| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1763.3B | ¥1784.1B | -1.2% |
| Operating Income / Operating Profit | ¥39.8B | ¥3.0B | +114.7% |
| Ordinary Income | ¥37.8B | ¥-20.8B | -44.4% |
| Net Income (attributable to owners of parent) | ¥12.7B | ¥-116.7B | +110.9% |
| ROE | 2.0% | -19.1% | - |
For the fiscal year ended March 2026, Yorozu reported Revenue of ¥1,763.3B (YoY -¥20.8B, -1.2%), a slight decline, while achieving a material improvement in profitability: Operating Income of ¥39.8B (YoY +¥36.8B, +1,226.7%), Ordinary Income of ¥37.8B (YoY +¥58.6B, turned positive from prior year -¥20.8B), and Net Income attributable to owners of parent of ¥20.8B (YoY +¥154.2B, turned positive from prior year -¥134.5B). Operating margin improved to 2.3% (prior year 0.2%, +2.1pt) and Net margin to 1.2% (prior year -7.5%, +8.7pt), indicating a dramatic improvement in the profit structure. In addition to the elimination of the prior-year large impairment (¥91.5B) which limited one-off impacts, gross margin improved to 11.4% (prior year 9.4%, +2.0pt) and SG&A ratio improved to 9.1% (prior year 9.2%, -0.1pt), suggesting a bottoming of core profitability. Operating Cash Flow (OCF) was ¥80.3B (YoY +69.4%), and Free Cash Flow (FCF) was ¥61.9B, sufficiently covering dividends of ¥7.6B and share buybacks of ¥38.3B. By region, Japan was the earnings pillar with Operating Income of ¥28.3B (margin 4.6%), Asia recovered substantially to ¥8.9B (2.6%), while the Americas remained at very low margin with ¥1.5B (0.2%), leaving structural challenges.
[Revenue] Revenue was ¥1,763.3B (YoY -1.2%), a slight decline. By region, Japan was ¥616.1B (+3.0%) and held firm, the Americas were ¥875.5B (+0.5%) and broadly flat, while Asia was ¥345.7B (-11.5%) with a double-digit decline. The revenue decline in Asia is attributed primarily to demand adjustments in China and intensified competition. Consolidated revenue remained in a flat range, but segment mix continued to be dependent on the Americas (Americas 49.7%, Japan 34.9%, Asia 19.6%), and the low profitability in the Americas constrains consolidated margins. Contract liabilities (advance receipts) decreased substantially to ¥2.3B from ¥12.4B a year earlier, implying a reduction in backlog.
[Profitability] Operating Income expanded materially to ¥39.8B (YoY +1,226.7%) from ¥3.0B in the prior year. Gross margin improved to 11.4% (prior year 9.4%, +2.0pt) and SG&A ratio improved to 9.1% (prior year 9.2%, -0.1pt), supported by lower cost ratio and control of SG&A in absolute terms (¥161.1B vs prior year ¥164.9B). Operating margin improved to 2.3% from 0.2% (+2.1pt), highlighting signs of structural profitability improvement. Ordinary Income was ¥37.8B (turned positive from prior year -¥20.8B); non-operating income/expenses were net -¥2.0B (prior year -¥23.8B), substantially narrowing the loss. Non-operating income totaled ¥16.7B (including dividend income ¥2.3B, interest income ¥2.6B, derivative valuation gains ¥8.5B), and non-operating expenses were ¥18.7B (including interest expense ¥9.7B, foreign exchange losses ¥5.5B), with FX losses and interest burden as headwinds. Extraordinary items were net -¥1.6B (extraordinary gains ¥4.8B, extraordinary losses ¥6.3B), a small negative. Extraordinary gains were mainly ¥3.7B from sale of fixed assets; extraordinary losses included impairment losses of ¥1.1B, substantially lower than prior year ¥91.5B, limiting one-off impacts. Profit before tax was ¥36.2B (turned positive from prior year -¥113.4B); after income taxes of ¥11.7B and non-controlling interests of ¥3.8B, Net Income attributable to owners of parent was ¥20.8B (prior year -¥134.5B), a return to profit. In summary, despite slightly lower revenue, cost-of-sales improvement and the removal of one-off losses drove significant profit recovery, resulting in a shrink-in-revenue/increase-in-profit scenario.
The Japan segment recorded Revenue of ¥616.1B (YoY +3.0%), Operating Income of ¥28.3B (+20.8%), and an operating margin of 4.6% (prior year 3.9%, +0.7pt), achieving both revenue and profit growth with improved profitability. Stable domestic demand and cost improvements contributed, making Japan the pillar accounting for 71.1% of consolidated operating profit. The Americas segment reported Revenue of ¥875.5B (+0.5%) and Operating Income of ¥1.5B (turned positive from prior year -¥26.1B), with an operating margin of 0.2% (prior year -3.0%); although back in the black, margins remain extremely low. The prior-year large impairment (¥52.7B) dropped out and the segment exited losses, but structural profitability improvement remains incomplete—productivity improvements at facilities and passing through price increases are urgent. The Asia segment posted Revenue of ¥345.7B (-11.5%) and Operating Income of ¥8.9B (prior year ¥0.6B to large increase), with an operating margin of 2.6% (prior year 0.2%, +2.4pt); despite revenue decline, profit increased substantially due to the removal of prior-year impairment (¥40.8B), cost cuts, and utilization improvements, while the revenue decline reflects demand adjustments in China.
[Profitability] Operating margin was 2.3% (prior year 0.2%, +2.1pt) and Net margin was 1.2% (prior year -7.5%, +8.7pt), significantly improved but still low. Gross margin was 11.4% (prior year 9.4%, +2.0pt) and SG&A ratio 9.1% (prior year 9.2%), indicating signs of stabilization in core profitability. ROE was 2.0% (prior year -22.8%), returning to positive but capital efficiency remains low, driven mainly by Net margin improvement. [Cash Quality] Operating CF / Net Income was 6.33x, indicating very strong cash backing of profits and confirming limited impact from one-off items. Operating CF / EBITDA was 0.80x, somewhat weak, affected by working capital (notably accounts payable decrease of ¥28.9B) tying up funds. FCF / Operating CF was 0.77x, healthy, showing robust cash generation after CAPEX. [Investment Efficiency] Total asset turnover was 1.28x (prior year 1.31x), slightly down; inventory turnover days were 78 days (prior year 81 days), modest improvement, but work-in-process was ¥69.0B, accounting for 57% of total inventory and suggesting process bottlenecks. CAPEX was ¥52.0B and depreciation ¥61.1B, a CAPEX/Depreciation ratio of 0.85x, indicating restrained capex with maintenance-focused investment. [Financial Health] Equity Ratio was 46.3% (prior year 38.1%, +8.2pt) and current ratio was 194.3% (prior year 158.3%), both favorable. Interest-bearing debt was ¥362.1B (short-term ¥113.7B, long-term ¥248.4B), with Debt/EBITDA 3.59x somewhat elevated, but EBITDA coverage was 10.4x, keeping interest burden manageable. Long-term borrowings increased to ¥250.5B (prior year ¥173.9B, +44.1%) as refinancing extended maturity dispersion.
Operating CF was ¥80.3B (prior year ¥47.4B, +69.4%), a large increase. Cash subtotal (profit before tax + non-cash expenses) was ¥93.3B, led by depreciation ¥61.1B, provisions increase ¥5.2B, and FX losses ¥3.6B. Working capital changes contributed -¥12.7B, with inventory decrease +¥13.2B and receivables decrease +¥1.2B positive, but payables decrease -¥28.9B causing cash outflow. After corporate tax payments -¥8.3B, interest and dividend received +¥5.0B, and interest paid -¥9.7B, Operating CF showed cash generation approximately 3.9x Net Income ¥20.8B, evidencing very strong cash generation. Investing CF was -¥18.5B (prior year -¥118.1B), a major improvement. CAPEX was -¥52.0B (prior year -¥90.7B), restrained, while net movement in time deposits +¥26.0B and fixed asset disposals +¥6.2B contributed inflows. FCF turned positive to ¥61.9B (prior year -¥70.7B), markedly improving shareholder return capacity. Financing CF was -¥31.4B (prior year +¥67.6B); net long-term borrowings were +¥124.9B with repayments -¥105.8B resulting in net +¥19.1B, offset by short-term borrowings -¥9.0B, share buybacks -¥38.3B, and dividends -¥7.5B. Adding FX-driven cash increase +¥14.3B, cash balance rose to ¥297.7B (prior year ¥252.9B, +17.7%), significantly improving liquidity.
Net Income attributable to owners of parent was ¥20.8B while Comprehensive Income was ¥66.1B, a ¥45.3B divergence, mainly from other comprehensive income: foreign currency translation adjustments +¥42.2B, valuation difference on securities +¥6.6B, and pension adjustments +¥0.5B. The foreign currency translation gain reflects appreciation of overseas subsidiaries’ assets due to yen depreciation and is largely a temporary valuation gain. The difference between Ordinary Income ¥37.8B and Operating Income ¥39.8B was -¥2.0B, indicating limited impact from non-operating items. Of non-operating income ¥16.7B, derivative valuation gains ¥8.5B are temporary mark-to-market items; interest income ¥2.6B and dividends ¥2.3B are recurring. Of non-operating expenses ¥18.7B, interest expense ¥9.7B is recurring, and FX losses ¥5.5B are a volatile factor. Extraordinary items were a small net -¥1.6B, mainly fixed asset sale gains ¥3.7B and impairment losses ¥1.1B. The prior year included a large one-off impairment of ¥91.5B, reduced to ¥1.1B this period, considerably lowering the impact of one-offs. Improvement at the operating income level supports the quality of Net Income, and sustaining gross margin improvement of +2.0pt and SG&A restraint will be key to persistence. Note, Operating CF ¥80.3B is 0.80x of Operating Income ¥39.8B + Depreciation ¥61.1B = ¥100.9B, indicating that the decline in working capital (particularly accounts payable) partially constrained cash generation, leaving room for improved working capital management.
Full-year guidance is conservative: Revenue ¥1,660.0B (YoY -5.9%), Operating Income ¥33.0B (-17.1%), Ordinary Income ¥21.0B (-44.4%), and Net Income attributable to owners of parent ¥11.0B (-47.0%). An assumed Operating margin of 2.0% (this period 2.3%, -0.3pt) incorporates lower fixed-cost absorption due to declining revenue. Downside to Ordinary Income is presumed to reflect potential non-operating FX losses and increased interest burden. Dividend guidance is DPS ¥16 (this period ¥33, -¥17), implying a forecast payout ratio of 30.2%, a conservative level. Progress rates are ahead: Revenue 106.2%, Operating Income 120.6%, Ordinary Income 179.9%, underscoring a cautious second-half outlook. We believe this conservatism likely reflects uncertainty around major customers’ production plans, conservative FX assumptions, and uncertain improvements in Americas operations. The sustainability of first-half gross margin improvements and second-half fixed-cost absorption progress will be the focus for assessing forecast execution.
Annual dividend is ¥33 (interim ¥15, year-end ¥18), with a payout ratio of 36.3% and total dividends of ¥7.6B. Additionally, share buybacks of ¥38.3B were executed, making total shareholder return ¥45.9B and a Total Return Ratio of 221% (vs FCF 74.2%), indicating an aggressive return policy. Company repurchased 4.46 million shares during the period at an average price of ¥858, aiming to enhance tangible net asset value per share and improve capital efficiency. Total returns of ¥45.9B against FCF ¥61.9B are coverable, and given cash ¥297.7B and interest-bearing debt ¥362.1B (net debt ¥64.4B), return capacity is sufficient. Next fiscal year’s forecast DPS is ¥16 (payout ratio 30.2%), a dividend cut outlook, but given conservative guidance, there remains a possibility of maintaining or increasing actual dividends if results allow. From a dividend sustainability perspective, stable OCF generation and low leverage support limited risk of a large dividend cut even in a downturn.
Americas segment low-profitability risk: With an operating margin of 0.2% at a very low level and accounting for 49.7% of revenue, delayed profitability improvement in the Americas would continue to structurally constrain consolidated margins. Even after the prior large impairment, recovery has been slow; productivity improvements and price pass-through are critical to medium-term performance. Under a relatively high leverage (Debt/EBITDA 3.59x), persistent low profitability could erode financial flexibility in a rising interest rate environment.
Inventory composition and working capital risk: Work-in-process of ¥69.0B represents 57% of total inventory, suggesting process bottlenecks and risk of valuation losses under demand volatility. The decrease in accounts payable (-¥28.9B) has pressured Operating CF; delayed improvements in working capital efficiency would reduce cash generation and affect FCF sustainability. While inventory turnover days improved to 78 days, correcting the work-in-process bias is urgent.
Automotive industry structural change risk: Electrification (EV) and shortened model cycles could reduce demand for conventional suspension components and increase product-mix volatility. With limited negotiating power with major customers (OEMs), inability to pass through raw material cost increases or FX changes could reverse gross margin improvements. The forecasted revenue decline reflects customer production plan conservatism; the firm’s ability to respond to demand shifts will determine earnings volatility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.3% | 7.8% (4.6%–12.3%) | -5.5pt |
| Net Margin | 0.7% | 5.2% (2.3%–8.2%) | -4.5pt |
Profitability is well below the industry median, with a gap of -5.5pt in Operating Margin and -4.5pt in Net Margin. High cost ratios and low profitability in the Americas are the main causes, placing the company in the lower tier of the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -1.2% | 3.7% (-0.4%–9.3%) | -4.9pt |
Growth also lags the industry median; the -1.2% decline contrasts with industry trend (+3.7%). Demand adjustments in Asia and focus on Americas profitability affect top-line expansion, and re-accelerating top-line growth remains a challenge.
※ Source: Company aggregation
Bottoming of profit structure and return to profit: Operating margin improved from 0.2% to 2.3% (+2.1pt) with gross margin +2.0pt improvement and the removal of prior-year impairment of ¥91.5B, resulting in a return to profit. Core profitability improvement is evident, and if cost reductions and price pass-through continue, there is scope for mid-term margin improvement. That said, the operating margin of 2.3% remains -5.5pt below the industry median of 7.8%, and the path to structural profitability improvement is a key investment consideration.
Robust cash generation and shareholder return capacity: Operating CF ¥80.3B and FCF ¥61.9B are ample, fully covering dividends ¥7.6B and buybacks ¥38.3B. The company executed aggressive returns with a Total Return Ratio of 221% while retaining cash ¥297.7B and maintaining Debt/EBITDA 3.59x; liquidity is sufficient. Next fiscal year DPS ¥16 is conservative, leaving room for actual maintenance or upside based on results.
Americas profitability and inventory efficiency remain medium-term issues: Americas operating margin at 0.2% is very low, and if profitability improvement at this major region (49.7% weight) is delayed, consolidated margin expansion will be constrained. Work-in-process ratio at 57% suggests process bottlenecks; improving working capital efficiency is critical to raise Operating CF/EBITDA above 0.80x and enhance asset turnover. While next-year guidance is conservative, continued gross margin improvement and profit normalization in the Americas and Asia could result in upside, making quarterly monitoring of segment margins and inventory turnover important.
This report is an earnings analysis document automatically generated by AI after analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company based on public financial statement data. Investment decisions are your own responsibility; please consult a professional advisor as appropriate before making any investment decisions.