Quick View
| Metric | Current Period | Year-Ago Period | YoY |
|---|---|---|---|
| Revenue | ¥24.67B | ¥23.01B | +7.2% |
| Operating Income | ¥3.39B | ¥4.46B | −24.1% |
| Ordinary Income | ¥3.67B | ¥4.87B | −24.6% |
| Net Income | ¥2.25B | ¥3.65B | −38.4% |
| ROE (Annualized) | 4.9% | 8.2% | - |
Executive Summary
In Q1 of the fiscal year ending May 2027, revenue increased while profit declined, as higher SG&A expenses and lower profitability in the overseas wholesale business weighed on earnings. Revenue was ¥24.67B (up 7.2% YoY, or ¥1.66B), while operating income was ¥3.39B (down 24.1% YoY, or ¥1.08B). Ordinary income was ¥3.67B (down 24.6% YoY), and net income attributable to owners of the parent was ¥2.24B (down 38.4% YoY). The operating margin fell 5.7pt, from 19.4% to 13.7%, making the failure of revenue growth to translate into profit a defining feature of the quarter. The ¥0.55B extraordinary gain recorded in the year-ago period did not recur this period, increasing the decline in net income relative to operating income.
Factors Behind Performance Changes
【Revenue】The overseas wholesale business was the main driver of revenue growth, with revenue of ¥18.03B (up 7.5% YoY), accounting for 73.1% of total company revenue. The domestic wholesale business recorded ¥4.44B (+2.2%), while the retail business recorded ¥0.93B (△1.1%). The Other business grew 33.5% to ¥1.26B, but remains small in scale.
【Profit and Loss】Gross profit was ¥16.57B, and the gross margin declined from 69.7% to 67.2%. Cost of sales increased 16.4%, outpacing the 7.2% revenue growth. SG&A expenses increased 13.8% to ¥13.18B (from ¥11.58B in the year-ago period), with the SG&A ratio at 53.4%. Operating income in the overseas wholesale business declined 27.1% to ¥3.81B, making it the primary driver of the company-wide operating income decline. Non-operating items included dividend income of ¥0.29B and interest income of ¥0.22B, while a foreign exchange loss of ¥0.15B was recorded. The current period’s extraordinary loss was an impairment loss of ¥0.02B; the absence of the ¥0.55B extraordinary gain recorded in the year-ago period widened the decline in net income. Profit before income taxes was ¥3.65B (down 32.5%), and income taxes were ¥1.4B. Overall, revenue increased while profit declined.
Segment Analysis
The overseas wholesale business had the highest operating income at ¥3.81B, but income declined 27.1% YoY, with a margin of 21.1%. The domestic wholesale business recorded operating income of ¥2.45B (+6.7%) and a margin of 55.2%, maintaining the highest profitability. The retail business posted an operating loss of ¥0.15B, narrower than the ¥0.21B loss in the year-ago period. The Other business recorded operating income of ¥0.06B, up 220.0% YoY.
Total segment income was ¥6.18B. After deducting adjustments of △¥2.79B, consolidated operating income was ¥3.39B. Most of the adjustments consisted of ¥2.68B in company-wide expenses, including parent-company research, supply chain, and administrative costs. The decline in the overseas wholesale business had a substantial impact on company-wide profit, while company-wide expenses also affect the consolidated margin.
Key Financial Indicators
【Profitability】The operating margin was 13.7% (19.4% in the year-ago period), while the gross margin was 67.2% (69.7% in the year-ago period). Annualized ROE was 4.9%, down from approximately 8.1% in the year-ago period. The main reason for the decline was a contraction in the net profit margin, with an increase in the effective tax rate also contributing. 【Cash Flow Quality】No cash flow statement was disclosed, but cash and deposits were ¥29.01B, with no major change from ¥30.16B at the end of the year-ago period. Inventory increased 6.3% to ¥59.07B (from ¥55.55B in the year-ago period). Accounts payable declined to ¥4B (from ¥7.93B). 【Investment Efficiency】The annualized total asset turnover ratio was approximately 0.445x, reflecting an asset structure that holds substantial inventory due to the nature of the business. 【Financial Soundness】The equity ratio remained high at 82.3% (82.3% in the year-ago period). The current ratio was approximately 489%. Short-term borrowings increased to ¥8.19B (from ¥4.03B in the year-ago period), but cash and deposits exceeded this amount.
Cash Flow Analysis
The balance sheet trend shows increased investment in working capital, while financial flexibility remains ample. Inventory increased ¥3.52B YoY, while accounts payable declined ¥3.93B. Funding from trade payables contracted, increasing working capital funding needs. Short-term borrowings increased ¥4.16B, from ¥4.03B to ¥8.19B, indicating that short-term borrowing covered the shortfall. Cash and deposits were ¥29.01B, exceeding interest-bearing debt of ¥9.78B by ¥19.23B. Investment securities increased by ¥2.34B to ¥22.67B. In a business structure where inventory accounts for approximately 27% of assets, inventory turnover determines the movement of funds.
Quality of Earnings
The quality of earnings this period was primarily affected by weaker operating profitability, while the impact of extraordinary items was limited. The extraordinary loss was limited to an impairment loss of ¥0.02B. Net non-operating income was +¥0.28B (income of ¥0.66B and expenses of ¥0.38B), bringing ordinary income ¥0.28B above operating income. Non-operating income consisted mainly of dividend income of ¥0.29B and interest income of ¥0.22B, while the foreign exchange loss of ¥0.15B increased expenses. The year-ago period included an extraordinary gain of ¥0.55B, so the YoY decline in net income includes the impact of this one-off item not recurring. Comprehensive income was ¥6.1B, significantly exceeding net income of ¥2.25B. The difference was attributable to a foreign currency translation adjustment of ¥2.27B and a valuation difference on securities of ¥1.6B; note that valuation gains arising from market conditions contributed to this result.
Earnings Forecast and Guidance
The full-year forecast is revenue of ¥110B (up 5.5% YoY), operating income of ¥13.5B (+2.9%), ordinary income of ¥13.5B (△5.5%), and net income of ¥10B (△17.8%); there have been no revisions this quarter. Q1 progress toward the full-year forecasts was 22.4% for revenue, 25.1% for operating income, and 22.4% for net income.
Operating income progress exceeded 25%, but income is tracking below the year-ago period. Achieving the forecast assumes a recovery in margins from Q2 onward. Demand for seeds and seedlings is considered seasonal, so simply multiplying the Q1 progress rate by four is not an appropriate way to estimate full-year performance.
Shareholder Returns
The full-year dividend forecast remains ¥90 per share, with no revision. The forecast payout ratio is approximately 38.0% based on forecast EPS of ¥236.63. The XBRL data for the year-ago period lists a dividend of ¥35, but the period classification may differ, so direct comparison should be avoided. Based on 42,140,712 shares outstanding after deducting treasury shares, total annual dividends would be approximately ¥3.79B, within the forecast net income of ¥10B. Cash and deposits of ¥29.01B provide ample resources for dividend payments.
Risk Factors
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Declining profitability in the overseas wholesale business: The company’s core business accounts for 73.1% of revenue, and operating income declined to ¥3.81B (down 27.1% YoY). The operating margin was 21.1%. Whether this business recovers will determine the consolidated margin.
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Inventory growth and working capital: Inventory was ¥59.07B (26.7% of total assets), up 6.3% YoY. Accounts payable declined 49.5% YoY. Continued inventory accumulation could increase the risk of write-downs and funds being tied up.
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Foreign exchange fluctuations and increased short-term borrowing: The company has a high proportion of overseas sales and recorded a foreign exchange loss of ¥0.15B. Short-term borrowings increased to ¥8.19B (up 103.2% YoY). However, cash and deposits of ¥29.01B were approximately 3.5x short-term borrowings.
Industry Benchmarks (Reference; Compiled by the Company)
Industry Benchmarks (bank)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 13.7% | – | – |
| Net Profit Margin | 9.1% | – | – |
The company’s position within the industry cannot be determined because industry median data is unavailable.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 7.2% | – | – |
The company’s position within the industry cannot be determined because industry median data is unavailable.
※Source: Company compilation
Key Points to Watch in the Earnings
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The main reasons for revenue growth alongside declining profit were lower earnings in the overseas wholesale business and higher SG&A expenses. The operating margin fell 5.7pt, making whether revenue growth translates into profit a key measure of earnings quality.
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The equity ratio of 82.3% and cash and deposits of ¥29.01B indicate a financial buffer. Meanwhile, inventory of ¥59.07B and increased short-term borrowings indicate that more funds are being tied up in inventory.
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Operating income progress toward the full-year forecast was 25.1%. However, operating income declined YoY, and going forward, attention will focus not only on progress toward the forecast but also on trends in the overseas wholesale business margin and the SG&A ratio.
This report is an earnings analysis document automatically generated by AI analysis of XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the company based on publicly available earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.
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