SUZUKI MOTOR CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.86T
• Operating Income: ¥276.48B
• Net Income: ¥245.16B
• EPS: ¥99.93

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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: A mixed quarter with resilient top-line but notable margin compression, resulting in double-digit declines in operating and net profit despite solid cash generation. Revenue was 28,642.27 (100M JPY), up a modest 0.3% YoY, indicating broadly steady unit volumes/pricing amid tougher cost and mix conditions. Operating income fell 17.5% YoY to 2,764.79, driving an estimated operating margin decline to 9.65% from about 11.74% a year ago (roughly 209 bps compression). Gross profit was 7,378.36 with a gross margin of 25.8%; while the YoY gross margin isn’t disclosed, the operating margin deterioration implies either gross pressure, higher SG&A, or both. SG&A totaled 4,764.36; with flat revenue and lower operating profit, SG&A growth likely outpaced revenue growth. Net income was 1,927.88, down 11.3% YoY, cushioned by non-operating items and a 26.2% effective tax rate. Earnings quality was strong: operating cash flow of 2,653.27 exceeded net income, with OCF/NI at 1.38x. Free cash flow was solid at 1,413.70 after 1,913.42 in capex, supporting both investment and shareholder returns. Balance sheet strength remains a positive: equity ratio is 50.4% and D/E is a conservative 0.61x, indicating ample solvency headroom. Working capital appears adequate with accounts receivable (6,119.58) and inventories (6,444.61) exceeding accounts payable (4,588.08), though the current ratio cannot be computed due to missing current liabilities. DuPont ROE printed at 5.0%, driven by a 6.7% net margin, 0.463x asset turnover, and 1.61x financial leverage—profitability, not leverage, is the main constraint on ROE. Equity-method income contributed 46.82, a small 1.4% of profit composition, so core operations dominate results. ROIC of 5.3% is below the 7–8% benchmark, reflecting margin headwinds and likely still-elevated investment for future models/technologies. Dividend affordability is reasonable with a calculated payout ratio of 41.8% and FCF coverage of 1.76x, although the exact DPS is unreported. Looking ahead, the key swing factors are cost normalization, pricing discipline and mix, and any recovery in operating margin; if these improve, ROE and ROIC should trend up, supported by healthy cash flow and balance sheet resilience.

Profitability Analysis

ROE decomposition (DuPont): 5.0% ROE = 6.7% Net Profit Margin × 0.463 Asset Turnover × 1.61x Financial Leverage. The most material change this quarter versus last year is operating profitability (margin), as operating income fell 17.5% YoY on essentially flat revenue (+0.3%), implying margin compression downstream to net margin. Business drivers likely include input cost/mix pressure, incentives, and/or SG&A increases (advertising, logistics, R&D expensed through SG&A), given the flat sales base. The change is partially cyclical and could normalize as cost headwinds ease or pricing/mix improves; however, competitive pricing and product refresh costs could keep margins below last year’s level near term. Asset turnover (0.463) appears stable for an automaker with sizable asset base and inventory; no evidence it drove the ROE decline. Leverage at 1.61x is moderate and did not materially change the ROE trajectory; the company is not relying on leverage to compensate for lower margins. Concerning trend flag: SG&A burden effectively increased relative to revenue, since operating profit contracted while sales were flat, indicating negative operating leverage.

Growth Assessment

Revenue growth of +0.3% YoY indicates stable demand but limited growth momentum in the half. Operating income declined 17.5% YoY, reflecting weaker margin capture more than volume growth. Net income fell 11.3% YoY, softer than operating profit due to below-the-line support and a manageable tax rate. EBITDA was 4,084.13 with a 14.3% margin, still healthy but indicative of pressure versus the prior year (prior-year EBITDA margin not disclosed). Equity-method income contributed 46.82, a minor share, confirming results are primarily driven by core operations. Profit quality is solid—cash conversion (OCF/NI 1.38x) suggests earnings are backed by cash, not one-offs. Outlook hinges on cost normalization (materials, logistics), pricing/mix resilience, and demand in core geographies; with capex at 1,913.42 and ROIC at 5.3%, management focus on improving capital productivity is important for sustainable growth. Absent a clear top-line acceleration, margin restoration is the key lever for earnings growth in upcoming quarters.

Financial Health

Liquidity: Current ratio cannot be calculated due to unreported current liabilities; no warning triggered. Working capital appears solid with current assets of 26,375.80 and accounts receivable (6,119.58) plus inventory (6,444.61) exceeding accounts payable (4,588.08), reducing near-term liquidity strain. Solvency: Equity ratio is 50.4% and D/E is 0.61x, indicating conservative leverage and strong balance sheet capacity. No explicit maturity data for short- vs long-term debt, so maturity mismatch risk cannot be fully assessed; however, cash & equivalents of 9,300.37 provide a cushion. Off-balance sheet obligations not reported; no assessment possible. No thresholds breached (Current Ratio < 1.0 unknown; D/E > 2.0 not applicable). Overall, financial health is strong with ample equity support and manageable payables relative to current assets.

Cash Flow Quality

Earnings quality is high with OCF/Net Income at 1.38x, indicating robust cash conversion. Free cash flow of 1,413.70 after capex of 1,913.42 demonstrates capacity to fund investment and distributions. FCF sustainability appears reasonable so long as OCF remains at or above current levels; investment intensity is meaningful but covered. No apparent working capital manipulation: inventories (6,444.61) and receivables (6,119.58) are balanced against payables (4,588.08); the OCF outperformance vs NI suggests collection and inventory management supported cash. No interest coverage ratio is calculable due to unreported interest expense, but overall leverage is conservative, lessening near-term refinancing or interest burden concerns.

Dividend Sustainability

Calculated payout ratio is 41.8%, within the sub-60% benchmark for sustainability. FCF coverage is 1.76x, indicating distributions are well supported by free cash generation this period. While DPS and total dividends are unreported, the combination of positive FCF, strong equity ratio (50.4%), and modest leverage (D/E 0.61x) suggests headroom to maintain policy. Key watchpoints are operating margin recovery and capex trajectory; if capex rises materially without a commensurate OCF lift, FCF coverage could tighten. With OCF > NI and stable balance sheet metrics, near-term dividend sustainability appears sound under current conditions.

Risk Assessment

Business Risks:

• Margin pressure from input costs, incentives, and product mix evidenced by 209 bps operating margin compression.
• Execution risk on new model launches and technology transition (EV/HEV) requiring sustained capex (1,913.42) with ROIC at 5.3%.
• Geographic demand volatility in core markets, which can materially affect volumes on a flat revenue base.
• Supply chain constraints (e.g., semiconductors, logistics) that can disrupt production and delivery timing.

Financial Risks:

• Potential maturity mismatch cannot be assessed due to unreported current liabilities and debt composition.
• Interest rate exposure unknown given unreported interest expense and debt mix, though leverage is moderate (D/E 0.61x).
• Currency fluctuation risk impacting revenues and costs, typical for global automakers.

Key Concerns:

• ROIC at 5.3% below the 7–8% benchmark, indicating capital efficiency headroom.
• ROE at 5.0% constrained primarily by margins, not leverage or turnover.
• SG&A growth likely outpacing revenue, driving negative operating leverage.
• Limited revenue growth (+0.3% YoY) increases reliance on margin recovery for EPS growth.

Investment Implications

Key Takeaways:

• Top-line held steady (+0.3% YoY) but operating profit fell 17.5% on margin compression.
• Operating margin declined to about 9.65% from ~11.74% (≈209 bps compression).
• Cash generation is strong (OCF/NI 1.38x) with positive FCF of 1,413.70.
• Balance sheet is conservative (equity ratio 50.4%, D/E 0.61x).
• ROE 5.0% and ROIC 5.3% highlight need for margin and capital efficiency improvement.
• Dividend affordability appears sound with a 41.8% payout and 1.76x FCF coverage.

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio
• Gross margin and input cost trends
• Inventory days and receivables collection to confirm cash conversion sustainability
• Capex intensity versus OCF to safeguard FCF
• ROIC progress toward 7–8% benchmark
• FX impact on revenue/cost and pricing actions

Relative Positioning: Within the Japanese autos peer set, the company shows solid cash generation and conservative leverage but lags on profitability metrics this quarter (ROE/ROIC) due to margin compression; sustained improvement in operating margin and capital efficiency is needed to close the gap with higher-ROIC peers.

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
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis