Thank you very much for taking the time to join us today for Bridgestone Corporation's Financial Results Briefing for the First Quarter of Fiscal 2026. First, I would like to introduce the two attendees. Vice President and Senior Officer CFO, Naoki Hishinuma. Director of IR and Finance Planning Division, Kazuchika Higuchi. We have two speakers today. Now, CFO Hishinuma will present the financial results for the first quarter of FY 2026.
I am Hishinuma, CFO. I will now explain our consolidated financial results for the first quarter of fiscal year 2026, and our full year outlook guidance. This is today's agenda. Now, let me begin by explaining the summary of financial results for Q1, and fiscal 2026 full year guidance. In the first quarter of 2026, our consolidated results achieved record high revenue, and adjusted operating profit, supported by a tailwind from yen depreciation. We will provide further details on our consolidated results later. Amidst the continuing challenging business environment, particularly in North America, the expansion of HRD tire sales, and the effects of business rebuilding have contributed to our performance. The capital policy announced in February is being steadily executed as planned. Next, regarding our full year guidance, there are no changes from what we announced in February.
We will provide further details on the fluid situation in the Middle East on the next page. Regarding the impact of U.S. tariffs, there are no significant changes from our February assumptions. While the situation in the Middle East remains fluid, we prioritize two things: safety comes first, and close collaboration with the local partners. The sales from this region account for approximately 1.5% of our consolidated revenue, so the direct impact on our consolidated performance is limited. We do anticipate, however, indirect impacts, including the cost inflation. We estimate the impact of cost inflation on raw materials, conversion cost, and logistics cost due to the rising crude oil prices, and energy cost to be approximately JPY 70 million for the full year, assuming that our crude oil prices remain at $90 per barrel throughout the year.
We anticipate that the cost increases, including raw material costs, will become apparent from the second quarter onward, but we will strive to minimize the impact by implementing various measures such as business cost reduction, and cost optimization. Regarding the impact on production due to the supply chain disruptions, we have no immediate concerns. Although the situation is volatile, we will continue to closely monitor the situation, and take appropriate measures. Next, I would like to talk about the business, and financial performance for Q1 of fiscal 2026. For the first quarter of 2026, consolidated results showed net revenue of JPY 1,113.4 billion, adjusted operating profit of JPY 122.2 billion, and adjusting operating profit margin of 11%. The factors contributing to the year on year change in adjusted operating profit will be shared on the next page.
Profit attributable to owners of the parent company was JPY 92.1 billion. In addition to the increase in adjusted operating profit, the year on year increase was due to factors such as the expense accounting related to the business rebuilding in the previous fiscal year. Let me now explain the factors contributing to the year on year change in the adjusted operating profit. In addition to improvements in raw materials, and the sales mix due to increased sales of HRD tires, steady progress in global business cost reduction activities, and improvements in business structure through the rebuilding efforts have steadily supported this performance. Despite the decrease in the sales volume, and the impact of U.S. tariffs, profits increased year on year, even excluding the impact of exchange rates.
Next is results by segment. In the Japan segment, revenue and profit grew year-over-year and margins improved, driven by higher sales of replacement tires, and improved price, and mix, as well as yen depreciation. In the Asia, Pacific, India, and China segment, sales of Passenger, and replacement tires remained strong, resulting in a year-over-year increase in revenue. Excluding the impact of one-off items that occurred in the previous year, profit also increased year on year. In the Americas, revenue increased year on year, but profits declined. In North America, although demand slowed down partly due to the cold wave, new replacement tires, and a multi-brand strategy contributed to sales exceeding demand for PS, LT, and TB tires. We steadily increased our market share, which supported our performance. In Latin America, despite a continuing challenge in business environment, we maintained our efforts to strengthen business fundamentals in sales, thereby securing black ink.
In Europe, Middle East, and Africa, while sales, and profits declined in the Middle East due to geopolitical impact in the region, Europe had continued growth in sales of HRD tires, as well as the steady contribution of business rebuilding efforts, resulting in the increase of revenue and profit, and a significant year on year improvement in profit margin to 8.3%. Now let me explain our results by product. While sales volume of PS and LT tires declined due to falling demand for replacement tires in North America, we continued to expand sales of HRD tires, and increase their share of the product mix. This, combined with improved profitability in the retail business, resulted in year on year increases in both revenue and profit, with margins showing a slight improvement.
Profit for TB tires increased year on year, and profitability improved, driven by the effects of business rebuilding in the Americas and Europe, as well as increased profits from the Retread business. Regarding specialties, sales of OR tires declined year on year due to factors such as lower coal demand in Asia. However, revenue and profit both increased, driven by favorable exchange rates, and raw material prices. The segment continues to maintain high profitability above 20%, and is contributing to the consolidated results. Diversified Products business continued to make steady improvements. Both revenue and profit increased year on year, and profit margin also improved. Next, I will explain our performance by business portfolio. Despite challenging conditions, the Tire Business maintained an adjusted operating margin of just under 13%. The Solutions Business, which is a growth driver, saw increased revenue and profits along with improved profitability.
The retail business also saw increased revenue and profits along with improved profitability, while the commercial B2B solutions also saw improved profitability, achieving a margin of over 13%. Finally, here is the status of our balance sheet, and cash flow. Total assets amounted to JPY 5,645.8 billion, a decrease of JPY 101.9 billion from the end of the previous fiscal year. The ratio of cash and cash equivalents to monthly sales stood at 1.7 months, ending 0.2 months lower than at the end of the previous fiscal year, partly due to the use of available liquidity for the repurchase of treasury stock. We continued thorough lean inventory management for finished products, resulting in a year on year decrease, excluding foreign exchange effects, and a slight improvement in the cash conversion cycle.
Free cash flow amounted to JPY 108.7 billion. This represents an increase of JPY 17.4 billion year on year, driven by an improvement in operating cash flow resulting from higher pretax profit, and a reduction in working capital. Regarding the capital policy announced in February, we are steadily proceeding with both the share buyback, and the debt financing. This concludes my presentation. Thank you for your kind attention.
That was a presentation by Mr. Hishinuma on the financial results for the first quarter of fiscal 2026. Next, we'd like to have a Q&A. From Japan Rubber Weekly, Sasaki-san, please go ahead.
From Japan Rubber Weekly, my name is Sasaki. Can you hear me?
Yes, we can hear you. Thank you.
Thank you, and thank you for the explanation. On slide 10, about the diversified products business, I have a question. In the first quarter, the business has improved. On this slide, you mentioned continued steady improvements achieving enhanced business fundamentals. As much as possible, if you can, if you can elaborate further in more specifics is possible. Thank you.
For the diversified products business, the business environment continues to be quite challenging as we understand.
With just the hose, and core businesses, the sales is steadily increasing, and in order, on top of growing the top line on the cost side as well, we are accumulating the steady cost reduction efforts, therefore resulting to a significant improvement in the profit margin. Therefore, it's not that there was any special one-off factor here, but rather it was the results of the steady improvements that have been accumulated leading to this level of performance. That's our understanding.
Now, the sales volume itself is not increasing?
The sales volume itself is also increasing.
I understand. Thank you very much.
Thank you, Sasaki-san. Next question is from Takahashi-san from Nikkei. Please go ahead.
Thank you for the explanation. My name is Takahashi from Nikkei. Can you hear me all right?
Yes, we can. Thank you.
I apologize if I have missed it, but regarding the impact of the Middle East situation, you said that the estimate is JPY 70 billion. Is it correct that this is not reflected in the guidance for this fiscal year? If you can provide us with the breakdown of the JPY 70 billion, I would appreciate it.
Yes. Regarding the JPY 70 billion, we announced our annual plan in February, and that did not include this impact. This time, we are newly estimating this impact.
Through various measures, we are planning to minimize the impact so that we can achieve the targeted annual performance. In terms of the breakdown, about 70% is related to raw materials. Petrochemical raw materials, and synthetic rubber situation. Well, we are experiencing increase in the prices of rubbers. That account for about 70% of the JPY 70 billion. The remaining 30%, out of which 20% is, w ell, we have global operations, and there are transportation freights, which is anticipated to rise. In manufacturing plants, we could experience increase in the utility costs. That account for 20%. The remaining 10% is related to the ocean freight in overseas. That accounts for the remaining 10%.
In total, we are estimating the cost impact to be JPY 70 billion. I hope I answered your question.
Yes. Thank you.
Thank you very much, Takashi-san. Next, from Nikkei BP, Tomioka-san, please go ahead.
From Nikkei Automotive, my name is Tomioka. Can you hear me?
Yes, we can hear you. Thank you.
With regards to Honda's review of EV strategy, if you can tell us the impact of that. I think with 0 Series, you are jointly developing the tires with Honda. That's what I'm assuming. What kind of impact can you potentially see? Do you think you can get compensation from Honda? If you can elaborate on those points.
I'm sorry, I cannot make a comment on any matters related to individual clients. I have to refrain from answering. Generally speaking, when it comes to EVs, the tires for EVs, it's not going to be dedicated to EVs. Our policy is basically that it can be applied to EVs, not necessarily dedicated. Any issues with EVs, for instance, the wear related, or the running distance, by enhancing those performance to be able to address the EVs. That's the basic policy in that sense, the impact of EV specifically, because this performance is common across the general tires. It's not that will be directly impacted by any EV specific factors. That's our understanding.
Thank you very much. Did I answer your question?
Thank you.
Thank you, Tomioka-san. The next question is from Ota-san from Nikkei. Please go ahead.
I am Ota from Nikkei. Can you hear me?
Yes, we can. Thank you.
Thank you. I also have a question related to the impact of the Middle East situation. On page five, it says that the gross impact is expected to be around JPY 70 billion. Below that, you have described business cost reduction, and optimizing costs. By optimizing costs, are you referring, or suggesting price increase? Can you please give us some more color on specific actions?
Yes. As you just pointed out, really regarding the potential price increase, among the measures to minimize this cost impact, it would include passing on the impact to the selling prices. The raw material prices continue to go up and down over many years.
In principle, we have always worked on business cost reduction, and price increase, and mix improvement in order to minimize any impact. We will be addressing this expected impact in the same manner. That means, price increase would definitely be one of the measures. We already have been implementing this measure in some of the regions. Specifically by region, we have different competitive, or business landscape. By region, by product, by brand. It will be balancing the price and volume in our future decisions. I hope I answered your question.
Thank you. I have a follow-up question.
Regarding the indirect impact, the second bullet point says impact on production due to supply chain disruptions. It also says that no concerns so far that requires cautious monitoring. My understanding is that the closure of the Strait of Hormuz is leading to the slowdown of imports of naphtha, and oil. What is the rationale for saying no concerns so far, and do you have any alternative routes, do you have inventory sufficient?
Yes, regarding the procurement of raw materials, our procurement team is taking the initiative to work with suppliers, and for individual material, they're having monitoring, and exploring the availability.
As a result of such monitoring efforts, we learned that for the time being, we don't have a risk of not being able to produce, or having to produce in lower volume.
Understood. Thank you.
Thank you.
Thank you, Ms. Ota. Next from Nikkan Jidosha Shimbun. Nomoto-san, please go ahead.
The Daily Automotive News. My name is Nomoto. Can you hear me?
Yes. Thank you.
Related to the last question. In Japan, in the tire plant, I think the price increase has already started in Japan, and you mentioned earlier that passing it through to the selling price is one of the measures that you will look into. Any impact to the domestic tire market that you may have to worry that it may actually slow down the market. How do you see the balance?
Yes. As you pointed out correctly, and as I said earlier, rather than just Japan, but by region on a global scale, the competitive landscape is different from region to the other.
As such, we have to see the balance between the prices, and the volume, and then consider the specific measures looking at the balance. Now, for domestic sales, please refrain. Please allow me to refrain from making a comment specifically on Japan.
Is that because looking at the competitive environment, or looking at the market trend, you will decide? Is that what you mean?
Yes, exactly. Thank you.
Thank you.
Thank you, Nomoto-san. The next question is from Zushi-san from Rubber Times.
My name is Zushi from Rubber Times. Can you hear me all right?
Yes, we can.
I also have a question related to the Middle East situation. Working closely with local partners was one of your priority measures. After two months, what is the situation so far? What kind of coordination have you realized so far? Is there anything that you can share with us?
Yes. Regarding the Middle East region, basically we work with local distributors to supply, and sell our products. In that regard, together with the local partners, we are continuing to have close coordination so that we do not cause inconveniences to customers.
For example, we are changing the port of discharge to avoid the Strait of Hormuz. We are taking responses on a case-by-case basis.
Can I assume that tires are being delivered smoothly to customers?
Yes. However, as I said, because of the situation in the region, there is a slight impact on the sales.
I understand. Thank you.
Thank you very much, Zushi-san. Now, we would like to take questions from the analysts from here on. Due to time constraints, please limit to one question per person, and thank you for your understanding. If you have any questions, at the bottom of the screen you should see Raise Hand button. Please click Raise Hand button, and once your name is called, please unmute yourself, and if possible, please turn on your camera to show your face, and speak up. From Mizuho Securities, Sakaguchi-san, please go ahead.
This is Sakaguchi from Mizuho Securities. Thank you very much. Thank you for this opportunity. Thank you. The full year guidance remained unchanged. On that, I'd like you to elaborate further. Q1, originally what you were looking internally, the adjusted operating profit, compared to your internal level, was it better or worse?
I think there were some ups and downs in the breakdown. After going through that, the impact from the Middle East, other than the cost inflation, I think it could have an impact on maybe the potential lower volume, and other factors as well, s o going forward any potential risks? Considering all those risks at this point in time, by taking meticulous measures, you think that you can still maintain the guidance? Is that the idea behind this? Given the current circumstances, what's the significance of not changing the full year guidance, if you can elaborate further? Thank you.
On your first point, Q1 against our internal plan, to give you the conclusion, vis-à-vis the internal plan, actually we're able to achieve higher.
In terms of different factors, in North America, there was unfavorable winter weather, the volume was a bit weak. The positive factors is on the cost, and expenses. We had good control of the OpEx given the challenging environment. There was some time lag, there was an OpEx control, and also the raw materials was a little bit better compared to what we had anticipated. On top of that, for North America, some retailers were actually stronger than planned. Because of those factors against our internal plan, we are able to actually go a bit higher. We decided to keep the full year guidance unchanged on that point. As I mentioned earlier, the JPY 70 billion.
As it has been continuing from the past, the business cost reduction, and the supply chain optimization, and on top of that, as I explained earlier, some measures from the sales perspective. By accumulating those different actions, and measures, we would like to strive to achieve the plan. That's our basic stance. The opportunity so to speak, as the momentum was quite strong in the first quarter, and for the foreign exchange, I think it will be a tailwind. It could be a tailwind for us as well. Because of that, I would like to stick to the full year guidance, and try to strive to achieve the target. The sales impact as a marketing condition, for instance, the gasoline prices are going up, so maybe people will drive less, and the market may slow down because of that.
Is there any signs of that? Any possibility? In that sense, as you pointed out correctly, the gasoline prices will increase. If that's the case, then it could impact the demand. That's a possibility. If the impact lags, then it could have an impact. It could have a potential impact on our performance. At this point in time, we're not seeing any impact pushing down the demand. That's not what we are seeing yet. Again, if I may repeat, if this continues to be a long-term trend, then that could become an impact, so we need to look into that, and consider that. Thank you very much.
Thank you.
Thank you, Sakaguchi-san. Next question is from Tokai Tokyo Intelligence Lab. Kanai-san, please go ahead.
I am Kanai from Tokai Tokyo Intelligence Lab. I have one question regarding the results of the first quarter. On page 11 of the presentation deck, this times profit increase is probably driven by the Solutions Business. Because of my ignorance, I cannot really align this with the factors of for the operating profit increase and decrease on page eight. What were the factors, and why did the profit not increase in the Tire Business? Thank you.
Higuchi-san is going to respond.
Thank you, Kanai-san, for your question.
First of all, on the page 11 of the deck, the solutions business is being a great profit growth driver as you rightly suggested. If you look at the breakdown, we have the OP growth year-over-year for the retail business. As Hishinuma explained earlier, especially in North America, retail services, we had an increase in the revenue year on year, which contributed to the profit growth. We have been discussing revitalization of Firestone since last year, and I believe that efforts have been making, or are starting to make contributions gradually. When we look at the current North American market, the number of years one person drives that is becoming longer as a trend.
For us, we have 2,200 retail outlets in North America where we also sell tires. There we replace engine oils, brake pads, alignment. We offer diverse services together with the sales of tires. Our efforts to strengthen such services is also contributing to this increase in the profit. The other chunk is the commercial B2B solutions. On year on year basis, the profit increased partly due to the Retread business. There are a couple of things I can share, but for example, regarding new fleets, we were able to acquire business opportunities. Last year we had some one-off costs, which is no longer the case this year.
In the Retread business, that is also becoming a driver in the commercial B2B solutions, and for the entire solutions business. To your second question, regarding the relations, with the increase and decrease in the profit. In others, service, gross profit growth is included, and the negative factors are, for example, the impact of U.S. tariffs, and losses from unrealized profit. That is negatively offsetting the profit growth in the retail services business that I just explained. I believe that is making it more confusing. To your third point of why is the profit in the tire business not growing? Well, the TB tires, the demand is in a very difficult situation on year on year basis, especially in North America.
We are working on increasing the market share. It is not that there is something significantly out of expectation, but partly due to the cold wave, the demand recovery is being slow. We struggled, especially in the TB tire business. That is one of the factors for the decline in the profit. As a one-off factor, as I have been saying, there was a impact from the cold wave in January and February. There were two significant cold wave impacts in North America. Our factories had to slow down production. In conversion costs, I believe that was the negative factor. On the other hand, in the tire business, that it was one of the negative factors for the profit development.
I understand that was very clear. Thank you.
Thank you.
Thank you very much, Kanai-san. Next, from Morgan Stanley MUFG Securities, Kakiuchi-san, please go ahead.
Thank you. This is Kakiuchi from Morgan Stanley Securities. Thank you. As was mentioned a bit, the sales trend in North America, the market, is quite challenging as you mentioned, but you also mentioned that the Passenger, and TB for the replacement for the entire market, you actually outperformed the market. Your share is increasing for the replacement. For the Passenger, and the truck, and bus for both line with the Firestone revitalization, being effective. If you can elaborate further, and make some additional comments. Was it just coincident the first quarter was good, or do you think it's sustainable? If you can elaborate further on that. Thank you.
Thank you for that question. First of all, for North America Passenger, starting with that, as has been mentioned, the multi-brand strategy in the first quarter results for North America, I think, that made a contribution on the volume-wise. The multi-brand strategy with two brands, Bridgestone and Firestone, we have two major brands in North America. You we talked about the share increase. Bridgestone and Firestone, for both brands, were able to achieve the sales that was above the demand for the first quarter. Especially, attractive products, it's one of our issue. We're focusing on providing more attractive products. Bridgestone brand this year, launched a new product, Potenza, this year. For Firestone, we launched a new product linked to Indy 500 called Firehawk. This is a sort of collaboration.
Both for two brands, we launched a new product, and as a multi-brand strategy, we've been enhancing, and strengthening the sales. Gradually it's starting to have a positive contribution. And if I may add a little bit, what we call HRD, so-called the high rim diameter, more than 18 in and over. The sales is very solid for the HRD, and in this high rim diameter area, we're steadily increasing the share, and that's another positive factor on the Passenger side. Now for Truck and Bus, for TB tires, again, for Bridgestone and Firestone brands, we've be able to outperform the demand in terms of the sales volume. That's the first quarter results.
Now for TB Both for fleet, and the dealer, there is a strong business foundation. For Retread, as was mentioned earlier, in the Truck and Bus business, as a package, not just selling the single product, but to deliver the package with the services. It's one of our strengths to be able to deliver the solutions as a package, including the services. Despite the challenging demand, we're being quite persistent, being able to outperform the demand. That's the result for the first quarter for TB as well. Thank you.
For the Passenger, the lower-end products are trading down, so that's like the market trend, so to speak. With your measures with attractive products, you'll be able to offset that trend. You've been able to offset that trend, and achieve the strong results.
Kakiuchi-san, thank you for that point. For North American market, looking at the consumer sentiment, it's still weak. It is still quite stagnant. The business environment itself, how should I put it? It's not necessarily improving, but rather the business environment continues to be quite challenging and tough, and there is a pricing pressure that is continuing. Looking at the breakdown of our sales, Bridgestone and Firestone, I already explained, but very limited. Associates brand sales was quite challenging for the first quarter's actual. We cannot be optimistic at all. The consumer sentiment, looking at the data in the details, for instance, the affluent or the middle income layers, it seems like they have hit the bottom, and we're starting to see some signs of improvement. Overall, it's at a low level.
Given such business environment, we need to strengthen the sales.
Thank you very much. I understand it very well.
Thank you.
Thank you, Kakiuchi-san. Next question is from Daiwa Securities. Ohashi-san, please go ahead.
Thank you as always. I am Ohashi from Daiwa. The operating expenses, I do not think that is much of a negative driver for the OP in the first quarter, and I believe there will be more concentration in the second half. Can I assume that this can be used to offset the Middle East situation? Regarding the business cost down for raw materials, I would appreciate it if you can provide us with the breakdown.
This is a more big question, but because this is Q1, given the Middle East situation, did you not decide to revise the plan or do you think that there is a high probability of being able to offset the negative factors?
Yes. Thank you for your question. I believe that contained a couple of questions, so I would like to answer them one by one. First of all, regarding the OpEx in our annual plan, presented in February, there isn't a much buffer, but this is just an accumulation of different numbers. I'm repeating myself, but as the breakdown of JPY 70 billion, 20% is due to the increase in the variable cost, and 30% is related to the strategic growth resources for the future.
We will be strengthening brands. That is what we would like to use the money for. The remaining 50%, we had a gain on sale of assets from last year, but that does not exist this year. That is becoming the negative factor. That is a rough breakdown of the JPY 70 billion. In Q1, profit grew on YoY, and the OpEx is not increasing much. This is much impacted by the timing difference from Q1 to Q2, and beyond. This includes things to be used from Q2, and beyond. There is much uncertainty regarding the Middle East situation. Basically, we are planning to use these strategic resources to succeed for the future.
In order to secure the bottom line. We haven't made any decision, but depending on the situation, we will be deciding the right timing to take necessary actions. I believe that is the answer to the question regarding operating expenses. I hope I answered your question.
Yes, that was very clear. Thank you.
To your second question regarding the raw materials. The breakdown of this OP increase was the question?
Well, it was regarding the conversion costs. It includes return from business rebuilding, and business cost reduction. Business cost reduction is also included under raw materials. How are they distributed between these two? If you have any breakdown, I would appreciate it. That was my question.
Okay, thank you.
In that sense, business cost reduction in Q1 in total, the impact was at about JPY +12 billion . That is the amount of cost reduction we were able to make. The breakdown is raw materials were JPY 4 billion approximately, conversion costs were JPY 6 billion, and the remainder was operating expenses, and et cetera. Business cost down is making a certain contribution to these three items. Thank you.
The reason why we did not make downward revision of the guidance?
Yes, what is the probability of being able to achieve the plan?
Thank you for clarifying the question. JPY 70 billion is the estimated cost impact. As an assumption, WTI $90 per barrel is assumed to continue until the end of the year.
I hope you can understand that this amount is based on such assumptions. We will be working to minimize this impact through business cost reduction, and utilization of global supply chain for the sake of cost optimization. We will be strengthening sales initiatives, including price increases. We will be accumulating such various actions, so that we can achieve JPY 515 billion as publicly disclosed. That is the reason why we did not make downward revision. We are setting certain assumptions to estimate the impact. Within this certain range, we do have a visibility to minimizing the impact. We decided not to make downward revision.
That was very clear. Thank you.
Thank you, Mr. Ohashi. The time has come, I'd like to finish the Q&A session. With this, we would like to conclude the briefing for financial results for the first quarter of fiscal 2026 of Bridgestone Corporation.