| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥954.1B | ¥948.0B | +0.6% |
| Operating Income | ¥43.0B | ¥39.3B | +9.4% |
| Ordinary Income | ¥57.3B | ¥62.3B | -8.0% |
| Net Income | ¥31.2B | ¥36.9B | -15.4% |
| ROE | 3.5% | 4.3% | - |
For the fiscal year ended March 2026, Revenue was ¥954.1B (YoY +¥6.1B +0.6%), Operating Income was ¥43.0B (YoY +¥3.7B +9.4%), Ordinary Income was ¥57.3B (YoY -¥5.0B -8.0%), and Net Income attributable to owners of the parent was ¥31.2B (YoY -¥5.7B -15.4%). Revenue ticked up slightly, while profitability improved: gross margin 14.3% (prior year 13.4% +0.9pt) and operating margin 4.5% (prior year 4.1% +0.4pt). Ordinary Income declined due to a decrease in equity-method investment income (¥15.4B → ¥8.4B) and higher interest expense (¥2.0B → ¥2.9B). Extraordinary losses in the prior year totaled ¥17.97B (impairment ¥7.17B, business restructuring ¥6.20B, etc.), versus ¥2.26B in the current year, which moderated the decline; pretax income increased from ¥54.8B to ¥62.3B (+13.6%), so improvements at the operating level partially offset decreases in Ordinary and Net Income.
[Revenue] Revenue was ¥954.1B (YoY +0.6%). By segment, Environmental-Related Business grew most at ¥180.9B (+7.8%), and Household Products Business also increased to ¥189.9B (+1.9%). Conversely, Industrial Materials Business decreased to ¥444.7B (-0.7%), and Specialty Materials Business declined to ¥202.9B (-5.5%). Industrial Materials was pressured by weaker demand for general-purpose products such as corrugated base paper and packaging paper; Specialty Materials was affected by contraction in the specialty printing paper market. Revenue mix: Industrial Materials 46.6%, Household Products 19.9%, Environmental-Related 19.0%, Specialty Materials 21.3%. The core Industrial Materials remained flat, while higher-value Environmental-Related and Household Products supported overall performance. Sales to the major customer (Nippon Tokai Industrial Paper Supply) totaled ¥358.1B, representing about 37.5% of sales, indicating a high customer concentration.
[Profitability] Cost of sales was ¥817.4B (prior year ¥820.97B, -0.4%), showing improved cost efficiency amid flat sales. Gross profit was ¥136.7B (gross margin 14.3%), up ¥9.7B from prior year ¥127.0B (13.4%). SG&A was ¥93.7B (SG&A ratio 9.8%; prior year ¥87.7B / 9.3%), including goodwill amortization of ¥4.8B. Operating Income was ¥43.0B (operating margin 4.5%), up 9.4% from prior year ¥39.3B (4.1%). Non-operating income was ¥18.5B (equity-method investment income ¥8.4B, dividend income ¥3.8B, etc.), and non-operating expenses were ¥4.2B (interest expense ¥2.9B, etc.), resulting in Ordinary Income of ¥57.3B (prior year ¥62.3B, -8.0%). Extraordinary gains ¥7.2B (gain on sale of investment securities ¥8.0B, gain on sale of fixed assets ¥0.5B), extraordinary losses ¥2.3B (loss on retirement of fixed assets ¥1.4B, impairment ¥0.7B, disaster loss ¥0.6B, business restructuring costs ¥6.2B) netted to +¥5.0B. Pretax income was ¥62.3B (prior year ¥54.8B, +13.6%), income taxes ¥16.8B, noncontrolling interests ¥1.8B, resulting in Net Income attributable to owners of the parent of ¥31.2B (prior year ¥36.9B, -15.4%). Conclusion: revenue up and operating income up, Ordinary Income down, Net Income down.
Industrial Materials Business: Revenue ¥444.7B (-0.7%), Operating Income ¥11.7B (+7.3%), margin 2.6%. Sales were pressured by weaker demand for corrugated base paper and packaging paper, but cost efficiencies drove profit growth. Specialty Materials Business: Revenue ¥202.9B (-5.5%), Operating Income ¥14.9B (-8.8%), margin 7.4%. Demand declines in specialty printing paper and functional specialty papers impacted sales, but it still maintains the highest margin company-wide. Household Products Business: Revenue ¥189.9B (+1.9%), Operating Income ¥8.0B (+50.0%), margin 4.2%. Increased demand and improved distribution efficiency for consumer products like paper towels and toilet paper led to substantial profit growth. Environmental-Related Business: Revenue ¥180.9B (+7.8%), Operating Income ¥7.5B (+42.7%), margin 4.2%. Expansion of nature-based initiatives using the Minami Alps company-owned forests and recycling businesses made this a high-growth segment contributing to company profits. On an operating income basis, Specialty Materials accounted for the largest share at 34.7% of company operating income; Environmental-Related and Household Products are growth engines, while Industrial Materials is low-margin and dilutes overall profitability.
[Profitability] Operating margin 4.5% (prior year 4.1% +0.4pt), Net income margin 3.3% (prior year 3.9% -0.6pt). Gross margin 14.3% (prior year 13.4% +0.9pt) improved, but rising SG&A ratio 9.8% (prior year 9.3% +0.5pt) limited operating profit expansion. ROE 3.5% (prior year 3.7%) and ROA 2.2% (prior year 2.6%) declined YoY, indicating weaker capital efficiency. By segment, Specialty Materials margin 7.4% is highest; Industrial Materials 2.6% is lowest. [Cash Quality] Operating Cash Flow (OCF) ¥98.9B is 3.2x Net Income ¥31.2B, indicating strong cash generation. OCF/EBITDA (Operating Income + Depreciation ¥66.1B = ¥109.1B) is 0.91x, favorable. Accrual ratio (Net Income - OCF)/Total Assets is -4.8%, indicating solid cash backing of earnings. [Investment Efficiency] Capital expenditures ¥82.4B are 1.25x depreciation ¥66.1B, indicating investment exceeding replacement levels. Free Cash Flow (FCF) ¥19.7B (OCF - Investing CF) exceeds dividends ¥14.1B, enabling shareholder returns from internal funds. [Financial Soundness] Equity Ratio 63.8% (prior year 61.5% +2.3pt), D/E ratio 0.25x (prior year 0.23x slight increase), indicating stable financial base. Current ratio 152.6% (current assets ¥509.8B / current liabilities ¥334.0B), quick ratio 132.6% (current assets - inventory ¥165.3B / current liabilities) show good short-term liquidity. Interest-bearing debt ¥204.8B (short-term borrowings ¥84.5B, long-term borrowings ¥120.3B) yields Debt/EBITDA 1.88x, interest coverage 14.7x (EBIT ¥43.0B / interest expense ¥2.9B), indicating strong creditworthiness. Cash and deposits ¥78.1B / short-term liabilities ¥334.0B is 23.4%. Short-term debt ratio 41.3% (short-term interest-bearing debt ¥137.8B / total assets) is somewhat high, so management of refinancing plans is important.
OCF was ¥98.9B (YoY +12.8%). Starting from pretax profit before income taxes and minority interests ¥62.3B, adjustments included depreciation ¥66.1B, goodwill amortization ¥4.8B, equity-method investment losses -¥8.4B, totaling a subtotal of ¥106.0B; working capital changes (inventory increase -¥16.5B, trade receivables decrease +¥14.9B, trade payables decrease -¥8.1B) and income taxes paid -¥21.0B were reflected. Investing Cash Flow was -¥79.2B, driven by capital expenditures -¥82.4B. Increases in tangible fixed assets (prior year ¥644.5B → current ¥663.3B, +¥18.8B) and work-in-progress / construction in progress (prior year ¥62.5B → current ¥66.7B) indicate ongoing factory investment. Proceeds from sale of investment securities ¥9.6B were recorded. Financing Cash Flow was -¥54.9B, main items being long-term loan repayments -¥59.4B, long-term borrowings +¥39.0B, net decrease in short-term borrowings -¥5.3B, dividends paid -¥14.5B (to owners of parent -¥14.1B, to noncontrolling interests -¥1.0B). FCF was ¥19.7B positive and covered dividends of ¥14.1B. Cash and deposits decreased from ¥113.8B to ¥78.1B (-¥35.8B, -31.4%). Working capital metrics: DSO 94 days (trade receivables ¥245.0B / (Revenue ¥954.1B / 365)), DIO 179 days (inventory ¥165.3B / (COGS ¥817.4B / 365)), DPO 145 days (trade payables ¥85.8B / (COGS ¥817.4B / 365)), resulting in CCC 128 days and a trend toward elongation. Inventory increases and trade payable decreases are constraining cash flow; improving working capital efficiency is a key task for the next fiscal year.
Operating Income ¥43.0B indicates core business earnings power. Non-operating income ¥18.5B (1.9% of Revenue) is mainly equity-method investment income ¥8.4B and dividend income ¥3.8B, not indicating excessive reliance. Equity-method investment income declined from ¥15.4B in the prior year and is trending toward normalization. Extraordinary items netted to +¥5.0B (extraordinary gains ¥7.2B - extraordinary losses ¥2.3B), which boosted pretax income. Extraordinary gains were primarily from gain on sale of investment securities ¥8.0B and are temporary. Extraordinary losses were impairment ¥0.7B, loss on retirement of fixed assets ¥1.4B, business restructuring costs ¥6.2B, substantially reduced from prior year extraordinary losses ¥17.97B. The gap between Ordinary Income ¥57.3B and Net Income attributable to owners of the parent ¥31.2B is due to net extraordinary items +¥5.0B, income taxes ¥16.8B, and noncontrolling interests ¥1.8B, indicating limited structural distortion. OCF/Net Income = 3.2x and accrual ratio -4.8% indicate robust cash backing of earnings. Comprehensive income ¥70.0B (Net Income ¥31.2B + Other Comprehensive Income ¥38.8B) was contributed by valuation differences on available-for-sale securities ¥22.2B, retirement benefit adjustments ¥2.3B, etc., suggesting high accounting quality of profits.
For FY ending March 2027, full-year forecast: Revenue ¥1,000.0B (YoY +4.8%), Operating Income ¥32.0B (YoY -25.5%), Ordinary Income ¥58.0B (YoY +1.2%), Net Income attributable to owners of the parent ¥46.0B (not directly comparable to prior year ¥31.2B due to substantial extraordinary items in the current year), EPS ¥131.65. Year-to-date progress rates based on first half results are Revenue 95.4%, Operating Income 134.4%, Ordinary Income 98.8%, indicating operating-stage performance is nearly achieved while Ordinary Income is slightly behind. The full-year Operating Income forecast ¥32.0B is conservative versus current-year actual ¥43.0B (-25.5%), factoring in rising fuel & raw material costs, changes in sales mix, and the disappearance of one-off gains (equity-method income and extraordinary gains). Ordinary Income is forecast to slightly increase, assuming stability in non-operating income. Next fiscal year dividend forecast is ¥47.0 (current period was ¥60.0 but subject to a 1:3 stock split effective October 1, 2025, so on a post-split basis this equates to ¥20.0), implying a substantive dividend increase policy.
Dividends paid to owners of the parent amounted to ¥14.05B, with a payout ratio of 32.2% (dividends ¥14.05B / Net Income attributable to owners of the parent ¥43.68B※) representing a sustainable level. ※Using XBRL data NetIncomeAttributableToOwners ¥43.68B. Share buybacks were minimal at ¥0.01B; total return ratio is approximately 32%, dividend-centered. Next period dividend forecast is ¥47.0; compared to the effective dividend in this period after stock split ¥20.0 (¥60.0 ÷ 3), this represents a planned +35% increase. FCF ¥19.7B exceeds dividends ¥14.1B, enabling shareholder returns from internal funds. The payout ratio is kept below approximately 40%, leaving room for profit growth while maintaining stable dividends.
Raw material and fuel price increases: COGS ¥817.4B (85.7% of Revenue) is mainly pulp and energy, and volatility in global commodity markets directly impacts gross margin. Although gross margin improved to 14.3% this period, Industrial Materials margin of 2.6% is thin with limited price pass-through power. The conservative next-year guidance (Operating Income -25.5%) incorporates potential cost increases.
Working capital efficiency deterioration: CCC 128 days (DSO 94 days, DIO 179 days) is elongated, with inventory increase -¥16.5B and trade payables decrease -¥8.1B constraining OCF. Inventory level of ¥165.3B (17.3% of Revenue) poses increased excess inventory risk in a demand downturn. Receivables collection and inventory optimization are critical KPIs for cash management.
Customer concentration risk: Sales to Nippon Tokai Industrial Paper Supply ¥358.1B (37.5% of total) create dependency. Negotiating power and demand changes of a single large customer could materially affect company revenue and profit, making deterioration in terms or order volumes a significant risk.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.5% | 7.8% (4.6%–12.3%) | -3.2pt |
| Net Income Margin | 3.3% | 5.2% (2.3%–8.2%) | -1.9pt |
Both operating margin and net income margin are below industry median, placing profitability at the lower end within the sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 0.6% | 3.7% (-0.4%–9.3%) | -3.1pt |
Revenue growth rate is below industry median, underperforming peers in top-line expansion.
※Source: Company compilation based on publicly disclosed financial statements
Sustainability of profitability improvement: Gross margin 14.3% (prior year 13.4% +0.9pt) and operating margin 4.5% (prior year 4.1% +0.4pt) show improving trends, but both are well below industry medians (operating margin 7.8%, net income margin 5.2%). Industrial Materials margin of 2.6% dilutes the company; improving mix toward higher-value products (Specialty Materials 7.4%, Environmental-Related 4.2%, Household Products 4.2%) and strengthening price pass-through are keys to medium-term margin improvement. The conservative next-year operating income guidance (-25.5%) reflects anticipated raw material cost increases and sales-mix shifts; execution of price and cost controls will be decisive.
Working capital efficiency and cash generation: OCF ¥98.9B (3.2x Net Income) is high-quality, but CCC 128 days (DSO 94 days, DIO 179 days) elongation increases cash tied up. There is considerable room to compress inventory ¥165.3B (17.3% of Revenue) and receivables ¥245.0B (25.7% of Revenue); improvements in collection and inventory efficiency are required to expand next-year FCF. With capital expenditures ¥82.4B (1.25x depreciation) at a high level, the structure of funding dividends from FCF ¥19.7B remains intact, but the cash balance ¥78.1B (from ¥113.8B, -31.4%) has decreased and liquidity buffers have tightened. Short-term debt ratio 41.3% is somewhat high; monitoring refinancing and interest rate trends is important.
Structural shifts and next-year outlook: High growth in Environmental-Related (+7.8%) and Household Products (+1.9%, operating income +50.0%) has driven company-level profit, while Specialty Materials’ high margin (7.4%) remains a profit pillar; however, Industrial Materials’ low-margin structure (2.6%) and demand decline (-0.7%) are challenges. Equity-method investment income decline (¥15.4B → ¥8.4B) is expected to normalize, making enhancement of core operating capabilities the primary growth driver. Next year, management forecasts revenue growth and slight increase in Ordinary Income but a large decrease in operating profit, reflecting a conservative plan that assumes cost increases and the loss of one-off gains. If price correction, mix improvement, and working capital efficiency are realized in execution, upside is possible.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions should be made at your own responsibility, and where necessary, consult a professional advisor.