Zero Co., Ltd. Announces Q1 FY2025/2026 Results: Revenue Growth Amid Cost Pressures

Key Highlights for Investors

• Revenue Growth: Consolidated sales revenue increased by 3.3% year-on-year to 35,453 million yen in Q1 FY2025/2026.
• Profit Decline: Operating profit fell 7.9% to 2,510 million yen, and profit attributable to shareholders decreased by 7.4% to 1,747 million yen.
• Dividend Guidance Maintained: No changes to dividend forecast, with full-year payout expected at 140.30 yen per share.
• Unchanged Full-Year Guidance: Management left FY2025/2026 full-year forecasts unchanged.
• Segment Developments: Mixed performance across business segments, with notable pressures in the domestic automotive segment and profit declines in the overseas segment due to one-off effects last year.
• Balance Sheet Remains Solid: Equity ratio improved to 60.5%; cash and cash equivalents stand at 14,653 million yen despite higher payouts and investments.

Detailed Financial Performance

Consolidated Results

• Sales revenue rose to 35,453 million yen (+3.3%).
• Operating profit fell to 2,510 million yen (-7.9%).
• Profit before tax also declined by 7.3% to 2,516 million yen.
• Profit attributable to shareholders was 1,747 million yen (-7.4%).
• Comprehensive income for the quarter was 2,046 million yen (+17.9%), mainly due to positive other comprehensive income items.
• Basic and diluted earnings per share both declined to 103.10 yen (from 111.55 yen).

Segment Performance

Domestic Automotive-Related Business

• Revenue: Slightly decreased to 16,631 million yen (99.6% of last year’s Q1).
• Profit: Fell to 2,261 million yen (91% of last year), mainly due to increased labor costs (wage hikes from July), system and maintenance costs, and extraordinary maintenance/fire-response on car carriers.
• Market Context: New vehicle sales in Japan dropped to 95.5% of prior-year levels, especially Nissan (down to 79.2%), but used car registrations and exports remained robust.

Human Resources Business

• Revenue: Rose to 5,947 million yen (104.2%).
• Profit: Decreased to 218 million yen (94.7%), with shuttle services growing but staffing services hit by higher labor costs and a loss from the withdrawal of Wnten.com.

General Cargo Business

• Revenue: Increased to 1,727 million yen (111.1%).
• Profit: Jumped to 492 million yen (156.3%), led by new warehousing projects, higher port cargo volumes (biomass fuel), and higher rental income.

Overseas-Related Business

• Revenue: Up to 11,147 million yen (107.6%).
• Profit: Fell sharply to 139 million yen (53.8%), due to the absence of one-off gains from the previous year, despite cost reductions and higher export volumes.

Balance Sheet and Cash Flow

• Total Assets: 71,541 million yen, down 3.3% from June 2025, mainly due to reductions in cash, inventories, and receivables.
• Equity: Grew 1.0% to 43,970 million yen, with a higher equity ratio (60.5%).
• Operating Cash Flow: Strong at 2,371 million yen (up from 1,280 million yen last year), driven by profit, inventory reductions, and non-cash items.
• Investing Cash Flow: Outflows increased to 1,415 million yen (property, plant, equipment, and intangibles).
• Financing Cash Flow: Significant outflow of 2,986 million yen, due to higher dividends (1,624 million yen), lease repayments, and reduction in short-term borrowings.
• Cash at Quarter End: 14,653 million yen, down 1,990 million yen from June 2025.

Dividend Outlook

• FY2025/2026 forecast maintained: 140.30 yen per share total payout (56 yen at 2nd quarter, 84.30 yen at year-end).
• No change to previous guidance; no amendments signaled.

Strategic and Price-Sensitive Points

• Cost Pressures: Rising labor, maintenance, and IT costs are eroding margins in core domestic and staffing segments. Shareholders should monitor if these pressures persist or escalate, as they could continue to impact profitability.
• Segmental Shifts: The company is adapting to weaker new-vehicle sales by pivoting to used-car logistics and expanding maintenance operations, but the transition is not enough to offset profit declines.
• Dividend Stability: Despite profit declines, the company is maintaining its dividend payout, signaling confidence in cash flow sustainability. This may support the share price in the near term.
• One-Off Factors: The significant drop in overseas business profit is due to the absence of previous one-time gains; investors should be aware that future comparatives will normalize.
• Macro Sensitivities: Management cautions that forecasts are based on current information and reasonable assumptions; actual results could diverge significantly due to economic conditions and exchange rate fluctuations.

Outlook

The company has not revised its full-year consolidated earnings forecast as of August 7, 2025. Investors should expect ongoing cost challenges but take some confidence from resilient revenues, especially in general cargo and overseas operations. The dividend outlook remains a key support for the share price, but further profit weakness, especially in domestic and staffing businesses, could weigh on sentiment if not addressed.

Disclaimer

This report is a summary and analysis based on the company’s unaudited financial statements and management commentary. Investors are advised that the information contained herein is for informational purposes only and should not be construed as investment advice. Actual results may differ materially from the forecasts due to various risks and uncertainties. Please consult with a financial advisor or conduct your own due diligence before making any investment decisions.

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