| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥6105.0B | ¥6003.7B | +1.7% |
| Operating Income | ¥40.3B | ¥57.1B | -29.4% |
| Equity-method investment income | ¥0.9B | ¥0.2B | +256.0% |
| Ordinary Income | ¥78.2B | ¥69.7B | +12.2% |
| Net Income | ¥46.9B | ¥66.2B | -29.1% |
| ROE | 4.0% | 6.2% | - |
For the fiscal year ended March 2026, Revenue was ¥6104.9B (YoY +¥101.2B +1.7%), Operating Income was ¥40.3B (YoY -¥16.8B -29.4%), Ordinary Income was ¥78.2B (YoY +¥8.5B +12.2%), and Net Income attributable to owners of the parent was ¥46.9B (YoY -¥19.3B -29.1%). Revenue growth was driven mainly by the pharmaceutical wholesale business, but selling, general and administrative expenses increased, resulting in a large decline in profit at the operating level. Ordinary Income increased due to non-operating income such as investment partnership gains of ¥27.4B, but Net Income attributable to owners of the parent decreased because the previous year’s special gains from disposal of investment securities (¥42.7B) declined to ¥40.8B in the current period. The result is a year of higher revenue but lower profitability.
Revenue reached ¥6104.9B (YoY +1.7%), achieving growth. The core Pharmaceutical Wholesale Business posted Revenue of ¥5838.5B (+1.5%) and accounted for 95.6% of total Revenue. The Pharmacy Business recorded ¥199.7B (+2.1%), the Veterinary Pharmaceutical Wholesale Business ¥126.3B (+8.6%), both showing solid growth. The Nursing Care Rental and Other Businesses expanded to ¥78.7B (+7.5%). The Pharmaceutical Manufacturing Business, added to the reported segments from Q1, recorded no Revenue, but growth across existing businesses led to a companywide Revenue increase of ¥101.2B YoY. Gross profit was ¥495.8B (gross margin 8.1%), down 0.1pt from ¥492.1B (gross margin 8.2%) in the prior year.
SG&A expenses were ¥455.5B (YoY +¥20.4B +4.7%), rising materially faster than Revenue growth (+1.7%), and SG&A ratio increased to 7.5% (prior year 7.2%), up 0.3pt. As a result, Operating Income fell sharply to ¥40.3B (-29.4%), with an operating margin of 0.7% (prior year 1.0%). Non-operating income was large at ¥40.7B, with investment partnership gains of ¥27.4B and dividend income of ¥6.8B contributing, and Ordinary Income rose to ¥78.2B (+12.2%), offsetting operating-level weakness. Special gains were ¥42.2B (primarily gains on sales of investment securities ¥40.8B) and special losses were ¥5.4B (including impairment losses ¥1.9B), producing profit before income taxes of ¥115.0B (+7.6%). After income taxes of ¥40.5B, Net Income attributable to owners of the parent was ¥46.9B (-29.1%). Comprehensive income expanded significantly to ¥140.9B, including unrealized gains on other securities of ¥36.0B and retirement benefit adjustment of ¥18.2B. In conclusion, this was a year of revenue growth but profit decline.
The Pharmaceutical Wholesale Business posted Revenue of ¥5838.5B (YoY +1.5%), Operating Income of ¥49.2B (-4.7%), and margin of 0.8% (prior year 0.9%), a profit decline of ¥2.4B. Although the core segment, its margin remains low. The Pharmacy Business recorded Revenue of ¥199.7B (+2.1%), Operating Income of ¥2.5B (+0.4%), and margin of 1.3% (prior year 1.3%), maintaining stable profitability. The Veterinary Pharmaceutical Wholesale Business grew strongly with Revenue of ¥126.3B (+8.6%) but Operating Income declined to ¥3.0B (-3.2%), margin 2.4% (prior year 2.7%). The Pharmaceutical Manufacturing Business incurred an Operating Loss of ¥13.1B due to upfront investment associated with the new launch. The Nursing Care Rental and Other Businesses grew to Revenue ¥78.7B (+7.5%) but recorded an Operating Loss of ¥1.0B (prior year -¥0.8B), widening the deficit. Declining margins in Pharmaceutical Wholesale and losses in the Pharmaceutical Manufacturing and Nursing Care Rental segments were the main drivers of the companywide decline in Operating Income.
Profitability: Operating margin was 0.7% (prior year 1.0%), down 0.3pt, and Net margin was 0.8% (prior year 1.1%), also contracting. ROE was 4.0% (implied approx. 6.6% from prior-year data) and fell substantially, indicating capital efficiency needs improvement. With gross margin 8.1% and SG&A ratio 7.5%, the business exhibits thin margins and negative operating leverage. Cash quality: Operating Cash Flow (OCF) of ¥48.3B is 1.03x Net Income ¥46.9B, broadly covering Net Income. OCF improved sharply YoY (+160.2%) from ¥18.6B (previously depressed by working capital changes). Approximate EBITDA is Operating Income ¥40.3B + Depreciation ¥38.5B = ¥78.8B, giving an EBITDA margin of 1.3%. Investment efficiency: Total asset turnover declined to 1.90x (prior year 2.00x), indicating deteriorating asset efficiency. Financial soundness: Equity Ratio improved to 37.0% (prior year 35.4%), and net cash stands at roughly ¥171B, computed as cash ¥229.5B less interest-bearing debt (short-term borrowings ¥9.5B + long-term borrowings ¥38.9B + long-term borrowings due within one year ¥9.8B), effectively debt-free. Current ratio was 106.4% (prior year 107.4%). Interest coverage is high at approximately 69x, calculated as OCF ¥48.3B / interest paid ¥0.7B, indicating strong financial safety.
OCF improved significantly to ¥48.3B (prior year ¥18.6B, +160.2%). OCF subtotal (before working capital changes) was ¥69.5B; changes in working capital showed accounts receivable increased by -¥41.2B (cash outflow due to AR increase), which was partly offset by an increase in trade payables +¥72.3B, making net working capital a source of cash. After income tax payments of -¥29.6B, OCF of ¥48.3B was achieved. Investing CF was -¥10.7B, reflecting capital expenditures -¥37.2B, intangible asset investments -¥15.5B, and acquisitions of subsidiary shares -¥19.4B, partly offset by proceeds from sale of investment securities +¥55.9B. Free Cash Flow was ¥37.6B (OCF ¥48.3B + Investing CF -¥10.7B). Financing CF was -¥44.0B, driven by dividend payments -¥28.1B, lease liability repayments -¥6.3B, and long-term borrowings repayment -¥9.8B. Consequently, cash decreased by ¥6.4B, leaving ending cash of ¥194.4B (cash and deposits ¥229.5B after deducting time deposits, etc.).
Of Ordinary Income ¥78.2B, Operating Income accounted for ¥40.3B, and non-operating income ¥40.7B boosted Ordinary Income. The main driver of non-operating income was investment partnership gains of ¥27.4B (prior year recorded a loss of ¥2.6B on investment partnerships), a factor with a strong one-off character. Dividend income ¥6.8B and equity-method investment income ¥0.9B are relatively stable income sources. Special gains of ¥42.2B were primarily gains on sales of investment securities ¥40.8B; the prior year also recorded ¥42.7B of such gains, indicating continued dispositions of policy-held shares. Special losses of ¥5.4B (impairment losses ¥1.9B, valuation losses on investment securities ¥1.3B, etc.) were limited. Comprehensive income ¥140.9B substantially exceeded Net Income ¥46.9B, including unrealized gains on other securities ¥36.0B and retirement benefit adjustment ¥18.2B. OCF of ¥48.3B versus OCF subtotal ¥69.5B shows working capital changes contributed positively to cash generation, but the increase in accounts receivable -¥41.2B suggests lengthening collection terms, which warrants attention regarding earnings quality.
Full Year forecast: Revenue ¥6200.0B (YoY +1.6%), Operating Income ¥41.0B (+1.8%), Ordinary Income ¥50.0B (-36.1%), and Net Income attributable to owners of the parent ¥47.5B (+1.3%). Compared with this period’s results, Revenue and Operating Income are expected to be broadly unchanged, but Ordinary Income is projected to decline significantly. This incorporates a reversion of non-operating and special factors recorded this period, such as investment partnership gains ¥27.4B and gains on sale of investment securities ¥40.8B. Progress rates are Revenue 98.5%, Operating Income 98.3%, Ordinary Income 156.4% (already exceeded), and Net Income 98.7%; Ordinary Income has already materially exceeded the full-year forecast. The Operating Income progress rate of 98.3% indicates the full-year target of ¥41.0B is nearly achieved, and the company appears to maintain a conservative plan assuming flat performance in the second half.
Annual dividend is ¥70 (interim ¥34, year-end ¥36), unchanged from the prior year. Payout Ratio is 30.2% (based on Net Income), at an appropriate level. Free Cash Flow ¥37.6B versus total dividends of approximately ¥28.1B (estimated from dividend payments) gives an FCF coverage of about 1.34x, indicating dividends are adequately covered by internal funds. Next fiscal year dividend guidance shows ¥35, which may refer to the year-end dividend rather than annual; if annualized at ¥35, that would be a dividend cut. However, maintaining a payout ratio of ~30.2% suggests, given next-year forecast EPS of ¥155.03, an annual dividend around ¥47 (≈30% payout) would be appropriate. Share buybacks were ¥0 this period, leaving Total Return Ratio equal to the payout ratio at 30.2%. Given net cash of approx. ¥171B, there is room for dividend increases, but in light of the projected large decline in Ordinary Income, the company is likely prioritizing maintaining current dividend levels.
Profitability decline risk: With Operating margin 0.7% and Net margin 0.8%, the business model is extremely low-margin. SG&A growth (+4.7%) exceeded Revenue growth (+1.7%), producing negative operating leverage. Pharmaceutical Wholesale margin at 0.8% is structurally low in the industry, and losses in the Pharmaceutical Manufacturing Business (Operating Loss ¥13.1B) and Nursing Care Rental and Other Businesses (Operating Loss ¥1.0B) are pressuring companywide profitability. The outlook for next year anticipates Ordinary Income -36.1%, indicating high dependency on non-operating and special gains; strengthening core earnings is urgent.
Working capital and cash flow efficiency risk: Of OCF subtotal ¥69.5B, the increase in accounts receivable -¥41.2B absorbed cash, raising concerns about a lengthening AR collection cycle. Days sales outstanding (DSO) calculated from accounts receivable ¥1212.3B / Revenue ¥6104.9B indicates approximately 72 days, slightly longer than the prior year (AR ¥1169.4B / Revenue ¥6003.7B ≈ 71 days). Given the structural tendency for medical institutions to extend payment terms in the pharmaceutical wholesale industry, further increases in working capital could reduce Free Cash Flow.
Investment securities valuation and impairment risk: Investment securities are ¥530.6B (prior year ¥451.3B), including valuation differences of ¥27.4B (23.1% of net assets). This period recorded gains on sale of investment securities ¥40.8B, but a reversion is expected next period. Goodwill rose from ¥6.2B to ¥26.5B, mainly due to M&A in the Nursing Care Rental and Other Businesses; if this business continues to record losses, impairment risk could materialize. Intangible assets also increased to ¥68.9B (prior year ¥42.9B), and delays in investment returns could lead to impairment losses.
Revenue & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating margin | 0.7% | 3.4% (1.4%–5.0%) | -2.7pt |
| Net margin | 0.8% | 2.3% (1.0%–4.6%) | -1.5pt |
The company’s Operating and Net margins are well below industry medians, indicating the low-margin nature of pharmaceutical wholesale is relatively disadvantageous within the sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth (YoY) | 1.7% | 5.9% (0.4%–10.7%) | -4.2pt |
Revenue growth also lags the industry median, showing the company trails peers on growth.
※Source: Company compilation
Priority is shifting from dependence on non-operating/special gains to strengthening core earnings: Of Ordinary Income ¥78.2B, non-operating income ¥40.7B (investment partnership gains ¥27.4B, etc.) and special gains ¥42.2B (gains on sales of investment securities ¥40.8B) materially boosted profits this period, but next year the company projects Ordinary Income -36.1%. To raise the Operating margin from 0.7%, it is essential to control the SG&A ratio (7.5%) through logistics efficiency and process reform, and to improve gross margin (8.1%) via stronger pricing negotiation and a shift to higher value-added products. Turning the Pharmaceutical Manufacturing and Nursing Care Rental Businesses profitable will also be key to earnings improvement.
Working capital efficiency has room for improvement: Although OCF ¥48.3B improved YoY, AR increase -¥41.2B absorbed cash, and there is room to shorten DSO of about 72 days. While elongated payment terms from medical institutions are a structural issue in the pharmaceutical wholesale industry, tightening credit control and streamlining billing/collection processes could reduce working capital and stabilize Free Cash Flow. FCF ¥37.6B exceeds total dividends of approx. ¥28.1B, preserving internal funding capacity for shareholder returns, but sustained cash generation is needed to secure dividend stability.
Realizing M&A synergies and early profitability of loss-making businesses: Goodwill rose from ¥6.2B to ¥26.5B and intangible assets expanded to ¥68.9B, reflecting active M&A mainly in Nursing Care Rental and Other Businesses. Although that segment’s Revenue ¥78.7B (+7.5%) is growing, the ongoing Operating Loss ¥1.0B requires early turnaround and return on investment. The Pharmaceutical Manufacturing Business also carries an Operating Loss ¥13.1B due to upfront investments; the timing and scale of its future contributions will be critical to improving companywide ROE.
This report is an earnings analysis document automatically generated by AI from XBRL earnings release 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 necessary.