AIT (9381) FY2027 Q2 Earnings Report

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Executive Summary

For the interim period, revenue and operating income increased, while ordinary income and net income declined due to a shift from foreign exchange gains to losses and a higher tax burden. Revenue was ¥30.52B (+8.1% YoY), and operating income was ¥2.24B (+10.9%). Ordinary income was ¥2.39B (△0.3% YoY), and net income attributable to owners of the parent was ¥1.59B (△2.4%). Growth was primarily driven by expansion in the Japan segment. In non-operating items, the foreign exchange gain of ¥0.192B in the prior-year period turned into a foreign exchange loss of ¥0.049B in the current period. A key feature of these results is that improvement in core operations did not translate into higher net income.

Factors Behind Performance Changes

【Revenue】Revenue was driven by the Japan segment, resulting in consolidated growth of +8.1%. Segment composition was Japan 85.4% (¥26.08B, +9.2%), China 12.1% (¥3.69B, +5.9%), and Other 2.5% (¥0.75B, △13.7%). Other comprises subsidiaries in Taiwan, Vietnam, and Myanmar, and was the only segment to report a revenue decline.

【Profit and Loss】Operating income increased as growth in gross profit outpaced the increase in SG&A expenses. Gross profit was ¥5.47B (+8.8%), and SG&A expenses were ¥3.23B (+7.3%), raising the operating margin to 7.4% (7.2% in the prior-year period). In non-operating items, foreign exchange gains/losses deteriorated from a gain of ¥0.192B in the prior-year period to a loss of ¥0.049B. As a result, ordinary income edged down. The ratio of income taxes to income before taxes increased from approximately 28.3% in the prior-year period to 32.2%. Net income attributable to owners of the parent was ¥1.59B, while extraordinary gains and losses were effectively zero. Overall, revenue and operating income increased, but ordinary income and net income declined.

Segment Analysis

Japan reported operating income of ¥1.79B (+11.6%) and a 6.9% margin. It accounts for approximately 80% of operating income and determines the direction of consolidated results. China reported operating income of ¥0.39B (+27.9%) and a 10.6% margin, approximately 3.7pt above Japan’s, and recorded the strongest growth. Other reported operating income of ¥0.06B (△46.8%) and a 7.7% margin, representing a substantial decline. Consolidated operating income of ¥2.24B equals the sum of these three segments.

Key Financial Metrics

【Profitability】The gross margin improved slightly to 17.9% (17.8% in the prior-year period), and the operating margin rose to 7.4% (7.2% in the prior-year period). Annualized ROE was 15.0%. The decline in the net margin was the primary factor weighing on ROE.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1.63B (△1.3% YoY), approximately 1.02x net income attributable to owners of the parent of ¥1.59B. However, against OCF before working capital changes of ¥2.28B, increases in trade receivables and prepaid expenses tied up cash. The ¥1.22B increase in accounts payable offset these outflows, meaning cash generation depended on an increase in trade payables.【Investment Efficiency】Investing Cash Flow was △¥4.38B, while capital expenditures were limited to ¥0.05B. The main factors were net deposits into time deposits and the acquisition of investment securities for ¥1.29B, resulting in free cash flow of △¥2.75B.【Financial Soundness】The equity ratio was 73.5%, cash and deposits were ¥13.3B, and the current ratio was approximately 354%. The company has ample short-term liquidity.

Cash Flow Analysis

OCF was ¥1.63B, broadly in line with the prior year, while cash movements across financing and investing activities were primarily driven by an increase in investment assets. OCF of ¥1.63B was the result of deducting items including income taxes paid of ¥0.99B from OCF before working capital changes of ¥2.28B. Increases in trade receivables of ¥0.47B and prepaid expenses of ¥0.95B resulted in cash outflows. These were offset by an increase in accounts payable of ¥1.22B. Investing Cash Flow was △¥4.38B, primarily due to deposits into time deposits of ¥3.36B and acquisitions of investment securities of ¥1.29B. Capital expenditures were small at ¥0.05B, so free cash flow of △¥2.75B primarily reflected cash management rather than the burden of business investment. Financing Cash Flow was △¥1.39B, most of which was dividend payments of ¥1.29B. Cash and cash equivalents at period-end decreased to ¥9.92B (¥13.85B in the prior year), while cash and deposits, including time deposits, stood at ¥13.3B.

Earnings Quality

Operating income is the primary source of earnings, while non-operating income and expenses are subject to significant fluctuations in foreign exchange gains and losses. Non-operating income of ¥0.2B mainly comprised interest income of ¥0.09B and equity-method investment income of ¥0.09B. Foreign exchange losses of ¥0.05B accounted for most non-operating expenses, and the change from a foreign exchange gain of ¥0.19B in the prior-year period weighed on the YoY change in ordinary income. Extraordinary gains and losses were effectively zero, indicating a limited impact from one-off factors. The difference between ordinary income and net income is explained by income taxes of ¥0.77B and the non-controlling interests’ share of ¥0.03B. OCF exceeded net income, but was partly supported by the increase in accounts payable. Comprehensive income was ¥1.99B (¥1.36B in the prior-year period); the difference from net income of ¥1.62B (consolidated net income) was due to OCI items such as foreign currency translation adjustments.

Earnings Forecast and Guidance

Interim progress against the full-year forecast was 48.8% for revenue, 49.5% for operating income, 48.2% for ordinary income, and 46.9% for net income. The full-year forecast is revenue of ¥62.5B, operating income of ¥4.53B (+7.9%), ordinary income of ¥4.96B (+6.0%), and EPS of ¥144.29. To meet the forecast, revenue of ¥31.98B and operating income of ¥2.29B are required in the second half; revenue would need to be approximately 4.8% above the first-half level. Net income of approximately ¥1.8B is required in the second half, about ¥0.21B above the first half. There have been no revisions to the earnings or dividend forecasts.

Shareholder Returns

The interim dividend was ¥55 per share, an increase of ¥10 from ¥45 in the prior-year period. The full-year dividend forecast is ¥110 per share. Dividend payments in the first half were ¥1.29B, within the range of OCF. The interim payout ratio, calculated using the interim dividend of ¥55 and EPS of ¥67.66, is approximately 81%. For the full year, the payout ratio, based on the forecast dividend of ¥110 and forecast EPS of ¥144.29, is approximately 76%. The dividend burden is not light, but is supported by cash and deposits of ¥13.3B and an equity ratio of 73.5%.

Risk Factors

1. Concentration in the Japan business: Japan accounts for 85.4% of revenue and approximately 80% of operating income. A slowdown in domestic cargo flows or international logistics demand would have a substantial impact on consolidated results. Maintaining the gross margin of 17.9% is also subject to freight rate fluctuations.

2. Foreign exchange fluctuations: The shift from a foreign exchange gain of ¥0.192B to a loss of ¥0.049B offset operating income growth at the ordinary income level. The swing in foreign exchange gains and losses was approximately ¥0.24B, compared with operating income of ¥2.24B.

3. Working capital and cash generation: Prepaid expenses increased by ¥0.95B, and trade receivables increased by ¥0.47B. The increase in accounts payable of ¥1.22B offset these outflows, and changes in payment terms could cause OCF to fluctuate. Investment securities also increased to ¥5.12B (¥3.92B in the prior year), accounting for 17.5% of total assets.

Industry Benchmarks (Reference; Compiled by the Company)

Profitability and Returns

Both the operating margin and net margin exceed the industry median, placing the company around the middle-to-upper portion of the interquartile range.

Growth and Capital Efficiency

Revenue growth is above the industry IQR upper bound of 7.2%.

※Source: Company compilation

Key Points of Interest in the Results

1. Divergence between operating improvement and net income: Operating income increased by +10.9%, and the operating margin improved to 7.4%. However, the shift in foreign exchange gains and losses and the increase in the effective tax rate (approximately 32.2%) resulted in net income declining by △2.4%.

2. Quality of cash generation: OCF exceeds net income, but the increase in accounts payable offsets increases in prepaid expenses and trade receivables. The substantial outflow in Investing Cash Flow was primarily attributable to the allocation of funds to time deposits and investment securities.

3. Financial capacity and dividends: The company has a strong financial foundation, with cash and deposits of ¥13.3B and an equity ratio of 73.5%. The interim dividend increased to ¥55 (¥45 in the prior year), and the payout ratio based on the full-year dividend forecast of ¥110 is approximately 76%.

Theoretical Share Value (Reference)

Sensitivity: ¥1,068 to ¥1,126 for cost of equity ±1%; ¥1,093 to ¥1,102 for ω ±0.1.

Notes:

• Goodwill amortization of ¥4.6 per share is added back to earnings (a non-cash expense; for comparability with IFRS companies).
• Net assets are taken at the quarter end (there is a timing gap with the full-year forecast).
• Net assets include non-controlling interests, so the estimate may be somewhat high.

(Model: residual income model (Ohlson-type, explicit 5-year fade) / rate reference month: 2026-09 / a mechanical estimate from public data only; it is not a forecast of the market price or a recommendation of any 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 investment in any specific security. Industry benchmarks are reference information compiled by the company from publicly available earnings data. Investment decisions should be made at your own responsibility and, if necessary, after consulting a professional.

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