| Indicator | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥1042.8B | ¥929.2B | +12.2% |
| Operating Income | ¥131.2B | ¥122.6B | +7.1% |
| Ordinary Income | ¥142.8B | ¥123.1B | +16.0% |
| Net Income | ¥59.3B | ¥41.1B | +44.4% |
| ROE | 3.3% | 2.5% | - |
For the fiscal year ended May 2026, Revenue was ¥1,042.8B (vs. prior year +¥113.6B, +12.2%), Operating Income was ¥131.2B (vs. prior year +¥8.7B, +7.1%), Ordinary Income was ¥142.8B (vs. prior year +¥19.7B, +16.0%), and Net Income Attributable to Owners of the Parent was ¥121.6B (vs. prior year +¥30.5B, +25.2%), finishing with higher revenue and profit. The core Overseas Wholesale Business achieved double-digit growth at ¥849.0B (+14.7%) and posted Operating Income of ¥209.8B (+4.8%), remaining solid. Gross margin improved by +0.7pt to 63.6% (prior year 62.9%), but SG&A ratio rose by +1.3pt to 51.0% (prior year 49.7%), causing Operating Margin to decline by -0.6pt to 12.6% (prior year 13.2%). Non-operating items included interest and dividend income of ¥13.8B and foreign exchange gains of ¥2.0B, expanding the increase at the Ordinary Income level. Extraordinary gains — gain on sale of available-for-sale securities ¥16.9B and gain on sale of fixed assets ¥23.5B — boosted Net Income, resulting in a substantial +44.4% increase at the bottom line. Total assets expanded to ¥2,167.8B (prior year ¥1,909.9B), net assets were ¥1,789.8B (prior year ¥1,617.7B), and Equity Ratio remained high at 82.6% (prior year 84.5%).
[Revenue] Revenue of ¥1,042.8B (prior year ¥929.2B, +12.2%) was driven by growth in the Overseas Wholesale Business. Overseas Wholesale achieved ¥849.0B (+14.7%) and strengthened its position as the core business, accounting for 81.4% of total revenue. By region, expansion progressed in key markets: US ¥171.5B, Europe & Middle East ¥260.1B, South America ¥104.4B. Domestic Wholesale was steady at ¥138.5B (+4.1%), contributing stably as a high-margin business with an Operating Margin of 34.9%. Retail declined to ¥40.6B (-10.4%), and the operating loss widened to ¥4.4B (prior year ▲¥2.6B). By product, seeds and seedlings increased to ¥910.1B (prior year ¥821.2B), demonstrating competitiveness of the core business.
[Profitability] Cost of sales was ¥379.5B (36.4% of revenue), yielding Gross Profit of ¥663.3B and a Gross Margin of 63.6%, up +0.7pt from 62.9% a year earlier. Price measures and product mix optimization contributed. SG&A increased to ¥532.1B (51.0% of revenue), including goodwill amortization of ¥1.7B; overall company expenses increased (adjustment ▲¥124.4B, prior year ▲¥123.7B), pressuring the Operating Margin. Operating Income of ¥131.2B (12.6% of revenue) rose only +7.1%, indicating operating leverage lagged behind revenue growth of +12.2%. Non-operating income included interest income ¥8.2B, dividend income ¥5.6B, and foreign exchange gains ¥2.0B, totaling ¥22.8B. Non-operating expenses were ¥11.2B, mainly interest expense ¥3.6B and foreign exchange losses ¥4.6B, resulting in Ordinary Income of ¥142.8B (vs. prior year ¥123.1B; +16.0%). Extraordinary gains included gain on sale of available-for-sale securities ¥16.9B and gain on sale of fixed assets ¥23.5B; extraordinary losses composed of impairment losses ¥4.1B and disaster losses ¥4.2B, netting to ¥4.1B (net). After deducting income taxes of ¥39.1B, Net Income Attributable to Owners of the Parent was ¥121.6B (vs. prior year, +11.7%), finishing with higher revenue and profit.
The Overseas Wholesale Business was the largest segment with Revenue ¥849.0B (+14.7%), Operating Income ¥209.8B (+4.8%), and margin 24.7%. Margin contracted by -2.4pt YoY but Operating Income increased by ¥9.6B in absolute terms. The US, Europe & Middle East, and South America led the expansion, and favorable FX contributed. Domestic Wholesale reported Revenue ¥138.5B (+4.1%), Operating Income ¥48.4B (+1.6%), and margin 34.9%, maintaining high profitability though margin eased -0.8pt YoY. Retail posted Revenue ¥40.6B (-10.4%) and an operating loss of ¥4.4B (prior year ▲¥2.6B), indicating widening deficits and structural issues. Other Businesses had Revenue ¥43.8B (+9.9%), Operating Income ¥1.8B (+75.2%), and margin 4.2%, showing small-scale but improving profitability. Corporate adjustments were ▲¥124.4B, reflecting consolidated R&D, supply chain, and headquarters administrative costs.
[Profitability] Operating Margin of 12.6% declined -0.6pt from 13.2% the prior year, primarily due to the rise in SG&A ratio. ROE is estimated at 3.3% (calculated from prior-year data), and a relatively large equity base (Equity Ratio 82.6%) is a constraining factor. With Operating Income ¥131.2B and interest expense ¥3.6B, Interest Coverage is 36.4x, indicating very strong financial stability. [Cash Quality] Operating Cash Flow (OCF) was ¥91.7B, exceeding Net Income ¥59.3B (consolidated basis), producing an OCF/Net Income ratio of 1.55x, which is healthy. From Operating Cash Flow subtotal ¥91.3B, after deducting income taxes paid ¥28.2B, increases in working capital (inventory ▲¥67.0B, trade receivables ▲¥31.2B, trade payables +¥6.0B) were absorbed while maintaining positive cash. Free Cash Flow was ¥36.8B (OCF ¥91.7B − Investing CF ¥55.0B), exceeding dividend payments ¥34.6B, indicating dividends are maintainable from internal funds. [Investment Efficiency] With depreciation ¥54.8B and capital expenditure ¥68.3B, the CapEx/Depreciation ratio is 1.25x, reflecting continued growth investment. Goodwill of ¥10.7B represents 0.5% of total assets and is limited, indicating low M&A risk. [Financial Soundness] Equity Ratio 82.6% and Current Ratio 495.5% (Current Assets ¥1,292.3B / Current Liabilities ¥260.8B) demonstrate strong balance sheet health. Cash and deposits ¥301.6B versus short-term borrowings ¥40.3B yield a Cash/Short-term Interest-bearing Debt ratio of 7.5x, indicating ample liquidity. Interest-bearing debt totaled ¥55.8B (short-term borrowings ¥40.3B + long-term borrowings ¥15.5B), and Debt/EBITDA is 0.30x (EBITDA = Operating Income ¥131.2B + Depreciation ¥54.8B = ¥186.0B), an extremely low level.
OCF improved significantly to ¥91.7B (prior year ¥51.0B, +79.9%). This reflects Operating Cash Flow subtotal ¥91.3B adjusted for interest and dividend received ¥13.8B, interest paid ▲¥3.6B, and income taxes paid ▲¥28.2B. In working capital, increases in inventory ▲¥67.0B (ending ¥555.5B, prior year ¥452.97B) and trade receivables ▲¥31.2B (ending ¥257.3B, prior year ¥214.24B) absorbed cash, but the year-on-year slowdown in inventory increase (prior year ▲¥40.4B) was beneficial. Investing Cash Flow was ▲¥55.0B, led by capital expenditures ▲¥68.3B, plus payments for business transfers ▲¥6.4B and intangible asset acquisitions ▲¥5.0B. Net change in time deposits (deposits ▲¥37.3B, withdrawals +¥41.3B) was roughly neutral. Financing Cash Flow was ▲¥51.8B, reflecting shareholder returns totaling ¥67.5B (dividends paid ▲¥34.6B and share buybacks ▲¥32.9B), partially funded by net increase in short-term borrowings ¥15.1B and proceeds from long-term borrowings ¥11.1B. Free Cash Flow of ¥36.8B exceeded dividends ¥34.6B, producing a dividend coverage of 1.06x. Cash and cash equivalents rose slightly from beginning balance ¥224.5B to ending ¥225.2B (+¥0.7B), maintaining ample liquidity including FX translation impact of +¥15.8B.
Ordinary Income of ¥142.8B versus Net Income ¥59.3B (pre-attribution to parent) reflects pretax income ¥161.0B minus income taxes ¥39.1B. The increase from Operating Income ¥131.2B to Ordinary Income (+¥11.6B) corresponds to net non-operating items: Non-operating income ¥22.8B (interest income ¥8.2B, dividend income ¥5.6B, FX gains ¥2.0B) less non-operating expenses ¥11.2B (interest expense ¥3.6B, FX losses ¥4.6B). The contribution from financial items remains within ordinary bounds. Conversely, extraordinary gains ¥22.4B (gain on sale of available-for-sale securities ¥16.9B, gain on sale of fixed assets ¥23.5B) were temporary and were the main driver of the large +44.4% increase in Net Income. OCF ¥91.7B closely matches the OCF subtotal ¥91.3B, indicating cash generation was maintained while absorbing working capital increases. Inventory increase ¥67.0B and trade receivables increase ¥31.2B reflect working capital needs supporting growth; future inventory efficiency and collection period trends should be monitored. Comprehensive income was ¥239.3B (parent attributable ¥238.7B), substantially exceeding Net Income ¥59.3B, driven by FX translation adjustments ¥89.0B, valuation difference on available-for-sale securities ¥20.6B, and actuarial gains related to retirement benefits ¥7.8B. The gap between Net Income and Comprehensive Income stems from valuation items and should be evaluated separately from operating performance.
Company plan for FY2027 (year ending May 2027) projects Revenue ¥1,100.0B (vs. prior year +5.5%), Operating Income ¥135.0B (vs. prior year +2.9%), Ordinary Income ¥135.0B (vs. prior year ▲5.5%), and Net Income Attributable to Owners of the Parent ¥100.0B (EPS forecast ¥236.63). Progress against the revenue target is ¥1,042.8B / ¥1,100.0B = 94.8%, indicating achievement is plausible within the remaining nearly two months. Progress on Operating Income is ¥131.2B / ¥135.0B = 97.2%, a high level that presumes SG&A efficiency improvements. Ordinary Income guidance of ¥135.0B vs. actual ¥142.8B implies a -5.5% decline, reflecting a conservative assumption that last year’s non-operating and extraordinary gains (FX gains, etc.) will not recur. Dividend forecast is annual ¥40 (interim undecided), down from this period’s actual ¥85 (interim ¥35, year-end ¥50); the payout ratio against forecast Net Income ¥100.0B is about 17%, a low level, so consistency with realized dividends should be confirmed. Operating Margin on the forecast basis is 12.3% (¥135.0B / ¥1,100.0B), roughly flat versus the current 12.6%, making gross margin maintenance and SG&A control critical.
This period’s dividend was annual ¥85 (interim ¥35, year-end ¥50). Based on the number of shares outstanding excluding treasury stock at period-end of 42,259 thousand shares, total dividends are estimated at ¥3.59B. Dividend payout ratio against Net Income Attributable to Owners of the Parent ¥121.6B is approximately 28%, a sustainable level. Share buybacks of ¥3.29B were executed, bringing total shareholder returns (dividends plus buybacks) to approximately ¥6.88B, or about 57% of Net Income on a consolidated basis. Total returns relative to Free Cash Flow (¥36.8B) are about 1.9x; although shareholder returns exceeded Free Cash Flow, ample cash and deposits ¥301.6B mitigate financial concerns. The dividend payout remains within historically prudent levels (prior year payout ratio also 33.7%), supporting dividend sustainability. The FY2027 dividend forecast of ¥40 is a reduction from ¥85, but the forecast payout ratio of approximately 17% against projected Net Income ¥100.0B is conservative; the divergence versus actual dividends may reflect prudence in guidance. Share buybacks are implemented flexibly, indicating focus on improving capital efficiency.
Working capital increase and funding efficiency risk: Inventory rose to ¥555.5B (prior year ¥453.0B, +22.6%) and trade receivables to ¥257.3B (prior year ¥214.2B, +20.1%), expanding at a pace exceeding revenue growth of +12.2%. Days Inventory Outstanding (DIO) equals Inventory ¥555.5B / Cost of Sales ¥379.5B × 365 days = approximately 534 days, indicating a lengthening trend; even considering seed/seedling industry production cycles, inventory valuation loss and obsolescence risk are elevated. Days Sales Outstanding (DSO) is estimated around 90 days; compressing working capital will be key to improving future cash generation.
Concentration risk in Overseas Wholesale Business: Overseas Wholesale accounts for 81.4% of revenue and is the primary profit source, with Europe & Middle East, US, and South America as major markets. Exposure to FX fluctuations (FX translation adjustment gain ¥89.0B), changes in agricultural policies/regulation in each country, climate change, and pest/disease outbreaks that reduce planting areas is high. Although geographic diversification is progressing, adverse supply-demand in specific markets could materially affect consolidated results.
Rising SG&A ratio and slowing operating leverage: SG&A ratio rose to 51.0% (prior year 49.7%) (+1.3pt), causing Operating Margin to decline to 12.6% (prior year 13.2%). Corporate adjustments (▲¥124.4B) include R&D, supply chain, and HQ costs and represent upfront investments for growth; however, if SG&A growth continues to outpace revenue growth (+12.2%), a structural deterioration in profitability could occur. Monitoring the time lag for R&D returns to translate into revenue/profit and opportunities to optimize fixed costs is essential.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.6% | 14.6% (7.2%–39.4%) | -2.1pt |
| Net Margin | 5.7% | 11.9% (7.2%–35.4%) | -6.2pt |
Operating Margin is 2.1pt below the industry median of 14.6%, influenced by upfront company-wide investments and rising SG&A ratio. Net Margin is 5.7% (consolidated Net Income ¥59.3B / Revenue ¥1,042.8B) and is well below the median of 11.9%; however, on a Net Income Attributable to Owners of the Parent basis the margin is 11.7% (¥121.6B / ¥1,042.8B), which is comparable to the median.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 12.2% | 10.1% (7.3%–12.1%) | +2.1pt |
Revenue Growth of +12.2% exceeds the industry median +10.1% by 2.1pt, driven by expansion of the Overseas Wholesale Business and market share gains across regions. The company is among the industry’s faster growers, and there is scope for margin improvement through SG&A efficiency.
※ Source: Company compilation
The -0.6pt decline in Operating Margin is attributable to upfront corporate investments; if R&D and supply chain strengthening deliver results over the medium term, there is potential for a reversal and margin improvement. Overseas Wholesale margin of 24.7% declined -2.4pt YoY, but Operating Income increased by ¥9.6B in absolute terms; as scale expands and fixed-cost absorption progresses, margin recovery is expected. Domestic Wholesale’s margin of 34.9% remains high and functions as a stable cash cow.
Working capital increases (Inventory +¥67.0B, Trade Receivables +¥31.2B) indicate funding demand accompanying growth, and long DIO (~534 days) suggests inventory compression and shorter collection periods are key to improving cash generation. OCF ¥91.7B generated Free Cash Flow ¥36.8B and exceeded dividends ¥34.6B; however, total shareholder returns ¥68.8B including buybacks exceeded Free Cash Flow, meaning sustained efficiency improvements in working capital are a prerequisite for sustainable shareholder returns. Strong balance sheet cushions include Cash & Deposits ¥301.6B and Equity Ratio 82.6%.
FY2027 guidance of Revenue +5.5% and Operating Income +2.9% is conservative on the profit side, with Ordinary Income projected to decline by -5.5% due to anticipated reversal of prior-year extraordinary and non-operating gains. Current-period progress rates are high (Operating Income 97.2%, Revenue 94.8%), so normalization of inventory and SG&A efficiency improvements could allow results to beat guidance. The dividend forecast of ¥40 is lower than this period’s ¥85, and the forecast payout ratio of ~17% against projected Net Income ¥100.0B is conservative; if guidance proves unduly cautious, dividend maintenance or increase could be reconsidered.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by our firm based on publicly disclosed financial statements and are for reference only. Investment decisions are your own responsibility; consult professional advisors as necessary.
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