F.C.C.CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Both core businesses, Motorcycles and Automobiles, achieved revenue growth and margin improvement simultaneously, resulting in higher revenue and higher profit. Revenue was ¥718.0B (+18.3% YoY), Operating Income was ¥70.3B (+38.8%), Profit Before Tax was ¥77.2B (+41.8%), and Net Income attributable to owners of the parent was ¥58.1B (+24.3%; consolidated quarterly profit was ¥58.5B, +24.7%). The primary drivers of revenue growth were expanding demand in both the Motorcycle Business (+22.8%) and Automobile Business (+14.3%). The Operating Income margin improved to 9.8% (8.3% in the same period last year), resulting in a profit growth rate exceeding the revenue growth rate. Progress against the Full-Year forecast was also solid for Q1, at 27.1% for Revenue and 32.0% for Operating Income.

Factors Affecting Performance

【Revenue】Revenue of ¥718.0B (+18.3% YoY) was driven by both the Motorcycle Business at ¥345.9B (+22.8%, 48.2% of total) and the Automobile Business at ¥371.6B (+14.3%, 51.8% of total). The Environmental and Energy Business posted ¥0.4B (+56.0%); although small in scale, it recorded a high growth rate. There has been no change in the composition whereby the two core businesses together account for nearly all revenue.

【Profit and Loss】Cost of sales was ¥578.2B (+16.6%), below the Revenue growth rate (+18.3%), improving the gross margin to 19.5% (18.3% in the same period last year). SG&A expenses were ¥70.7B (+15.9%), with the increase remaining below the Revenue growth rate, and the Operating Income margin improved to 9.8% (8.3% in the same period last year). Financial income of ¥7.9B exceeded financial expenses of ¥1.0B, and Profit Before Tax expanded by 41.8% to ¥77.2B, exceeding Operating Income growth. However, income taxes and other taxes increased to ¥18.8B (¥7.6B in the same period last year), raising the effective tax rate to 24.3% (13.9% in the same period last year); consequently, Net Income growth (+24.3%) moderated relative to Profit Before Tax growth. This was a high-quality increase in profit, accompanied by both revenue growth and improved profitability.

Segment Analysis

The Automobile Business recorded Revenue of ¥371.6B (+14.3% YoY), Operating Income of ¥40.8B (+29.5%), and a margin of 11.0% (9.7% in the same period last year), generating the largest absolute profit among all segments while also improving its margin year over year. The Motorcycle Business posted Revenue of ¥345.9B (+22.8%), Operating Income of ¥36.0B (+43.2%), and a margin of 10.4% (8.9% in the same period last year). It recorded the highest revenue and profit growth rates among the three businesses, suggesting progress in price and product-mix improvement or fixed-cost absorption. The Environmental and Energy Business generated Revenue of ¥0.4B (+56.0%) but incurred an Operating Loss of ¥6.5B (loss of ¥6.0B in the same period last year). Due to its small scale, its margin can fluctuate significantly mathematically, but the loss widened slightly from the prior-year period. While both core businesses reached double-digit profit margins and lifted the Company-wide Operating Income margin to 9.8%, losses in the Environmental and Energy Business remain a factor weighing on total Company profit.

Key Financial Indicators

【Profitability】The Operating Income margin of 9.8% (8.3% in the same period last year) and Net Income margin of 8.1% (7.7% in the same period last year, based on Net Income attributable to owners of the parent) both improved year over year, supported by fixed-cost absorption accompanying revenue growth and cost control.【Cash Flow Quality】ROE of 2.8% (quarterly, before annualization) improved slightly from approximately 2.6% in the same period last year, calculated using average shareholders’ equity during the period. However, it remains low in absolute terms against a substantial Equity Ratio of 77.6%.【Investment Efficiency】Capital expenditures of ¥32.1B were approximately in line with depreciation and amortization expenses of ¥31.1B (CapEx/D&A ratio of 1.03x), and represented 4.5% of Revenue, indicating that the Company is not in a phase of significant expansionary investment.【Financial Soundness】With an Equity Ratio of 77.6% (at the same level as the prior year), Current Assets of ¥1691.1B versus Current Liabilities of ¥485.7B, and a high Current Ratio of approximately 3.5x, the Company has a sound financial position. It also holds ¥710.0B in cash and cash equivalents.

Cash Flow Analysis

Cash flow from operating activities was ¥63.9B (¥64.3B in the same period last year, -0.6% YoY), representing approximately 1.10x Net Income attributable to owners of the parent of ¥58.1B, which is generally solid. However, inventories increased by ¥24.2B, while trade payables (operating liabilities) decreased by ¥10.3B, creating headwinds from a working-capital perspective. These factors weighed on the conversion of the subtotal after adjustments for Profit Before Tax and depreciation and amortization of ¥68.0B into Operating Cash Flow, after income tax payments of ¥12.0B and other items. Cash flow from investing activities was an outflow of ¥23.0B, of which capital expenditures accounted for ¥32.1B, resulting in free cash flow of ¥41.0B. Cash flow from financing activities was an outflow of ¥52.9B, primarily due to dividend payments of ¥60.6B relating to the prior fiscal year. Although free cash flow alone did not cover these dividend payments, the shortfall was offset by the substantial cash and cash equivalents balance of ¥710.0B. If the upward trend in inventories continues, monitoring will be necessary from the perspective of cash conversion efficiency.

Quality of Earnings

Current-period Profit Before Tax of ¥77.2B comprised Operating Income of ¥70.3B, plus financial income of ¥7.9B, less financial expenses of ¥1.0B. No temporary factors equivalent to extraordinary gains or losses were identified. Non-operating income and expenses had a stable composition, with financial income exceeding financial expenses, and were not a major factor affecting earnings quality. Comprehensive income was ¥89.6B (¥89.0B attributable to owners of the parent). The approximately ¥30.9B difference from Net Income of ¥58.1B was primarily attributable to foreign currency translation adjustments for foreign operations (+¥22.3B) and fair-value changes in other securities (+¥8.9B), indicating that currency and market factors separate from the underlying earnings power of the business contributed to the increase. From an accruals perspective, the Operating Cash Flow subtotal of ¥68.0B was slightly below Profit Before Tax of ¥77.2B. Attention should be paid to the fact that working-capital investment, centered on the increase in inventories, created a gap between profit and cash flow.

Earnings Forecast and Guidance

The Full-Year forecast is Revenue of ¥2650.0B, Operating Income of ¥220.0B (+16.2% YoY), Net Income of ¥171.0B (-9.4%), forecast EPS of ¥356.43, and forecast dividends of ¥180.00 per share. Both the earnings forecast and dividend forecast were revised during the current quarter. Q1 progress rates were 27.1% for Revenue, 32.0% for Operating Income, and 34.2% for Net Income on an attributable-to-owners-of-the-parent basis, exceeding the simple quarterly progress benchmark of 25%. In particular, progress in Operating Income and Net Income exceeded Revenue progress, and the Q1 growth rates of Operating Income (+38.8%) and Net Income (+24.3%) both exceeded the Full-Year forecast growth rates of Operating Income (+16.2%) and Net Income (-9.4%), respectively.

Shareholder Returns

Dividend payments during the current quarter were ¥60.6B (¥48.0B in the same period last year), relating to dividends for the prior fiscal year. The Full-Year dividend forecast is ¥180.00 per share, implying a Payout Ratio of approximately 50.5% based on forecast EPS of ¥356.43. Free cash flow of ¥41.0B during the current quarter was below dividend payments of ¥60.6B, with the shortfall covered by the cash and cash equivalents balance of ¥710.0B. No share repurchases were conducted, and shareholder returns for the period consisted solely of dividends.

Risk Factors

1. Business Segment Concentration Risk: The Motorcycle Business (48.2% of total) and Automobile Business (51.8% of total) account for nearly all Revenue, while the Environmental and Energy Business continues to incur a loss, with Revenue of ¥0.4B against an Operating Loss of ¥6.5B. The Company’s performance is highly dependent on demand trends in its two core businesses.

2. Cash Conversion Risk from Increasing Inventories: Inventories increased to ¥394.3B (¥363.3B in the same period last year, +8.5%), weighing on Operating Cash Flow. The difference between the Operating Cash Flow subtotal of ¥68.0B and Profit Before Tax of ¥77.2B was primarily attributable to this increase in inventories, indicating a decline in cash conversion efficiency.

3. Foreign Exchange Risk: Foreign currency translation adjustments for foreign operations within other comprehensive income fluctuated to +¥22.3B in the current period (-¥29.0B in the same period last year), becoming the primary factor behind the difference between Comprehensive Income of ¥89.6B and Net Income of ¥58.1B. If the proportion of overseas operations is high, foreign exchange movements may cause volatility in financial performance.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin exceed the industry median, placing the Company’s profitability in the middle to upper range within the industry.

Growth and Capital Efficiency

The Revenue growth rate significantly exceeds the industry median, indicating a high growth pace within the industry.

※Source: Compiled by the Company

Key Earnings Highlights

1. Both the Motorcycle Business (10.4% margin) and Automobile Business (11.0% margin) achieved double-digit profit margins, indicating a structural improvement in which revenue growth and margin improvement are progressing simultaneously and suggesting the effectiveness of the cost structure and pricing strategy.

2. Progress against the Full-Year forecast was rapid for Q1, at 27.1% for Revenue, 32.0% for Operating Income, and 34.2% for Net Income, with profit-related indicators advancing particularly strongly.

3. Operating Cash Flow growth has not kept pace with Net Income growth as inventories increased (+8.5% YoY), making the trend in cash conversion efficiency an important point of observation in assessing future earnings quality.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥4,116–¥4,352 at ±1% for the cost of equity, and ¥4,229–¥4,233 at ±0.1 for ω.

Notes:

• 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 were used, resulting in a time-period mismatch with the Full-Year forecast.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value is not intended to predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility and, where necessary, after consulting with a professional advisor.

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