6770.T6770.TJPX
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Operator: We will now begin the financial results briefing for ALPS ALPINE CO., LTD. For Q1 of the fiscal year ending March 2026. Thank you very much for joining us today. The items we will be covering in today’s briefing are shown here. Presenting on behalf of the Company are President and CEO, Mr. Izumi; and Director, Executive Vice President, COO and CFO, Mr. Kodaira. The explanation will be given by Mr. Kodaira. Please proceed.
Satoshi Kodaira: Hello, everyone. My name is Kodaira, CFO and COO of ALPS ALPINE, as introduced just now. Let me begin with a summary of today’s presentation. For Q1 of FY2026, we recorded both revenue and operating profit growth YoY, achieving the highest quarterly sales in our history. Revenue growth was driven by steady demand for mobile and consumer market products in the components segment. The improvement in operating profit was due to structural reforms in the mobility segment, which led to cost reductions in both variable and fixed expenses and thus improved performance. Next, compared to the initial forecast announced on April 30, both revenue and operating profit in the components and mobility segments exceeded expectations. This was primarily due to a weaker yen than initially projected and a smaller-than-expected impact from tariffs. Furthermore, for H1, we have revised our earnings forecast upward. This reflects our conservative initial estimates of the impact from tariffs, as well as early progress in tough price pass-through negotiations with customers. However, due to continued uncertainty in H2, especially with regard to tariff effects, we are maintaining our initial plan for H2. Now, let me explain the actual results for Q1 of FY2026. Revenue and operating profit both increased YoY in Q1. The exchange rate shifted from JPY155.88 per US dollar in the same period last year to JPY144.59, resulting in an approximately JPY11 yen appreciation. This had a negative impact of JPY13.3 billion on revenue. Nonetheless, net sales increased by JPY5.3 billion YoY, reaching JPY238.9 billion. Operating profit, despite a JPY3.1 billion negative impact from currency appreciation, rose by JPY2.5 billion YoY to JPY3.7 billion. Ordinary profit decreased by JPY3.5 billion YoY to JPY1.2 billion, due to a foreign exchange loss of JPY3.7 billion. Net profit attributable to owners of the parent declined by JPY3.2 billion YoY, resulting in a net loss of JPY2.8 billion, also due to the impact of foreign exchange loss. Next, I will explain the factors behind the YoY change in operating profit. Beginning this fiscal year, we have reclassified the components affecting operating profit into five categories for greater clarity: variable costs, R&D expenses, fixed costs, production efficiency variance, and others. The production efficiency variance includes inventory changes and cost differences, while others includes factors such as inventory valuation losses. Comparing these components YoY: foreign exchange had a negative impact of JPY3.1 billion due to an approximately JPY11 yen appreciation; revenue contributed a positive JPY5.2 billion, mainly due to increased sales of actuators for the mobile market. Variable costs had a negative impact of JPY4.1 billion due to the increased actuator sales. R&D expenses improved by JPY600 million due to reduced spending and higher capitalized development costs in the components and mobility segments. Fixed costs improved by JPY2 billion, primarily due to the reversal of an allowance for doubtful accounts recorded in the mobility segment last year. Production efficiency variance contributed a positive JPY2 billion due to inventory-related effects. As a result, operating profit increased by JPY2.5 billion YoY to JPY3.7 billion. Next, let me provide a breakdown of sales and operating profit by business segment compared to the same period last year. The components segment posted higher sales but lower profit. The sensor and communication segment recorded declines in both sales and profit. The mobility segment saw lower sales but improved profit. I will now explain each segment in more detail in the following pages. First, the components segment. The upper section of the chart shows quarterly sales by market using bar graphs, with operating profit overlaid as a line graph. The lower section presents a breakdown of operating profit, on the left, a YoY comparison, on the right, a comparison with the previous quarter. Net sales for Q1 were JPY82.9 billion, showing both YoY and QoQ growth. This was driven by strong performance of actuators for the mobile market and game console-related products for the consumer market. The increased demand for actuators is believed to be partially due to temporary procurement issues for magnets stemming from China's rare earth export regulations. Operating profit was JPY6.2 billion. While it increased from the previous quarter, it declined YoY. The YoY decline was due to foreign exchange effects and a higher proportion of low-margin products among mobile actuators. Although this is not clearly visible in the graphs, we are actively shifting our revenue structure from mobile-focused to consumer and automotive markets. Despite the yen’s appreciation in the most recent quarter, profit increased thanks to higher sales. Next is the sensor and communication segment. Net sales were JPY19.8 billion, a YoY decline but an increase from the previous quarter. Operating profit was negative JPY2.1 billion, declining both YoY and QoQ. The YoY decline was due to lower sales of keyless entry systems for the automotive market, worsened variable costs from changes in product mix, and increased development costs for new product lines planned for launch next fiscal year. In addition, the delay in recovering the royalty reversals recorded last year also had an impact. However, we expect to complete recovery during H1, so the impact on full H1 results should be limited. Lastly, the mobility segment. Net sales were JPY131.4 billion, declining both YoY and QoQ. Operating profit was negative JPY500 million, an improvement YoY but a decline from the previous quarter. The YoY improvement was due to the cost structure reforms implemented last year, including reduced abnormal costs for new products and the winding down of unprofitable businesses, as well as the reversal of an allowance for doubtful accounts recorded in the prior year. The QoQ decline was due to foreign exchange effects, lower sales, the absence of one-time recoveries recorded in Q4 of the previous fiscal year for abnormal costs in Europe, and reduced recovery of development costs. Next, I will discuss the balance sheet. Compared to the end of the previous fiscal year, we reduced cash and interest-bearing debt by JPY31.8 billion, mainly due to the repayment of JPY27.5 billion in short-term borrowings. This led to a reduction in total assets. Shareholders’ equity decreased by JPY13.6 billion due to dividends and share buybacks, but the equity ratio improved by 0.9 percentage points to 56.8%. We will continue to maintain and strengthen our sound financial base. Now, let me explain the full-year earnings forecast for FY2026. First, here is a summary of the changes in sales outlook for H1 compared to the initial plan announced on April 30. In the components segment, we saw a temporary surge in actuator demand in Q1 due to rare earth export restrictions. While seasonal demand increases are expected in Q2, we anticipate performance to be generally in line with the initial forecast. In the consumer market, certain game console-related products remain strong, and overall performance in this segment is expected to exceed the plan. The sensor and communication segment is progressing roughly as planned. In the mobility segment, although we initially adopted a cautious outlook due to concerns over US tariffs and an uncertain business environment, customer new car sales have exceeded our expectations. In addition, the impact of tariffs on our products has been limited, and price pass-through negotiations are progressing as planned. As a result, we now expect to outperform our initial forecast. However, for H2, although tariff rates have been decided, the overall market impact remains uncertain. We therefore judged that it is still difficult to assess the business environment at this stage and have left the initial plan unchanged. Based on the revised sales outlook, here is the updated forecast by segment. Compared to the initial forecast announced on April 30, we have revised H1 sales upward by JPY40 billion to JPY498 billion, and operating profit by JPY8 billion to JPY12.1 billion. Ordinary profit is now expected to increase by JPY4.5 billion to JPY9 billion, and net profit by JPY1 billion to JPY2 billion. The assumed exchange rate for Q2 is JPY145 to the US dollar. Initially, we estimated the impact of tariffs at approximately JPY23 billion in operating profit, with a target of recovering 80%. With the easing of tariffs, we have revised the estimate to reflect the impact within H1. As uncertainties remain for H2, including foreign exchange, we have left the initial H2 plan unchanged. Although the business environment remains uncertain, the initiatives outlined in our previously announced Medium-Term Plan 2027 are progressing as scheduled. We will report on the status of this progress in our next Q2 financial results briefing. At ALPS ALPINE, we are committed not only to achieving our annual targets but also to accomplishing the goals of our medium-term management plan. That concludes today's presentation. Thank you very much for your attention.
Operator: We will now open the floor for questions from participants. Mr. Sato, please go ahead.
Satoshi Kodaira: This is Sato from Morgan Stanley Securities. Thank you for your presentation. I have three questions. First, regarding the impact of US import tariffs: you initially estimated an impact of JPY23 billion on operating profit in FY2025. How has that figure changed at this point?
Satoshi Kodaira: Just to confirm, does this mean that the full-year impact has decreased from JPY23 billion to JPY10 billion, and that the impact on H1 is almost negligible?
Satoshi Kodaira: The direct impact on H1 operating profit was around JPY1 billion. Originally, tariffs applied through May were at much higher levels, sometimes over 100%, but have since dropped to 15% and so on. If we calculate based on the original tariff levels, the impact would have been around JPY4 billion. So, taking that into account, we estimate the actual impact on operating profit to be around JPY800 million to JPY1 billion.
Satoshi Kodaira: Understood. Thank you. My second question concerns camera actuators in the components segment. How did things change from Q4 to Q1? Was your sales or market share higher compared to competitors? And what kind of changes do you expect from Q1 to Q2?
Hideo Izumi: I’ll answer that question. As mentioned earlier by Mr. Kodaira, in Q1 there were special circumstances due to rare earth supply issues, which caused some procurement difficulties for magnets. As a result, we received more orders than initially expected. From Q2 onward, however, we expect performance to return to plan levels. We anticipate results moving in line with our initial forecast going forward.
Satoshi Kodaira: Sorry, how did Q1 sales change compared to Q4? And what kind of change do you expect from Q1 to Q2?
Hideo Izumi: Mr. Kodaira will now explain the sales trends.
Satoshi Kodaira: As you can see in the bar chart here, the grey portion represents the mobile segment [inaudible]. Regarding actuators, sales increased overall from Q4 to Q1. For Q1 to Q2, due to seasonal factors, we are planning for a further increase. While there may have been questions about competitive advantages in the past, we are not assuming any advantage over competitors this time. While sales will increase due to seasonal factors, we believe they will settle around the levels we initially planned. In other words, we are not factoring in any upside from competitive gains.
Satoshi Kodaira: Thank you. Lastly, my third question is about the mobility segment. You’re forecasting a Q2 loss of JPY600 million and a total H1 loss of JPY1.2 billion, but a H2 profit of JPY7.2 billion. How are you projecting development cost recovery to change from Q1 to Q4, and into Q2 and H2?
Satoshi Kodaira: I’ll take that as well. First, in absolute terms, for the mobility segment in Q1, net development costs came to approximately JPY4.7 billion. This includes actual expenditures, recoveries, and capitalized amounts. Looking ahead to H2, Q3 and Q4 combined, we’re forecasting development costs of JPY4.3 billion. So while Q1 came to JPY4.7 billion and Q2 is projected at JPY5.8 billion, H2 will be significantly lower, meaning we expect about JPY6 billion in improvement between H1 and H2. This JPY6 billion improvement is mainly attributable to cost recovery. As we see each year, most of this recovery tends to concentrate in H2, particularly in Q4. Based on this, our profit structure remains H2-weighted.
Satoshi Kodaira: On the other hand, last fiscal year, there was also some recovery in Q2. If the same happens this year, would that become a factor for further upside in H1?
Satoshi Kodaira: Yes, that’s correct.
Satoshi Kodaira: Got it. Thank you very much.
Operator: Next, Mr. Takayama, please.
Daiki Takayama: Thank you very much. I’d like to follow up on the mobility topic from a slightly different angle. In your H1 forecast, you mentioned a JPY5 billion improvement in profit. Could you break that down and explain how much of the upside came in Q1 versus Q2?
Satoshi Kodaira: Let me first show the mobility segment’s sales balance. As you noted, you're asking for a breakdown of Q1 versus Q2 compared to the plan.
Daiki Takayama: Yes, compared to the initial forecast.
Satoshi Kodaira: In terms of the initial forecast, Q1 outperformed our expectations considerably. As I mentioned earlier, this includes some one- time factors such as reversals of allowance for doubtful accounts. When those are excluded, we view Q1 as largely in line with our expectations. As for Q2, we anticipate some upside in revenue, approximately JPY4 billion higher than planned. Although we are still projecting an operating loss of JPY700 million for Q2, development costs will continue to be a burden. In response to your question, our planned losses of JPY500 million in Q1 and JPY700 million in Q2, totaling JPY1.2 billion for H1, are roughly in line with our original plan.
Daiki Takayama: Just to clarify, by plan, you’re referring to the initial forecast?
Satoshi Kodaira: Yes, and from that standpoint, Q1 did outperform. However, Q2 is expected to be roughly flat with the original plan.
Daiki Takayama: Understood. The JPY5 billion H1 profit upside in the mobility segment, most of it appeared in Q1.
Satoshi Kodaira: That’s correct.
Daiki Takayama: And the Q2 loss of around JPY700 million has been left unchanged?
Satoshi Kodaira: Yes.
Daiki Takayama: What drove the upside in Q1?
Satoshi Kodaira: The main factor was development costs.
Daiki Takayama: Since you said net development costs were JPY4.7 billion in Q1, were you originally planning to spend around JPY10 billion?
Satoshi Kodaira: The initial plan was JPY7.4 billion. So, we spent about JPY3 billion less than planned. That JPY3 billion upside accounts for most of the positive variance in Q1.
Daiki Takayama: Got it. Were there any additional contributions from foreign exchange or sales?
Satoshi Kodaira: Yes.
Daiki Takayama: For Q2, does the unchanged loss forecast reflect a shift in development costs from Q1 to Q2?
Satoshi Kodaira: Partially, yes. Some development costs originally expected in Q1 were shifted to Q2, so we’re forecasting slightly higher development costs in Q2.
Daiki Takayama: Sales and FX are still positive contributors from Q1 to Q2, correct?
Satoshi Kodaira: That’s right, they will continue to support growth.
Daiki Takayama: But despite that, the Q2 loss forecast remains at around JPY700 million, which implies that the shifted development costs are offsetting the upside?
Satoshi Kodaira: Yes.
Daiki Takayama: I see. I was wondering whether Q2 might come in a bit stronger, but I suppose the shifted development costs are offsetting that?
Satoshi Kodaira: Regarding development costs, as I mentioned earlier, we saved about JPY3 billion in Q1. However, not all of that shifts into Q2. There are some genuine improvements. That said, about two-fifths of the savings will be carried into Q2, and that results in approximately a JPY1 billion negative impact. We conservatively project a JPY700 million loss for Q2.
Daiki Takayama: Understood. My second major question is also about actuators. Earlier, I understood your comments on market share, but I’m wondering if you’ve seen any signs of front-loaded orders from customers across the industry. Would that imply a definite drop in H2? In other words, are there any changes from the initial assumptions?
Hideo Izumi: I’ll answer that. As mentioned earlier, Q1 included special circumstances involving rare earth and magnet supply issues. As we look at H1 overall, we believe results will follow the initial plan. As for trends beyond that, to be honest, it’s still difficult to grasp any clear signals at this point. For example, how India’s increase in tariffs to 25% might affect the market is one uncertainty. But for now, we do not expect significant deviations, either upward or downward, from our initial plan.
Daiki Takayama: So, if we look back at Q1, can I assume that the increase came solely from market share gains and not from front-loaded demand beyond your initial assumptions?
Hideo Izumi: Yes, that understanding is correct.
Daiki Takayama: That means from Q2 onward, you expect to return to the initial plan, and the Q1 share gains will hold without causing a backlash?
Hideo Izumi: Exactly. That’s what we’re assuming, and we currently see no major changes in that outlook.
Daiki Takayama: Understood. Lastly, a brief question. I know you’ll go into detail at the interim results, but since it’s been just one quarter since announcing your medium-term plan, could you share any signs of progress toward FY2027 targets? Any areas where you feel confident or behind schedule based on Q1 performance?
Hideo Izumi: I’ll answer that as well. Since we announced the medium-term management plan, many questions have centered on whether we can truly achieve the improvements planned for the next fiscal year, particularly the biggest hurdle. One area we addressed early was the impact of tariffs. Mr. Kodaira explained the earnings side earlier, but beyond that, we’ve seen tangible results in other areas: reduced fixed costs, which we had discussed last year, and the phasing out of low-profit products. These initiatives in the mobility segment have started to show stronger-than-expected results in Q1. So, we’re seeing clear signs of progress toward the medium-term targets. Another concern was whether the sensor and communication segment could achieve the major leap we forecast for next fiscal year. As mentioned during the medium-term plan announcement, the biggest earnings drag was the heavy development burden from digital keys and new products starting in FY2026. We are now finally seeing a turning point, especially in H1. As for the upside, we’re seeing significant growth in mmWave sensors and, though we hadn’t mentioned it much before, stylus- related force sensors for tablets in the Chinese market. These are showing remarkable expansion. In addition, our core technology, sublimation printers, is also seeing continued growth in mobile photo printers, which have been performing well over the past few years and are accelerating even further in H1. Altogether, these factors indicate that we’ve begun realizing results toward FY2026 improvement in Q1. We’ll explain the details at the Q2 results briefing, but for now, that summarizes our progress.
Daiki Takayama: Thank you very much.
Operator: Mr. Akizuki, please go ahead.
Manabu Akizuki: This is Akizuki from Nomura. Thank you. I have a couple of questions. First, starting with a straightforward one: for the mobility segment, could you provide the usual breakdown for Q1 and Q2 execution, recovery, and capitalization of development expenses? Also, this is also related to mobility: on page nine, under the waterfall chart, fixed costs appear to have had a positive impact both YoY and QoQ. Could you explain what’s contributing to that improvement in fixed costs?
Manabu Akizuki: That’s quite a lot.
Satoshi Kodaira: We’re planning JPY9 billion in recovery and JPY2.7 billion in capitalization. The net development cost for Q2 is projected to be JPY5.8 billion. So yes, as mentioned earlier, execution and recovery are both increasing in Q2. That concludes my answer to your first question.
Manabu Akizuki: And about fixed costs in Q1?
Satoshi Kodaira: May I explain now?
Manabu Akizuki: Yes, please.
Satoshi Kodaira: Regarding fixed costs, they were higher YoY. Last year, we recorded JPY1.7 billion in allowance for doubtful accounts due to uncollected receivables. In addition, depreciation costs increased by JPY500 million. We also saw fixed cost improvements from Smart Power, which refers to the restructuring of our European module business that had previously posted a JPY10 billion loss. These actions contributed to the YoY fixed cost improvement. As for the QoQ improvement, the positive impact came from depreciation and cost recovery from our affiliated company Neusoft. Compared to Q4, these factors pushed Q1 fixed costs down. Thirdly, at the end of last year, the mobility segment incurred approximately JPY800 million in quality-related recall expenses. With that removed from Q1 this year, it also contributes to the positive variance.
Manabu Akizuki: The drivers were all quite different.
Satoshi Kodaira: Yes, they were. The factors change from period to period, which leads to various pluses and minuses.
Manabu Akizuki: Thank you. On the Q2 development expense execution figure, it seems high. Could you explain why?
Satoshi Kodaira: As mentioned earlier, some of the costs we didn’t incur in Q1 have shifted into Q2. That’s one reason why we don’t expect a major contribution to profit in Q2.
Manabu Akizuki: Understood. My second question is about the components segment. I believe you revised up your H1 operating profit forecast by JPY5 billion. Given that the assumed exchange rate is now JPY145 to the US dollar, I estimate that about JPY2 billion of that is due to FX, with the remaining JPY3 billion plus being actual profit improvement. You mentioned temporary upside in actuators in Q1 and strong game console-related shipments, so I assume gaming is also a positive factor. Ignoring FX, could you break down the real drivers of the H1 profit increase by product?
Satoshi Kodaira: Certainly. In Q1, the components segment posted JPY6.2 billion in operating profit. For Q2, we’re forecasting JPY9.1 billion, bringing the total H1 forecast to JPY16 billion. Your question pertains to the breakdown of that JPY6.2 billion in Q1 and JPY9.1 billion in Q2. The biggest contributor to the JPY9.1 billion forecast for Q2 is actuator sales. As seasonal demand increases, sales go up accordingly. While Q1 performed better than usual, Q2 is expected to follow the initial plan, which already assumes a seasonal increase. The primary driver of the JPY9.1 billion in Q2 is higher actuator sales compared to Q1. In addition, sales in automotive, consumer, and amusement-related products are also contributing positively, though this isn’t as visible in the charts. Altogether, these contributions lead us to the JPY16 billion forecast for H1.
Manabu Akizuki: So, in terms of the H1 upward revision, FX obviously helps, but actuators account for most of the real profit increase?
Satoshi Kodaira: Actuators are the biggest contributor, but automotive and other products also play a role, even if it’s less visible on the bar chart.
Manabu Akizuki: I see. So overall, it’s fair to say that the segment performed well across the board.
Satoshi Kodaira: Yes, that would be accurate.
Manabu Akizuki: Understood. Thank you.
Operator: Next, Mr. Hirata, please go ahead.
Shingo Hirata: This is Hirata from UBS Securities. Thank you for the presentation. I have a related question regarding fixed costs. Earlier, you mentioned that from Q4 to Q1, the reduction in fixed costs was due to factors like depreciation, cost recovery from Neusoft, and the resolution of JPY800 million in recall expenses. Could you share your outlook on fixed costs for the mobility segment from Q1 to Q2? For example, was the cost recovery from Neusoft a one-time benefit, or is it expected to continue?
Satoshi Kodaira: I’ll answer that. The items like the recall expenses I mentioned earlier were indeed one-off items, so they won’t carry into Q2. As for the cost recovery from Neusoft, while it did occur in Q1, we have also factored it into our plans for Q2 and beyond. Although I can’t disclose the specific amount, we’ve included it in our assumptions as a positive factor in Q2 and later. Does that answer your question?
Shingo Hirata: Just to confirm, you’re not able to share the specific amount of the Neusoft recovery, correct?
Satoshi Kodaira: The amount?
Shingo Hirata: Yes.
Satoshi Kodaira: You’re asking how much? Unfortunately, we’re not in a position to disclose the actual figure, so we’d prefer not to comment on that.
Shingo Hirata: Was this Neusoft-related item part of your initial plan at the beginning of the fiscal year?
Satoshi Kodaira: Yes, it was included in the initial plan. While it’s shown in the comparison against the previous quarter, we did account for it in our original forecast.
Shingo Hirata: Understood. My second question concerns the impact of tariffs. You currently estimate a gross impact of JPY4 billion in H1, with a net impact of about JPY800 million after price increases. Could you walk us through how this compares to your previous assumptions; what were the original gross and net estimates, and how did they change?
Satoshi Kodaira: At the earnings release on April 30, we mentioned an operating profit impact of JPY23 billion. Assuming an 80% pass-through rate to customers, we initially estimated a net impact of about JPY5 billion. If we break it down roughly into H1 and H2, we expected a gross impact of about JPY11.5 billion in H1, with a net operating profit impact of around JPY2.5 billion. Now, however, that has changed to a gross JPY4 billion and a net JPY800 million, as mentioned earlier.
Shingo Hirata: I see. And for H2, you're still using the original estimate of JPY11.5 billion gross and JPY2.5 billion net?
Satoshi Kodaira: Correct.
Shingo Hirata: Understood. Thank you very much.
Operator: Mr. Yasuda, please go ahead.
Yasuda: Thank you very much. This is Yasuda from Toyo Securities. I apologize for always asking about gaming, but I have a question regarding the consumer and gaming segments. The materials show that there hasn’t been a revision in this area. From your perspective, is it correct to understand that your production capacity is already at full scale, and although the products are very popular and hard to obtain for consumers, there are bottlenecks elsewhere that make it difficult for you to increase output?
Hideo Izumi: I’ll address the outlook for this area. I believe you're referring to the fact that our H2 forecast has not been revised.
Yasuda: Yes. Page 12 of the presentation materials indicates that the outlook for H1 remains unchanged. Could you clarify how we should interpret that?
Hideo Izumi: We are progressing in line with our initial plan, so there are no bottlenecks on our side that would hinder production or shipment.
Yasuda: Would it be fair to say that, although your products are popular and in short supply, bottlenecks elsewhere make it difficult for you to increase production?
Hideo Izumi: I’m sorry, but we don’t have enough concrete information to answer definitively on that point, so I’d prefer to refrain from commenting.
Yasuda: Understood. Regarding H2, since you’ve kept the original plan unchanged, is it correct to assume that the outlook remains the same as at the beginning of the fiscal year?
Hideo Izumi: At present, there are many uncertainties. While we have seen slight variations in individual categories like gaming, mobile phones, and even automotive, we have decided to keep our initial H2 forecast unchanged for now. If revisions are necessary, we’ll reflect them in the Q2 earnings announcement.
Yasuda: Understood. Thank you very much.
Operator: Are there any other questions? If not, this concludes the financial results briefing for ALPS ALPINE for Q1 of the fiscal year ending March 2026.Thank you all very much for your participation today.
Hideo Izumi: Thank you very much.
Satoshi Kodaira: Thank you very much. [END]