THK (6481) Q2 2024 earnings summary

Executive summary

• Consolidated sales revenue for the first half of FY2024 declined 3.1% year-over-year to ¥179.8 billion, mainly due to a high order backlog last year and global economic uncertainty.

• Operating income dropped 49.0% year-over-year to ¥8.3 billion, with margin falling to 4.7% as cost-to-revenue and SG&A ratios increased.

• Profit attributable to owners of the parent fell 40.1% year-over-year to ¥7.2 billion, and basic EPS decreased to ¥58.83.

• Revenue and operating income exceeded initial plan targets, aided by gradual demand recovery and a weaker yen.

• Comprehensive income rose to ¥42,305 million, driven by significant foreign exchange translation gains.

Financial highlights

• Gross profit for the period was ¥39,876 million, down from ¥45,292 million year-over-year.

• SG&A expenses increased 8.4% to ¥32,425 million, raising the SG&A-to-revenue ratio to 18.0%.

• Cash flows from operating activities were ¥18.5 billion, with investing and financing outflows of ¥17.5 billion and ¥15.3 billion, respectively.

• Total assets increased by ¥30.4 billion from the previous year to ¥586.8 billion.

• Profit attributable to owners of the parent was ¥7.2 billion for 1H FY2024, down 40.1% year-over-year.

Outlook and guidance

• Full-year 2024 revenue is forecast at ¥365,000 million, up 3.7% year-over-year, with operating income projected at ¥27,000 million and profit attributable to owners at ¥20,800 million.

• Management targets for FY2026: revenue ¥500.0 billion, operating income ¥100.0 billion, ROE 17%, EPS ¥590.

• Dividend policy targets a 30% payout ratio, with share buybacks considered when capital is in excess.

• Orders in the industrial machinery business have bottomed out and are on a gradual recovery trend, especially in the U.S. and China.

• Japan is expected to complete inventory and order adjustments by Q3, with normalized demand anticipated.