LIXIL (5938) Q1 2025 earnings summary

Executive summary

• Revenue increased 3.0% year-over-year to JPY 369.8 billion in Q1 FY2025, but core earnings dropped 82.9% to JPY 0.6 billion and profit for the quarter fell to a loss of JPY 5.8 billion, mainly due to higher expenses and tax costs.

• Japan's renovation sales offset declines in new housing, while international revenue grew 10% (down 2% excluding forex); Europe recovered, but the US and China remained weak.

• Operating cash flow improved, generating JPY 14.6 billion in free cash flow.

• Structural reforms and inventory write-downs weighed on profit, but were expected and are anticipated to benefit future quarters.

Financial highlights

• Gross profit increased 1.5% year-over-year to JPY 117.4 billion, but gross margin declined by 0.5pp to 31.7%.

• Core earnings fell 82.9% year-over-year to JPY 639 million.

• Free cash flow improved by JPY 50.2 billion year-over-year to JPY 14.6 billion.

• Basic earnings per share dropped to -JPY 20.39 from JPY 1.31 year-over-year.

• SG&A expenses rose by JPY 4.8 billion, mainly from higher personnel costs in Japan and forex impacts.

Outlook and guidance

• Full-year FY2025 revenue forecast is JPY 1,570 billion, up 5.9% year-over-year, with profit and core earnings expected to rise significantly.

• Japan's renovation demand is expected to remain strong, with a turnaround anticipated in the second half as showroom visitors increase.

• Price optimizations and new product launches in Q3 are expected to improve profitability.

• Annual profit distribution expected to be weighted toward the second half, especially Q4.

• Medium-term growth in domestic sales and profit to focus on renovation demand.