ANA HOLDINGS INC. (shares of preferred stock) (9202) FY2027 Q1

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Executive Summary

Revenue increased significantly due to the recovery in air travel demand, but higher costs pressured earnings, resulting in higher revenue but lower income. Revenue was ¥672.73B (+22.6% YoY), Operating Income was ¥20.78B (-43.5%), Ordinary Income was ¥22.51B (-37.3%), and Net Income attributable to owners of the parent was ¥19.41B (-15.4%). The primary driver of revenue growth was a significant 25.2% increase in external revenue from the Airline Business, while cost of sales increased by 29.2%, outpacing revenue growth, causing the gross profit margin to decline to 12.3% from 16.7% in the previous year.

Factors Affecting Business Performance

【Revenue】Consolidated revenue was ¥672.73B, representing a 22.6% YoY increase. By segment, the Airline Business was the core business, with revenue of ¥620.83B (81.2% of total revenue, +24.9% YoY), followed by the Aviation-Related Business at ¥92.65B (12.1%, +7.4%) and the Trading Business at ¥37.46B (4.9%, +7.9%). The Travel Business was ¥13.93B (1.8%), down 9.3% YoY, making it the only segment to report a revenue decline.

【Profit and Loss】Operating Income was ¥20.78B, a substantial 43.5% decrease YoY. The primary factor was that cost of sales increased at a faster pace than revenue. Gross profit declined by 10.0%, from ¥91.79B in the previous year to ¥82.62B. Although the SG&A ratio improved by 0.8pt YoY to 9.2%, the improvement was insufficient to offset higher costs. Segment profit for the Airline Business was ¥18.15B (-48.7%), making it the primary contributor to the company-wide earnings decline, while its profit margin fell significantly to 2.9% from 7.1% in the previous year. In contrast, the Aviation-Related Business posted a 54.3% increase in profit, and the Travel Business turned profitable from a loss in the previous year. Profit before tax included a one-time gain on the sale of investment securities of ¥2.05B; excluding this item, it was consistent with Ordinary Income. In conclusion, revenue increased while income declined.

Segment Analysis

The Airline Business was the core segment, accounting for more than 80% of total revenue, with revenue of ¥620.83B (+24.9% YoY). However, segment profit declined substantially to ¥18.15B (-48.7% YoY), and the profit margin fell from 7.1% to 2.9%. This indicates that expanding demand has not translated into earnings growth, likely due to higher operating-related expenses, maintenance costs, and personnel expenses. The Aviation-Related Business reported higher revenue and profit, with revenue of ¥92.65B (+7.4%) and profit of ¥4.92B (+54.3%), improving its profit margin to 5.3%. The Trading Business reported revenue of ¥37.46B (+7.9%) but profit of ¥1.07B (-19.8%), resulting in higher revenue but lower income. The Travel Business reported a revenue decline to ¥13.93B (-9.3%) but turned profitable from a loss in the previous year, recording profit of ¥0.14B. Overall, the decline in the profitability of the Airline Business remains the key factor determining consolidated performance.

Key Financial Indicators

【Profitability】The Operating Income margin was 3.1%, down 3.6pt from 6.7% in the previous year, while the Net Income margin was 2.9%, down 1.3pt from 4.2%. Annualized ROE was 5.6% and annualized ROIC was 4.0%, both remaining at low levels, indicating room to improve returns on invested capital under the capital-intensive business structure. 【Cash Quality】Profit before tax of ¥24.56B included a ¥2.05B gain on the sale of investment securities, a one-time factor accounting for approximately 8.3% of profit before tax. Contract liabilities increased by 9.5% YoY to ¥653.70B, supporting working capital as deferred revenue associated with future obligations to provide transportation services. 【Investment Efficiency】Basic EPS was ¥39.99 (¥48.84 in the previous year), and BPS was ¥2,753.77 (¥2,853.60 in the previous year), with both figures below the previous year. 【Financial Soundness】The Equity Ratio was 35.9%, down from 37.7% in the previous year. Interest-bearing debt was ¥852.58B, and cash and deposits were ¥572.80B. The current ratio was approximately 147.9%, indicating that short-term liquidity was secured.

Cash Flow Analysis

As this report does not include direct data from the cash flow statement, funding trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥572.80B, an increase of ¥20.01B from ¥552.79B in the previous year. Meanwhile, long-term borrowings increased by ¥49.16B YoY to ¥792.49B, indicating that financing from the capital markets was one factor supporting funds. Treasury stock increased by ¥50.18B YoY to ¥151.74B, suggesting that shareholder returns involving capital outflows or capital policy measures were implemented. The ¥56.88B increase in contract liabilities represents the accumulation of advance payments for future service provision and contributed partially to working capital. Net assets decreased by ¥94.33B YoY, as share repurchases and negative other comprehensive income restrained capital accumulation.

Quality of Earnings

Profit before tax of ¥24.56B for the quarter included a ¥2.05B gain on the sale of investment securities as an extraordinary gain, which should be distinguished as a one-time factor. Recurring profit excluding this item was equivalent to Ordinary Income of ¥22.51B. Non-operating income and expenses resulted in a net gain of ¥1.73B, with interest received of ¥2.53B and dividends received of ¥1.06B offsetting financial expenses including interest paid of ¥4.67B. While these represent recurring sources of income associated with business operations, they do not provide a permanent supplement to the weakness in core earnings, reflected in the 3.1% Operating Income margin. Comprehensive income was negative ¥11.98B on a consolidated basis and negative ¥12.46B attributable to owners of the parent, representing a substantial divergence from Net Income of ¥19.41B. The primary cause of this divergence was negative deferred hedge gains and losses of ¥31.39B. The temporary downward pressure on net assets from fluctuations in foreign exchange- and interest rate-related hedge valuations should be noted when assessing earnings quality.

Earnings Forecast and Guidance

The full-year company forecast calls for revenue of ¥2,770.0B (+9.1% YoY), Operating Income of ¥150.0B (-31.0%), and Ordinary Income of ¥137.0B (-37.6%). As of Q1, no revisions had been made to the earnings or dividend forecasts. Progress rates were 24.3% for revenue, 13.9% for Operating Income, and 20.2% for Net Income attributable to owners of the parent (actual results of ¥19.41B against the forecast of ¥96.0B), indicating that earnings were behind schedule compared with the standard quarterly progress rate of 25%. However, the Airline Business has strong seasonality, with demand tending to concentrate in the second half of the year; therefore, it is not appropriate to determine the likelihood of achieving the full-year targets based solely on the Q1 progress rate. The company’s plan itself incorporates lower Operating Income despite higher revenue, indicating that it assumes continued cost pressures.

Shareholder Returns

The full-year dividend forecast for common shares is ¥60 per share, representing a Payout Ratio of 28.7% against forecast EPS of ¥209.26. This level is below the generally cited sustainability benchmark of 60% and is conservatively set relative to the earnings forecast. No revision was made to the dividend forecast for Q1. For the First Series Class Shares with Bond-Type Terms, the forecast annual dividend is ¥175.00, which must be treated separately from common shares as a capital-like instrument with different characteristics. Treasury stock increased by ¥50.18B compared with the same period of the previous year, suggesting that capital allocation other than dividends may have been implemented. While dividend coverage based solely on earnings is favorable, comprehensive capital allocation, including share repurchases, should be evaluated in light of future trends in profit margins and priorities relative to capital expenditures and debt repayment.

Risk Factors

1. Decline in the Airline Business profit margin: While revenue in the Airline Business increased 25.2% YoY, segment profit declined substantially by 48.7%, and the profit margin fell from 7.1% to 2.9%. Demand growth has not been sufficient to absorb rising costs, making trends in unit costs a key focus going forward.

2. Declining profitability and capital efficiency: The consolidated Operating Income margin of 3.1% and annualized ROIC of 4.0% are both low and have deteriorated from the previous year. The gross profit margin also declined by approximately 4.4pt to 12.3% from 16.7% in the previous year, making improvement in cost absorption a challenge.

3. Financial leverage and interest burden: Interest-bearing debt was ¥852.58B, and the Equity Ratio declined to 35.9% from 37.7% in the previous year. Interest paid was ¥4.67B, down from ¥6.22B in the previous year, but resilience to earnings volatility may become a challenge in an environment of rising interest rates.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Income margin and Net Income margin are below the industry median, indicating relatively low profitability within the industry.

Growth and Capital Efficiency

The Revenue growth rate substantially exceeds the industry median, demonstrating top-tier growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Release

1. Although revenue growth of +22.6% was among the most notable in the industry, Operating Income declined substantially by -43.5%. The earnings data indicate that the immediate focus is on monetizing demand growth, including cost management, rather than demand expansion itself.

2. The decline in the Airline Business segment profit margin from 7.1% to 2.9% was the primary cause of the company-wide earnings decline. Trends in operating-related expenses, maintenance costs, and personnel expenses will determine the future recovery of profit margins.

3. Profit before tax included a one-time gain on the sale of investment securities of ¥2.05B, leaving recurring earnings power at the level of Ordinary Income of ¥22.51B after excluding this item. Negative comprehensive income of ¥11.98B was primarily attributable to fluctuations in deferred hedge gains and losses. The substantial divergence from Net Income should be noted when assessing earnings quality.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,478–¥2,620 at ±1% in the cost of equity, and ¥2,541–¥2,552 at ω±0.1.

Notes:

• Since 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).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and 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 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 responsibility, after consulting with a professional as necessary.

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