| Metric | Current Period | Prior Year Comparable | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥4978.8B | ¥4727.2B | +5.3% |
| Operating Income | ¥216.8B | ¥229.7B | -5.6% |
| Ordinary Income | ¥232.7B | ¥229.7B | +1.3% |
| Net Income (attributable to owners of parent) | ¥14.8B | ¥116.7B | -87.3% |
| ROE | 0.8% | 6.6% | - |
For the fiscal year ended April 2026, revenue was ¥4978.8B (YoY +¥251.6B +5.3%), Operating Income was ¥216.8B (YoY -¥12.9B -5.6%), Ordinary Income was ¥232.7B (YoY +¥2.9B +1.3%), and Net Income attributable to owners of the parent was ¥14.8B (YoY -¥101.9B -87.3%). Despite revenue growth, Operating Income and Net Income declined sharply. Revenue was driven by the core Leaf & Drink related business, marking the third consecutive year of revenue increase, but Gross Margin fell to 36.0% (approximately 200bp lower year-on-year). SG&A ratio improved to 31.7%, yet Operating Margin contracted to 4.4%. Ordinary Income edged up due to foreign exchange gains of ¥10.1B and equity-method investment income of ¥4.3B, but the recognition of Special Losses of ¥167.4B (of which impairment losses ¥148.8B) reduced Profit Before Tax to ¥68.4B and caused a sharp YoY decline in Net Income. The one-off impairment heavily depressed Net Income, and ROE fell to 0.8%.
[Revenue] Revenue totaled ¥4978.8B (+5.3%), showing solid growth. By segment, the Leaf & Drink related business accounted for ¥4451.3B (+5.6%), representing 89.4% of revenue, supported by expanded sales domestically and internationally. The Foodservice-related business recorded ¥468.6B (+7.0%), a high growth rate reflecting benefits from expanded store openings. Non-operating income included ¥28.3B (including foreign exchange gains of ¥10.1B) and equity-method investment income of ¥4.3B, supporting the top line. Cost of goods sold was ¥3184.6B, with a COGS ratio of 64.0% (approx. +200bp YoY), as rising raw material, energy, packaging, and logistics costs pressured gross profit. Gross profit was ¥1794.2B (Gross Margin 36.0%), suggesting challenges in passing through costs and optimizing product mix.
[Profitability] SG&A was ¥1577.3B (SG&A ratio 31.7%), improving by about 140bp YoY. Breakdown includes salaries and allowances ¥524.2B (+4% range), estimated transportation costs ¥1546.6B, and advertising ¥116.2B (2.3% of sales), with rising personnel and logistics costs while overall SG&A restraint was visible. Operating Income was ¥216.8B (-5.6%), with Operating Margin shrinking to 4.4%, unable to fully offset the decline in Gross Margin. From Non-operating income ¥28.3B, after deducting Non-operating expenses ¥12.5B (including interest expense ¥9.1B), Ordinary Income rose slightly to ¥232.7B (+1.3%). However, recognition of Special Losses ¥167.4B (impairment losses ¥148.8B, loss on disposal of fixed assets ¥10.8B, valuation loss on investment securities ¥3.5B) caused Profit Before Tax to fall sharply to ¥68.4B. After deducting corporate taxes ¥30.8B (effective tax rate 45%), Net Income attributable to owners of the parent declined substantially to ¥14.8B (-87.3%). Comprehensive Income was ¥78.5B, supplemented by Other Comprehensive Income of ¥40.6B including foreign currency translation adjustments ¥30.5B and valuation differences on available-for-sale securities ¥7.0B. In conclusion, despite revenue growth, deterioration in Gross Margin and a one-off impairment led to higher revenue but lower profits.
The Leaf & Drink related business reported sales of ¥4451.3B (+5.6%), Operating Income ¥175.0B (-8.0%), with a margin of 3.9%. As the core business, its margin declined year-on-year. The high concentration—89.4% of revenue—is notable and exposed the segment to rising raw material and logistics costs. The Foodservice-related business reported sales of ¥468.6B (+7.0%), Operating Income ¥35.5B (+1.1%), with a margin of 7.6%, maintaining the highest margin among segments and confirming the profitability of its store base. The large margin gap between segments highlights the relative high profitability of the Foodservice business, while improving profitability in the core business remains a company-wide issue.
[Profitability] Operating Margin was 4.4%, down 0.5pt from 4.9% the prior year, mainly due to a 200bp deterioration in Gross Margin. ROE was 0.8% (a substantial decline from 8.0% prior year), reflecting the sharp fall in Net Profit Margin to 0.3% (from 2.5%). ROA (on an Ordinary Income basis) remained sound at 6.8%. [Cash Quality] Operating Cash Flow / Net Income was 3.26x on a superficial basis, but this primarily reflects the non-cash addition of impairment losses ¥148.8B. OCF/EBITDA (Operating CF / estimated EBITDA approx. ¥307B) was 0.37x, indicating low cash conversion efficiency. Inventory turnover days were ~65 days, extended by ~12 days from ~53 days prior year, showing working capital expansion. [Investment Efficiency] R&D expenses were ¥24.2B (0.5% of sales), at a conservative level, and advertising expense was ¥116.2B (2.3% of sales), indicating restrained brand investment. Total asset turnover was stable at 1.45x. [Financial Soundness] Equity Ratio improved to 51.9% from 50.6% prior year, Debt/Equity ratio remained low at approx. 32.8%. Current Ratio was 252.4% and Quick Ratio was 191.8%, indicating sufficient liquidity. Interest Coverage was approx. 33x (Operating CF / interest paid), showing limited interest burden.
Operating Cash Flow was ¥113.0B (prior year ¥180.4B, -37.3%), significantly impacted by deterioration in working capital. The subtotal of Operating CF (after adjustments to Profit Before Tax) was ¥178.0B, but increases in inventories ¥128.2B, increases in trade receivables ¥4.0B, and decreases in trade payables ¥14.2B strained pre-CF liquidity. After deducting corporate tax payments of ¥62.6B, final Operating CF stood at ¥113.0B. Investing CF was △¥110.7B, primarily due to acquisitions of tangible and intangible fixed assets ¥113.0B. Capex was approximately 1.32x depreciation ¥85.5B, maintaining a balance between maintenance and growth investment. Free Cash Flow was ¥2.3B, marginally positive, but Financing CF △¥166.1B (including dividend payments ¥56.6B, long-term borrowings repayment ¥235.5B, long-term borrowings issuance ¥144.4B) led to a decrease in cash and cash equivalents of △¥145.0B, leaving year-end cash balance at ¥710.8B. Operating CF/EBITDA at 0.37x is low, making inventory optimization and strengthening collection terms urgent to improve working capital.
Earnings persistence is centered on Operating Income of ¥216.8B, supplemented by Non-operating income of ¥28.3B including equity-method investment income ¥4.3B and foreign exchange gains ¥10.1B, producing Ordinary Income of ¥232.7B. Non-operating income is about 0.6% of sales, indicating low dependency and that core business profitability is the main driver. The recording of Special Losses ¥167.4B (impairment losses ¥148.8B, loss on disposal of fixed assets ¥10.8B, valuation loss on investment securities ¥3.5B) is a one-off, and the sharp reduction to Profit Before Tax ¥68.4B and Net Income ¥14.8B is not expected to be persistent. Operating CF ¥113.0B is 3.26x Net Income ¥14.8B, but this is due to the non-cash add-back of impairment losses ¥148.8B; on an accrual basis, working capital increases (inventories △¥128.2B, etc.) pressured cash. The low OCF/EBITDA of 0.37x points to weak cash conversion efficiency, leaving some concern about earnings quality. The divergence between Ordinary Income and Net Income stems from Special Losses, and normalization is expected next fiscal year as one-off factors abate.
The plan for FY ending April 2027 forecasts Revenue ¥5000.0B (+0.4%), Operating Income ¥200.0B (-7.8%), Ordinary Income ¥205.0B (-11.9%), and Net Income attributable to owners of the parent ¥113.0B (+663.6%). Compared with this fiscal year’s results, revenue is essentially flat, Operating and Ordinary Income are expected to decline, while Net Income is projected to recover sharply (over sevenfold) assuming the impairment cycle has passed. The Operating Income reduction plan is conservative; recovery in Gross Margin and SG&A optimization will be key. EPS forecast is ¥95.44, dividend forecast is ¥26, and next fiscal year’s Payout Ratio is expected to normalize to 27.2%. The company’s achievement will depend on inventory and working capital optimization and successful cost pass-through.
Annual dividend for common shares is ¥48 (interim ¥24, year-end ¥24). With Net Income ¥14.8B, total dividends amount to approximately ¥37.8B (outstanding shares 85.21 million less treasury shares 0.89 million), yielding a Payout Ratio of about 254%, an extremely high level. Share buybacks were ¥0.1B and shareholder returns are dividend-centric. Total Return Ratio is roughly in line with the Payout Ratio, and at the current Net Income level dividends substantially exceed internal earnings. Free Cash Flow is only ¥2.3B, so covering dividends ¥56.6B solely from internal funds is insufficient and required use of borrowings or existing cash. The dividend forecast for FY April 2027 is ¥26, and assuming Net Income ¥113.0B, the Payout Ratio is planned to normalize to about 27.2%, indicating an adjustment via dividend reduction to a sustainable level.
Continued Gross Margin deterioration risk: Gross Margin is 36.0%, about 200bp worse YoY, with ongoing upward pressure on raw materials (tea leaves, sugar, etc.), energy, packaging (PET resin, etc.), and logistics. If cost pass-through and product mix optimization do not progress, Operating Margin may be further compressed. The rise in COGS ratio to 64.0% suggests structural cost increases and is reflected in the FY April 2027 Operating Income reduction plan.
Inventory and working capital expansion risk: Inventories are ¥56.97B (¥569.7B) up approximately ¥10.7B (note: reported as ¥569.7B) from ¥46.26B (¥462.6B) prior year, and inventory days have extended to ~65 days from ~53 days, about a 12-day increase. Increased inventory raises the risk of valuation losses or write-offs, and persistent working capital expansion pressures Operating CF. The low OCF/EBITDA of 0.37x indicates vulnerability in cash conversion, and delays in inventory normalization constrain financial flexibility.
Recurrence of one-off losses and dividend sustainability risk: This year’s impairment losses ¥148.8B caused Net Income to fall sharply and pushed the Payout Ratio to ~254%. FCF is only ¥2.3B, inadequate to cover dividends ¥56.6B from internal funds alone. Though FY April 2027 anticipates Net Income recovery as impairments subside, new impairments or further losses on disposal of fixed assets, or delays in profitability improvement, would raise concerns about dividend sustainability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.4% | 5.0% (3.3%–8.4%) | -0.6pt |
| Net Profit Margin | 0.3% | 3.2% (1.9%–6.6%) | -2.9pt |
Operating Margin is 0.6pt below the industry median of 5.0%, and Net Profit Margin lags the median 3.2% by 2.9pt. The one-off impairment distorts Net Profit Margin, leaving the company in the lower ranks for profitability within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.3% | 5.4% (1.0%–8.6%) | -0.1pt |
Revenue growth is roughly in line with the industry median of 5.4%, indicating top-line expansion pace is comparable to peers.
※ Source: Company compilation
Path to reverse Gross Margin decline and improve profitability: Gross Margin fell to 36.0% (~200bp decline) and Operating Margin is 4.4%, below the industry median of 5.0%. With continued cost pressure from raw materials, energy, and logistics, the effectiveness of cost pass-through and product mix optimization will be a key focus next year. Although FY April 2027 plans lower Operating Income, Net Income is expected to recover substantially as one-off impairments normalize. Recovery in Gross Margin and further improvement in SG&A ratio are essential for restoring Operating Margin.
Working capital optimization and improvement in cash conversion efficiency: Inventories increased by approximately ¥10.7B (reported as ¥569.7B) with inventory days at ~65, a ~12-day extension. OCF/EBITDA is low at 0.37x and the weak cash conversion is evident. FCF is only ¥2.3B, limiting the capacity to fund dividends and investments from internal funds. Compressing working capital via inventory normalization and stricter collection terms, and recovering Operating CF, are urgent to secure financial flexibility and dividend sustainability.
Dividend normalization and restoration of financial discipline: This fiscal year’s Payout Ratio of ~254% is excessive, and FCF coverage remained only 0.06x. FY April 2027 plans to normalize payouts to ~27.2% via a dividend reduction, balancing Net Income recovery and dividend sustainability. Avoiding recurrence of impairments and improving Gross Margin and inventory efficiency to stabilize Operating CF are prerequisites for sustainable shareholder returns.
This report was generated by AI analyzing XBRL financial statement data and is an automated earnings analysis document. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by our firm based on public financial statements. Investment decisions should be made at your own responsibility; consult a professional advisor as necessary.