Yokogawa Electric Corporation

Q1 orders received were JPY149.1 billion, up JPY1.6 billion or 1% excluding FX; sales were JPY130.2 billion, up JPY9.2 billion or 7.1% excluding FX; operating profit was JPY16.2 billion, up JPY1.4 billion YoY in nominal terms. Excluding FX, operating profit increased by JPY2.7 billion from JPY14.8 billion YoY, with gross profit up JPY4.3 billion and gross margin improving by JPY0.5 billion, partly offset by a JPY2.1 billion increase in SG&A. Net income rose by JPY5.1 billion YoY to JPY15.2 billion, helped by lower deferred income taxes. Management said the full-year earnings forecast announced in May was unchanged.

Nakajima framed the quarter as a better-than-expected start on orders, especially relative to the risk assumptions built into the May forecast, while saying sales and profit were broadly as planned. She emphasized that the business is still seeing more orders than sales, which is steadily building backlog, and noted that the quarter ended with backlog up by more than JPY15 billion over the prior three months. Her tone was cautious but constructive: strong in energy and certain instrument areas, but still watching China, tariffs, and timing risk on large orders.

Nakajima walked through the bridge in operating profit, saying FX adjusted operating profit rose JPY2.7 billion YoY, with JPY9.2 billion higher net sales translating into JPY4.3 billion higher gross profit and a slight JPY0.5 billion improvement in gross margin. SG&A increased by JPY2.1 billion due to personnel inflation, upfront investment, periodic expenses, and the retirement of BaxEnergy goodwill. On tariffs, she said the first-quarter import duty burden was about JPY0.3 billion and noted that the company had previously assumed about JPY3 billion in annual tariff payments, with about half potentially passed through to customers; she also explained the higher tax benefit as a deferred tax asset accounting change tied to higher earnings levels.

Analysts pressed on whether Q1 orders beat internal expectations; management said orders were ahead of the May risk-adjusted view, but sales and profit were in line, and it was too early to say full-year order targets would be exceeded. Questions on tariffs focused on direct and indirect effects; management said the direct Q1 hit was modest, while the bigger concern was customer wait-and-see behavior, especially in Materials and China, though some relief could emerge from Q2 onward. On demand, management pointed to strong energy pipelines in the UAE, ASEAN, North America and LNG/CCUS, while saying China remained weak and Japan and Latin America were generally firm once FX is stripped out.