| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1076.3B | ¥1047.9B | +2.7% |
| Operating Income / Operating Profit | ¥23.7B | ¥30.0B | -21.1% |
| Ordinary Income | ¥27.6B | ¥25.1B | +10.0% |
| Net Income / Net Profit | ¥-2.9B | ¥3.6B | -181.2% |
| ROE | -0.7% | 1.0% | - |
For the fiscal year ended May 2026, Revenue was ¥1,076.3B (YoY +¥28.4B, +2.7%), achieving top-line growth, while Operating Income declined to ¥23.7B (YoY -¥6.3B, -21.1%) and Ordinary Income rose to ¥27.6B (YoY +¥2.5B, +10.0%), resulting in an operating-stage profit decrease. Net Income attributable to owners of the parent fell into a loss of ¥-2.9B (deterioration of ¥-6.5B from ¥3.6B in the prior year). Revenue increased across all three business segments, with the Interior Business at ¥401.1B (+2.7%) and the Automotive & Vehicle Interior Business at ¥652.4B (+2.8%) showing solid performance. Gross margin decreased to 20.7% (down 0.2pt YoY), and the operating margin deteriorated to 2.2% (down 0.7pt from 2.9% a year earlier). Non-operating items contributed positively—foreign exchange gains of ¥3.5B and dividend income of ¥1.5B—leading to an increase at the ordinary income stage; however, an abnormal tax burden of ¥24.1B (effective tax rate 83%) on pretax income of ¥29.0B and an expansion of non-controlling interests to ¥8.3B resulted in a final net loss. Operating Cash Flow was ¥50.0B (YoY +119.0%) with a significant improvement, Free Cash Flow was ¥32.2B, and the company maintained cash generation sufficient to cover dividends and capital expenditures.
[Revenue] Revenue was ¥1,076.3B (YoY +2.7%). By segment, Interior Business: ¥401.1B (+2.7%, composition 37.3%), Automotive & Vehicle Interior Business: ¥652.4B (+2.8%, composition 60.6%), Functional Materials Business: ¥27.4B (+1.7%, composition 2.5%), all showing growth. By region, Japan ¥708.4B, North America ¥196.4B, Asia ¥170.5B—all regions expanded, led by domestic sales. Sales to major customer Hayashi Kasei (林テレンプ) amounted to ¥109.3B, representing 10.2% of consolidated sales. Gross profit was ¥223.0B, with a gross margin of 20.7% (down 0.2pt YoY). Rising raw material and energy costs and deteriorating product mix pressured gross margin.
[Profitability] From gross profit of ¥223.0B, SG&A was ¥199.3B (SG&A ratio 18.5%, +0.1pt YoY), resulting in Operating Income of ¥23.7B (Operating margin 2.2%). Corporate-level costs of ¥22.4B increased ¥1.2B YoY, squeezing operating profitability. By segment, Interior Business Operating Income improved materially to ¥14.6B (Operating margin 3.6%, YoY +42.2%), while Automotive & Vehicle Interior Business fell to ¥29.3B (margin 4.5%, YoY -28.5%), a significant profit decline that pressured consolidated earnings. Functional Materials Business turned profitable at ¥0.5B (margin 2.0%). Non-operating items netted ¥+3.9B, with dividend income ¥1.5B and FX gains ¥3.5B contributing, offset partially by interest expense ¥4.5B and FX losses ¥4.0B, leading to Ordinary Income of ¥27.6B (+10.0%), covering the operating-stage shortfall. Extraordinary items netted ¥+1.4B (including gain on sale of investment securities ¥1.3B). However, pretax income of ¥29.0B incurred corporate taxes of ¥24.1B—an extraordinary effective tax rate of 83%. A reassessment of deferred tax assets and regional mix effects contributed to this high tax burden. Subtracting non-controlling interests of ¥8.3B from after-tax profit of ¥4.9B produced Net Income attributable to owners of the parent of ¥-2.9B. Comprehensive income was ¥36.0B (YoY +478.2% from ¥6.2B), including foreign currency translation adjustments ¥13.3B, valuation differences on available-for-sale securities ¥14.4B, and retirement benefit adjustments ¥3.2B as positive contributors. In summary, despite revenue growth, deteriorating gross margin, weaker profitability in the Automotive & Vehicle Interior Business, and high tax burden led to revenue-up/profit-down and a final net loss.
The Interior Business achieved Revenue ¥401.1B (+2.7%) and Operating Income ¥14.6B (+42.2%, margin 3.6%), delivering revenue and profit growth and materially supporting consolidated profitability. The Automotive & Vehicle Interior Business maintained Revenue growth at ¥652.4B (+2.8%) but recorded a sharp Operating Income decline to ¥29.3B (-28.5%, margin 4.5%) due to rising costs, delayed price pass-through, and adverse product mix. This segment accounts for 64.0% of consolidated operating income, and its margin deterioration was the primary driver of consolidated operating profit decline. The Functional Materials Business posted Revenue ¥27.4B (+1.7%) and Operating Income ¥0.5B (+143.5%, margin 2.0%), turning profitable. Other businesses had Revenue ¥6.6B (+7.1%) and Operating Income ¥1.3B (+52.3%, margin 19.8%), maintaining high profitability. The increase in corporate costs of ¥22.4B offset segment contributions, leaving consolidated Operating Income at ¥23.7B.
[Profitability] Operating margin 2.2% (down 0.7pt from 2.9%), Ordinary Income margin 2.6% (up 0.2pt from 2.4%), Net margin -0.3% (down 0.6pt from 0.3%), indicating deterioration in operating-stage profitability. ROE was -0.7% (prior year 2.1%), indicating a significant decline in capital efficiency, while ROA (on an ordinary income basis) was 3.0% (prior year 2.7%)—a slight increase. Gross margin 20.7% reflects pressure from higher raw material and energy costs; SG&A ratio 18.5% rose 0.1pt YoY due to increased corporate expenses. [Cash Quality] Operating Cash Flow ¥50.0B substantially exceeded Net Income attributable to owners of the parent of ¥-2.9B, maintaining a healthy cash conversion with Operating CF/EBITDA of 1.04x. Working capital improvements (accounts receivable -¥47.4B, inventories -¥15.3B) contributed, partially offset by a decrease in accounts payable of -¥58.0B. Free Cash Flow was ¥32.2B, with FCF/Revenue at 3.0%. [Investment Efficiency] Capital expenditures ¥11.6B / Depreciation ¥24.6B yields an investment ratio of 0.47x, indicating a conservative stance focused on maintenance capex. Tangible fixed assets/Revenue 29.4%, asset turnover 1.17x, roughly unchanged YoY—asset efficiency remained flat. [Financial Soundness] Equity Ratio 43.4% (up 4.3pt from 39.1%), Current Ratio 137.0%, Quick Ratio 111.5%—stability improved. Interest-bearing debt was ¥758.6B (YoY -¥28.9B), Debt/EBITDA 3.93x, Interest Coverage 5.30x—moderate leverage. Cash and deposits ¥89.1B and short-term investment securities ¥0.8B comprise 9.8% of total assets, but short-term borrowings of ¥133.9B are high; Cash/short-term liabilities ratio is 0.67x, making refinance management important.
Operating CF was ¥50.0B (YoY +119.0%), a substantial improvement and robust cash generation exceeding pretax profit before tax adjustments of ¥29.0B. Operating CF before working capital changes subtotaled ¥67.0B, including Depreciation ¥24.6B and Provision changes -¥0.2B. Working capital changes contributed: decrease in trade receivables ¥47.4B and decrease in inventories ¥15.3B were positive, while decrease in accounts payable ¥58.0B offset these, resulting in a net cash-in effect of ¥+4.7B. After corporate tax payments ¥14.9B, interest and dividend received ¥1.9B, and interest paid ¥4.6B, Operating CF totaled ¥50.0B. Investing CF was ¥-17.8B, comprising CapEx ¥11.6B and intangible asset acquisitions ¥3.3B, with sale proceeds ¥0.5B and net increase in time deposits -¥4.7B. Free Cash Flow was ¥32.2B, sufficient to cover dividend payments ¥5.5B and CapEx. Financing CF was ¥-41.6B: while long-term borrowings ¥38.0B were raised, repayments of long-term borrowings ¥55.3B, net increase in short-term borrowings ¥5.8B, bond redemptions ¥10.0B, dividend payments ¥5.5B, dividends to non-controlling interests ¥4.4B, and lease obligation repayments ¥10.2B were executed. Cash and cash equivalents were ¥82.8B (from ¥86.9B at beginning of period, net decrease ¥-4.2B), including FX effects of +¥5.1B, resulting in a net change of -¥4.2B.
Of Ordinary Income ¥27.6B, non-operating income totaled ¥10.9B, primarily dividend income ¥1.5B and FX gains ¥3.5B, indicating a reasonably stable base. FX losses ¥4.0B were also recorded, so net FX effect was limited to ¥-0.5B. Extraordinary gains ¥2.3B (including gain on sale of investment securities ¥1.3B) and extraordinary losses ¥0.9B (including loss on disposal of fixed assets ¥0.2B) indicate minor one-off impacts; pretax income ¥29.0B largely reflects ordinary earnings. The gap between Comprehensive Income ¥36.0B and Net Income attributable to owners of the parent ¥-2.9B is ¥38.9B, composed of foreign currency translation adjustments ¥13.3B, valuation differences on available-for-sale securities ¥14.4B, retirement benefit adjustments ¥3.2B, and comprehensive income attributable to non-controlling interests ¥10.6B. Valuation differences reflect unrealized gains on investment securities of ¥66.1B (YoY +45.9%), representing potential sources of future sale gains and dividend income. The abnormal effective tax rate of 83% is likely attributable to reassessment of deferred tax assets and tax adjustments and is expected to normalize in the following year. While the divergence between Operating CF and Net Income is large, it is mainly due to high tax burden and non-cash items (depreciation and valuation gains/losses); accrual quality is judged to be generally sound.
Full-year forecast: Revenue ¥1,065.0B (-1.1%), Operating Income ¥35.0B (+47.7%), Ordinary Income ¥36.0B (+30.2%), Net Income attributable to owners of the parent ¥14.5B, EPS ¥109.30. Against this fiscal-year forecast, Operating Income achieved ¥23.7B vs. forecast ¥35.0B (progress 67.7%), Ordinary Income ¥27.6B vs. forecast ¥36.0B (progress 76.7%)—both below plan. Revenue outperformed the forecast (¥1,076.3B vs. ¥1,065.0B), but deterioration in gross margin and profitability decline in the Automotive & Vehicle Interior Business led to missing profit targets. To meet the full-year outlook, an incremental Operating Income of ¥11.3B and Ordinary Income of ¥8.4B are required in H2. The company's plan assumes H2 improvements via gross margin recovery and SG&A control to achieve operating leverage and normalization of tax burden to recover Net Income to ¥14.5B. Dividend forecast is ¥21.00/year per share (post-split), below this fiscal-year actual ¥40.00 (interim ¥21.50 + year-end ¥18.50, pre-split equivalent ¥80), and assumes a payout ratio of 19.2% after profit normalization. Key levers to improve progress are margin correction in the automotive field, progress in passing through raw material price increases, and normalization of tax effects.
Annual dividend was ¥40.00 per share (interim ¥21.50 + year-end ¥18.50), with total dividend payout ¥5.5B. A 2-for-1 stock split was implemented on March 1, 2025; on a pre-split basis this equates to ¥80.00 annually. Despite Net Income attributable to owners of the parent of ¥-2.9B, dividends were paid, resulting in a negative payout ratio arithmetically; however, dividends as a percentage of Free Cash Flow were 17.1%, indicating room, and retained earnings of ¥114.6B provide sufficient capacity for payment. The dividend payout target is conservative at 19.2% on the full-year forecast basis (forecast dividend ¥21.00 / forecast EPS ¥109.30), reflecting a focus on stable dividends. No share buybacks were executed; Total Return Ratio equals the payout ratio. If the full-year forecast is achieved, the payout ratio would normalize and allow sustained returns commensurate with cash generation. A shareholder benefit program exists with a provision for shareholder benefits of ¥0.6B.
Profitability deterioration risk in the Automotive & Vehicle Interior Business: Operating Income fell to ¥29.3B (-28.5%, margin 4.5%), and since this segment accounts for 64.0% of consolidated Operating Income, margin deterioration materially pressures consolidated earnings. Rising raw material and energy costs, delayed price pass-through, and adverse product mix are factors; fluctuations in automotive production cycles and customer pricing pressure may delay margin recovery.
Short-term debt dependence and liquidity management risk: Short-term borrowings ¥133.9B and bonds maturing within one year ¥10.0B result in a high short-term debt ratio of 70.6%, and Cash and deposits ¥89.1B yield a Cash/short-term liabilities ratio of 0.67x, below 1.0x. In the event of rising interest rates or deteriorating credit conditions, refinancing costs could increase, making liquidity provision for seasonal working capital and large payments a challenge.
High tax burden and earnings volatility risk: An abnormal effective tax rate of 83% materially reduced Net Income due to reassessment of deferred tax assets and regional tax adjustments. Tax uncertainties and changes in regional mix could increase post-tax earnings volatility, affecting ROE and stability of dividend resources.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating margin | 2.2% | 4.6% (1.7%–8.2%) | -2.4pt |
| Net margin | -0.3% | 3.3% (0.9%–5.8%) | -3.6pt |
Profitability lags the industry median substantially, with both Operating margin and Net margin in the lower range.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth rate (YoY) | 2.7% | 4.3% (2.2%–13.0%) | -1.6pt |
Revenue growth rate is 1.6pt below the median, indicating a topline expansion pace below industry average.
※Source: Company compilation
Margin correction in the Automotive & Vehicle Interior Business and normalization of tax burden are catalysts for earnings recovery. This segment’s operating margin at 4.5% is depressed and was the primary driver of consolidated profit decline, but the full-year forecast anticipates a recovery to Operating Income ¥35.0B. The abnormal effective tax rate (83%) is likely a temporary factor, and normalization next fiscal year could restore Net Income to ¥14.5B. The Interior Business shows improving operating margins at 3.6%, and diversification of earnings is expected to be beneficial.
Cash generation and financial stability are maintained: Operating CF ¥50.0B, Free CF ¥32.2B—internal funds are sufficient to cover CapEx and dividends. Comprehensive Income ¥36.0B includes valuation gains on available-for-sale securities ¥14.4B; unrealized gains on investment securities of ¥66.1B provide a potential cushion for future sale gains or dividend income. Although short-term debt ratio of 70.6% makes refinancing management an issue, Current Ratio 137.0% and Equity Ratio 43.4% indicate maintained stability and limited liquidity risk.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial statements. Investment decisions are your responsibility; consult a professional advisor as necessary.