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

Suzuki Motor Corporation (IFRS, consolidated) delivered modest top-line growth in FY2026 Q2 with revenue of 28,642.27, up 0.3% YoY, but experienced a notable deterioration in profitability. Operating income declined 17.5% YoY to 2,764.79, compressing the operating margin to approximately 9.7%, indicating negative operating leverage amid flat volumes/mix and cost pressures. Gross profit reached 7,973.17, implying a gross margin of 27.8%, which, together with SG&A of 4,671.14 (16.3% of sales), signals either increased selling expenses, adverse mix, or weaker price realization compared to the prior year. Net income fell 11.3% YoY to 1,927.88, translating to a net margin of 6.7%, cushioned partly by non-operating items captured in profit before tax of 3,321.95 and an effective tax rate of 31.8%. DuPont analysis points to a reported ROE of 5.0%, driven by a 6.7% net margin, asset turnover of 0.463, and financial leverage of 1.61x; the decline in margin is the primary headwind to equity returns. Cash generation was strong: operating cash flow of 3,353.87 exceeded net income by 1.74x, and free cash flow, defined here as OCF plus total investing CF, was 2,025.98, underlining solid earnings quality. Capex was 1,731.44, above D&A of 1,214.31 (capex/D&A ≈ 1.43x), indicating ongoing growth and maintenance investment, likely in electrification and capacity. The balance sheet remains conservative with total assets of 61,904.59 and total equity of 38,362.27; the reported equity ratio is 50.4%, while total liabilities of 23,055.86 equate to a liabilities-to-equity metric of 0.60x. Liquidity looks ample with cash and equivalents of 8,427.10, and financing cash outflows of 1,007.76 suggest shareholder returns and/or debt reduction, though dividends and buybacks are not separately disclosed. Working capital elements are sizable (AR 5,903.03; inventories 5,714.68; AP 4,221.42), consistent with the scale and global footprint; however, the lack of current liabilities disclosure limits precise liquidity ratio analysis. Dividend affordability appears comfortable: a calculated payout ratio of 41.8% and FCF coverage of 2.52x indicate headroom absent major shocks. Overall, revenue resilience contrasts with margin pressure, implying cost normalization (e.g., materials, logistics), competitive pricing, or region/mix effects (notably India) as likely drivers. Non-operating details are limited (ordinary income, interest) but equity-method income of 58.39 contributed modestly. Key near-term focus is on restoring operating margin via pricing, mix, and cost control while sustaining strong cash conversion. Despite data gaps (notably R&D, interest, current liabilities), the available metrics suggest a solid financial base that can support investment and dividends while management addresses profitability headwinds.

Profitability Analysis

ROE_decomposition: - Net profit margin: 6.7%; Asset turnover: 0.463; Financial leverage: 1.61x; Calculated ROE: 5.0% (matches reported). Margin compression is the dominant driver of the YoY ROE decline, as leverage is modest and asset turnover is relatively stable for an auto OEM. margin_quality: - Gross margin: 27.8% (7,973.17/28,642.27). - SG&A intensity: 16.3% (4,671.14/28,642.27). - Operating margin: ~9.7% (2,764.79/28,642.27), down YoY alongside flat revenue, indicating unfavorable mix or cost inflation outpacing pricing. - EBITDA margin: 13.9% on EBITDA of 3,979.10. - Effective tax rate: 31.8% (1,056.83/3,321.95). operating_leverage: Revenue +0.3% YoY versus operating income -17.5% YoY implies negative operating leverage; fixed costs and/or pricing/mix pressures amplified the profit decline. D&A at 1,214.31 and capex above D&A suggest higher fixed cost absorption requirements, increasing sensitivity to volume/mix.

Growth Assessment

revenue_sustainability: Top-line grew 0.3% YoY to 28,642.27, indicating stabilization rather than acceleration. With auto demand in key markets and FX tailwinds less pronounced, sustaining growth likely requires product mix upgrades and pricing discipline. profit_quality: Net margin at 6.7% remains healthy but fell with operating weakness. Equity-method income (58.39) provided a small buffer. Lack of ordinary income and interest detail limits full assessment of below-OP components, but PBT of 3,321.95 outpacing OP suggests some non-operating support. outlook: Short-term focus is on margin recovery through pricing/mix in India and ASEAN, cost optimization, and supply chain normalization. Capex > D&A indicates continued product and capacity investment, which should support medium-term growth, though near-term profitability may remain sensitive to materials, incentives, and FX.

Financial Health

liquidity: Cash and equivalents of 8,427.10 provide a solid buffer. Current assets are 25,286.81, but current liabilities are unreported; thus, current and quick ratios are not calculable. Working capital reported at 25,286.81 appears to be current assets rather than the CA–CL construct; treat with caution. solvency: Total liabilities are 23,055.86 versus equity of 38,362.27, implying a liabilities-to-equity metric of 0.60x. Reported equity ratio is 50.4% (owners' equity basis under IFRS likely differs from total equity figure provided), indicating a conservative capital structure. capital_structure: Interest-bearing debt is unreported; hence, net debt and interest coverage cannot be calculated. Financing cash outflow of -1,007.76 indicates either dividend payments, debt reduction, or both. Overall leverage appears low for the sector based on total-liability-to-equity.

Cash Flow Quality

earnings_quality: OCF of 3,353.87 is 1.74x net income (1,927.88), signaling good cash conversion and low accrual risk. EBITDA-to-OCF conversion is ~0.84x (3,353.87/3,979.10), reasonable for an auto OEM given working capital seasonality. FCF_analysis: Free cash flow (defined here as OCF + total investing CF) is 2,025.98, consistent with 3,353.87 + (-1,327.89). Capex of -1,731.44 exceeds D&A (1,214.31), implying reinvestment above maintenance; non-capex investing inflows (~403) helped support FCF. working_capital: AR: 5,903.03; inventories: 5,714.68; AP: 4,221.42. Absolute balances are sizeable but typical. Without beginning-period balances, turnover/days cannot be derived; however, the strong OCF suggests no major working capital build this period.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 41.8%, a moderate level compatible with reinvestment needs and cyclicality. Official DPS and total dividends are unreported. FCF_coverage: FCF coverage of dividends is 2.52x (based on provided metric), indicating healthy headroom under current cash generation. policy_outlook: While detailed dividend policy disclosure is absent here, balance sheet strength and durable OCF support continuity. Near-term dividend growth likely depends on restoring operating margins and macro/FX conditions.

Risk Assessment

Business Risks:

• Adverse mix and pricing pressure in key markets (notably India and ASEAN)
• Raw material and logistics cost volatility impacting gross margin
• Demand cyclicality in autos and two-wheelers
• Intensifying competition in compact cars and emerging-market segments
• Execution risk in electrification/hybrid roadmap and related R&D/capex
• Supply chain constraints including semiconductors and critical components
• Regulatory and emissions/safety compliance costs across jurisdictions

Financial Risks:

• FX volatility (JPY, INR, USD, EUR) affecting translation and transaction margins
• Interest rate risk on unreported debt profile and cash holdings
• Working capital swings tied to inventory and receivables
• Potential impairment risk on investments/intangibles (details unreported)
• Tax rate variability (effective tax currently 31.8%)

Key Concerns:

• Operating margin compression despite flat revenue (+0.3% YoY)
• Negative operating leverage (-17.5% YoY in OP)
• Limited visibility on interest-bearing debt and current liabilities
• R&D expense disclosure absent, obscuring investment intensity in EV/HEV

Investment Implications

Key Takeaways:

• Stable revenue but weakened profitability; operating margin ~9.7% with -17.5% YoY OP decline
• Cash generation robust: OCF 3,353.87 (1.74x NI), FCF 2,025.98 despite elevated capex
• Conservative balance sheet with liabilities-to-equity ~0.60x and reported equity ratio 50.4%
• Capex/D&A ~1.43x signals ongoing growth and transition investments
• Dividend affordability appears sound with 41.8% payout and 2.52x FCF cover
• Non-operating items supported PBT above OP; details limited due to unreported ordinary income/interest
• Margin recovery is the critical near-term driver for ROE improvement (currently 5.0%)

Metrics to Watch:

• Operating margin and gross margin trajectory
• Price/mix and regional volume (especially India) trends
• FX impacts (JPY/INR/USD) on revenue and COGS
• Inventory and receivables turnover; working capital intensity
• Capex-to-sales and R&D intensity (once disclosed)
• OCF/Net income and OCF/EBITDA conversion
• Equity-method contributions and non-operating gains/losses

Relative Positioning: Within Japanese auto peers, Suzuki maintains lower leverage and strong cash generation but typically operates with lower margins than best-in-class players; its outsized exposure to India and compact segments offers volume resilience but can dilute margins when cost inflation or competitive pricing intensifies.

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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