A&D HOLON Holdings Company,Limited FY2027 Q1 Earnings Report

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Executive Summary

The first quarter of the fiscal year ending April 2026 was marked by a significant decline in operating income and below despite nearly flat revenue, clearly indicating a slowdown in profitability. Revenue was ¥1.438B (-1.2% YoY), operating income was ¥0.062B (-53.2%), ordinary income was ¥0.078B (-45.3%), and net income attributable to owners of the parent was ¥0.043B (-45.6%). While the Medical and Health Equipment Business drove the Company with revenue of ¥1.275B (+26.2%), the Semiconductor-Related Business sharply decelerated to revenue of ¥0.093B (-67.8%), and the Americas Measurement and Weighing Equipment Business also posted an operating loss, offsetting the benefit of higher revenue and pressuring profits.

Factors Affecting Performance

【Revenue】Revenue was ¥1.438B, essentially flat at -1.2% year on year. While the Medical and Health Equipment Business secured higher revenue of ¥1.275B (+26.2%, 88.7% of total), and the Measurement and Weighing Equipment Business recorded revenue of ¥0.842B (+6.1%), the Semiconductor-Related Business declined sharply to ¥0.093B (-67.8%), offsetting the increase in revenue. By region, the Americas (+26.7%), Europe (+22.9%), and Asia (+34.3%) in the Medical and Health Equipment Business all posted double-digit revenue growth, indicating geographically broad-based demand.

【Profit and Loss】Operating income was ¥0.062B (-53.2%), ordinary income was ¥0.078B (-45.3%), and net income attributable to owners of the parent was ¥0.043B (-45.6%), all representing substantial declines. The gross profit margin remained essentially flat at 45.4%, but the SG&A expense ratio rose to 41.0% from 36.1% in the previous year, an increase of +4.9pt, with reduced fixed-cost absorption being the primary cause of the decline in operating income. The extraordinary loss of ¥0.004B (including loss on disposal of fixed assets) was a minor temporary factor. The difference between ordinary income and net income was mainly attributable to income taxes of ¥0.030B, with the effective tax rate at approximately 40.8%, higher than in the previous year. Accordingly, the quarter is classified as one of lower revenue and lower profit (a modest revenue decline and substantial profit decline).

Segment Analysis

The Medical and Health Equipment Business led consolidated profit growth, with revenue of ¥1.275B (+26.2%), operating income of ¥0.113B (+86.5%), and an operating margin of 8.9%. By region, Japan was exceptionally profitable, with revenue of ¥0.479B (+23.7%) and a profit margin of 21.4%. In contrast, the Americas posted revenue of ¥0.310B (+26.7%) but an operating loss of ¥0.003B (profit margin: -0.8%), indicating deteriorating profitability and a significant regional mix disparity.

The Measurement and Weighing Equipment Business expanded its profit surplus, with revenue of ¥0.842B (+6.1%) and operating income of ¥0.017B (+203.6%). By region, Japan (profit margin: 2.5%), Asia (profit margin: 8.1%), and Europe (profit margin: 18.9%) remained profitable, while the Americas generated revenue of ¥0.116B (+3.9%) but posted an operating loss of ¥0.018B (profit margin: -15.8%), impairing consolidated profitability.

The Semiconductor-Related Business was affected by headwinds from the demand cycle, recording revenue of ¥0.093B (-67.8%) and an operating loss of ¥0.012B (profit margin: -13.1%). Japan was the center of the slowdown, with revenue of ¥0.088B, -69.6%, and an operating loss of ¥0.014B, while the Americas and Asia remained profitable, albeit on a small scale.

Key Financial Indicators

【Profitability】The operating margin declined to 4.3% from 9.1% in the previous year, a decrease of -4.8pt, while the net profit margin, based on net income attributable to owners of the parent, also declined to 3.0% from 5.5%, a decrease of -2.5pt. The gross profit margin remained essentially flat at 45.4%; the primary cause of deteriorating profitability was reduced fixed-cost absorption due to the increase in the SG&A expense ratio (36.1% in the previous year → 41.0%). 【Cash Quality】The accounts receivable days outstanding (based on a 90-day period) were approximately 94 days, inventory days outstanding were approximately 137 days, and accounts payable days outstanding were approximately 42 days, resulting in a cash conversion cycle of approximately 189 days. This was shorter than approximately 205 days in the same period of the previous year, primarily due to an improvement in accounts receivable turnover (118 days in the previous year → 94 days). However, inventory days outstanding increased somewhat (126 days in the previous year → 137 days), requiring monitoring of inventory levels. 【Investment Efficiency】ROE was 0.9%, with the decline in the net profit margin being the primary downward factor. 【Financial Soundness】The equity ratio was 67.1% (65.7% in the previous year), the current ratio was 250.3%, and the interest coverage ratio was approximately 8.4x based on operating income, indicating that the financial foundation remains robust.

Cash Flow Analysis

As the cash flow statement is not disclosed in this report, cash trends are analyzed based on changes in the balance sheet. Cash and deposits increased by ¥0.088B (+6.4%) from the end of the previous fiscal year to ¥1.464B, while trade receivables decreased by ¥0.403B (-21.1%) to ¥1.505B, suggesting that collection progress and changes in the sales mix contributed to the accumulation of cash. Inventories increased by ¥0.083B (+7.4%) to ¥1.198B, indicating that the buildup of inventory placed a certain degree of pressure on working capital. Short-term borrowings increased by ¥0.099B (+9.5%) to ¥1.144B, while current portion of long-term borrowings declined substantially to ¥0.020B from ¥0.119B at the end of the previous fiscal year, indicating a shift in the composition of interest-bearing debt involving a reduction in long-term debt. Overall, although cash accumulated, inventory growth represented a use of funds, and inventory turnover should be closely monitored with respect to the quality of working capital.

Earnings Quality

The recurring source of earnings in the quarter was operating income of ¥0.062B. Including non-operating income of ¥0.025B (of which interest income was ¥0.018B), ordinary income amounted to ¥0.078B. Non-operating income was only approximately 1.7% of revenue, indicating that support for ordinary income from financial income was limited and that structural distortion was minor. Extraordinary income and losses were both insignificant, consisting of extraordinary income of ¥0.000B and extraordinary loss of ¥0.004B (including loss on disposal of fixed assets); therefore, temporary factors had only a minor impact on net income. Meanwhile, comprehensive income was ¥0.110B (¥0.109B attributable to owners of the parent), substantially exceeding net income of ¥0.043B. The primary cause of this divergence was foreign currency translation adjustments of +¥0.067B. This divergence reflects valuation differences arising from the translation of overseas subsidiaries into yen and should be considered separately from net income, which reflects the actual condition of operating activities. The difference between ordinary income and net income was primarily attributable to income taxes of ¥0.030B (effective tax rate: approximately 40.8%), with the heavy tax burden compressing the net profit margin.

Earnings Forecast and Guidance

Progress against the full-year plan (revenue of ¥6.800B, operating income of ¥0.700B, ordinary income of ¥0.690B, and net income of ¥0.450B) was 21.2% for revenue, 8.9% for operating income, 11.4% for ordinary income, and 9.6% for net income in Q1. Compared with a simple one-fourth benchmark of 25%, revenue was -3.8pt below, operating income was -16.1pt below, ordinary income was -13.6pt below, and net income was -15.4pt below, with the delay in profit progress particularly pronounced. There were no revisions to either the earnings forecast or dividend forecast for the quarter, and the full-year plan remains unchanged. While the Medical and Health Equipment Business is expected to continue its trend of higher revenue and profit, the timing of a bottom in the Semiconductor-Related Business and progress in restoring the profitability of the Americas Measurement and Weighing Equipment Business will determine the degree to which the full-year plan is achieved in the second half.

Shareholder Returns

The Company’s full-year-end dividend forecast is ¥60 per share, an increase from the previous year’s actual dividend of ¥25. Based on the average number of shares outstanding during the period of 27,387 thousand shares, the estimated annual total dividend is approximately ¥0.164B, resulting in a payout ratio of approximately 36.5% against the full-year net income forecast of ¥0.450B, based on net income attributable to owners of the parent. With cash and deposits of ¥1.464B and an equity ratio of 67.1%, the Company has ample liquidity and a strong financial foundation, securing sufficient capacity to support this dividend level.

Risk Factors

1. Demand cycle risk in the Semiconductor-Related Business: Revenue declined sharply to ¥0.093B, down -67.8% year on year, and the business recorded an operating loss of ¥0.012B (profit margin: -13.1%). If the timing of the business recovery remains uncertain, the impact on consolidated performance may continue.

2. Deteriorating profitability in the Americas Measurement and Weighing Equipment Business: The business recorded an operating loss of ¥0.018B (profit margin: -15.8%) against revenue of ¥0.116B (+3.9%), and the continuation of losses even during a period of revenue growth requires monitoring in terms of the fixed-cost structure and competitive pricing environment.

3. Structural decline in profitability: The operating margin declined to 4.3% from 9.1% in the previous year, a decrease of -4.8pt, and was also below the industry median of 8.7%. While the gross profit margin remained essentially flat, the SG&A expense ratio increased, making improvement in fixed-cost absorption a key challenge.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the operating margin and net profit margin are below the industry median, indicating that profitability is relatively low within the peer group.

Growth and Capital Efficiency

The revenue growth rate is substantially below the industry median and does not reach the lower bound of the IQR.

※Source: Compiled by the Company

Key Earnings Highlights

1. While the Medical and Health Equipment Business accounts for 88.7% of total Company revenue, its Japanese operations maintained a high profit margin of 21.4% and drove the majority of the Company’s profit in the quarter. Meanwhile, profitability at the Americas operations, both Medical and Measurement, was relatively weak, making the regional mix a factor behind fluctuations in the consolidated profit margin.

2. The operating margin declined to 4.3% from 9.1% in the previous year, a decrease of -4.8pt, and was also below the industry median of 8.7%. Given that the gross profit margin remained essentially flat, the data indicate that the primary cause of the decline in profitability was reduced fixed-cost absorption resulting from higher SG&A expenses.

3. Comprehensive income attributable to owners of the parent of ¥0.109B substantially exceeded net income of ¥0.043B. The difference was primarily attributable to foreign currency translation adjustments of +¥0.067B. This difference largely reflects foreign exchange valuation rather than the earnings power of the core business, and comprehensive income should therefore be distinguished from net income.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on 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 share price or a recommendation of any specific investment action.

Sensitivity: ¥1,768–¥1,871 at ±1% for the cost of equity, and ¥1,819–¥1,819 at ±0.1 for ω.

Notes:

• As 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 (there is a timing difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model / Interest rate reference month: 2026-07 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release 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 discretion and responsibility, after consulting with a professional as necessary.

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