| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥6157.6B | ¥6158.2B | +0.0% |
| Operating Income / Operating Profit | ¥182.7B | ¥191.2B | -4.5% |
| Ordinary Income | ¥204.9B | ¥202.6B | +1.1% |
| Net Income / Net Profit | ¥286.3B | ¥97.4B | +193.9% |
| ROE | 11.9% | 3.9% | - |
For the fiscal year ended March 2026, Revenue was ¥6,157.6B (YoY -¥0.6B, flat), Operating Income was ¥182.7B (YoY -¥8.5B, -4.5%), Ordinary Income was ¥204.9B (YoY +¥2.3B, +1.1%), and Net Income was ¥286.3B (YoY +¥188.9B, +193.9%). Revenue was flat as solid performance in the Dairy Products segment (+2.1%) offset weaker Beverage & Dessert sales (-1.5%). At the operating level, SG&A increases drove lower operating profit, but at the ordinary income level, non-operating income of ¥33.1B including equity-method investment income of ¥12.1B provided support. Net income surged nearly threefold year-over-year due to special gains of ¥306.0B, mainly investment securities sale gains of ¥299.9B. Gross margin improved by 0.4pt to 16.9% from the prior-year equivalent of 16.5%, while the SG&A ratio rose 0.6pt to 14.0% from 13.4%, resulting in a slight decline in operating margin to 3.0% (down 0.1pt from 3.1% prior year). ROE of 11.9% doubled from 5.8% last year, largely driven by one-off gains increasing net margin; core earnings improvement was limited. Operating Cash Flow was ¥229.0B (up 8.5%) but only 0.80x of net income ¥286.3B, with inventory increase (-¥91.5B) and receivables increase (-¥26.0B) weighing on working capital. Investing Cash Flow was +¥70.7B, a large positive driven by investment securities sales inflow of ¥321.9B that exceeded capital expenditures of ¥272.9B. Financing Cash Flow was -¥373.5B, mainly due to ¥200.1B share buybacks and debt repayments. Free Cash Flow was robust at ¥299.6B, sufficiently covering dividends of ¥67.7B and capex. Total return ratio including buybacks was a high level above approximately 80%. The FY2027 plan forecasts Revenue ¥6,450B (+4.7%) and Operating Income ¥210B (+15.0%) implying higher sales and profits, but this assumes the large special gains in the current year do not recur and EPS normalizes to ¥414.53.
[Revenue] Revenue ¥6,157.6B was essentially flat YoY (-0.0%). By segment, Dairy Products led growth at ¥2,834.5B (+2.1%), supported by price revisions for cheese, butter, etc., and improved mix in premium products. Beverage & Dessert was ¥2,603.5B (-1.5%) and declined due to lower volumes in milk and yogurt and intensified competition. Feed & Seeds contracted to ¥485.7B (-2.2%). Other (shared distribution center business, real estate leasing, etc.) was steady at ¥541.5B (+1.8%). Overall, Dairy Products growth offset declines in other segments and topline finished flat. While price pass-through and mix improvements progressed, volume declines and a tough competitive environment limited growth.
[Profitability] Cost of sales was ¥5,114.0B (83.1% of sales), giving gross profit of ¥1,043.6B (gross margin 16.9%), a 0.4pt improvement from the prior-year equivalent of 16.5%. Rising raw material costs were partly absorbed through price pass-through and mix improvements. SG&A totaled ¥861.0B (SG&A ratio 14.0%), up 0.6pt from the prior-year equivalent of 13.4%, with higher logistics and personnel costs pressuring profits. Operating Income was ¥182.7B (operating margin 3.0%), down ¥8.5B (-4.5%) YoY. By segment, Dairy Products operating profit was ¥105.2B (margin 3.7%, +1.1%) showing slight growth, while Beverage & Dessert operating profit was ¥39.0B (margin 1.5%, -30.9%) with a significant decline. Weak profitability in Beverage & Dessert pressured group margins. Non-operating income of ¥33.1B (including equity-method investment income ¥12.1B and dividend income ¥9.4B) contributed to maintain Ordinary Income at ¥204.9B (+1.1%). Special gains of ¥306.0B (mainly investment securities sale gains ¥299.9B) drove Pre-tax Profit to ¥457.4B (+147.0%). After deducting income taxes of ¥130.4B, Net Income was ¥286.3B (+193.9%). In summary, the company experienced flat revenue and lower operating profit, but net profit rose substantially due to special gains.
Dairy Products: Revenue ¥2,834.5B (+2.1%), Operating Income ¥105.2B (+1.1%), Margin 3.7%. Price revisions for cheese and butter and improved premium product mix sustained revenue and profit growth. Margin was roughly flat at the prior-year equivalent of 3.7%, offsetting cost increases via price pass-through.
Beverage & Dessert: Revenue ¥2,603.5B (-1.5%), Operating Income ¥39.0B (-30.9%), Margin 1.5%. Volume declines in milk and yogurt and intensified competition led to lower revenue and profitability. Margin fell 0.6pt from the prior-year equivalent of 2.1%, pressuring group profitability.
Feed & Seeds: Revenue ¥485.7B (-2.2%), Operating Income ¥7.1B (+95.6%), Margin 1.5%. Despite lower sales, cost reductions improved margin by 0.8pt from the prior-year equivalent of 0.7%.
Other: Revenue ¥541.5B (+1.8%), Operating Income ¥33.5B (+25.0%), Margin 6.2%. Efficiency gains at the shared distribution center contributed to maintaining high profitability. The core Dairy Products business is stable; recovery in Beverage & Dessert profitability is key to improving group margins.
[Profitability] Operating margin 3.0% is down 0.1pt from 3.1% last year. Gross margin 16.9% improved 0.4pt but was offset by a 0.6pt rise in the SG&A ratio to 14.0%. ROE 11.9% doubled from 5.8%, primarily due to one-off gains raising net margin to 5.3% (prior year 1.9%). ROA (on an ordinary income basis) 4.8% edged up from 4.7%. Total asset turnover was 1.44x, indicating continued efficient asset use.
[Cash Quality] Operating CF / Net Income 0.80x and OCF / EBITDA 0.64x indicate weaker cash conversion. The accrual ratio of 2.3% is healthy, but inventory increase (-¥91.5B) and receivables increase (-¥26.0B) absorbed cash and pressured working capital. Free Cash Flow ¥299.6B sufficiently covers dividends ¥67.7B and capex ¥272.9B, but depends on one-off investment securities sales of ¥321.9B.
[Investment Efficiency] Capex ¥272.9B was 1.56x depreciation ¥174.8B, supporting ongoing renewal and growth investments. Investing CF / Operating CF ratio was 0.31x (atypical as Investing CF was positive), reflecting proceeds from asset sales.
[Financial Soundness] Equity Ratio 56.4% (down 1.1pt from 57.5%), D/E ratio 0.09x, Net D/E -0.04x indicating effectively no net debt. Current ratio 136.9%, quick ratio 100.5% show acceptable short-term liquidity. Debt / EBITDA 0.73x and interest coverage 90.73x indicate very low leverage and substantial financial flexibility.
Operating CF was ¥229.0B (YoY +8.5%). The subtotal of ¥256.9B decreased due to working capital movements (inventory increase -¥91.5B, receivables increase -¥26.0B, payables decrease -¥11.9B). Operating CF was 0.80x of Net Income ¥286.3B, indicating weak cash realization of profits. OCF / EBITDA 0.64x is low, driven by inventory and receivables increases. Investing CF was +¥70.7B, a positive driven by a one-time inflow of ¥321.9B from investment securities sales that substantially exceeded capex of ¥272.9B. Underlying FCF excluding sale proceeds is weaker. Financing CF was -¥373.5B, reflecting ¥200.1B share buybacks, ¥96.4B debt repayments, and ¥67.7B dividends. FCF ¥299.6B covers total dividends and capex of ¥340.6B at 0.88x, and excluding one-time sale proceeds shows some shortfall. Cash and deposits decreased to ¥140.4B (from ¥213.7B, -¥73.3B). Normalizing working capital and improving inventory efficiency are focal points to bolster next-year cash generation.
Of Net Income ¥286.3B, Special Gains ¥306.0B (mainly investment securities sale gains ¥299.9B) made a large contribution, necessitating separation from recurring earnings. The gap between Operating Income ¥182.7B and Net Income reflects a +56.7% divergence, indicating high dependence on one-offs. Non-operating income ¥33.1B was mainly equity-method investment income ¥12.1B and dividend income ¥9.4B, small at 0.5% of sales. Special losses ¥53.5B (impairment ¥25.0B, asset retirement losses ¥14.9B) were one-off costs associated with plant restructuring and are likely one-time. Accrual quality is good with an accrual ratio of 2.3%, but cash conversion remains weak (Operating CF / Net Income 0.80x, OCF / EBITDA 0.64x) as inventory and receivables increases hinder cash realization. Comprehensive income ¥195.0B lagged Net Income ¥286.3B due to a decrease in valuation differences on available-for-sale securities of -¥137.2B, reflecting a reduction in unrealized gains on held assets. Core earnings remain limited at Operating Income ¥182.7B (margin 3.0%), and sustainable earnings strength is a challenge.
The FY2027 plan forecasts Revenue ¥6,450B (+4.7%), Operating Income ¥210B (+15.0%), and Ordinary Income ¥218B (+6.4%), implying growth in sales and profits. Progress rates to targets are 95.4% for Revenue (based on ¥6,450B target), 87.0% for Operating Income (¥210B target), and 94.0% for Ordinary Income (¥218B target), indicating generally steady progress versus the initial plan. The large special gains in the current year (investment securities sale gains ¥299.9B) are not expected to recur, so EPS is projected to normalize to ¥414.53 from this year’s ¥524.82. Assumptions include continued price revisions and mix improvements, fixed cost reductions after plant restructuring, and recovery in Beverage & Dessert profitability. No recurrence of special gains is assumed; achievement of the plan hinges on improvements in core operations. Dividend forecast is maintained at ¥100, keeping payout ratio at 24.1%, a healthy level.
Year-end dividend set at ¥100, implying a payout ratio of 19.0% (dividend-only) and ample headroom. Dividend was maintained at ¥100 last year, continuing a stable dividend policy. Share buybacks of ¥200.1B were executed, and combined with dividends ¥67.7B the total return ratio is a high level above approximately 80%. Total return amount ¥267.8B represents 93.5% of Parent Company Shareholders’ Net Income ¥286.3B, strengthening shareholder returns. Against FCF ¥299.6B, total return amount ¥267.8B is covered at 1.12x, but depends on one-off investment securities sale proceeds ¥321.9B. From next fiscal year onward, balancing core OCF recovery with capex plans is important. Dividend sustainability appears sound given cash & deposits ¥140.4B and Operating CF ¥229.0B. DOE (return on shareholders’ equity via dividends) is 2.8%, unchanged from prior year, signaling an intent to improve capital efficiency. The plan for FY2027 is to maintain the dividend at ¥100, and maintaining the current dividend level appears reasonable.
Risk of continued deterioration in Beverage & Dessert profitability: Operating Income ¥39.0B (-30.9%), margin 1.5% (down 0.6pt from prior-year equivalent of 2.1%) with significant profit decline. Volume declines and intensified price competition are the main causes. As this core business accounts for 21.4% of group operating profit, its underperformance pressures the group margin of 3.0%. Delays in structural profitability improvements (pricing policy, manufacturing/logistics efficiency) pose downside risk to group results.
Working capital increase and declining cash conversion efficiency: Inventory increase -¥91.5B and receivables increase -¥26.0B have absorbed cash, leading to low Operating CF / Net Income 0.80x and OCF / EBITDA 0.64x. Prolonged inventory days, obsolescence risk, or continued deteriorating capital efficiency could weaken FCF generation and constrain financial flexibility.
Dependence on one-time asset sale gains and volatility in net income: Of Net Income ¥286.3B, Special Gains ¥306.0B (mainly investment securities sale gains ¥299.9B) contributed significantly, while core earnings remain at Operating Income ¥182.7B (margin 3.0%). As special gains are not expected to recur next year and EPS is projected to normalize, investor focus will shift to core margins and cash generation; delayed improvement may lead to valuation adjustment pressure.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.0% | 5.0% (3.3%–8.4%) | -2.0pt |
| Net Margin | 4.6% | 3.2% (1.9%–6.6%) | +1.5pt |
Operating margin trails the industry median 5.0% by 2.0pt, indicating substantial room to improve cost structure. Net margin at 4.6% exceeds the median 3.2% by 1.5pt, but this is largely driven by special gains and underwhelms on a core basis.
※ Source: Company aggregation of public financial statements
Sharp rise in net income driven by one-off gains and normalization next year: Net Income ¥286.3B rose YoY +193.9% due to investment securities sale gains ¥299.9B, but core earnings remain at Operating Income ¥182.7B (margin 3.0%). EPS is expected to normalize to ¥414.53 in FY2027, shifting investor focus to core margin and cash generation improvements. Recovery in Beverage & Dessert profitability and SG&A efficiency are key to achieving the plan.
Declining cash conversion efficiency and working capital management challenge: Operating CF / Net Income 0.80x and OCF / EBITDA 0.64x are low, driven by inventory increase -¥91.5B and receivables increase -¥26.0B. Although FCF ¥299.6B was secured via one-time investment securities sales of ¥321.9B, recovery of core OCF and inventory efficiency are prerequisites for sustaining cash flow and total returns next fiscal year. Timing and magnitude of fixed-cost reductions post-plant restructuring are monitoring points.
High shareholder returns backed by financial flexibility and intent to improve capital efficiency: Total return ratio above approximately 80% including ¥200.1B buybacks and DOE 2.8% show a clear intent to improve capital efficiency. With Equity Ratio 56.4% and Net D/E -0.04x indicating effectively no net debt, financial flexibility is ample and maintaining the ¥100 dividend is feasible. However, ROE 11.9% is heavily influenced by one-off gains; structural improvement in operating margin is essential for sustainable ROE improvement.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; please consult professionals as needed before making investment decisions.