| Metric | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue | ¥5714.6B | ¥5611.7B | +1.8% |
| Operating Income | ¥344.8B | ¥296.6B | +16.3% |
| Ordinary Income | ¥371.2B | ¥298.6B | +24.3% |
| Net Income | ¥98.3B | ¥-16.4B | +699.1% |
| ROE | 3.5% | -0.6% | - |
For the fiscal year ended March 2026, Revenue was ¥5714.6B (YoY +¥102.9B, +1.8%), Operating Income was ¥344.8B (YoY +¥48.2B, +16.3%), Ordinary Income was ¥371.2B (YoY +¥72.6B, +24.3%), and Net Income attributable to owners of the parent was ¥225.9B (YoY +¥169.4B, a substantial turnaround from a loss in the prior year). Revenue edged up driven by price revisions and improved product mix. At the operating level, gross margin improved to 25.1% (up +1.0pt from 24.1% a year ago) and operating margin improved to 6.0% (up +0.7pt from 5.3%), delivering double-digit operating profit growth. At the ordinary income level, foreign exchange gains of ¥24.0B contributed to an accelerated increase. Net income recovered sharply due to the absence of the prior year’s large special losses (impairment of ¥204.8B, etc.). This marks the third consecutive year of revenue growth with a Revenue CAGR of +1.2%, and Operating Income reversed from the prior year to achieve year-on-year growth after two years, indicating a marked improvement in core business profitability.
[Revenue] Revenue was ¥5714.6B (+1.8%), marking the third consecutive year of revenue growth. By segment, the Food Business accounted for ¥5476.6B (+1.8%), representing 95.8% of revenue, with core categories—municipal milk, dairy products, ice cream, and beverages—performing steadily due to price revisions and improved product mix. Other businesses (feed, plant equipment, real estate leasing, etc.) grew strongly to ¥339.6B (+5.1%). Cost of sales was ¥4282.0B, yielding a gross margin of 25.1% (up +1.0pt from 24.1%) as price pass-through progressed and cost controls were effective. SG&A was ¥1087.8B (+3.4%), rising at a pace above revenue growth, but the SG&A ratio remained at 19.0% (up +0.2pt from 18.8%), not preventing improvement in operating margin.
[Profitability] Operating Income was ¥344.8B (+16.3%), with operating margin improving to 6.0%. By segment, the Food Business Operating Income was ¥458.1B (+15.1%, margin 8.4%), and Other Businesses was ¥35.8B (+23.7%, margin 10.5%); both achieved double-digit profit growth, resulting in adjusted consolidated Operating Income of ¥344.8B. Ordinary Income was ¥371.2B (+24.3%), as non-operating income of ¥53.5B (foreign exchange gains ¥24.0B, dividends received ¥11.8B, etc.) substantially exceeded non-operating expenses of ¥27.1B (interest paid ¥15.6B, etc.), producing a higher growth rate than at the operating level. Extraordinary items comprised special gains of ¥29.2B (gain on sale of investment securities ¥4.5B, gain on sale of fixed assets ¥2.5B, etc.) and special losses of ¥78.0B (centered on impairment losses ¥35.5B), yielding a net special loss of ¥48.8B, substantially reduced from the prior year’s net special loss of ¥145.8B. Profit before income taxes was ¥322.4B (up +110.9% from ¥152.9B a year earlier). After income taxes of ¥94.5B, profit for the period was ¥227.8B; after deducting non-controlling interests of ¥1.9B, Net Income attributable to owners of the parent was ¥225.9B (from ¥-16.4B prior, +699.1%, effectively returning to profitability). In conclusion, revenue and profit increased, core business profitability improved, and the reduction in special losses contributed to the substantial profit growth.
The Food Business delivered Revenue of ¥5476.6B (+1.8%) and Operating Income of ¥458.1B (+15.1%, margin 8.4%), accounting for 95.8% of Revenue and the majority of Operating Income, driving the revenue and profit growth. Price revisions and premium product introductions across municipal milk, dairy products, ice cream, and beverages improved product mix, and combined with gross margin improvement and operating leverage, margins improved year-on-year. Other businesses (feed, plant equipment, real estate leasing, etc.) grew to Revenue of ¥339.6B (+5.1%) and Operating Income of ¥35.8B (+23.7%, margin 10.5%), contributing as complementary income sources to the core business. After corporate-level adjustments, consolidated Operating Income was ¥344.8B, with synergies across segments and a balanced business portfolio contributing to improved profitability.
[Profitability] Operating margin of 6.0% (up +0.7pt from 5.3% prior) marked a recovery to the 6% range for the first time in three years, primarily driven by improvement in gross margin to 25.1% (up +1.0pt from 24.1%). Net margin was 4.0% (improved significantly from -0.3% prior), normalized by the reduction in special losses. ROE recovered to 8.1% (up +6.2pt from 1.9%), led by the improvement in net margin, exceeding the three-year average (~4.5%). ROA (on an Ordinary Income basis) improved to 7.0% (up +1.5pt from 5.5%), indicating more efficient use of total assets.
[Cash Quality] Operating Cash Flow (OCF)/Net Income ratio was 1.58x, indicating healthy cash backing of profits; however OCF/EBITDA was 0.61x (OCF ¥357.2B vs. EBITDA ¥583.6B), showing weak cash conversion efficiency as working capital absorbed cash (inventory increase ¥68.3B, accounts receivable increase ¥33.7B). Accrual ratio was -2.4%, indicating high alignment between accounting profit and cash.
[Investment Efficiency] Total asset turnover was 1.04x (slightly down from 1.08x prior), as total assets increased to ¥5471.2B (up +5.1% from ¥5204.2B) while revenue growth was moderate. Tangible fixed asset turnover was 1.97x, and inventory turnover was 8.74x, suggesting scope for improving asset and inventory efficiency.
[Financial Soundness] Equity Ratio was 51.1% (virtually unchanged from 51.2% prior), indicating stability. Current ratio was 138.2% and quick ratio 94.2%, showing somewhat tight short-term liquidity but manageable. Debt/EBITDA was 0.56x, and interest coverage was 22.1x (Operating Cash Flow ¥357.2B / interest paid ¥16.1B), reflecting strong debt service capacity.
Operating Cash Flow was ¥357.2B (substantially improved from ¥-124.6B prior). Starting from profit before income taxes of ¥322.4B, non-cash items including depreciation and amortization of ¥238.8B produced a subtotal before working capital changes of ¥397.0B. Working capital deterioration—inventory increase -¥68.3B, trade receivables increase -¥33.7B, trade payables decrease -¥5.2B—absorbed -¥107.2B, and after income taxes paid of -¥39.9B, OCF was ¥357.2B. While the OCF/Net Income ratio of 1.58x indicates good cash backing of profit, the OCF/EBITDA ratio of 0.61x suggests weak cash conversion due to inventory build-up and receivables increases. Investing Cash Flow was -¥388.7B, driven mainly by tangible fixed asset acquisitions of -¥399.9B (up +24.1% YoY from -¥322.2B), reflecting continued active growth investment; partial offsets included long-term loan recoveries ¥29.3B and proceeds from sale of investment securities ¥5.5B. Free Cash Flow was -¥31.5B (improved from -¥143.2B prior but still negative), as capital expenditures continued to exceed OCF. Financing Cash Flow was -¥5.0B: while long-term borrowings increased ¥242.6B and bond issuance ¥198.9B bolstered long-term funding, the company repaid bonds -¥150.0B, repaid long-term borrowings -¥106.4B, paid dividends -¥74.7B, and repurchased treasury stock -¥100.1B, balancing capital policy and debt refinancing. Cash and cash equivalents declined ¥25.0B from ¥285.6B at the beginning of the period to ¥260.6B at the end, confirming significant funding needs during an investment-frontloaded phase.
Of Net Income ¥225.9B, Ordinary Income ¥371.2B reflects recurring earning power from core business and financial activities, while net special items of -¥48.8B (special gains ¥29.2B - special losses ¥78.0B) depressed Net Income as one-off factors. Special gains included gain on sale of investment securities ¥4.5B and gain on sale of fixed assets ¥2.5B; special losses centered on impairment losses of ¥35.5B, a large reduction from ¥204.8B in the prior year. Of non-operating income ¥53.5B, foreign exchange gains ¥24.0B are largely non-recurring, whereas dividends received ¥11.8B are viewed as a more persistent income source. Non-operating expenses of ¥27.1B are mainly interest paid ¥15.6B; the increase in long-term borrowings and bonds raises financial costs that could pressure future profits. Comprehensive income was ¥260.6B (owners of parent ¥258.2B), where Net Income ¥227.8B was augmented by other comprehensive income of ¥32.8B (foreign currency translation adjustments ¥43.5B, valuation differences on available-for-sale securities ¥12.1B, retirement benefit adjustments -¥23.5B), reflecting effects of temporary differences. Accrual (Net Income - OCF) was -¥131.3B, meaning OCF exceeded Net Income and indicating high alignment between accounting profit and cash flows, with no signs of earnings management. Quality of earnings on an Ordinary Income basis is good, but monitoring is required for the risk of foreign exchange gain reversal and potential recurrence of special losses.
For the fiscal year ending March 2027, management guidance is Revenue ¥5800.0B (YoY +1.5%), Operating Income ¥320.0B (YoY -7.2%), Ordinary Income ¥327.0B (YoY -11.9%), and Net Income attributable to owners of the parent ¥200.0B (YoY -11.5%), constituting a conservative earnings decline plan. While Revenue is expected to inch up, the decline in Operating Income appears to factor in the disappearance of non-recurring foreign exchange gains, potential upside in raw material and energy costs, and increased SG&A from strategic investments. Progress against full-year guidance stands at Revenue 98.5%, Operating Income 107.7%, Ordinary Income 113.5% in the first half, exceeding plan; however, management may expect higher cost burdens and concentration of investment expenses in the second half. EPS forecast is ¥61.96 (down sharply from ¥276.02 this period), and dividend guidance is ¥12.00/share (down from ¥100.00/share this period); a 1-for-4 stock split is scheduled effective July 1, 2026, so on a post-split basis the plan is ¥12 at end of Q2 and ¥12 at year-end. Forecasted Payout Ratio is 19.4%, a conservative level that suggests prioritization of dividend sustainability even under a profit decline. The full-year guidance appears to conservatively embed FX and cost uncertainties, though upside revisions remain possible given first-half strength.
Annual dividend was ¥100.00 per share (interim ¥45.00, year-end ¥55.00), with a Payout Ratio of 36.2% (total dividends ¥81.9B against Net Income ¥225.9B), an appropriate level. The prior year dividend was ¥45.00, so this represents a 2.22x increase; however, comparison is difficult due to the prior-year loss. Dividend policy emphasizes earnings linkage while prioritizing stable dividends. Share repurchases totaled ¥100.1B in Financing Cash Flow; combined with dividends ¥75.7B, total shareholder returns amounted to ¥175.8B, yielding a Total Return Ratio of 77.8%. This was within OCF of ¥357.2B, but with Free Cash Flow at -¥31.5B, total returns were supplemented by long-term borrowings and bond issuance. Next fiscal year’s dividend guidance is ¥12.00/share (post-split basis), which equates to ¥48.00/share on a pre-split basis, representing an effective year-on-year reduction. Forecasted Payout Ratio of 19.4% is conservative, indicating a preference for maintaining dividends even under reduced earnings. Although share buybacks were executed this period, no buyback plan has been disclosed for the next period; future buybacks are expected to depend on FCF generation and capital policy priorities. Sustainable shareholder returns will require improvements in working capital efficiency and investment payback to restore positive Free Cash Flow.
Working capital efficiency risk: Inventory increase of ¥68.3B and accounts receivable increase of ¥33.7B left OCF/EBITDA at 0.61x, reducing cash conversion efficiency. Deterioration in inventory turnover to 8.74x (from 9.29x prior) may reflect product mix shifts or production adjustments; continued inventory buildup would sustain cash absorption risk. Prolonged receivables collection periods could indicate lax credit control or delayed collections, constraining cash-flow-driven management.
Raw material and energy cost upside risk: Fluctuations in milk prices, sugar, fats and oils, packaging materials, and energy can directly pressure gross margin of 25.1%. While price revisions achieved a +1.0pt gross margin improvement this period, next fiscal year’s conservative profit forecast already factors in potential cost rises; limits to price pass-through and intensified competition could further compress margins. Under a high fixed-cost production structure, raw material surges can rapidly deteriorate profit margins.
Continued aggressive investment and sustained FCF deficit risk: Tangible fixed asset acquisitions of ¥399.9B (YoY +24.1%) led investing cash outflows to exceed OCF, resulting in negative Free Cash Flow of ¥-31.5B. With forecasted earnings decline next year and expected lower OCF, maintaining the current pace of capital expenditure could perpetuate FCF deficits, making shareholder distributions rely on long-term borrowing and bond issuance. Delays in investment payback or underperformance in utilization rates would elevate impairment risk and financial burden.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.0% | 5.0% (3.3%–8.4%) | +1.0pt |
| Net Margin | 1.7% | 3.2% (1.9%–6.6%) | -1.5pt |
Operating margin is +1.0pt above the industry median, placing the company in an upper position and indicating superior core profitability relative to peers. Net margin trails the median by -1.5pt, but excluding special losses, competitiveness is broadly at par.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 1.8% | 5.4% (1.0%–8.6%) | -3.6pt |
Revenue growth lags the industry median by -3.6pt, indicating a slower growth pace; however, value can be attributed to profit growth achieved through price revisions and mix improvement.
※ Source: Company compilation
Improvement trend in core profitability: Operating margin recovered to 6.0% (up +0.7pt from 5.3%), and gross margin improved to 25.1% (up +1.0pt), marking the first improvement in three years. Price revisions, stronger product mix, and cost controls worked in tandem. ROE recovered to 8.1% (up +6.2pt from 1.9%), well above the three-year average of 4.5%. The reduction in special losses (impairment ¥35.5B, down substantially from ¥204.8B prior) has helped normalize the financial profile and establish a foundation for sustainable profit growth. Although next year’s plan is for lower earnings, if core profitability improvements take hold, there is room for mid-term margin expansion.
Cash conversion efficiency and working capital management issues: OCF of ¥357.2B exceeded Net Income ¥225.9B, showing good cash backing of profits, but OCF/EBITDA of 0.61x indicates weak cash conversion as inventory increased by ¥68.3B and receivables by ¥33.7B. Inventory turnover fell to 8.74x (from 9.29x prior), and total asset turnover was 1.04x (slightly down from 1.08x), indicating significant scope for efficiency gains. Ongoing aggressive investment resulted in Free Cash Flow deficit of ¥-31.5B, and total shareholder returns of ¥175.8B (dividends + buybacks) were complemented by long-term borrowings and bond issuance. Going forward, inventory reduction, accelerated receivables collection to improve OCF, and optimization of investment pace will be key to restoring FCF positivity and sustaining shareholder returns.
Balancing financial soundness and long-term growth investment: Equity Ratio of 51.1%, Debt/EBITDA of 0.56x, and interest coverage of 22.1x indicate high financial resilience, and increases in long-term borrowings +¥193.8B and bonds +¥200.0B are within tolerable limits. Active tangible fixed asset investment of ¥399.9B (YoY +24.1%) likely targets capacity expansion, automation, and quality improvements, which could strengthen competitiveness and margins over the medium term. If investment payback proceeds smoothly, improved capacity utilization and productivity could expand OCF and achieve FCF positivity, enhancing shareholder return capacity. Conversely, delays in realizing investment benefits or emergence of impairment risks would increase financial burden, making close monitoring of investment projects critical.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; please consult professional advisors as necessary before acting.
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