Earnings Call: Q1 2027

Aug 5, 2026

Summary

Q1 sales and all profit measures reached first-quarter records, led by North American demand, pricing and yen effects. Full-year forecasts were raised, with growth expectations balanced by weakness outside North America, tariff costs and raw material inflation.

Thank you very much for joining today's financial results briefing for Airman Corporation. My name is Goichi Sato. I am the Representative Director and President of the company. I appreciate your time today. I hope you will stay with me for this brief presentation. Let me begin with the highlights for the first quarter of the current fiscal year. In the first quarter, net sales and all profit measures reached record highs. This was driven by significant sales growth. With that as background, today I will discuss the financial results for the first quarter, the earnings outlook for the current fiscal year, our shareholder return policy, and topics, in that order. Consolidated net sales for the first quarter were JPY 13.7 billion, up 3.7% year-on-year, with both domestic and overseas sales increasing. Operating profit, which I will explain in more detail on page seven, increased 50.9% year-on-year to JPY 2.4 billion. Ordinary profit increased 67.9% to JPY 2.5 billion, reflecting foreign exchange gains recorded as the yen weakened further. Profit attributable to owners of parent for the quarter increased 63.3% year-on-year to JPY 1.7 billion. As a result, first quarter consolidated net sales and all profit measures reached record highs. Next, I will explain net sales by segment. First, net sales in the construction machinery business increased 4.4% year-on-year to JPY 11.2 billion. Of this, domestic sales rose 4.9% to JPY 4.9 billion as shipments of engine compressors increased on the back of construction demand. Overseas sales increased 3.9% to JPY 6.2 billion. In North America, sales of engine compressors and engine generators grew significantly, mainly to major rental fleet customers, offsetting declines in Asia and the Middle East. I will explain overseas sales by region in more detail on the next slide. Next, in the industrial machinery business, sales of our mainstay motor compressors remained firm, led by inverter models with excellent energy-saving performance, and net sales increased 0.9% to JPY 2.5 billion. We position the overseas construction machinery channel and the domestic industrial machinery channel as key future growth drivers and will continue to pursue reforms, including reforms to our organizational structure. Next, I will explain net sales by segment and region. In North America, demand expanded alongside progress on large-scale infrastructure projects involving the construction of data centers and natural gas transportation pipelines. As a result, sales of engine compressors and engine generators grew significantly, primarily to major rental fleet customers, and net sales rose 62.8% year-on-year to JPY 3.5 billion. North America's share of sales by region also rose from 16.7% in the same period of the previous fiscal year to 26.1%. In Asia, by contrast, market conditions remained weak against the backdrop of higher crude oil prices caused by geopolitical tensions in the Middle East, and sales declined 33.1% year-on-year to JPY 1.0 billion. In the Middle East, shipments to the region were suspended following a sharp deterioration in conditions, and sales fell significantly by 89.6% year-on-year to JPY 120 million. We will continue to monitor developments closely and respond appropriately. Domestic sales were, as I explained earlier. As a result, growth in North America offset declines in Asia and the Middle East, and the overseas sales ratio remained at the same level as in the same period of the previous fiscal year. I will now provide a summary by major product. For engine compressors, domestic sales grew on the back of construction demand. Overseas sales also grew, driven by significant sales growth in North America, resulting in growth in both domestic and overseas sales. For engine generators, domestic sales remained firm. Overseas, the suspension of shipments to the Middle East and weak market conditions in Asia weighed on sales, but sales to North America grew significantly. For aerial work platforms, construction demand remained firm, but shipments struggled due to delays in construction plans caused by labor shortages and rising material costs. For motor compressors, meanwhile, capital investment sentiment in Japan recovered gradually, and sales remained firm, led by inverter models with excellent energy-saving performance. Next, I will explain the factors behind the change in operating profit. The main factors contributing to higher profit were sales growth in North America, margin improvement following selling price revisions, and foreign exchange effects. On the other hand, lower sales in overseas markets outside North America, tariff-related costs, rising raw material prices, and consolidation adjustments and other factors weighed on profit. As a result, operating profit increased 50.9% year-on-year to JPY 2.4 billion. With regard to refunds of U.S. reciprocal tariffs, very little was recorded in the first quarter, and the impact on results was minimal. On the next slide, I will explain the main reasons for the revision in greater detail. Let me explain the main reasons for the change in first quarter operating profit, separating the upside and downside factors. First, the upside factors. Domestic sales grew. In addition to sales that leveraged our strength as a market leader, sales growth in high value-added products contributed to higher profit. Next, shipments to North America exceeded our initial assumptions, resulting in higher sales. Establishing the Overseas Sales Division as an independent organization, thereby speeding up decision-making and concentrating resources, also contributed. Next, profit margins in North America improved. We implemented price revisions in anticipation of the 15% U.S. reciprocal tariff, and this had a positive effect. However, because the tariff-related costs shown below were an offsetting downside factor, the net contribution from the improvement in profit margins is limited to JPY 290 million. In addition, the average exchange rate during the period was about JPY 15 weaker than in the same period of the previous fiscal year, and the positive effect of a weaker yen lifted profit. Turning to the downside factors, first, the tariff-related costs increased as the 15% U.S. reciprocal tariff raised tariff-related costs on shipments to North America. Sales in markets outside North America, particularly the Middle East and Asia, also fell below our initial assumptions, due in part to geopolitical tensions in the Middle East. In addition, higher raw material prices increased manufacturing costs. From here, I will explain the performance trend. Consolidated net sales were JPY 13.7 billion, a record high for a first quarter. This was an increase of 3.7% year-on-year and marked the fifth consecutive increase in first quarter net sales. Operating profit, which reflects earnings from our core business, was JPY 2.4 billion, also a record high for a first quarter, up 50.9% year-on-year, supported by higher sales, selling price revisions, and the positive effect of a weaker yen. Ordinary profit increased 67.9% to JPY 2.5 billion, reflecting foreign exchange gains recorded as the yen weakened further. Profit attributable to owners of parent also increased 63.3% to JPY 1.7 billion. Both reached record highs for a first quarter. In light of these developments, on July 30th, we announced a revision to our earnings forecasts. Next, I will discuss our earnings outlook for the fiscal year ending March 31st, 2027. Based on our performance in the first quarter and current business conditions, we have revised the first half and full-year consolidated earnings forecasts that we announced on May 11th, 2026. For the full year, we now forecast net sales of JPY 60.2 billion, an increase of JPY 1.7 billion from our previous forecast. We forecast full-year operating profit of JPY 8.3 billion, an increase of JPY 2.6 billion. We forecast ordinary profit of JPY 8.7 billion, an increase of JPY 2.9 billion, and profit attributable to owners of parent of JPY 6.0 billion, an increase of JPY 2.0 billion. With these revisions, we expect to achieve the net sales and profit targets set out in Medium-Term Vision 2027, one year ahead of the original schedule. In addition, in light of recent exchange rate movements, we have revised our assumed exchange rate to 158 yen to the U.S. dollar. Now, I will compare the earnings forecast announced on May 11th with our revised forecast and explain the factors behind the change in operating profit for the first half. The main upside factors are related to North America. We expect sales growth in North America, improved profit margins, the positive effect of a weaker yen, and tariff refunds. On the downside, we are factoring in lower sales in overseas markets outside North America. On the next slide, I will explain the main reasons for the revision in greater detail. Let me explain the main reasons for revising our first-half earnings forecast, separating the upside and downside factors. First, the upside factors. Shipments to North America are running above our initial assumptions, and we now expect higher net sales. In addition, establishing the Overseas Sales Division as an independent organization has accelerated decision-making and concentrated resources, which has also contributed to the upside in sales. We expect the improvement in profit margins to be supported by the price revisions implemented in anticipation of the 15% U.S. reciprocal tariff as well as by the subsequent reduction in the U.S. tariff rate from 15% to 10%. In addition, based on recent exchange rate movements, we have revised our assumed exchange rate to ¥158 to the U.S. dollar, and we expect a positive effect from the weaker yen. On tariffs, refunds related to U.S. reciprocal tariffs are expected to contribute to second quarter results. It should be noted, however, that these tariff refunds are a temporary positive factor and should be viewed separately from ongoing improvements in profitability. On the downside, we expect net sales in overseas markets outside North America, particularly the Middle East and Asia, to fall below our initial assumptions. Taking all of these upside and downside factors into account, we have revised our first-half earnings forecast. Next, I will explain the factors behind the revision to our full-year operating profit forecast. The main upside factors are once again related primarily to North America, where we expect sales growth, margin improvement, and the positive effect of a weaker yen to contribute to profit growth. We expect the tariff refunds to be largely completed in the second quarter. On the downside, we are factoring in lower net sales in overseas markets outside North America, higher raw material costs, and higher tariff-related costs in North America. Let me explain the main reasons for revising our full-year earnings forecast. Again, separating the upside and downside factors. First, the upside factors. Continuing from the second quarter, we expect sales growth, margin improvement, and the positive effect of a weaker yen in the North American market to exceed our initial assumptions. Tariff refunds are expected to be largely completed in the second quarter. However, because they are a temporary upside factor, we expect their impact on second half results to be limited. Turning to the downside factors, we expect the decline in sales in overseas markets outside North America, particularly the Middle East and Asia, to continue. In addition, our full-year forecast incorporates higher costs from further increases in raw material prices expected in the second half. With regard to U.S. tariffs, we have also reflected the additional tariff burden associated with the increase from 10.0% to 12.5%, including the standard tariff. Accordingly, while our full-year forecast assumes continued improvement centered on North America, it also incorporates lower sales outside North America and the additional raw material costs and tariff-related costs specific to the second half. Taking all of these factors into account, we have revised our full-year earnings forecast. The business environment remains uncertain, including the worsening situation in the Middle East and the resulting slowdown in Asian markets, persistently high crude oil and raw material prices, and developments in U.S. tariff policy. The group will continue to closely monitor developments in each market while working to ensure appropriate selling prices, maintain strict cost control, and improve profitability in our core business. From here, I will explain our shareholder return policy. At the Board of Directors meeting held on July 30, 2026, we resolved on matters relating to share repurchases pursuant to Article 459, Paragraph 1 of the Companies Act and Article 37 of our Articles of Incorporation. The maximum number of shares to be repurchased is 450,000 shares, and the maximum total purchase price is JPY 800 million. Whenever we carry out share repurchases, we will announce the status of the repurchases through a news release. Finally, I will discuss our topics. To advance Medium-Term Vision 2027, we have been reviewing our organizational structure since April 2026. To accelerate our global strategy, we established the Overseas Sales Division as an independent organization by separating the Overseas Sales Department from the Sales Division. This has enabled faster decision-making and a greater concentration of resources. Under the resulting new four-division structure, we are strengthening collaboration among the divisions and have established a structure that enables the rapid sharing of key issues and the swift formulation and execution of measures to address them. By accelerating decision-making across the company in this way, we will work to respond flexibly as conditions and circumstances change while continuing to ensure stable business operations. This concludes today's financial results briefing. Although uncertainty remains in the external environment, we position the overseas construction machinery channel and the domestic industrial machinery channel as key future growth drivers. We will work to achieve sustainable growth by both capturing growth opportunities, particularly in North America, and improving profitability through appropriate pricing measures and the strengthening of parts and services. We sincerely ask for your continued understanding and support. Thank you very much for your attention.