| Indicator | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥11926.1B | ¥11824.3B | +0.9% |
| Operating Income | ¥252.1B | ¥197.1B | +27.9% |
| Ordinary Income | ¥231.0B | ¥155.1B | +49.0% |
| Net Income | ¥171.8B | ¥190.2B | -9.7% |
| ROE | 3.2% | 3.7% | - |
For the fiscal year ended March 2026, Revenue was 11,926B (YoY +102B +0.9%), Operating Income was 252B (YoY +55B +27.9%), Ordinary Income was 231B (YoY +76B +49.0%), and Net Income attributable to owners of the parent was 117B (YoY +73B +158.7%). Results showed modest revenue growth and profit improvement; the operating margin improved to 2.1% from 1.7% a year earlier (+0.4pt), and the ordinary profit margin improved to 1.9% from 1.3% (+0.6pt). Net margin improved to 1.0% from 0.4% (+0.6pt). A net amount of special items of +13.6B (gain on sale of investment securities 52.6B, insurance proceeds 39.5B, disaster losses 34.5B, impairments 20.1B, etc.) contributed, and the absence/normalization of last year’s large impairment (133B) boosted the bottom line. By segment, Wood Products / Building Materials / Civil Engineering & Construction contributed the most with Operating Income of 100B (margin 6.3%); Lifestyle-related posted Operating Income of 71.7B (margin 1.5%), a significant YoY increase of +217%; Paper & Paperboard recorded Operating Income of 5.6B (margin 0.1%), a sharp YoY decline of -93% highlighting weak profitability. Operating Cash Flow was 750B (YoY +3.0%) and Free Cash Flow remained positive at 314B.
[Revenue] Revenue was 11,926B (YoY +102B +0.9%), showing only slight growth. By segment, Paper & Paperboard was 5,772B (YoY -1.7%) with ongoing structural demand decline; Lifestyle-related was 4,895B (YoY +5.3%); Wood Products / Building Materials / Civil Engineering & Construction was 1,602B (YoY +4.8%) driving sales. Energy was 451B (YoY -6.7%) with revenue decline, and Others was 849B (YoY +4.6%) and steady. Revenue arising from contracts with customers accounted for 11,921B or 99.96% of Revenue; goods transferred at a point in time were 11,285B (94.6%), and goods and services transferred over time were 636B (5.3%).
[Profitability] Cost of sales was 9,936B, representing 83.3% of Revenue, and Gross Profit was 1,990B (gross margin 16.7%, +0.6pt from 16.1% a year earlier). Selling, General and Administrative expenses were 1,738B (SG&A ratio 14.6%, +0.1pt from 14.5% a year earlier), including salaries and allowances 460B and goodwill amortization 11.5B. Operating Income was 252B (operating margin 2.1%), up YoY +55B (+27.9%) driven by price revisions taking hold and cost easing. Non-operating items included interest income 16.1B, equity in earnings of affiliates 73.9B, dividend income 19.3B, and foreign exchange gains 18.1B; financing costs included interest expense 112.2B and foreign exchange losses 37.0B, resulting in non-operating income 167B and non-operating expenses 188B, yielding net non-operating loss of -21B. Ordinary Income was 231B (ordinary margin 1.9%), up YoY +76B (+49.0%). Special gains were 176B (gain on sale of investment securities 52.6B, insurance proceeds 39.5B, etc.), special losses were 163B (disaster losses 34.5B, loss on retirement of fixed assets 23.2B, impairment losses 20.1B, etc.), resulting in net special items of +13.6B; the normalization from last year’s impairment charge of 133B boosted net income. Income before income taxes was 245B; income taxes were 107B (effective tax rate 43.6%), and non-controlling interests were 21B, resulting in Net Income attributable to owners of the parent of 117B (net margin 1.0%), up YoY +73B (+158.7%). In conclusion, modest revenue growth and profit improvement were supported by price revisions, cost improvements, and the one-off improvement from normalization of prior impairments.
The Paper & Paperboard Business reported Revenue 5,772B (YoY -1.7%) and Operating Income 5.6B (YoY -93.2%) with a margin of 0.1%, remaining at an extremely low level. Structural demand decline and price competition rapidly deteriorated profitability, accounting for only about 2.2% of consolidated Operating Income. The Lifestyle-related Business reported Revenue 4,895B (YoY +5.3%) and Operating Income 71.7B (YoY +217%) with margin 1.5%, a large improvement driven by price revisions and improved product mix. The Wood Products / Building Materials / Civil Engineering & Construction Business reported Revenue 1,602B (YoY +4.8%) and Operating Income 100B (YoY +4.7%) with margin 6.3%, maintaining high and stable profitability and accounting for 39.8% of consolidated Operating Income, the largest contributor. The Energy Business reported Revenue 451B (YoY -6.7%) and Operating Income 33.3B (YoY -6.4%) with margin 7.4%, a high level of profitability but with revenue and profit decline. Others (logistics, leisure, etc.) reported Revenue 849B (YoY +4.6%) and Operating Income 32.0B (YoY +6.6%) with margin 3.8%, steady. There is a large disparity in margins across segments: low profitability in Paper & Paperboard weighs on consolidated margins, while Wood Products / Building Materials and Energy are pillars of profit.
[Profitability] Operating margin 2.1% (+0.4pt from 1.7% a year earlier), Ordinary margin 1.9% (+0.6pt from 1.3%), Net margin 1.0% (+0.6pt from 0.4%)—price revisions and cost improvements contributed, but absolute levels remain low. ROE was 3.2% (prior year 1.0%) improving but capital efficiency remains low. [Cash Quality] Operating Cash Flow (OCF) was 750B, 6.4x Net Income 117B; Operating CF/EBITDA was 0.85x, approaching a healthy range, and cash generation was solid despite headwinds from inventory increases and decreases in accounts payable. Depreciation and amortization was 632B versus acquisitions of tangible and intangible assets of about 543B, yielding CapEx/Depreciation ratio 0.86x—focused on maintenance and renewals, with no sign of overinvestment. [Investment Efficiency] Total asset turnover was 0.69x, remaining low, reflecting a capital-intensive business structure. [Financial Soundness] Equity Ratio was 31.1% (up 1.1pt from 30.0% prior year), Current Ratio 143.8%, Quick Ratio 117.8% indicating good short-term liquidity. Cash of 2,074B covers short-term borrowings of 1,923B and secures a working capital surplus of 2,025B. On the other hand, Total Interest-bearing Debt was 8,033B, D/E ratio 2.22x, Debt/EBITDA 9.1x, and EBIT-based interest burden 2.25x, indicating continued high leverage and limited resilience in a rising interest rate environment.
Operating Cash Flow was 750B (YoY +3.0%), with subtotal OCF of 729B; decrease in trade receivables of 10.3B contributed positively, while increase in inventories of 23.6B and decrease in trade payables of 80.5B were negative, resulting in net working capital movements of -93.8B cash outflow. Interest and dividends received were 77.6B, interest paid 110.4B, and income taxes paid 24.7B, resulting in OCF that is 6.4x Net Income 117B, demonstrating strong cash generation. Investing Cash Flow was -436B, primarily outflows for acquisition of tangible and intangible fixed assets 543B and purchases of investment securities 16B; inflows included proceeds from sale of tangible fixed assets 14B and sale of investment securities 101B, yielding Free Cash Flow of +314B. Financing Cash Flow was -79B, including long-term borrowings raised 1,162B, repayments 1,051B, net increase in short-term borrowings 0.1B, redemption of corporate bonds 100B, dividend payments 17B, and share buybacks 2.9B. Cash and cash equivalents increased from 1,859B at the beginning of the period to 2,074B at the end, a rise of 215B; after adjusting for foreign exchange impact of -21B, net increase was 214B.
Core recurring earnings were Operating Income 252B, with equity in earnings of affiliates 73.9B and interest & dividends received totaling 35.4B contributing stable non-operating income. One-off items were Special Gains 176B (gain on sale of investment securities 52.6B, insurance proceeds 39.5B, etc.) and Special Losses 163B (disaster losses 34.5B, impairment losses 20.1B, loss on retirement of fixed assets 23.2B, etc.), netting to +13.6B; normalization from last year’s 133B impairment significantly lifted Net Income. Non-operating foreign exchange was a net -18.9B (foreign exchange gains 18.1B - foreign exchange losses 37.0B), showing volatility, and interest expense of 112.2B remains a recurring burden. Operating Cash Flow of 750B substantially exceeded Net Income 117B, indicating good accrual quality, but about 12% of net income depended on one-off special items, so in normalization scenarios there is risk of profit reversion and volatility.
Compared with the company plan (Full Year Revenue 12,200B, Operating Income 250B, Ordinary Income 180B, Net Income attributable to owners of the parent 100B, annual dividend ¥5), actual results were Revenue 11,926B (progress 97.8%), Operating Income 252B (100.8%), Ordinary Income 231B (128.3%), and Net Income 117B (117.4%), with Operating Income achieving plan and Ordinary & Net exceeding plan. The upside in Ordinary & Net was due to robust equity in earnings of affiliates and one-off improvement in special items (normalization of last year’s impairment, gains on disposals and insurance proceeds). Dividend was raised to annual ¥15 (interim ¥5, year-end ¥10), a large increase from the planned ¥5, reflecting earnings recovery and improved financial capacity.
Annual dividend is ¥15 (interim ¥5, year-end ¥10) with Payout Ratio 25.4%. This marks the resumption and increase of dividends from no dividend in the prior year (no payout ratio data), reflecting improved financial flexibility. Share buybacks were minor at 2.9B, and Total Return Ratio is about 26%. Against Operating Cash Flow 750B and Free Cash Flow 314B, total dividends of 17.4B (payout basis) are well covered, with FCF coverage 18.0x indicating high sustainability. However, under high leverage (Debt/EBITDA 9.1x), the dividend policy remains cautious, prioritizing balance sheet restoration under a conservative capital allocation stance.
High leverage and interest burden: Total interest-bearing debt 8,033B, D/E ratio 2.22x, Debt/EBITDA 9.1x indicate sustained high leverage; EBIT-based interest burden is 2.25x. Interest expense of 112B is equivalent to 44.5% of Operating Income 252B, and refinancing risk and increased interest payments in a rising rate environment could pressure profitability and solvency. Long-term borrowings of 6,109B and a high proportion of long-term debt make management of maturity concentration risk important.
Structural deterioration of Paper & Paperboard profitability: Paper & Paperboard accounts for 5,772B or 48.4% of consolidated revenue but yields Operating Income 5.6B (margin 0.1%) with severe profitability deterioration YoY -93.2%. Structural demand decline (digitalization, paperless) and price competition may continue to weaken the revenue base; the success of restructuring through selection and concentration will be critical to overall company performance.
Dependence on one-off items and earnings volatility: Of Net Income 117B, net special items of +13.6B (about 12%) contributed, and the normalization from last year’s large impairment (133B) lifted profits. One-off items such as gain on sale of investment securities 52.6B and insurance proceeds 39.5B are large, and in normalization phases there is high risk of profit reversion and volatility. Disaster losses 34.5B, impairments 20.1B, etc., were also recorded, and uncertainty in the business environment could undermine earnings stability.
Profitability & Returns
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.1% | 7.8% (4.6%–12.3%) | -5.6pt |
| Net Margin | 1.4% | 5.2% (2.3%–8.2%) | -3.7pt |
The company’s profitability is well below the manufacturing industry median and sits in the lower group within the sector.
Growth & Capital Efficiency
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 0.9% | 3.7% (-0.4%–9.3%) | -2.8pt |
Revenue growth lags the industry median, reflecting continued low growth amid structural demand decline.
※Source: Company aggregation
Cost improvements and normalization of impairments lifted Operating Margin to 2.1% and ROE to 3.2% versus the prior year, but absolute levels remain low and far below the manufacturing median (Operating Margin 7.8%). The segment mix is shifting from Paper & Paperboard (margin 0.1%) toward Lifestyle-related (1.5%), Wood Products / Building Materials (6.3%), and Energy (7.4%). Going forward, sustained improvement in profitability will depend on expanding profit contribution from non-paper segments and progress in restructuring and restoring profitability in Paper & Paperboard through selection and concentration.
High leverage (Debt/EBITDA 9.1x, EBIT interest burden 2.25x) constrains valuation and financial resilience; refinancing risk and increased interest burden in a rising rate environment are major risks. On the other hand, Operating Cash Flow 750B (6.4x Net Income) and positive Free Cash Flow 314B indicate improved self-healing capacity. Gradual reduction in Debt/EBITDA and improvement in interest coverage will be key to restoring financial soundness.
This report is an earnings analysis document automatically generated by AI analyzing 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 public financial data. Investment decisions are your responsibility; please consult a professional advisor as necessary.