Zero Co., Ltd. Releases Unaudited H1 FY2026 Financial Results: Comprehensive Investor Insights

Key Highlights

• Revenue Decline: Consolidated sales revenue for the second quarter ended December 31, 2025, was ¥65.84 billion, a 4.5% year-on-year decrease.
• Profit Down: Operating profit dropped 10.4% to ¥4.44 billion, and net profit attributable to shareholders fell 13.3% to ¥3.04 billion.
• EPS Impact: Basic quarterly earnings per share declined from ¥207.12 to ¥179.11.
• Dividend Increase: Interim dividend per share for FY2025/2026 rose to ¥56.00 (up from ¥43.00), with a full-year forecast of ¥140.30, marginally above last year’s ¥139.90.
• Balance Sheet Strength: Total assets increased to ¥74.84 billion, equity ratio improved to 60.0% from 58.0%, and retained earnings rose by ¥1.62 billion.
• Cash Flow: Operating cash flow surged to ¥5.21 billion, but cash and equivalents decreased by ¥1.18 billion to ¥15.46 billion, mainly due to higher investment and dividend payouts.

Detailed Segment Analysis

Domestic Automotive Related Businesses

• Market Weakness: Japanese new vehicle sales declined to 96.8% of prior year levels, reflecting weak domestic demand. Used car registrations increased slightly due to robust export demand.
• Revenue Drop: Segment revenue was ¥33.11 billion (97.9% of prior year), and segment profit was ¥4.20 billion (89.0% of prior year).
• Cost Pressure: Higher labour costs (wage increases to secure drivers), system upgrade expenses, and increased maintenance costs (including special maintenance after carrier truck fires) weighed on profits, despite route optimization efforts.

Human Resource Businesses

• Resilience & Challenges: Shuttle and transportation business saw revenue growth from fare revisions and new contracts. Staffing services benefited from increased dispatched drivers.
• Profit Impact: Segment revenue rose to ¥11.94 billion (103.6% of prior year), but segment profit dropped to ¥425 million (94.8% of prior year) due to minimum wage hikes and indirect staff hiring.

General Cargo Business

• Growth Areas: Transport and warehousing revenue grew on new projects. Port cargo handling benefited from biomass fuel and select customers, offsetting lower auto volumes.
• Strong Performance: Segment revenue increased to ¥3.42 billion (106.0%), segment profit surged to ¥937 million (128.9%). Real estate rental income also grew due to contract renewals.

Overseas Related Businesses

• Mixed Results: Used-vehicle export revenue dropped due to import permit delays in Malaysia, pushing shipments to H2. In China, vehicle transportation revenue rose on new model launches.
• Profit Decline: Segment revenue was ¥17.36 billion (85.1%), segment profit was ¥203 million (53.6%). Last year’s profit was boosted by a one-off factor.

Corporate Expenses

• Administrative Costs: Corporate expenses not included in segment reporting amounted to ¥1.32 billion, reflecting ongoing management overhead.

Financial Position and Cash Flow

• Assets: Total assets increased to ¥74.84 billion, driven by higher inventories and non-current assets.
• Liabilities: Total liabilities decreased to ¥29.22 billion, as short-term borrowings and payables were reduced.
• Equity: Total equity increased to ¥45.62 billion, boosted by retained earnings.
• Cash Flow: Operating cash flow improved, but cash was used for investments (new assets, properties) and higher dividends.

Shareholder-Impacting and Price Sensitive Factors

• Profit Declines Across Segments: Except for General Cargo, all segments reported lower profits, with notable declines in automotive and overseas businesses. This could weigh on investor sentiment unless improvement is signaled in H2.
• Dividend Policy: Despite profit declines, dividend per share increased for the interim and is forecast to marginally rise full-year, signaling management’s commitment to shareholder returns.
• Cost Structure Changes: Wage increases, digitalization, and special maintenance expenses represent ongoing investment in future competitiveness, but short-term margin pressure may concern investors.
• Strong Cash Flow from Operations: Cash generation remains solid, supporting dividends and investment, but overall cash decreased due to higher capital expenditures and payouts.
• No Forecast Revisions: Management has not revised full-year guidance, signaling confidence in second-half recovery or stabilization.
• No Significant Subsequent Events: No material post-reporting events disclosed, reducing risk of immediate surprises.

Potential Share Price Impact

• The report indicates short-term challenges with revenue and profit declines, particularly in core automotive and overseas segments. Ongoing investments and higher dividends may reassure some investors, but margin pressure and lower EPS could trigger negative price action in the near term unless H2 recovery materializes.
• Strong cash flow and balance sheet stability are positives, but shareholders should monitor operating margins and profit trends closely, especially given the unchanged guidance and increased dividend payout.
• Any improvement in Japan’s vehicle sales, overseas export conditions, or reduction in cost pressures would be critical for H2 performance and share price recovery.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should review company filings and consult their financial advisor before making investment decisions. The information is based on unaudited financial statements and may be subject to revision.

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