| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥254.5B | ¥262.4B | -3.0% |
| Operating Income | ¥36.7B | ¥33.9B | +8.1% |
| Ordinary Income | ¥39.2B | ¥36.5B | +7.4% |
| Net Income | ¥26.2B | ¥34.3B | -23.5% |
| ROE | 2.4% | 3.2% | - |
FY2026 Q1 results: Revenue ¥254.5B (vs prior year ¥-7.9B -3.0%), Operating Income ¥36.7B (vs prior year ¥+2.7B +8.1%), Ordinary Income ¥39.2B (vs prior year ¥+2.7B +7.4%), Net Income ¥26.2B (vs prior year ¥-8.1B -23.5%). Despite revenue decline, operating-level profitability improved, but Net Income declined significantly due to a reduction in special gains and a relative increase in tax burden. Revenue fell mainly due to lower sales in the Gas Business (-7.5%), but gross margin improved to 25.1% (vs prior year 23.3% +1.8pt) and operating margin improved to 14.4% (vs prior year 12.9% +1.5pt), indicating higher profitability. At the Net Income level, although special gains contributed ¥14.0B (same as prior year), Pretax Income decreased to ¥38.2B (prior year ¥49.5B) and the effective tax rate rose to 31.4% (prior year 30.7%), resulting in lower Net Income. The company shows lower revenue but higher operating profit; however, one-off items and tax burden materially affected Net Income.
[Revenue] Revenue ¥254.5B (prior year ¥262.4B, ¥-7.9B -3.0%) decreased. By segment, the Gas Business declined to ¥188.6B (prior year ¥203.9B, -7.5%), dragging overall revenue down. Iodine Business grew to ¥39.1B (prior year ¥35.2B, +11.3%), and Other Businesses grew to ¥27.2B (prior year ¥24.2B, +12.3%). Revenue composition: Gas Business 74.0%, Iodine Business 15.4%, Other 10.7%, indicating high concentration in Gas. The Gas Business decline appears driven by seasonal factors (milder winter) and demand variability. Cost of sales decreased more than revenue, to ¥190.7B (prior year ¥201.3B, -5.3%), expanding Gross Profit to ¥63.8B (prior year ¥61.1B, +4.4%).
[Profitability] Gross margin 25.1% (prior year 23.3% +1.8pt) suggests procurement cost control and improved product mix. SG&A ¥27.2B (prior year ¥27.2B, flat) was controlled despite lower sales, expanding Operating Income to ¥36.7B (prior year ¥33.9B +8.1%) and improving Operating Margin to 14.4% (prior year 12.9% +1.5pt). Non-operating income ¥2.6B (mainly interest income ¥1.2B, dividend income ¥1.1B) and non-operating expenses ¥0.1B resulted in Ordinary Income ¥39.2B (prior year ¥36.5B +7.4%), continuing operating-level improvement. After special gains ¥14.0B (prior year ¥14.0B) and special losses ¥1.0B (impairment loss on fixed assets), Pretax Income was ¥38.2B (prior year ¥49.5B, -22.8%). Income taxes ¥12.0B (effective tax rate 31.4%) and non-controlling interests ¥2.2B deducted, leaving Net Income ¥26.2B (prior year ¥34.3B, -23.5%). Although the absolute amount of special gains was unchanged from the prior year, the decline in Pretax Income relative to the prior year's composition of one-off items contributed to the reduction. In conclusion, operating-level performance improved despite lower revenue, but Net Income declined due to one-off items and higher tax burden.
Gas Business: Revenue ¥188.6B (YoY -7.5%), Operating Income ¥21.0B (YoY -0.6%), Operating Margin 11.1%. Profit was almost flat despite revenue decline, reflecting effective cost management. Iodine Business: Revenue ¥39.1B (YoY +11.3%), Operating Income ¥22.9B (YoY +7.4%), Operating Margin 58.4%, maintaining high profitability and contributing the largest profit among segments. Other Businesses: Revenue ¥27.2B (YoY +12.3%), Operating Income ¥2.4B (YoY +237.5%), Operating Margin 8.9%, delivering substantial profit growth. Total segment Operating Income ¥46.3B, after corporate adjustments of -¥9.6B, consolidated Operating Income was ¥36.7B. The revenue mix depends heavily on Gas (>70% of revenue), so Gas demand variability drives overall revenue, while Iodine's high margins underpin profitability.
[Profitability] Operating Margin 14.4% (prior year 12.9% +1.5pt), Gross Margin 25.1% (prior year 23.3% +1.8pt) reflect cost controls and improved product mix. ROE 2.4% (annualized) is low, indicating room to improve capital efficiency. [Cash Quality] DSO (Days Sales Outstanding) is 169 days (Accounts receivable ¥117.8B ÷ quarterly Revenue ¥254.5B × 90 days), indicating elongation and issues in working capital efficiency. [Investment Efficiency] Total Asset Turnover 0.20x (annualized 0.78x) is low, requiring better asset utilization. [Financial Soundness] Equity Ratio 85.3% (prior year 85.2%), Current Ratio 442.7% (Current assets ¥537.3B ÷ current liabilities ¥121.4B), Quick Ratio 421.7% indicate a very strong balance sheet. The company effectively operates with no net debt, holding cash and deposits ¥161.5B and short-term securities ¥218.6B for a total liquidity of ¥380.1B, far exceeding short-term liabilities ¥121.4B. Cash and deposits decreased ¥-144.0B (-47.1%) from prior year ¥305.5B to ¥161.5B, but liquidity remains sufficient.
Cash flow statement data was not disclosed; funding trends are inferred from balance sheet movements. Cash and deposits decreased from ¥305.5B to ¥161.5B (¥-144.0B), while short-term securities increased from ¥83.5B to ¥218.6B (¥+135.1B), suggesting a shift of cash into short-term investment as a financing strategy. Accounts receivable rose from ¥102.6B to ¥117.8B (+14.8%), diverging from revenue decline of -3.0% and corroborating elongated collection terms (DSO 169 days). Inventories edged up from ¥24.8B to ¥25.5B, and accounts payable increased from ¥53.7B to ¥61.4B (+14.3%). Accrued income taxes decreased from ¥24.3B to ¥12.5B (¥-48.5%), reflecting tax payments in the prior period. Total assets rose from ¥1,277.7B to ¥1,298.9B (+¥21.2B), and net assets increased from ¥1,088.9B to ¥1,108.2B (+¥19.3B). Net asset growth was mainly driven by retained earnings of ¥26.2B and an increase in valuation difference on securities of ¥3.4B. Operating profitability is solid, but increased accounts receivable and working capital burden may be compressing cash efficiency; improving collections is a key issue going forward.
Analyze earnings quality from operating, ordinary, and one-off items. Operating Income ¥36.7B (Operating Margin 14.4%) increased YoY +8.1% due to gross margin improvement and SG&A control, indicating improved recurring earnings power. Non-operating income ¥2.6B (1.0% of sales) composed mainly of interest income ¥1.2B and dividend income ¥1.1B suggests stable financial income. Non-operating expenses ¥0.1B (interest expense ¥0.03B minimal) reflect near net-debt-free status. Ordinary Income ¥39.2B (YoY +7.4%) benefited from operating improvements. However, special gains ¥14.0B (36.6% of Pretax Income ¥38.2B) are a significant contributor, indicating high dependence on one-off items. Details of special gains/losses are not disclosed, but the same amount of special gains was recorded in the prior year, suggesting potential recurring asset dispositions. Income taxes ¥12.0B on Pretax Income ¥38.2B (effective tax rate 31.4%) were relatively heavy and weighed on Net Income. Comprehensive Income ¥29.5B exceeded Net Income ¥26.2B by ¥3.3B, with a ¥3.4B increase in valuation difference on securities contributing. The limited divergence between Net Income and Comprehensive Income indicates accumulating valuation gains and financial stability. Overall, the operating-level improvements appear sustainable, but the sizable contribution of special gains at the Net Income level makes distinguishing recurring earnings power important.
Full Year guidance: Revenue ¥870.0B (YoY -4.8%), Operating Income ¥92.0B (YoY -13.2%), Ordinary Income ¥103.0B (YoY -12.0%), Net Income ¥63.0B, EPS ¥118.00, Dividend ¥30.00 (pre-split basis ¥60). Q1 progress rates: Revenue 29.3%, Operating Income 39.8%, Ordinary Income 38.1%, Net Income 41.6%; progress for Operating Income and below substantially exceeds a typical 25% benchmark. Considering seasonality of the Gas Business (winter-weighted demand), Q1 tends to see revenue and profit front-loaded by heating demand, so high progress rates reflect seasonal effects. Full year outlook is set conservatively with lower revenue and profit versus the prior high base, but Q1 Operating Margin 14.4% exceeds the full-year target of 10.6% (Operating Income ¥92.0B ÷ Revenue ¥870.0B), boosting progress. Seasonal reversal is expected from Q2 onward, so care is required when assessing progress rates. Dividend guidance was adjusted in light of a stock split (1 share → 2 shares, effective date 2026-07-01); the mid-term dividend is listed on a pre-split basis and the year-end on a post-split basis, but the annual dividend is projected at ¥60 on a pre-split basis.
Q1-end dividend paid ¥24 per share; full-year dividend guidance is ¥60 per share on a pre-split basis (post-split equivalent would be mid-term ¥30 + year-end ¥30 totaling ¥60, though simple summation is not straightforward due to the split). Payout ratio relative to full-year EPS forecast ¥118.00 is approximately 50.8% (¥60 ÷ ¥118), reflecting a moderate shareholder return stance. Annualized Q1 Net Income ¥26.2B (annualized ¥104.8B) implies progress well above the full-year Net Income forecast ¥63.0B, but seasonality cautions against excessive extrapolation. From a dividend funding perspective, liquidity of cash and deposits ¥161.5B plus short-term securities ¥218.6B (total ¥380.1B) and a near net-debt-free balance sheet support dividend sustainability. Retained earnings ¥818.6B are ample, ensuring dividend funding. No share buyback was disclosed; shareholder returns are via dividends only. The stock split aims to lower trading unit size and improve liquidity, potentially broadening the shareholder base.
Seasonality Risk: The Gas Business accounts for 74.0% of revenue and is skewed toward winter demand. High Q1 progress (Operating Income 39.8%) reflects front-loaded heating demand, and seasonal reversal from Q2 onward could lead to revenue and profit declines. Full-year attainment depends on demand recovery in Q4; mild winter and other climate factors constitute performance risk.
Working Capital Efficiency Risk: DSO of 169 days has lengthened, and while revenue fell -3.0% YoY, accounts receivable increased +14.8%. Worsening collection terms raise working capital needs and may pressure cash flow generation. The drop in cash and deposits from ¥305.5B to ¥161.5B partly reflects a shift to short-term securities and possibly increased working capital needs. Improving collections is key to funding efficiency.
Capital Efficiency Risk: ROE 2.4% (annualized) and Total Asset Turnover 0.20x (annualized 0.78x) indicate low capital efficiency. Equity Ratio 85.3% and retained earnings ¥818.6B show very conservative capitalization, but capital is underutilized. Total assets increased +1.7% while revenue decreased -3.0%, indicating deteriorating asset efficiency. To generate returns above capital cost, the company needs to improve asset turnover and accelerate growth investments.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 14.4% | – | – |
| Net Margin | 10.3% | – | – |
Operating Margin 14.4% lacks peer comparatives due to limited industry data, but it improves on the company's prior-year 12.9%.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -3.0% | – | – |
Revenue growth -3.0% reflects seasonality and demand variation in the Gas Business; relative positioning is unclear due to lack of industry comparatives.
※ Source: Company aggregation
Improvement in operating-level profitability despite revenue decline (Gross Margin +1.8pt, Operating Margin +1.5pt) demonstrates successful cost control and product mix improvement. Iodine Business Operating Margin 58.4% (Operating Income ¥22.9B) is extremely high and acts as a profitable offset to Gas Business revenue decline. Segment Operating Income composition is Iodine 49.4%, Gas 45.4%, showing improved earnings diversification. Key factors going forward are iodine pricing and demand sustainability, and recovery in Gas demand.
Structural issues have emerged: deterioration in working capital efficiency (DSO 169 days, accounts receivable +14.8%) and low capital efficiency (ROE 2.4%, Total Asset Turnover 0.20x). Despite very conservative capitalization (Equity Ratio 85.3%) and large liquidity (cash & short-term securities ¥380.1B), capital is not being effectively deployed for growth. Normalization of accounts receivable and improved asset efficiency are essential to generate free cash flow and improve capital returns. While maintaining a moderate payout ratio (50.8% on full-year basis), strategic use of surplus capital is recommended.
This report is an AI-generated earnings analysis document created from XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information aggregated by the Company from public financial statements. Investment decisions are your responsibility; please consult a professional advisor if necessary.