YOROZU CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

A quarter in which Revenue increased and Operating Income, Ordinary Income, and Net Income all rose substantially, driven by an improvement in gross margin and the contribution of foreign exchange gains. Revenue was ¥445.5B (+7.5% YoY), Operating Income was ¥7.5B (+121.2% YoY), Ordinary Income was ¥8.1B (+177.4% YoY), and Net Income attributable to owners of the parent was ¥5.7B, compared with a ¥1.6B loss in the same period last year, resulting in a return to profitability. The primary drivers of the earnings growth were an improvement in gross margin to 11.4% from 9.5% in the prior-year period, due to cost improvements and the recovery of operating rates, as well as a ¥3.5B boost from foreign exchange gains. Both an improvement in core earning power and non-operating factors contributed.

Factors Affecting Performance

【Revenue】Revenue increased 7.5% YoY to ¥445.5B. By segment, the Americas was the largest contributor at ¥234.6B (51.0% of the total, +5.2% YoY). Japan grew significantly to ¥150.0B (32.6% of the total, +16.6% YoY), while Asia was nearly flat at ¥75.4B (16.4% of the total, -0.6% YoY). The high dependence on the Americas and Revenue growth in Japan supported overall growth.

【Profit and Loss】Operating Income increased 121.2% YoY to ¥7.5B, Ordinary Income increased 177.4% YoY to ¥8.1B, and Net Income was ¥5.7B, compared with a loss in the same period last year. Gross margin improved to 11.4% from 9.5% in the prior-year period; however, SG&A expenses increased 19.5% to ¥43.0B from ¥35.97B, expanding faster than the 7.5% Revenue growth rate, warranting attention to cost discipline. Foreign exchange gains of ¥3.5B, equivalent to a 46.4% contribution relative to Operating Income, made a significant contribution to the increase in Ordinary Income, indicating reliance on non-operating factors. An impairment loss of ¥1.0B was recorded as an extraordinary loss, a temporary factor, while an extraordinary gain of ¥0.2B from the sale of fixed assets was also recorded. Net extraordinary items therefore had a downward impact on Net Income. Overall, the results can be characterized as higher Revenue and higher earnings.

Segment Analysis

The Americas was the largest and highest-margin segment, with Revenue of ¥234.6B (51.0% of the total) and Operating Income of ¥4.8B (2.0% margin, +45.0% YoY). Japan recorded Revenue of ¥150.0B (32.6% of the total) and Operating Income of ¥1.1B (0.7% margin, +187.6% YoY), returning to profitability after recording a loss in the prior-year period. Asia recorded Revenue of ¥75.4B (16.4% of the total) and Operating Income of ¥0.9B (1.2% margin, +170.6% YoY). All three segments reported higher earnings; however, Japan had the lowest margin, and the earnings structure remains highly dependent on the Americas.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 1.7% from 0.8% in the prior-year period, while the Net Income margin improved to 1.3% from a negative figure in the prior-year period. However, the absolute levels remain low. ROE improved to 1.0% but remained at a low level. 【Cash Quality】Cash and deposits stood at ¥268.6B, while short-term borrowings were reduced to ¥81.1B (-27.3% from ¥111.6B in the prior-year period), resulting in cash substantially exceeding short-term borrowings. 【Investment Efficiency】Total assets were ¥1356.7B, down from the prior-year period, while net assets were ¥648.8B and remained nearly flat. Accounts receivable and notes receivable totaled ¥283.9B, and work in process totaled ¥58.7B, indicating substantial working capital and room for improvement in asset efficiency. 【Financial Soundness】The Equity Ratio improved to 47.8% from 39.2% in the prior-year period, maintaining a conservative capital structure.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is not available, funding trends can be assessed from changes in the balance sheet. Cash and deposits declined to ¥268.6B from ¥297.7B in the prior-year period, while short-term borrowings were reduced 27.3% from ¥111.6B to ¥81.1B, indicating progress in reducing interest-bearing debt. Long-term borrowings also declined slightly from ¥242.7B, compared with the prior-year level of approximately ¥250.5B, suggesting an ongoing stance of reducing debt financing. Accounts receivable and notes receivable totaled ¥283.9B, and work in process totaled ¥58.7B, indicating that a certain amount of funds remains tied up in working capital. Improving inventory and receivables turnover will therefore be a future challenge from the perspective of cash generation capacity.

Quality of Earnings

Non-operating income was ¥6.0B, or approximately 1.3% of Revenue, and was limited in scale. However, foreign exchange gains of ¥3.5B, the main component, made a significant contribution relative to Ordinary Income of ¥8.1B, indicating dependence on non-operating factors relative to core earnings (Operating Income). Net extraordinary items represented a loss of slightly less than ¥0.9B, consisting of an impairment loss of ¥1.0B and a gain on the sale of fixed assets of ¥0.2B. Although this represented a certain scale relative to Net Income, it did not reach a level warranting significant concern. The gap between Ordinary Income and Net Income was affected by the light ¥0.6B tax burden, which contributed positively. Overall, both a qualitative improvement in core earnings through gross-margin improvement and the non-recurring factor of foreign exchange gains supported earnings growth this period. The sustainability of earnings will depend on the subsequent accumulation of core earnings.

Earnings Forecast and Guidance

Progress toward the Full-Year plan was generally in line with a standard pace: Revenue was ¥445.5B against a plan of ¥1660.0B, representing 26.8% progress, while Operating Income was ¥7.5B against a plan of ¥33.0B, representing 22.9% progress. Ordinary Income was ¥8.1B against a plan of ¥21.0B, representing 38.6% progress, and Net Income was ¥5.7B against a plan of ¥11.0B, representing 52.0% progress, both ahead of schedule. The faster progress at the Ordinary Income and Net Income levels was largely attributable to non-operating and temporary factors, including foreign exchange gains and the light tax burden, while progress at the Operating Income level remained broadly in line with the plan. The Full-Year plan itself projects lower Revenue and lower earnings YoY (Revenue -5.9%, Operating Income -17.1%, Ordinary Income -44.4%). Whether the Q1 earnings growth can be sustained throughout the Full Year will depend on trends in the coming quarters.

Shareholder Returns

The company’s forecast annual dividend is ¥33 per share, implying a Payout Ratio of approximately 62.3% against forecast EPS of ¥53.00. The prior-year dividend was ¥15 per share, indicating a planned dividend increase. The Payout Ratio is slightly above the general benchmark of 60%, and achievement of the Full-Year Net Income plan of ¥11.0B will determine dividend sustainability. As no data on share repurchases has been identified, the evaluation here is based solely on the Payout Ratio.

Risk Factors

1. Regional concentration risk: The Americas segment accounts for 51.0% of Revenue and approximately 64% of segment profit, creating a structure in which demand trends in the Americas and the business conditions of OEM customers have a significant impact on overall performance.

2. Limited earnings cushion: With a gross margin of 11.4% and an Operating Income margin of 1.7%, profit headroom is limited. If the increase in raw-material prices and SG&A expenses (+19.5% YoY) continues, Revenue growth may not readily translate into higher earnings.

3. Dependence on non-operating factors: Foreign exchange gains of ¥3.5B made a significant contribution to the increase in Ordinary Income. If foreign exchange trends reverse, the boost to Ordinary Income and Net Income may diminish.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Compared with the median for the manufacturing industry, both the Operating Income margin and Net Income margin are substantially lower, placing profitability at a low level within the industry.

Growth and Capital Efficiency

The Revenue growth rate was slightly above the industry median, placing top-line growth at an average to slightly favorable level within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The gross margin improved to 11.4% from 9.5% in the prior-year period, with the recovery of operating rates and cost improvements contributing to higher core earnings. However, the Operating Income margin remained at 1.7%, substantially below the industry median of 8.7%.

2. Progress toward the Full-Year plan at the Ordinary Income and Net Income levels (38.6% and 52.0%, respectively) exceeded progress at the Operating Income level (22.9%). This difference was attributable to non-operating and temporary factors, such as foreign exchange gains and the light tax burden, which should be considered when evaluating earnings quality.

3. Financial soundness improved, as short-term borrowings were reduced by -27.3% YoY and the Equity Ratio improved to 47.8%. However, working capital, particularly accounts receivable and work in process, remains substantial, leaving room for improvement in terms of asset efficiency.

Theoretical Stock Price (Reference Value)

This is a reference range mechanically calculated solely from publicly available data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market stock price or a recommendation of any specific investment action.

Sensitivity: ¥2,426–¥2,562 at ±1% for the cost of equity, and ¥2,472–¥2,506 at ±0.1 for ω.

Notes:

• Net Income is substantially compressed relative to Operating Income due to the tax burden, acquisition-related expenses, and non-controlling interests, among other factors (Net Income ÷ Operating Income 33%). This value reflects that compression at face value; if the factors are temporary, the underlying earning power may be higher.
• 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, resulting in a timing difference relative to the Full-Year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated at a somewhat higher level.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not predict or guarantee the future stock price)

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This report is an earnings analysis document automatically generated by AI through analysis of 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, consulting a professional as necessary.

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