YAMAHA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥216.36B
• Operating Income: ¥12.47B
• Net Income: ¥9.80B
• EPS: ¥21.52

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Yamaha Corporation (7951) reported FY2026 Q2 consolidated results under IFRS with revenue of 2,163.64 (100M JPY), declining 5.2% YoY, while operating income rose 4.4% YoY to 124.73. Net income grew sharply by 85.4% YoY to 97.55, lifting net margin to 4.5% despite the revenue contraction. Gross profit was 912.71, translating to a robust gross margin of 42.2%, indicating resilient pricing and/or favorable mix. SG&A was 708.40, or 32.7% of revenue, implying disciplined opex control that supported operating margin expansion to roughly 5.8%. EBITDA was 235.54, with an EBITDA margin of 10.9%, evidencing reasonable operating efficiency. The DuPont breakdown shows net margin of 4.5%, asset turnover of 0.362x, and financial leverage of 1.30x, yielding an ROE of 2.1% for the period. Asset turnover remains modest, reflecting the asset-intensive nature and inventory levels in the business; leverage is conservative given an equity ratio of 76.9%. Operating cash flow was strong at 251.45, 2.58x net income, and free cash flow totaled 341.90 aided by positive investing cash flow, signaling good cash conversion this half. The balance sheet is conservative with total assets of 5,984.36 and equity of 4,612.75, supporting a low debt-to-equity ratio of 0.31x and ample solvency headroom. Working capital intensity is evident: inventories of 1,504.88 and receivables of 873.31 are sizable relative to half-year sales, warranting continued monitoring of turnover. Financing cash outflows of -159.39 include dividends of -61.42 and share repurchases of -66.58, indicating an ongoing shareholder return policy. The reported payout ratio of 257.8% likely reflects period mismatch or annualization effects; cash flow coverage for dividends was comfortable with FCF coverage of 1.36x. Liquidity ratios (current/quick) and interest coverage are not calculable from disclosed items, but cash and equivalents stood at 998.19, and the high equity ratio mitigates near-term liquidity risk. Data limitations exist due to multiple unreported line items (treated as unreported, not zero), but available figures support a view of stable profitability, solid cash generation, and a strong balance sheet amid softer topline.

Profitability Analysis

ROE decomposition: Net margin 4.5% x asset turnover 0.362 x financial leverage 1.30x yields a calculated ROE of 2.1% for the half year, matching the reported figure. Operating margin was approximately 5.8% (124.73 / 2,163.64), up YoY given operating income growth despite revenue decline, indicating positive operating leverage from SG&A control and mix. Gross margin at 42.2% is strong for the sector, suggesting pricing power in core products and/or favorable FX and mix. EBITDA margin of 10.9% reflects adequate absorption of fixed costs, with depreciation and amortization of 110.81 indicating a meaningful but manageable capital intensity. The YoY divergence between revenue (-5.2%) and operating income (+4.4%) points to margin improvement and disciplined cost management. Net margin benefited further from non-operating factors (details unreported) and a manageable effective tax rate of 26.5%. Overall profit quality appears reasonable, but the modest asset turnover constrains ROE; leverage remains intentionally conservative, limiting return amplification but supporting stability.

Growth Assessment

Revenue declined 5.2% YoY to 2,163.64, reflecting softer demand or timing effects; segment detail is not provided, but inventories suggest cautious sell-out dynamics. Operating income growth of 4.4% YoY amid lower sales signals improved mix, pricing, and/or cost efficiencies. Net income rose 85.4% YoY, likely aided by below-the-line items (non-operating details unreported) and solid tax management, amplifying bottom-line growth. Sustainability of profit growth will depend on sustaining gross margin resilience and maintaining SG&A discipline if volumes remain pressured. The EBITDA trajectory (10.9% margin) supports medium-term earnings capacity, though topline headwinds could limit operating leverage if prolonged. Outlook hinges on demand normalization in key geographies, FX tailwinds from a weaker JPY, and inventory normalization at channels. Without disclosed R&D and detailed segment data, visibility into product pipeline-driven growth is limited, but the balance sheet strength provides capacity to invest through the cycle.

Financial Health

Total assets were 5,984.36 and total equity 4,612.75, yielding an equity ratio of 76.9%, indicative of low balance sheet risk. Debt-to-equity was reported at 0.31x, consistent with conservative leverage; specific interest-bearing debt amounts are unreported. Cash and equivalents were 998.19, providing a meaningful liquidity buffer. Current and quick ratios are not calculable due to unreported current liabilities; however, current assets of 3,519.33 include sizable inventories (1,504.88) and receivables (873.31). Accounts payable stood at 640.04, suggesting a net working capital outlay typical for the business model. Solvency is strong given low leverage and high equity, while liquidity appears adequate though partially tied up in inventory. Interest coverage is not calculable due to missing interest expense, but EBITDA and OCF imply ample capacity to service debt obligations if any.

Cash Flow Quality

Operating cash flow of 251.45 exceeded net income of 97.55 by 2.58x, indicating robust cash conversion, likely driven by working capital inflows or non-cash items (D&A 110.81). Free cash flow was 341.90, stronger than OCF due to positive investing cash flow of 90.45; this suggests asset disposals, investment securities redemptions, or reduced capex, though capex was not disclosed. Earnings quality appears solid given OCF coverage, but the reliance on positive investing inflows is non-recurring in nature and should not be extrapolated. Working capital remains a key swing factor: inventories are elevated at 1,504.88, and receivables at 873.31; sustained improvements in turnover would further bolster OCF durability. Financing CF was -159.39, reflecting shareholder returns (dividends -61.42 and buybacks -66.58) and other financing outflows. Cash on hand at 998.19 provides flexibility for operations and returns, even if OCF moderates.

Dividend Sustainability

Dividends paid were -61.42 during the period, with an additional -66.58 in share repurchases, signaling a balanced return approach. The reported payout ratio of 257.8% likely reflects a mismatch between annual DPS and half-year EPS; using cash basis, dividends were covered by free cash flow with an FCF coverage ratio of 1.36x. On an earnings basis for the half, dividends represent approximately 63% of net income (61.42 / 97.55), but seasonality and annualization nuances under IFRS interim reporting should be considered. With strong equity (76.9% equity ratio) and positive OCF, near-term dividend capacity appears supported; however, sustainability depends on maintaining cash generation as inventories normalize and revenue trends stabilize. Lack of disclosed full-year DPS guidance and DOE limits precision. Policy appears shareholder-friendly with concurrent buybacks, but prudent calibration to cash generation remains important.

Risk Assessment

Business Risks:

• Demand cyclicality in consumer discretionary categories (musical instruments, audio equipment)
• Channel inventory normalization and potential sell-through softness in key markets
• Foreign exchange volatility (USD/EUR vs JPY) affecting revenue translation and margins
• Supply chain and component availability risks for digital instruments and pro audio
• Raw material and logistics cost fluctuations impacting gross margin
• Product mix risk between high-margin premium SKUs and entry-level products
• Competitive pricing pressure from global and regional peers
• Geopolitical and macroeconomic uncertainty in North America, Europe, and China

Financial Risks:

• Working capital intensity with elevated inventories and sizable receivables
• Potential non-recurring nature of positive investing cash flows underpinning FCF
• Limited visibility on interest expense and debt maturity profile due to unreported items
• Exposure to FX on both revenue and procurement potentially increasing earnings volatility

Key Concerns:

• Topline decline (-5.2% YoY) despite margin resilience
• Inventory level of 1,504.88 relative to half-year sales requiring careful management
• High reported payout ratio if measured against interim earnings, necessitating policy clarity
• Data gaps (ordinary income, interest expense, capex, R&D) limiting full assessment

Investment Implications

Key Takeaways:

• Revenue down 5.2% YoY but operating income up 4.4%, evidencing effective cost control and mix benefits
• Solid margins: gross margin 42.2%, operating margin ~5.8%, EBITDA margin 10.9%
• ROE at 2.1% constrained by modest asset turnover and low leverage
• Strong OCF (251.45) and FCF (341.90) support ongoing shareholder returns
• Balance sheet strength with 76.9% equity ratio and D/E of 0.31x mitigates solvency risk
• Inventory and receivable levels are key watchpoints for cash conversion and downside protection

Metrics to Watch:

• Revenue trajectory and order intake/backlog by region and product category
• Gross margin and ASP/mix trends, including FX impacts
• SG&A ratio and operating margin sustainability amid potential volume pressure
• Inventory turnover and channel inventory health
• OCF to net income ratio and FCF after normalizing for non-recurring investing inflows
• Dividend and buyback cadence relative to full-year earnings and FCF
• Asset turnover and ROE progression

Relative Positioning: Yamaha maintains strong brand equity and a conservatively financed balance sheet relative to peers in musical instruments and audio equipment. The company’s high equity ratio and consistent cash generation provide resilience versus more leveraged competitors, though lower asset turnover and conservative leverage temper ROE compared to some peers. Margin performance appears competitive, supported by mix and operational discipline.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
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