Zojirushi (7965) FY2026 Q3 Earnings Report

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Executive Summary

Revenue and operating income increased in the cumulative Q3 results, while net income attributable to owners of the parent declined, indicating that the improvement at the operating level did not flow through to net income. Revenue was ¥69.99B (+3.4% YoY), operating income was ¥5.86B (+5.3%), and ordinary income was ¥6.35B (+3.9%). Net income attributable to owners of the parent was ¥4.02B (△2.9% YoY). An improvement in the gross margin supported the increase in operating income. Meanwhile, the increase in income taxes and other taxes (¥2.16B, versus ¥1.81B in the prior year) was the main cause of the decline in net income.

Consolidated net income was ¥4.18B (△2.5% YoY), including ¥0.17B attributable to non-controlling interests.

Factors Behind Changes in Results

【Revenue】Revenue was ¥69.99B, an increase of ¥2.3B (+3.4%) from ¥67.69B in the prior year. The Group is primarily engaged in the manufacture and sale of household products, and segment information is omitted. Cost of sales increased by just 1.4%, so much of the increase in revenue contributed to higher gross profit.

【Profit and Loss】Gross profit was ¥24.06B (¥22.42B in the prior year), and the gross margin improved by approximately 1.3pt to 34.4% from 33.1%. SG&A expenses increased 8.0% to ¥18.21B (¥16.86B in the prior year), outpacing revenue growth. The SG&A ratio rose to 26.0% from 24.9%, absorbing most of the improvement in gross margin. The operating margin improved only modestly, to 8.4% from 8.2%. Special income and losses were ¥0.03B and ¥0.04B, respectively, for a net loss of just ¥0.01B, limiting their impact on net income. Income taxes and other taxes as a percentage of income before taxes of ¥6.34B rose to 34.0% from 29.7%. In summary, revenue and income increased at the operating and ordinary income levels, while income attributable to owners of the parent declined.

Key Financial Metrics

【Profitability】The operating margin was 8.4%, the gross margin was 34.4%, and the SG&A ratio was 26.0%. Annualized ROE was 6.1%, and basic EPS was ¥63.23 (¥63.47 in the prior year), essentially flat. The decline in net income and the increase in the tax burden are factors weighing on ROE.【Cash Quality】Cash and deposits were ¥28.13B, down ¥5.05B (△15.2%) from ¥33.18B in the prior year. Accounts payable declined by ¥2.76B to ¥5.25B from ¥8.01B in the prior year, reducing the funding support provided by trade payables.【Investment Efficiency】Property, plant and equipment increased 27.5% to ¥17.59B (¥13.8B in the prior year). Inventories were ¥26.95B (¥26.09B in the prior year), representing 23.1% of total assets.【Financial Soundness】The equity ratio was 78.9%, and the current ratio was 470.4% (current assets of ¥78.3B ÷ current liabilities of ¥16.64B). Total liabilities were ¥24.56B, and the debt-to-equity ratio was 0.27x relative to net assets of ¥92.01B, indicating substantial financial flexibility.

Cash Flow Analysis

As no cash flow statement is disclosed, changes in funding are assessed based on movements in the balance sheet. Cash and deposits declined by ¥5.05B. Key movements included a ¥2.76B decrease in accounts payable, a ¥0.86B increase in inventories, and a ¥3.79B increase in property, plant and equipment. On the other hand, accounts receivable declined by ¥3.77B, generating funds through collections. Investment securities increased by ¥1.39B to ¥12.72B (¥11.33B in the prior year). Taken together, the decline in cash on hand appears to have been primarily due to a reduction in trade payables and increased capital investment. Cash and deposits are approximately 1.7x current liabilities, so short-term funding capacity remains ample. However, inventories are substantial at ¥26.95B, and the funds tied up in inventory are an issue for capital efficiency.

Earnings Quality

Earnings quality is characterized by operating income accounting for the majority of ordinary income, indicating that earnings are primarily generated by core operations. Non-operating income was ¥0.72B, comprising ¥0.23B in dividend income, ¥0.27B in interest income, and ¥0.1B in equity-method investment income, among other items. Non-operating expenses were ¥0.23B, and ordinary income exceeded operating income by ¥0.49B. Special income and losses amounted to a small net loss of ¥0.01B, limiting the impact of one-off factors. Comprehensive income was ¥7.28B, of which ¥7.07B was attributable to owners of the parent, substantially exceeding net income of ¥4.18B. Foreign currency translation adjustments of ¥2.21B and valuation differences on securities of ¥0.86B were the main causes of this gap; these items are non-recurring in nature and include valuation fluctuations. In addition, the increase in the tax burden ratio (34.0%) is constraining net income growth and should be monitored as a factor affecting bottom-line results.

Earnings Forecast and Guidance

The full-year forecast is revenue of ¥92.5B (+1.5% YoY), operating income of ¥6.6B (△11.2%), ordinary income of ¥7.1B (△14.5%), and income attributable to owners of the parent of ¥4.8B (△19.7%). Progress against the cumulative actual results is 75.7% for revenue, 88.7% for operating income, 89.4% for ordinary income, and 83.6% for income attributable to owners of the parent. Operating income is well above the standard 75% progress level. Based on the difference from the full-year forecast, Q4 revenue is estimated at ¥22.51B and operating income at ¥0.74B, implying an operating margin of approximately 3.3%. This would be a substantial decline from the cumulative-period margin of 8.4%, making the outlook for profitability at year-end a key issue. There was no revision to the earnings forecast during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥46 per share, including a second-quarter-end dividend of ¥23 per share. The full-year dividend in the prior year was ¥30 per share, so an increase is forecast. The forecast payout ratio against forecast EPS of ¥75.58 is approximately 60.9% (¥46 ÷ ¥75.58). Based on the weighted-average number of shares during the period of 63.5 million, the estimated total dividend is ¥2.92B, equivalent to approximately 61% of forecast net income of ¥4.8B. Cash and deposits were ¥28.13B and the equity ratio was 78.9%, indicating ample financial capacity to support the dividend burden. However, the payout ratio will rise amid an expected decline in earnings.

Risk Factors

1. Inventory and obsolescence risk: Inventories were ¥26.95B, representing 23.1% of total assets, and increased 3.3% YoY. A mismatch in demand forecasts could lead to discounting or write-downs, making it necessary to monitor inventory turnover.

2. Rising SG&A expenses: SG&A expenses increased 8.0% YoY, exceeding the 3.4% increase in revenue. The SG&A ratio rose by approximately 1.1pt from the prior year to 26.0%, limiting the earnings benefit from the improvement in gross margin.

3. Tax burden and Q4 profitability: The effective tax rate rose to 34.0% from 29.7% in the prior year. In addition, the full-year forecast implies a Q4 operating margin of approximately 3.3%, making the decline in the year-end margin a source of uncertainty for full-year results.

Industry Benchmarks (Reference; Compiled by the Company)

Profitability and Returns

Both the operating margin and net margin are slightly below the median and within the IQR.

Growth and Capital Efficiency

Revenue growth is 0.4pt above the median, placing the company near the middle of the industry.

Source: Company compilation

Key Takeaways from the Results

1. The gross margin improved by approximately 1.3pt, supporting revenue growth and higher operating income, while an approximately 1.1pt increase in the SG&A ratio weakened operating leverage. Whether the increase in SG&A expenses is temporary or structural will be a key consideration in assessing the sustainability of margins.

2. The equity ratio of 78.9% and current ratio of 470.4% indicate ample financial flexibility. On the other hand, inventories account for 23.1% of total assets, and the concurrent decline in accounts payable makes working capital efficiency an issue for capital efficiency.

3. Progress toward the full-year operating income forecast has reached 88.7%. However, the forecast incorporates a Q4 operating margin of approximately 3.3%, making year-end profitability and the trend in the tax burden key determinants of full-year results.

Theoretical Share Price (Reference Value)

Sensitivity: At a cost of equity of ±1%, ¥1,250–¥1,320; at ω ±0.1, ¥1,279–¥1,288.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of quarter-end are used (there is a timing difference relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be somewhat overstated.

(Valuation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated using only publicly disclosed data; this is not a forecast of market share prices or a recommendation of any specific investment action, and it does not predict or guarantee future share prices.)

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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 investing in any specific security. Industry benchmarks are reference information compiled by the company based on publicly available earnings data. Please make investment decisions at your own responsibility and consult a professional as necessary.

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