F.C.C.CO.,LTD. FY2026 FY Earnings Report

Financial Highlights

• Net Sales: ¥260.84B
• Operating Income: ¥18.93B
• Net Income: ¥18.81B
• EPS: ¥387.36

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

FY2026 was a solid year for FCC (IFRS, consolidated), delivering resilient topline growth and improved profitability with strong cost discipline and healthy cash conversion versus earnings. Revenue grew 1.6% YoY to 2,608.36, while operating income rose 9.2% to 189.27, and net income increased 18.3% to 187.60. Gross profit was 482.35 with a gross margin of 18.5%, down about 70 bps YoY, but SG&A decreased 6.2% to 296.39, supporting operating margin expansion to 7.3% (+50 bps). Net margin improved to 7.2% (+100+ bps YoY), aided by net finance income and a 12.8% effective tax rate. Ordinary income increased 32.4% to 164.53, while total comprehensive income surged to 290.14, reflecting positive FX translation and FVOCI gains. By segment, Motorcycle grew 3.6% revenue with 9.8% margin; Automobile was flat in revenue (-0.1%) but lifted margin to 6.7%; NonMobility remained loss-making as a development platform. DuPont decomposition points to ROE of roughly 9.1% (Net margin 7.2% × Asset turnover 0.987 × Leverage 1.28x), up on margin gains with modest leverage. Cash flow quality was sound: operating cash flow of 227.79 exceeded net income (OCF/NI 1.21x), though OCF/EBITDA of 0.75x sits below the >0.9 benchmark on working capital outflows. Free cash flow was 62.93 after 157.67 of capex (CapEx/Depreciation 1.39x), indicating ongoing growth/refresh investment. The balance sheet remains exceptionally strong: equity ratio 77.6%, Debt/EBITDA 0.13x, and cash and equivalents of 713.60; short-term loans of 38.46 are easily serviceable. Dividend per share totaled 194 yen (including commemorative components), implying a payout of roughly 54%, which slightly exceeded FCF but was comfortably covered by OCF and cash on hand. Guidance versus results shows an operating income shortfall vs the 20.0 target but a meaningful net income beat on finance and tax effects. Looking ahead, cost control, stable Motorcycle demand, and improved mix in Automobile underpin earnings resilience, while elevated DSO and slightly above-benchmark inventory days merit monitoring. Investment intensity remains healthy with PPE at 25.4% of assets and capex above depreciation, supporting medium-term competitiveness. Overall, FCC exits FY2026 with improved profitability, conservative leverage, and sufficient liquidity to fund capex and a normalized dividend policy post-commemoratives.

Profitability Analysis

ROE decomposition (3-factor): ROE ≈ 9.1% = Net profit margin (7.2%) × Asset turnover (0.987) × Financial leverage (1.28x). The largest YoY change came from net margin expansion (driven by lower SG&A and a lower effective tax rate), outweighing a modest decline in gross margin. SG&A decreased 6.2% YoY to 296.39, reflecting tight expense management and operating leverage on a slightly higher revenue base; finance income net also contributed at the pre-tax level. The improvement appears largely sustainable from a cost-efficiency standpoint, though the favorable tax rate and finance income tailwind may normalize. Operating margin improved to 7.3% despite a 70 bps gross margin compression, indicating mix/price and expense control offsetting input cost pressure; watch that SG&A growth stays below revenue growth to sustain leverage.

Growth Assessment

Topline growth of 1.6% was supported by Motorcycle (+3.6%) offsetting flat Automobile (-0.1%). Operating income grew 9.2% on cost reductions and better segment profitability, with net income up 18.3% helped by finance income and a 12.8% tax rate. EBITDA reached 302.32 (11.6% margin), consistent with a steady, not hyper-growth, profile. Segment mix is favorable: Motorcycle maintained high single-digit margins and Automobile improved mid-single-digit margins. Capex of 157.67 (CapEx/Depreciation 1.39x) indicates continued capacity/efficiency investments, supportive of mid-term growth. Revenue sustainability rests on OEM demand cycles in two- and four-wheelers; with inventory days near benchmark and stable receivables, supply-demand appears balanced. Future growth catalysts include EV/CASE product development in both Motorcycle and Automobile segments and selective NonMobility initiatives once losses narrow.

Financial Health

Liquidity is robust: current assets 1,683.43 vs current liabilities 483.03 imply a current ratio around 3.5x (healthy). Cash and equivalents of 713.60 and very low interest-bearing debt (38.46) result in Debt/Capital of 1.8% and Debt/EBITDA of 0.13x; interest coverage is strong given minimal finance costs and positive net finance income. No warnings for Current Ratio < 1.0 or D/E > 2.0. Short-term debt of 38.46 is modest and fully covered by cash on hand, indicating negligible refinancing risk. Working capital shows ample receivables and inventories against payables; no maturity mismatch concerns. Off-balance sheet obligations were not indicated.

Notable B/S Changes

Short-term loans: +8.46 (+28.2%) - Higher short-term borrowings, though fully covered by cash; negligible leverage impact. Other financial assets (Noncurrent): +45.96 (+27.5%) - Increased long-term financial assets, potentially higher investment securities; watch market/valuation risk and income volatility. Deferred tax assets: +12.08 (+40.4%) - Higher DTAs reflecting timing differences; monitor sustainability amid profit and OCI movements. Deferred tax liabilities: -16.85 (-25.0%) - Reduction in DTLs, improving net deferred tax position and equity. Provisions (Current): +18.31 (+24.9%) - Higher short-term provisions (e.g., warranties/other); assess future cash impact if provisions crystallize.

Cash Flow Quality

OCF was 227.79 versus net income of 187.60 (OCF/NI 1.21x), a positive earnings quality signal. Free cash flow was 62.93 after capex of 157.67; working capital movements (inventory -15.47 and payables -28.73) dampened cash conversion, reflected in OCF/EBITDA of 0.75x (below 0.9 benchmark). Accruals ratio of -1.5% supports clean accrual quality. The combination of healthy OCF and large cash balances offsets the near-term FCF shortfall versus dividends; ongoing capex at 1.39x depreciation is appropriate for sustaining competitiveness. No clear signs of working capital manipulation; changes align with operational needs and a modest inventory build.

Dividend Sustainability

Total DPS was 194 yen, including commemorative components (interim 67 with 63 commemorative; year-end 127 with 63 commemorative). The implied payout ratio was roughly 54%, which is within the <60% sustainability benchmark for dividends-only, though FCF (62.93) did not fully cover cash dividends paid (81.31). Coverage by OCF remains ample, and the strong cash position provides flexibility. Normalized DPS (excluding commemorative portions) would be substantially lower and comfortably sustainable alongside capex. Total return was dominated by dividends; buybacks were negligible.

Risk Assessment

Business risks include Demand cyclicality at major OEM customers in Motorcycle and Automobile segments, Input cost volatility (steel, aluminum, energy) pressuring gross margins, Product transition risk tied to EV/CASE developments and potential mix shifts, NonMobility segment losses persisting longer than planned, delaying breakeven.

Financial risks include Elevated DSO at 65 days indicates slower collections than benchmark, tying up cash, Inventory days at 62 slightly above benchmark, risking obsolescence if demand softens, FX translation volatility affecting OCI and potentially earnings via transaction exposures.

Key concerns include Concentration risk: Automobile accounts for 52.1% of revenue, raising exposure to 4-wheeler OEM cycles, Gross margin at 18.5% (<20% benchmark) leaves less buffer against material cost spikes, Operating cash conversion (OCF/EBITDA 0.75x) below excellence threshold due to working capital outflows.

Investment Implications

Key takeaways include Margin-driven earnings improvement despite modest revenue growth, Cost discipline (SG&A -6.2% YoY) underpinning operating margin expansion, Healthy balance sheet with net cash and negligible leverage, OCF exceeds net income; FCF positive but below dividends due to capex and WC, Motorcycle remains the profit anchor; Automobile improving; NonMobility still loss-making.

Metrics to watch include Gross margin trajectory versus input costs, DSO and DIO to confirm working capital normalization, CapEx/Depreciation to sustain >1.0 while preserving FCF, Tax rate normalization and finance income sensitivity to rates/FX, Segment margin dispersion (Motorcycle vs Automobile) and NonMobility loss narrowing.

Regarding relative positioning, Within auto components peers, FCC combines conservative leverage and solid OCF with mid-single-digit operating margins; profitability is competitive in Motorcycle and improving in Automobile, with scope for further ROE gains if working capital efficiency and gross margin recover.