Rinnai Q1 FY2027: Record Revenue Up 10%, Operating Profit Down 5%

Rinnai posted consolidated revenue of ¥113,669 million in the first quarter of fiscal 2027, up 10.6% year-on-year and a record high for the April-June period. The increase was driven by the contribution of recently acquired Smart Energy and expanded sales at overseas subsidiaries. However, operating profit fell 5.2% to ¥9,195 million, and ordinary profit declined 3.5% to ¥10,302 million, as surging raw material costs and heavier fixed expenses from R&D investments in the U.S. and lower sales in China weighed on margins.

Net income attributable to owners of the parent inched up 1.8% to ¥6,744 million, supported by narrower foreign-exchange losses and a reduced tax burden, but the underlying business showed signs of weakening. Sales growth masked an operating profit decline, reflecting sharp regional divergences.

The Japan segment delivered steady results, with revenue of ¥47,808 million (+4.0%) supported by solid remodeling demand. High-value products like the gas clothes dryer "Air Bubble" performed well, but raw material costs pushed operating profit down 4.6% to ¥4,475 million.

Overseas, Australia was a standout, capitalizing on the electrification shift. Revenue surged 36.9% to ¥12,704 million, and operating profit jumped 263.0% to ¥518 million, driven by heat pump water heaters and storage batteries and synergies with Smart Energy. Australia surged on electrification.

In contrast, China suffered from a cooling economy, with revenue falling 18.9% to ¥7,055 million and an operating loss of ¥11 million (versus a ¥1.1 billion profit a year earlier). The U.S. saw revenue rise 8.4% to ¥18,782 million, but plunged to an operating loss of ¥14 million (compared with a ¥500 million profit) as a decline in non-condensing water heaters and upfront R&D costs outweighed strong condensing sales. China and U.S. swung to losses.

Other regions showed solid growth. South Korea reported revenue of ¥9,501 million (+5.7%) and operating profit of ¥546 million (+19.5%). Indonesia benefited from strong tabletop cooker sales, posting revenue of ¥5,280 million (+21.8%) and operating profit of ¥1,158 million (+22.5%). The Others segment (mainly Taiwan, Thailand, Vietnam, Brazil) recorded revenue of ¥12,536 million (+53.7%) and operating profit of ¥1,747 million.

A detailed segment table follows below.

Total assets at quarter-end stood at ¥647,567 million, down approximately ¥2 billion from the previous fiscal year-end. Cash and deposits were ¥166,825 million, slightly lower but still ample. The equity ratio remained high at 67.6%, underscoring financial strength.

For shareholder returns, Rinnai plans a full-year dividend of ¥106 per share, a ¥6 increase from the previous year and marking three consecutive years of dividend hikes. No share buyback was announced. Depreciation expense rose to ¥4,060 million (from ¥3,527 million), reflecting ongoing investment.

Rinnai maintained its full-year guidance from May 12, 2026. The company projects revenue of ¥500,000 million (+6.3%), operating profit of ¥50,500 million (-0.1%), and net income of ¥36,300 million (+0.4%). First-quarter progress rates were 22.7% for revenue and 18.2% for operating profit, roughly in line with historical patterns, but first-half profit is expected to fall below the prior year. Achieving full-year targets will require a recovery in China and the U.S., implying a high-margin second half.

The earnings report highlighted several risks:

• Geopolitical tensions in the Middle East may raise raw material and energy costs and disrupt supply chains.
• A prolonged downturn in the Chinese economy could further dampen consumption and sales.
• Raw material cost inflation for steel and resins continues to squeeze profitability.
• Currency volatility: with overseas sales accounting for nearly 60% of the total, a stronger yen would weigh on foreign-currency profits.
• Interest rate trends in the U.S. and Australia could cool housing investment.

Additionally, the success of the new medium-term plan "accelerate 2030" will depend on adapting product strategies to the shift from gas to electrification and swiftly turning around loss-making regions.