 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

Mazda’s FY2026 Q2 consolidated results under JGAAP show top-line resilience but loss-making profitability, with clear operating pressure and a mixed cash flow picture. Revenue was ¥2,238.5bn, down 6.5% YoY, indicating volume and/or pricing headwinds amidst a softer macro and product/FX mix shift. Gross profit of ¥528.5bn implies a gross margin of 23.6%, which is reasonable for an auto OEM but insufficient to cover fixed costs at current scale, as operating income came in at -¥53.9bn (operating margin -2.41%). Ordinary income improved relative to operating income at -¥21.3bn, suggesting sizable non-operating gains (likely FX or equity-method income) offsetting interest expense of ¥5.1bn. Net income was -¥45.3bn (net margin -2.02%), a 67.3% YoY contraction, reflecting persistent operating challenges and non-recurring tax impacts (income tax expense recorded despite a net loss). DuPont decomposition yields an ROE of -2.57%, driven by negative margins, modest asset turnover of 0.556x, and financial leverage of 2.29x. Liquidity is adequate with a current ratio of 148.4% and a quick ratio of 104.5%, supported by working capital of ¥726.3bn; inventories stood at ¥659.2bn, a key lever to monitor in the face of softer revenue. The balance sheet shows total assets of ¥4,027.9bn and total equity of ¥1,758.6bn, implying an equity-to-asset ratio of roughly 43.7% (the reported equity ratio of 0.0% is an unreported placeholder), and a debt-to-equity ratio of 1.30x. Operating cash flow of ¥50.7bn was positive despite the net loss, supported by non-cash charges and a working capital inflow. EBITDA was modest at ¥4.3bn, highlighting thin operating buffers and high operating leverage. Dividend per share was 0, consistent with negative earnings and the need to preserve liquidity. Investing cash flow and cash/equivalents were unreported in this dataset, constraining free cash flow and liquidity depth analysis. Overall, the quarter reflects margin compression, sensitivity to volume mix and FX, and reliance on non-operating items, partly mitigated by acceptable liquidity and a still-solid equity cushion. Key priorities include stabilizing production costs, optimizing mix, managing inventories, and strengthening pricing/FX hedging to restore operating margin. Data limitations (e.g., unreported cash, capex, and equity ratio) require caution in interpreting cash coverage and capital allocation. Relative to domestic auto peers, Mazda appears more exposed to operating leverage and FX swings due to its scale and geographic mix, making cost discipline and product momentum crucial for earnings normalization.

Profitability Analysis

ROE at -2.57% decomposes into: net profit margin -2.02%, asset turnover 0.556x, and financial leverage 2.29x. The primary drag is margin—operating margin stands at -2.41% (operating loss of ¥53.9bn on ¥2,238.5bn revenue) despite a reasonable gross margin of 23.6%, indicating that SG&A, R&D, and fixed manufacturing overheads outweighed contribution margins. Ordinary income (-¥21.3bn) is less negative than operating income due to net non-operating gains of roughly ¥32.6bn, partially offsetting interest expense of ¥5.1bn; this reduces core loss optics but is not a substitute for structural operating profitability. EBITDA of ¥4.3bn (0.2% margin) highlights very thin operating buffer; small volume or price shocks can swing earnings given high fixed costs. Operating leverage appears unfavorable this quarter: a 6.5% revenue decline translated into a 20.5% deeper operating loss YoY, implying cost base rigidity. Tax expense was recorded (¥44.1bn) despite a net loss, suggesting one-off or structural tax items (e.g., deferred tax valuation allowance changes), which depress bottom-line quality this period. Interest coverage on an EBIT basis is -10.5x, underscoring the lack of earnings headroom to service debt from operations in the quarter. Overall profitability hinges on mix/pricing, FX, and cost control to lift operating margin above breakeven.

Growth Assessment

Top line declined 6.5% YoY to ¥2,238.5bn, signaling softer unit volumes and/or adverse mix and FX. Gross profit held at ¥528.5bn, but opex and fixed costs eroded operating results. The deterioration in operating income (-20.5% YoY) versus revenue suggests negative operating leverage and highlights sensitivity to scale. Non-operating support (FX/equity income) cushioned ordinary income relative to operating losses, but this is volatile and less controllable. With inventories at ¥659.2bn, the company must balance production with demand to prevent further discounting and margin pressure. Near-term outlook depends on cost normalization (materials/logistics), product cadence, and FX trends; revenue sustainability will require stabilizing volumes in key regions and improving price/mix. Given the limited disclosures this quarter (capex, cash levels unreported), it is difficult to assess growth investments pace; however, positive OCF provides some internal funding capacity. Profit quality is currently weak due to reliance on non-operating items and tax noise; normalization of operating margin is essential for sustainable growth.

Financial Health

Liquidity is acceptable: current ratio 148.4% and quick ratio 104.5% suggest sufficient near-term coverage. Working capital is ¥726.3bn, with inventories at ¥659.2bn—elevated inventories could be a risk if demand softens further. Total assets are ¥4,027.9bn against total liabilities of ¥2,280.1bn and equity of ¥1,758.6bn, implying an equity ratio of ~43.7% (reported 0.0% is unreported) and a debt-to-equity ratio of 1.30x, indicating moderate leverage for an auto OEM. Interest expense of ¥5.1bn appears manageable in absolute terms, but negative EBIT makes coverage metrics weak. Financing cash inflow of ¥94.9bn suggests incremental reliance on external funding or reduced repayments; exact breakdown is unknown. Overall solvency appears reasonable given the equity base, but profitability restoration is needed to support organic deleveraging.

Cash Flow Quality

Operating cash flow was ¥50.7bn versus net income of -¥45.3bn, yielding an OCF/NI ratio of -1.12. The bridge implies non-cash additions (primarily D&A of ¥58.2bn) plus a working capital inflow of roughly ¥37–38bn after adjusting for the net loss, which is a positive cash conversion sign this quarter. EBITDA of ¥4.3bn is low, so the positive OCF likely benefited from temporary working capital movements; sustainability is uncertain if revenue remains soft. Investing cash flow is unreported (0), preventing assessment of capex and thus true free cash flow; the provided FCF of 0 should be treated as unknown rather than zero. Financing cash flow was a net inflow of ¥94.9bn, indicating external funding support; without cash balance data (unreported), liquidity headroom cannot be precisely gauged. Earnings quality is mixed: cash conversion was positive, but driven by non-operating and working capital dynamics amid operating losses.

Dividend Sustainability

Annual DPS is 0 and payout ratio is 0%, which is consistent with a net loss and the need to preserve cash. With investing cash flow and capex unreported, we cannot compute free cash flow coverage; the stated FCF of 0 is an unreported placeholder and should not be interpreted as actual zero. Given negative earnings and thin EBITDA, reinstating cash distributions would require a visible recovery in operating margin and stable OCF after capex. Mazda’s typical policy emphasizes sustainable dividends aligned with earnings; near-term policy likely prioritizes balance sheet resilience and investment over distributions until profitability normalizes.

Risk Assessment

Business Risks:

• High operating leverage: small volume/mix changes drive outsized profit swings
• FX exposure due to export mix; yen volatility directly impacts margins
• Input cost inflation (materials, logistics) and supply chain disruptions
• Product cycle risk and competitive pricing pressure in key markets
• Inventory management risk given ¥659bn inventories amid softer revenue
• Regulatory/technology transition costs (electrification, emissions, safety)

Financial Risks:

• Negative EBIT and weak interest coverage (-10.5x on EBIT basis)
• Reliance on non-operating gains to cushion losses (volatility risk)
• Potential need for continued external financing (¥94.9bn inflow this period)
• Tax volatility (tax expense despite net loss) affecting bottom-line predictability
• Limited visibility on cash and capex due to unreported items

Key Concerns:

• Sustained operating losses despite acceptable gross margin
• Revenue decline (-6.5% YoY) translating into worse operating results
• Thin EBITDA margin (0.2%) offering little buffer against shocks
• Unreported cash and capex data impede assessment of liquidity runway and FCF

Investment Implications

Key Takeaways:

• Top line down 6.5% YoY with operating margin at -2.41% highlights margin compression and negative operating leverage
• Ordinary income less negative than operating income due to non-operating gains; core profitability remains weak
• Liquidity adequate (current ratio 148%, quick 105%) and equity ratio ~44%, but earnings recovery is necessary
• Positive OCF (¥50.7bn) aided by working capital; sustainability uncertain without operating margin improvement
• Capex and cash levels unreported, limiting FCF and liquidity depth analysis
• Dividend suspended (DPS 0), consistent with the priority to stabilize operations and balance sheet

Metrics to Watch:

• Operating margin and EBITDA margin progression
• Inventory levels and days on hand vs sales trajectory
• FX rates (JPY vs USD/EUR) and hedge effectiveness
• Working capital movements and OCF sustainability
• Capex (once disclosed) and FCF after capex
• Unit volumes, price/mix, and regional revenue mix
• Interest coverage and net debt (once cash is disclosed)

Relative Positioning: Within Japan’s auto OEM cohort, Mazda’s smaller scale increases sensitivity to FX and operating leverage versus larger peers (e.g., Toyota, Honda). Current results show weaker operating profitability and heavier reliance on non-operating items than top-tier peers, though balance sheet equity remains solid. Execution on cost, mix, and product cycle will be key to closing the profitability gap.

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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