| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥179.3B | ¥206.1B | -13.0% |
| Operating Income | ¥6.3B | ¥28.4B | -77.8% |
| Profit Before Tax | ¥4.0B | ¥27.4B | -85.3% |
| Net Income | ¥3.3B | ¥19.2B | -82.8% |
| ROE | 0.4% | 2.2% | - |
FY2026 Q1 recorded Revenue of ¥179.3B (¥-26.8B YoY, -13.0%), Operating Income of ¥6.3B (¥-22.1B YoY, -77.8%), Ordinary Income of ¥3.0B (¥-25.5B YoY, -89.4%), and Net Income of ¥3.3B (¥-15.9B YoY, -82.8%), representing a substantial decline in both revenue and profit. In addition to lower revenue, a decline in gross margin (54.4%, -1.8pt YoY) and an increase in SG&A (¥89.2B, +¥3.2B) worsened operating leverage, pushing the operating margin down sharply to 3.5% (from 13.8%, -10.3pt). An increase in financial expenses to ¥3.0B (prior year ¥2.1B) further widened the decline below ordinary income, compressing the net margin to 1.8% (from 9.3%, -7.5pt). Operating Cash Flow (OCF) improved substantially to ¥22.9B (+106.0% YoY), supported by accounts receivable collections of ¥73.9B, partially offset by an increase in inventories of ¥27.5B and a decrease in accounts payable of ¥31.3B. Free Cash Flow was ¥12.4B and covered capital expenditures of ¥9.2B, but did not cover dividend payments of ¥21.1B. Progress toward Full Year guidance (Revenue ¥1,010.0B, Operating Income ¥194.0B, Net Income ¥125.0B) is significantly behind at 17.8% of Revenue, 3.2% of Operating Income, and 2.6% of Net Income, reflecting a back-loaded order-to-shipment business model.
[Revenue] Revenue was ¥179.3B (-13.0% YoY). As a single-segment company (manufacture and sale of scientific instruments), detailed segment analysis is not available; however, contract liabilities increased to ¥62.0B (from ¥49.6B, +25.0%), suggesting orders are accumulating but conversion to shipments is delayed. Cost of goods sold was ¥81.7B (¥-2.5B), leaving gross profit of ¥97.6B and a gross margin of 54.4% (down from 56.2%, -1.8pt). Changes in product mix, delayed price pass-through, or reduced fixed-cost absorption likely pressured gross margin.
[Profitability] Operating Income fell sharply to ¥6.3B (-77.8% YoY). SG&A increased to ¥89.2B (+¥3.2B, +3.6%), and the SG&A ratio worsened to 49.8% (from 41.7%, +8.1pt), meaning fixed-cost burden weighed heavily amid declining sales. The operating margin deterioration to 3.5% (from 13.8%, -10.3pt) was driven by both gross margin decline and higher SG&A. Financial income was ¥0.7B versus financial expenses of ¥3.0B (up from ¥2.1B, +43.8%), increasing interest burden and driving Profit Before Tax down to ¥4.0B (-85.4% YoY). After income taxes of ¥0.7B (effective tax rate 17.7%), Net Income was ¥3.3B (-82.8% YoY). Other comprehensive income improved, with foreign currency translation adjustments from foreign operations of ¥5.7B and cash flow hedge gains of ¥1.7B, bringing Comprehensive Income to ¥10.7B (from ¥0.5B). No material extraordinary items were noted, indicating limited impact from one-time events. In conclusion, the results reflect a sharp revenue decline due to demand slowdown and shipment timing delays, compounded by higher fixed costs and interest expense.
[Profitability] Operating margin 3.5% (prior 13.8%), Net margin 1.8% (prior 9.3%)—both down materially. ROE 0.4% (prior 2.2%) decomposes into Net margin 1.8% × Total asset turnover 0.098 × Financial leverage 2.09×, with margin deterioration as the main driver. EBIT margin of 3.5% is diluted by an interest burden factor of 0.64 (Profit Before Tax ¥4.0B ÷ Operating Income ¥6.3B), and interest coverage on an operating income basis is about 2.1× (¥6.3B ÷ financial expenses ¥3.0B), a low level. [Cash Quality] OCF ¥22.9B is 6.98× Net Income ¥3.3B, indicating high cash quality. The large accounts receivable collection (+¥73.9B) was the primary driver, though inventory increase (-¥27.5B) and accounts payable decrease (-¥31.3B) pressured working capital. [Investment Efficiency] Total assets ¥1,824.7B and Net assets ¥874.3B yield total asset turnover of 0.098x (annualized 0.39x), a low level. Goodwill of ¥518.6B represents 28.4% of total assets and 59.3% of net assets, making impairment sensitivity high. [Financial Soundness] Equity Ratio 47.9% (prior 47.7%) remains stable. Interest-bearing debt totaled ¥579.0B (short-term borrowings ¥87.2B + long-term borrowings ¥491.8B), net debt ¥322.1B, net D/E 0.37x. Current ratio 2.28x (current assets ¥732.4B ÷ current liabilities ¥321.0B) indicates solid short-term liquidity.
OCF improved substantially to ¥22.9B (from ¥11.1B, +106.0%). Profit Before Tax ¥4.0B plus depreciation & amortization ¥14.0B produced a subtotal before working capital changes of ¥47.1B. Large accounts receivable collections (+¥73.9B) were the biggest contributor, but inventory increases of ¥27.5B and a decrease in accounts payable of ¥31.3B absorbed cash; an increase in contract liabilities of ¥10.5B partially offset these outflows. After corporate tax payments of ¥17.3B and interest payments of ¥6.4B, OCF was ¥22.9B. Investing cash flow was -¥10.5B, mainly capital expenditures ¥9.2B and intangible asset investment ¥1.1B. Free Cash Flow was ¥12.4B (OCF ¥22.9B + Investing CF -¥10.5B), covering roughly 0.59× of dividend payments ¥21.1B, which was insufficient, but a robust cash balance of ¥256.9B provided buffer. Financing cash flow was -¥0.4B: borrowings included short-term borrowings ¥30.0B and long-term borrowings ¥33.4B, against repayments of short-term borrowings ¥20.0B, long-term borrowings ¥20.0B, dividend payments ¥21.1B, and lease repayments ¥3.6B. Cash and cash equivalents increased by ¥14.2B, including a ¥2.2B forex effect, ending the period at ¥256.9B. In working capital, while accounts receivable collections advanced, inventory buildup and accounts payable compression continued; normalizing inventory turnover will be key to sustaining OCF in subsequent periods.
Ordinary Income was ¥3.0B while Net Income was ¥3.3B, with an effective tax rate of 17.7%, relatively low; no extraordinary items were noted, supporting a view of recurring earnings. On the non-operating side, financial income was ¥0.7B versus financial expenses of ¥3.0B, and other income of ¥0.1B versus other expenses of ¥2.2B, both weighing on ordinary income. The fact that OCF ¥22.9B substantially exceeds Net Income ¥3.3B is positive for earnings quality; accruals are negative, indicating conservative profit recognition. Comprehensive Income ¥10.7B significantly exceeded Net Income ¥3.3B, driven by Other Comprehensive Income ¥7.4B (foreign currency translation adjustments from foreign operations ¥5.7B, cash flow hedge ¥1.7B), reflecting significant FX impact and a high overseas revenue ratio. Working capital movements, notably the large accounts receivable collection, boosted OCF, indicating that actual cash-generating ability is stronger than net income suggests.
Full Year guidance calls for Revenue ¥1,010.0B (+16.1% YoY), Operating Income ¥194.0B (+16.1% YoY), and Net Income ¥125.0B (+9.6% YoY). Q1 progress rates versus full year are 17.8% of Revenue (standard 25% benchmark -7.2pt), 3.2% of Operating Income (-21.8pt), and 2.6% of Net Income (-22.4pt), indicating significant lag. Given contract liabilities of ¥62.0B, orders are secured but shipments are expected to concentrate in the second half. Achieving full year targets requires substantial shipment acceleration from Q2 onward, recovery in gross margin, and restraint in SG&A. Dividend forecast is ¥9.5 per share (virtually flat from ¥9.4 this period), implying an expected payout ratio of roughly 17%, a sustainable level. No revisions to forecasts have been made; the company expects to make up ground in the second half.
Dividend payments for the period totaled ¥21.1B, equivalent to ¥9.4 per share. The apparent high dividend payout ratio versus Q1 Net Income of ¥3.3B is largely a timing mismatch between dividend payments and quarterly earnings. Based on Full Year Net Income guidance ¥125.0B, the annual dividend forecast of ¥9.5 per share (approx. total ¥21.5B) implies a payout ratio of about 17%, an appropriate level. Free Cash Flow ¥12.4B did not fully cover dividend payments of ¥21.1B, but ample cash on hand of ¥256.9B and expected OCF improvement over the year support dividend sustainability. Treasury stock equivalent of ¥403.0B was cancelled leaving a balance of ¥0.04B, aimed at improving capital efficiency. No share buyback was announced; shareholder returns are dividend-focused.
Goodwill impairment risk: Goodwill of ¥518.6B represents 59.3% of Net Assets ¥874.3B; under IFRS goodwill is not amortized, increasing sensitivity to impairment. A final market demand slowdown or delayed integration synergies could trigger significant impairment charges.
Rising interest burden risk: Financial expenses increased to ¥3.0B (¥+0.9B YoY, +43.8%), and interest coverage is about 2.1×, a low level. Of interest-bearing debt ¥579.0B, short-term borrowings ¥87.2B increased YoY by 27.3%, posing refinancing cost and profit pressure risks in a rising rate environment.
Working capital management risk: Inventories increased to ¥237.8B (¥+27.5B YoY) while accounts payable decreased to ¥86.0B (¥-31.0B YoY), resulting in working capital absorbing cash. Inventory obsolescence, impairment, or deteriorating supply chain management could materialize into cash flow deterioration and reduced profitability.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.5% | 6.8% (2.9%–9.0%) | -3.3pt |
| Net Margin | 1.8% | 5.9% (3.3%–7.7%) | -4.1pt |
The company's profitability lags the industry median, ranking in the lower tier for both operating and net margins.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -13.0% | 13.2% (2.5%–28.5%) | -26.2pt |
Revenue growth is well below the industry median and diverges from the broader manufacturing growth trend.
※ Source: Company compilation based on public financial statements
Deterioration in gross margin to 54.4% (-1.8pt YoY) and SG&A ratio to 49.8% (+8.1pt YoY) has compressed operating margin to 3.5%; recovery in gross margin (through price pass-through and product mix improvement) and SG&A restraint in the second half are essential to meet full year targets. The buildup of contract liabilities ¥62.0B indicates secured orders, but shipment conversion speed and profitability are the focus.
The divergence between OCF ¥22.9B and Net Income ¥3.3B (CF/NI = 6.98×) indicates high earnings quality, but excluding the temporary boost from accounts receivable collection ¥73.9B, inventory increases ¥27.5B and accounts payable decreases ¥31.3B show continued working capital cash absorption. Normalization of inventory turnover and supply chain improvements are key to sustaining cash flow in subsequent periods.
The combination of goodwill ¥518.6B (59.3% of net assets) and interest coverage of about 2.1× suggests financial vulnerability in a deteriorating macro environment. Given the upward trend in interest burden ¥3.0B (+43.8% YoY) and the back-loaded performance plan, monitoring shipment progress and gross margin trends from Q2 onward is critical.
This report was automatically generated by AI analyzing XBRL financial disclosure data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are compiled by the Company from public financial statements for reference. Investment decisions are your responsibility; please consult a professional advisor as necessary.