| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3943.2B | ¥3626.9B | +8.7% |
| Operating Income / Operating Profit | ¥170.8B | ¥206.0B | -17.1% |
| Ordinary Income | ¥168.6B | ¥221.8B | -24.0% |
| Net Income | ¥84.8B | ¥173.2B | -51.1% |
| ROE | 2.7% | 5.8% | - |
For the fiscal year ended March 2026, Revenue was ¥3,943B (YoY +¥316B +8.7%), achieving top-line growth, but Operating Income was ¥170B (YoY -¥35B -17.1%), Ordinary Income ¥168B (YoY -¥53B -24.0%), and Net Income attributable to owners of the parent ¥117B (YoY -¥45B -27.8%), marking a significant decline in profitability. Revenue expansion was driven by growth in the overseas alcoholic beverages business, but gross margin deteriorated to 32.4% (YoY -0.6pt) and SG&A ratio increased to 28.1% (YoY +1.2pt) amid cost pressure, resulting in an Operating Margin worsening by 1.4pt to 4.3%. After Special Gains of ¥74B (mainly ¥66B gain on sale of investment securities) less Special Losses of ¥60B (impairment losses ¥40B), Profit Before Tax was ¥183B (YoY -29.2%), but a high effective tax rate of 53.6% amplified the decline in Net Income. The Takara Bio Group swung to an operating loss of ¥47B, and double-digit SG&A increases were primary drivers of the profit decline.
Revenue: Revenue was ¥3,943B (YoY +8.7%). By segment, Takara Shuzo International Group led growth with ¥2,219B (+19.4%), supported by expanded global liquor sales and Japanese food ingredient wholesale. Domestic Takara Shuzo was ¥1,191B (-0.5%), slightly down, reflecting a mature liquor market and weak consumer spending. Takara Bio Group revenue was ¥403B (-10.5%), a double-digit decline due to reduced orders in reagents and CDMO businesses. Other segments were ¥322B (+4.3%) and remained steady. In the sales mix, overseas alcoholic beverages accounted for about 56%, domestic alcoholic beverages about 30%, and bio about 10%, indicating a shift of the portfolio toward overseas.
Profitability: Cost of sales rose to ¥2,666B (YoY +9.8%), outpacing revenue growth, and gross margin declined to 32.4% (YoY -0.6pt). Increases in raw material, energy, and logistics costs and changes in product mix in overseas operations pressured gross profit. SG&A was ¥1,106B (YoY +11.7%), increasing 3pt more than revenue growth, pushing the SG&A ratio to 28.1% (YoY +1.2pt). Drivers included higher logistics and promotion costs from overseas sales expansion and increased goodwill amortization of ¥31B (YoY +81.2%). Consequently, Operating Income was ¥170B (-17.1%), and Operating Margin deteriorated to 4.3% (YoY -1.4pt). Non-operating items contributed a net -¥2B (prior year +¥16B); interest and dividend income was ¥16B against interest expense ¥15B and foreign exchange losses ¥3B. Ordinary Income decreased to ¥168B (-24.0%). Special items netted to +¥14B (gain on sale of investment securities ¥66B - impairment losses ¥40B, etc.), supporting Net Income, but Profit Before Tax was ¥183B (-29.2%) and income taxes were ¥98B (effective tax rate 53.6%), resulting in Net Income before non-controlling interests of ¥85B (-51.1%) and Net Income attributable to owners of the parent of ¥117B (-27.8%). In conclusion, the result was revenue up but profit down.
Takara Shuzo International Group recorded Revenue ¥2,219B (YoY +19.4%), Operating Income ¥142B (YoY +21.8%), and margin 6.4%, continuing high growth and accounting for the bulk of consolidated operating profit. Exports of Japanese liquor from Japan, local production and sales in the U.S. and Europe, and Japanese food ingredient wholesale all performed well, aided by continued overseas interest in Japanese cuisine and expanded sales networks. Domestic Takara Shuzo had Revenue ¥1,191B (-0.5%), slightly down, but Operating Income ¥57B (+13.7%) and margin 4.8%, achieving profit growth through cost reductions and product mix improvements in a mature domestic market. Takara Bio Group posted Revenue ¥403B (-10.5%) and an Operating Loss of ¥47B (prior year operating profit ¥23B), turning to a loss and worsening margin to -11.6%. Declines in reagent orders, upfront investment burdens, and lower CDMO utilization were factors; this segment accounted for approximately ¥69B of the consolidated operating income decline of ¥35B. Other segments recorded Revenue ¥322B (+4.3%), Operating Income ¥34B (+24.0%), and margin 10.4%, supported by stable earnings from freight transport and real estate leasing.
Profitability: Operating Margin was 4.3%, deteriorating by 1.4pt YoY, and ROE was 2.7% (Net Income ¥117B / average shareholders’ equity ¥2,592B), down 1.5pt YoY. ROE decline stemmed from a Net Profit Margin of 2.2% (YoY -1.0pt), driven by weaker Operating Margin and a high effective tax rate (53.6%). Gross Profit Margin was 32.4% (YoY -0.6pt), SG&A Ratio 28.1% (YoY +1.2pt), reflecting margin pressure from rising costs. Cash Quality: Operating Cash Flow (OCF) was ¥173B, 1.48x Net Income ¥117B, indicating reasonable cash backing for accounting profit, but OCF/EBITDA (EBITDA = Operating Income ¥170B + Depreciation ¥122B = ¥292B) was 0.59x, down YoY, with working capital deterioration (inventory +¥63B, trade receivables +¥30B, etc.) impeding cash conversion. Free Cash Flow (FCF) was ¥20B (OCF ¥173B - Investing CF ¥153B), well below dividends of approx. ¥61B and share buybacks of ¥30B combined. Investment Efficiency: Total Asset Turnover was 0.767x (Revenue ¥3,943B / average total assets ¥5,138B), roughly flat, with inventory and construction-in-progress accumulation suppressing turnover. ROIC (NOPAT / Invested Capital) is estimated at roughly 3%, below the cost of capital. Financial Soundness: Equity Ratio was 50.5% (YoY -0.8pt) and remains solid; interest-bearing debt was ¥468B, Debt/EBITDA 1.60x, Debt/Capital 13.1%, indicating a conservative capital structure. Current Ratio was 304%, cash and deposits ¥732B covering short-term liabilities 8.9x, indicating strong liquidity. Interest Coverage was 11.3x (Operating Income ¥170B / Interest Expense ¥15B), showing a light interest burden.
OCF was ¥173B (YoY +7.2%), generated by Profit Before Tax ¥183B before tax adjustments plus Depreciation ¥122B, Goodwill Amortization ¥31B, Impairment ¥40B and other non-cash expenses. Working capital changes resulted in cash absorption of net -¥74B (inventory increase -¥63B, trade receivables increase -¥30B, trade payables increase +¥19B), and tax payments totaled -¥89B, resulting in OCF of ¥173B. OCF subtotal (before working capital changes) was ¥256B, well above Pretax Income, reflecting significant non-cash charges. Investing Cash Flow was -¥153B, centered on acquisitions of tangible and intangible fixed assets of -¥222B, reflecting active capex and development investment. Proceeds from sale of investment securities ¥80B and net change in time deposits +¥40B partially offset. Free Cash Flow improved to ¥20B (YoY +82.4%) but combined with Financing CF of -¥93B (dividends -¥61B, share buybacks -¥30B, long-term debt repayments -¥56B, etc.), cash decreased by -¥62B to an ending balance of ¥691B. Including foreign exchange translation adjustments +¥11B and changes in consolidated scope +¥0.5B, cash and cash equivalents at period end were ¥691B. The buildup in working capital has slowed cash conversion; improving inventory management and receivables collection is key to near-term cash generation.
Operating Income of ¥170B is composed of core businesses such as alcoholic beverages and food ingredient wholesale and forms the core of recurring earnings. Non-operating income was ¥24B (dividends received ¥9B, interest received ¥7B, etc.), small at 0.6% of Revenue, while non-operating expenses were ¥26B (interest expense ¥15B, foreign exchange losses ¥3B, etc.), netting to a limited -¥2B contribution. Special items netted +¥14B (gain on sale of investment securities ¥66B - impairment losses ¥40B - loss on disposal of fixed assets ¥8B, etc.), temporarily supporting Net Income and accounting for about 12% of Net Income ¥117B. A reversal of these one-off gains is expected next fiscal year, making recovery of core earnings important. From an accrual perspective, OCF ¥173B / Net Income ¥117B = 1.48x and OCF/EBITDA 0.59x indicate reasonable cash backing for accounting profit, but working capital deterioration suppresses efficiency. The gap between Ordinary Income ¥168B and Net Income ¥117B is attributable to net special gains +¥14B, income taxes ¥98B (high effective tax rate 53.6%), and non-controlling interests -¥32B (losses of consolidated subsidiaries such as Takara Bio), demonstrating that one-off factors and tax burden compressed final earnings.
The outlook for the fiscal year ending March 2027 forecasts Revenue ¥4,200B (YoY +6.5%), Operating Income ¥188B (YoY +10.1%), Ordinary Income ¥170B (YoY +0.8%), Net Income attributable to owners of the parent ¥119B (YoY +1.7%), EPS ¥61.70, and dividend ¥31. Progress toward the full-year plan stands at Sales 94%, Operating Income 91%, Ordinary Income 99%, Net Income 98%, suggesting generally steady progress, but this fiscal year benefited from substantial special gains and the full-year plan assumes profitability improvement on an ordinary-income basis. Recovery in Operating Income relies on continued growth in overseas alcoholic beverages, domestic cost improvements, and narrowing losses at Takara Bio. Achieving the full-year plan requires roughly ¥17B of Operating Income improvement in H2, contingent on stabilization of raw material, energy, and logistics costs, SG&A restraint, and inventory normalization to improve cash flow. Payout Ratio is 37.4% (projected about 50% on a full-year basis), which is reasonable, but FCF Coverage is 0.32x, low, so optimization of investment allocation and improvements in working capital efficiency are needed for sustained total returns.
The year-end dividend was ¥31 (including a ¥2 commemorative dividend for the 100th anniversary), resulting in an annual dividend of ¥31 and a Payout Ratio of 37.4%. The prior year also paid ¥31 with a Payout Ratio of 37.4%, showing a commitment to maintain dividends despite profit declines. Excluding the ¥2 commemorative dividend, the ordinary dividend equates to ¥29, prioritizing steady dividends given sluggish full-year profit growth. Total dividends amounted to approx. ¥61B, and Return on Equity via dividends was 2.4% (dividends ¥61B / shareholders’ equity ¥2,593B), a moderate level. Share buybacks of ¥30B were executed under Financing CF, bringing total shareholder returns to approx. ¥91B and Total Return Ratio to about 78% (total returns ¥91B / Net Income ¥117B). However, FCF was only ¥20B, and FCF Coverage was 0.22x (FCF ¥20B / Total returns ¥91B), indicating low coverage; while OCF ¥173B can support returns, the balance between investment and returns is tight. Medium-term sustainability of returns depends on eliminating losses in the bio business, compressing inventory and receivables to restore cash generation, and improving capex efficiency. Excluding the commemorative dividend, a sustainable payout ratio is estimated at around 50%, and the policy of stable dividends is expected to be maintained, though additional shareholder returns will depend on performance and cash flow recovery.
Risk of continued losses at Takara Bio Group: The Group swung to an operating loss of ¥47B, accounting for approximately ¥69B of the consolidated operating income decline of ¥35B. Reduced reagent orders, upfront investment burdens, and lower CDMO utilization have increased fixed cost burdens. Delays in structural reform and earnings recovery in the bio business risk prolonging weak consolidated profit margins.
Risk from working capital deterioration and inventory buildup: Inventories rose to ¥827B (+¥99B +13.6%), and trade receivables increased by ¥9B. OCF/EBITDA fell to 0.59x YoY, and prolongation of DIO/DSO impedes cash conversion. Inventory accumulation carries obsolescence and discounting risk; deterioration in working capital efficiency undermines FCF generation and pressurizes return capacity.
Investment risk from increases in construction-in-progress and intangible assets: Construction-in-progress was ¥285B (YoY +29%), intangible fixed assets ¥604B (YoY +45%), and goodwill expanded to ¥305B (YoY +20%). As capex and M&A-related investments accumulate, risks include delayed commissioning, impairment risk, and goodwill amortization burden (¥31B annually) that could pressure profits. Early commissioning of CIP and recovery of invested capital (improving ROIC) are key challenges.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.3% | 5.0% (3.3%–8.4%) | -0.7pt |
| Net Profit Margin | 2.2% | 3.2% (1.9%–6.6%) | -1.0pt |
Profitability lags the food & beverage industry median, with Takara Bio’s swing to loss and SG&A increases the primary reasons for a lower industry ranking.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 8.7% | 5.4% (1.0%–8.6%) | +3.3pt |
Revenue growth outperforms the industry median by +3.3pt, reflecting top-tier growth driven by expansion of the overseas alcoholic beverages business.
※ Source: Company aggregation
Overseas alcoholic beverages becoming a core and domestic alcoholic beverages providing stable earnings: Takara Shuzo International Group recorded Revenue ¥2,219B (+19.4%) and Operating Income ¥142B (+21.8%), securing its position as the primary high-growth segment accounting for the majority of consolidated operating profit. Continued global interest in Japanese cuisine and expanded sales networks have been tailwinds, with overseas sales share at 56% and an increasing contribution to Operating Income. Domestic Takara Shuzo, with Revenue ¥1,191B (-0.5%) and Operating Income ¥57B (+13.7%), achieved profit expansion through cost management and product mix improvement. As the portfolio shifts overseas, stable domestic earnings support the financial base.
Takara Bio’s swing to loss pressures consolidated profitability; structural reform is urgent: Takara Bio Group posted Revenue ¥403B (-10.5%) and an Operating Loss of ¥47B (prior year Operating Income ¥23B), turning to a loss and accounting for approximately ¥69B of the consolidated Operating Income decline of ¥35B. Reduced reagent orders, lower CDMO utilization, and upfront investment burdens led to an Operating Margin of -11.6%. The bio business loss is a primary reason for the consolidated Operating Margin decline to 4.3% (YoY -1.4pt) and ROE falling to 2.7%. Earnings recovery and fixed cost reduction in the bio business are keys to restoring consolidated margins and the medium-term growth scenario.
Slowing cash generation and sustainability of total returns are focal points: OCF ¥173B is 1.48x Net Income ¥117B and provides reasonable backing for accounting profit, but OCF/EBITDA 0.59x is down YoY and working capital deterioration (inventory +¥63B, receivables +¥30B, etc.) is impeding cash conversion. FCF was only ¥20B, far below dividends approx. ¥61B and share buybacks ¥30B totaling ~¥91B. FCF Coverage of 0.22x is low; while OCF can cover returns, the balance between investment and returns is tight. Inventory reduction, stronger receivables collection, and early commissioning of CIP to restore cash generation are prerequisites for medium-term sustainability of returns and securing investment capacity.
This report is an AI-generated financial analysis document created by analyzing 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 publicly available financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.