| Indicator | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥574.8B | ¥581.1B | -1.1% |
| Operating Income / Operating Profit | ¥15.7B | ¥41.6B | -62.3% |
| Ordinary Income | ¥16.9B | ¥42.5B | -60.2% |
| Net Income | ¥0.2B | ¥-1.7B | +114.8% |
| ROE | 0.1% | -1.0% | - |
For the fiscal year ending February 2026, revenue was ¥574.8B (YoY -¥6.3B -1.1%), operating income was ¥15.7B (YoY -¥25.9B -62.3%), ordinary income was ¥16.9B (YoY -¥25.6B -60.2%), and net income attributable to owners of the parent was ¥9.2B (YoY -¥9.4B -50.7%), representing lower revenue and a substantial profit decline. As a food group centered on the Manufacturing Business, gross margin deteriorated significantly to 19.7% (from 22.9% in the prior year, -3.2pt), and SG&A increased to ¥97.3B (YoY +¥5.9B +6.4%), which pressured operating income. The operating margin fell to 2.7% (from 7.2% in the prior year, -4.5pt), less than half the prior level. Extraordinary gains of ¥8.5B (gain on sale of fixed assets ¥3.6B, compensation income ¥4.9B) provided some support at the bottom line, but operating cash flow was a large negative ¥-25.0B (prior year +¥66.3B), driven mainly by inventory build-up (-¥38.2B) and increased tax payments. Free cash flow was ¥-45.4B, making the company clearly reliant on external financing.
[Revenue] Revenue was ¥574.8B (YoY -1.1%), a slight decline. By segment, the Manufacturing Business remained the core at ¥481.4B (-0.4%), Sales Business declined to ¥100.0B (-7.2%), and Other Businesses fell sharply to ¥3.9B (-32.4%). By region, Japan declined to ¥453.8B (from ¥463.7B, -2.1%), Singapore ¥91.0B (from ¥93.0B, -2.2%), and Malaysia increased to ¥30.0B (from ¥22.5B, +33.5%) but could not offset the overall decline. In the Manufacturing Business, higher raw material costs and delayed price pass-through weighed on margins; in the Sales Business, deteriorating market conditions restrained sales.
[Profitability] Cost of goods sold was ¥461.9B (COGS ratio 80.3%), resulting in gross profit of ¥113.0B (gross margin 19.7%), a substantial deterioration of -3.2pt from the prior year gross margin of 22.9%. SG&A was ¥97.3B (SG&A ratio 16.9%), up +6.4% YoY, with major items including salaries and allowances ¥21.1B and goodwill amortization ¥7.9B. Operating income of ¥15.7B (operating margin 2.7%) was a large decline of -62.3% from ¥41.6B the prior year. Non-operating items included interest income ¥0.4B versus interest expense ¥4.6B, producing a heavy interest burden, but exchange gains ¥3.5B and compensation income ¥4.9B contributed, resulting in ordinary income of ¥16.9B (ordinary income ratio 2.9%). After extraordinary gains ¥8.5B (gain on sale of fixed assets ¥3.6B, etc.) and extraordinary losses ¥0.5B (impairment losses ¥0.2B, etc.), pre-tax income was ¥24.9B. After corporate taxes ¥12.0B (effective tax rate 48.2%) and non-controlling interests ¥3.7B, net income attributable to owners of the parent was ¥9.2B (net income margin 1.6%). In conclusion, the company recorded lower sales and a steep profit decline; deteriorating gross margin, higher SG&A, and interest burden compressed profits, while one-off items supported the bottom line.
The Manufacturing Business (revenue ¥481.4B, composition ratio 83.8%) remains the core with operating income ¥22.9B (segment margin 4.8%), but operating profit decreased substantially YoY by -47.2%. The Sales Business (revenue ¥100.0B, composition ratio 17.4%) posted operating income ¥1.2B (segment margin 1.2%), a YoY decline of -78.9% indicating margin compression. Other Businesses (revenue ¥3.9B) had an operating loss of ¥1.5B (margin -39.3%), expanding the deficit. The Manufacturing Business margin decline was mainly due to higher raw material and personnel costs and delayed price pass-through; the Sales Business faced market deterioration and intensified competition that pressured profitability. Consolidated operating income after company-wide cost allocations was ¥15.7B, with the Manufacturing Business contributing more than half, but a sharp retreat from the prior year high level (Manufacturing Business ¥43.4B).
[Profitability] Operating margin 2.7% (from 7.2% prior, -4.5pt), ordinary income margin 2.9% (from 7.3% prior, -4.4pt), net income margin 1.6% (from 3.2% prior, -1.6pt), all stages deteriorated. ROE was 0.1% (prior 18.8%), a sharp decline, and ROA (ordinary income/total assets) was 2.8% (prior 7.8%), at a low level. [Cash Quality] Operating Cash Flow (OCF) was ¥-25.0B (prior +¥66.3B), a large negative, with OCF/Net Income at -2.7x. OCF/EBITDA (EBITDA = Operating Income + Depreciation ¥16.0B = ¥31.7B) was -0.79x, indicating extremely weak cash conversion. [Investment Efficiency] Total asset turnover was 0.94x (prior 1.04x), declining due to inventory accumulation. EPS was ¥38.50 (from ¥78.13 prior, -50.7%), BPS ¥520.32 (from ¥463.27 prior, +12.3%), suggesting a PBR below book value. [Financial Soundness] Equity ratio improved slightly to 31.5% (from 29.5% prior, +2.0pt), but D/E ratio was high at 2.17x (interest-bearing debt ¥253.8B / equity ¥116.8B). Debt/EBITDA was 8.0x (¥253.8B / ¥31.7B), placing credit metrics in a high-yield territory, and interest coverage was at the lower bound at 3.43x (EBIT ¥15.7B / interest expense ¥4.6B).
Operating cash flow was ¥-25.0B (prior +¥66.3B), a substantial negative. Net operating cash flow before working capital changes was ¥-4.7B, with inventory increase -¥38.2B, trade receivables increase -¥9.3B, and trade payables increase +¥7.7B causing working capital to worsen by -¥20.3B, and corporate tax payments -¥22.1B causing cash outflows. Investing cash flow was ¥-20.4B, with capital expenditures -¥12.4B, acquisition of subsidiary shares -¥14.3B (one new consolidation), and proceeds from sale of fixed assets +¥6.7B as main items. Free cash flow was ¥-45.4B (Operating CF -¥25.0B + Investing CF -¥20.4B), largely negative, and was supplemented by financing cash flow of +¥16.5B (long-term borrowings +¥112.1B, repayments -¥100.0B, net increase in short-term borrowings +¥6.3B, lease repayments -¥1.8B, bond redemptions -¥3.4B). Cash decreased from ¥110.4B at the beginning of the period to ¥82.9B at the end of the period, a decline of ¥-27.5B. With depreciation ¥16.0B versus capital expenditures ¥12.4B, the capex/depreciation ratio was 0.78x, indicating maintenance-focused spending, but limited room for growth investment. Working capital deterioration (DIO 118 days, DSO 62 days, CCC 147 days) was the largest cash drain, making inventory optimization an urgent priority.
Of operating income ¥15.7B, exchange gains ¥3.5B (22.3% of operating income) and compensation income ¥4.9B boosted profits at the non-operating and extraordinary stages, limiting the stability of ordinary income ¥16.9B. Extraordinary gains ¥8.5B (gain on sale of fixed assets ¥3.6B, compensation income, etc.) account for approximately 42% of net income attributable to owners of the parent ¥9.2B, indicating a high dependence on one-off items. Pre-tax income of ¥24.9B faced corporate taxes of ¥12.0B (effective tax rate 48.2%), a heavy tax burden, so sustained net income generation requires improvement at the operating level. Operating cash flow lags net income significantly (OCF/Net Income -2.7x), and accrual analysis shows working capital deterioration is preventing earnings from being converted into cash. Comprehensive income was ¥20.4B (net income attributable to owners of the parent ¥13.4B), exceeding net income, with translation adjustments +¥5.7B and valuation differences on available-for-sale securities +¥1.7B contributing; however, these are temporary valuation gains with limited sustainability.
Full Year (FY) forecast: revenue ¥575.0B (YoY +0.0%), operating income ¥20.0B (+27.5%), ordinary income ¥17.0B (+0.5%), net income attributable to owners of the parent ¥14.0B, EPS forecast ¥58.64. Progress against guidance: revenue achieved 99.97%, ordinary income 99.5% achieved, operating income 78.4%, net income 65.6% — indicating shortfalls. The shortfall in operating income was mainly due to deteriorated gross margin and higher SG&A; the net income shortfall was due to persistently high effective tax rates and dependence on one-off items. The achievement of ordinary income was aided by exchange gains but lacks sustainability. For next year, inventory optimization, progress in price pass-through, and margin recovery in the Manufacturing Business are prerequisites.
Interim dividend ¥0, year-end dividend forecast ¥0, continuing no dividend. With net income attributable to owners of the parent at ¥9.2B and a payout ratio of 0%, and free cash flow at ¥-45.4B, shareholder returns are difficult in the current environment. Share buybacks were not executed (-¥0.0B). Given high leverage (D/E 2.17x) and working capital pressure, the policy to prioritize internal reserves and financial improvement is reasonable. Resumption of dividends will require recovery in profitability, improvement in cash generation, and reduction in Debt/EBITDA.
Inventory Risk: Inventory stood at ¥128.6B (YoY +60.8%), a significant build-up, with DIO 118 days and CCC 147 days prolonged. There is heightened risk of inventory write-downs and disposal, which contributed to the -3.2pt deterioration in gross margin. Inventory growth amid flat sales suggests demand weakness or procurement excess, posing major risks of delayed cash conversion and increased impairment losses.
High Leverage and Interest Burden: Interest-bearing debt ¥253.8B (D/E 2.17x, Debt/EBITDA 8.0x) places credit metrics in a high-yield territory. Interest expense ¥4.6B accounts for 29.3% of operating income ¥15.7B, and interest rate increases would raise interest payment burdens. Short-term borrowings ¥82.5B plus ¥54.7B due within one year concentrate maturities, creating refinance and liquidity risks alongside inventory-heavy current assets (inventory ¥128.6B / cash ¥110.0B), heightening liquidity risk.
Profitability Fragility: Gross margin 19.7% is well below industry benchmarks (25–40%), and the Manufacturing Business OP margin of 4.8% is low. Delays in passing through higher raw material and labor costs and SG&A rigidity (YoY +6.4%) have reversed operating leverage. One-off gains (extraordinary gains, exchange gains) account for a large portion of net income, exposing weakness in recurring profit generation.
Profitability & Returns
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.7% | 5.0% (3.3%–8.4%) | -2.3pt |
| Net Income Margin | 0.0% | 3.2% (1.9%–6.6%) | -3.1pt |
Profitability is well below the industry median, with deteriorated gross margin and higher SG&A depressing operating margin, positioning the company in the lower tier within the industry.
Growth & Capital Efficiency
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -1.1% | 5.4% (1.0%–8.6%) | -6.5pt |
Revenue growth is negative and trails the industry median by -6.5pt, with domestic slowdown and delayed price pass-through dragging on growth.
※ Source: Company compilation
Improving profitability and cash generation is the top priority. Low gross margin 19.7% (industry median delta -5.3pt) and operating margin 2.7% (delta -2.3pt) are mainly due to higher raw material costs, delayed price pass-through, and SG&A rigidity. Prolonged inventory turnover days of 118 and CCC 147 are pressuring cash, with operating cash flow -¥25.0B and free cash flow -¥45.4B. Inventory optimization (target DIO <80 days, CCC <90 days), progress in price pass-through, and strengthened cost control in the Manufacturing Business are keys to improving both profit and cash.
Correcting high leverage and interest burden is a prerequisite for credit improvement. Debt/EBITDA 8.0x (target <4.0x), D/E 2.17x, interest coverage 3.43x (target >5x) indicate fragile credit metrics. Interest expense ¥4.6B accounts for 29.3% of operating income, and rising interest rates would increase payment burdens. With short-term borrowings ¥82.5B and ¥54.7B due within one year, an asset structure skewed toward inventory (inventory ¥128.6B / cash ¥110.0B) elevates liquidity risk. Operating cash flow normalization and debt reduction are prerequisites for financial improvement.
Moving away from one-off income dependence and establishing a recurring profit base. Extraordinary gains ¥8.5B account for ~42% of net income ¥9.2B, and exchange gains ¥3.5B represent 22.3% of operating income, showing dependence on volatile items. Achievement versus full-year forecast stands at operating income 78% and net income 66%, indicating underperformance and weak sustainable profit-generation capacity. Recovery of Manufacturing Business margins (target OP margin >8%), revenue diversification in the Sales Business, stronger pricing power, and brand investment are keys to building a stable recurring profit base.
This report was automatically generated by AI analyzing XBRL financial statement data. It is not 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 a professional advisor as needed.