| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥3144.7B | ¥2926.3B | +7.5% |
| Operating Income | ¥29.1B | ¥54.9B | -47.0% |
| Ordinary Income | ¥25.1B | ¥55.5B | -54.8% |
| Net Income | ¥3.6B | ¥26.2B | -86.2% |
| ROE | 0.1% | 0.5% | - |
Revenue increased 7.5%, but profitability deteriorated significantly due to higher raw material and fuel costs and delays in passing costs through to prices, with net income attributable to owners of the parent falling from ¥19.1B in the previous year to a loss of ¥2.3B. Against revenue of ¥3,144.7B (previous year: ¥2,926.3B, +7.5%), Operating Income was ¥29.1B (down 47.0% YoY; previous year: ¥54.9B), while Ordinary Income was ¥25.1B (down 54.8% YoY; previous year: ¥55.5B), indicating an expanding decline in earnings. Consolidated Net Income, including the portion attributable to non-controlling interests, was ¥3.6B (previous year: ¥26.2B, down 86.2%); however, the key point of this earnings release is that income attributable to owners of the parent shifted from a profit in the same period of the previous year to a loss. The gross margin declined to 15.6% (previous year: 16.8%), while higher SG&A expenses (¥461.9B, previous year: ¥436.2B) further highlighted a structure in which revenue growth is not translating into earnings.
【Revenue】Revenue was ¥3,144.7B, representing a 7.5% increase YoY. On a segment-total basis, the Pulp and Paperboard Business, with a 47.2% composition ratio, increased 10.3%, while the Lifestyle-Related Business, with a 38.2% composition ratio, increased 8.3%, with both core businesses driving growth. The Timber, Building Materials, and Civil Engineering-Related Business increased revenue by 3.5%, while the Energy Business recorded a 14.6% decline.
【Profit and Loss】The gross margin declined to 15.6%, down 117bp from 16.8% in the previous year, suggesting that price pass-through has not kept pace with rising raw material, fuel, and energy costs. SG&A expenses increased to ¥461.9B (previous year: ¥436.2B, +5.9%), reducing Operating Income to ¥29.1B (Operating Margin: 0.9%; previous year: 1.9%). Ordinary Income was limited to ¥25.1B (Ordinary Income Margin: 0.8%; previous year: 1.9%), as non-operating income of ¥46.2B (including dividend income of ¥11.7B and foreign exchange gains of ¥10.3B) was offset by non-operating expenses of ¥50.2B (including interest expenses of ¥31.1B, up 26.5% from ¥24.6B in the previous year). Although extraordinary income of ¥24.2B (including gains on the sale of investment securities of ¥17.6B) exceeded extraordinary losses of ¥20.5B (including losses on the disposal of fixed assets of ¥9.8B), resulting in Profit Before Tax of ¥28.8B, deducting income taxes and other taxes of ¥25.2B (equivalent to an effective tax rate of 87.4%) and Net Income attributable to non-controlling interests of ¥6.0B resulted in a loss attributable to owners of the parent of ¥2.3B (previous year: ¥19.1B). Despite revenue growth, higher costs from the operating level onward and the heavy tax burden reduced final earnings, leading to the conclusion that the company experienced higher revenue but lower profit.
Segment Operating Income (segment total: ¥29.1B) was led by the Timber, Building Materials, and Civil Engineering-Related Business at ¥20.2B (margin: 5.1%; down 33.0% YoY), making it the largest earnings contributor and accounting for approximately 70% of company-wide Operating Income. The Pulp and Paperboard Business remained loss-making at ¥1.4B, but the loss narrowed from ¥9.2B in the previous year (improvement: +84.3%). The Lifestyle-Related Business recorded a sharp decline in profit to ¥2.8B (margin: 0.2%; down 90.7% YoY), with its contribution to earnings nearly disappearing. The Energy Business also declined to ¥0.1B (down 98.0% YoY), confirming deteriorating profitability across all businesses other than the Timber and Building Materials Business. The increasing concentration of profit within the business portfolio was the primary factor behind the decline in the company-wide Operating Margin to 0.9%.
【Profitability】The Operating Margin was 0.9%, deteriorating from 1.9% in the previous year. The Ordinary Income Margin also declined to 0.8% (previous year: 1.9%), while the gross margin decreased by 117bp to 15.6% (previous year: 16.8%).【Cash Flow Quality】Cash and deposits were ¥1,601.3B, down ¥473B from ¥2,074.1B in the previous year, while accounts receivable and notes receivable increased to ¥2,122.8B (previous year: ¥1,812.3B), and inventories remained broadly flat at ¥1,197.8B.【Investment Efficiency】ROE remained at 0.1% (based on consolidated Net Income); however, given that Net Income attributable to owners of the parent was a loss of ¥2.3B, the return on shareholders’ equity can effectively be interpreted as being in negative territory.【Financial Soundness】The Equity Ratio was broadly unchanged at 29.3% (previous year: 29.2%). Interest-bearing debt declined slightly to ¥8,422.6B (previous year: ¥8,582.5B), and the interest-bearing debt-to-equity ratio (D/E) improved modestly to 1.63x (previous year: 1.69x). The current ratio was 139.0% and the quick ratio was 113.7%, indicating a certain degree of flexibility in short-term liquidity management.
Although a cash flow statement was not disclosed, fund movements can be reviewed based on changes in the balance sheet. Cash and deposits declined by ¥473B to ¥1,601.3B from ¥2,074.1B in the previous year, suggesting that the ¥310.5B increase in accounts receivable and notes receivable and the ¥290.1B increase in property, plant and equipment (continued investment) absorbed funds. Interest-bearing debt was ¥8,422.6B, down slightly from ¥8,582.5B in the previous year. Short-term borrowings increased to ¥2,106.9B (previous year: ¥1,923.4B, +9.5%), while long-term borrowings declined modestly to ¥6,065.7B (previous year: ¥6,109.1B). Retained earnings declined by ¥29.9B to ¥185.7B from ¥215.5B in the previous year, confirming that the current-period loss and dividend payments reduced internal reserves. Overall, the structure indicates that lower operating-level earnings and the accumulation of working capital, particularly accounts receivable, led to a decline in cash on hand.
The recurring earning power of the core business weakened, with both the Operating Margin and Ordinary Income Margin declining from the previous year to 0.9% and 0.8%, respectively, indicating a deterioration in earnings quality. Extraordinary income of ¥24.2B (including gains on the sale of investment securities of ¥17.6B) exceeded extraordinary losses of ¥20.5B (including losses on the disposal of fixed assets of ¥9.8B), providing a net ¥3.7B boost to Profit Before Tax; however, this was a temporary factor and does not indicate a recovery in recurring earnings. Income taxes and other taxes amounted to ¥25.2B, resulting in an effective tax rate equivalent to 87.4%, significantly reducing the conversion efficiency from Profit Before Tax of ¥28.8B to Net Income. Comprehensive Income was ¥102.7B, substantially higher than the loss of ¥2.3B in Net Income attributable to owners of the parent, primarily due to foreign currency translation adjustments of +¥112.6B. This was principally an accounting effect from the revaluation of overseas assets resulting from yen depreciation and does not indicate an improvement in the earnings power of the core business.
The company disclosed that an earnings forecast revision was made during the quarter; however, specific figures for the revised full-year revenue and profit forecasts were not included in the provided data. No revision was made to the dividend forecast, and the annual dividend forecast of ¥15 remains unchanged.
The annual dividend forecast remains unchanged at ¥15, with no revision to the dividend forecast during the quarter. The dividend paid in the same period of the previous year was ¥5; however, a simple comparison is not possible because the correspondence between the interim and year-end periods is unclear. Since Net Income attributable to owners of the parent was a loss of ¥2.3B for the current period, the Payout Ratio based on current-period results has no meaningful calculation. The company holds ¥1,601.3B in cash and deposits, providing a certain degree of short-term capacity for dividend funding; however, dividend sustainability will depend on a recovery in core business profits and Operating Cash Flow.
Profitability deterioration risk: The gross margin declined to 15.6% (previous year: 16.8%, ▲117bp), while the Operating Margin decreased to 0.9% (previous year: 1.9%), suggesting that price pass-through has not kept pace with persistently high raw material, fuel, and energy costs.
Financial leverage and interest burden risk: Interest-bearing debt was ¥8,422.6B, and the D/E ratio was high at 1.63x. Interest expenses increased to ¥31.1B (previous year: ¥24.6B, +26.5%), while interest coverage based on Operating Income remained at just 0.93x, indicating that the interest burden is putting pressure on Ordinary Income.
Concentration of segment earnings risk: The Pulp and Paperboard Business remained loss-making at ¥1.4B, while the Lifestyle-Related Business saw its margin shrink to 0.2%. Meanwhile, the Timber, Building Materials, and Civil Engineering-Related Business supports approximately 70% of company-wide Operating Income, resulting in a high dependence on a specific segment for profit generation.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 0.9% | 8.7% (4.2%–14.2%) | -7.8pt |
| Net Profit Margin | 0.1% | 7.0% (3.2%–10.6%) | -6.9pt |
Both the Operating Margin and Net Profit Margin are substantially below the industry median, placing profitability in the lower tier of the industry.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 7.5% | 6.2% (-1.1%–14.6%) | +1.2pt |
The Revenue Growth Rate is slightly above the industry median, but low profitability is offsetting the benefits of revenue growth.
※Source: Compiled by the Company
Despite revenue growth of +7.5%, the 117bp decline in the gross margin and the 47.0% decline in Operating Income indicate a time lag in passing higher costs through to prices. The shift in Net Income attributable to owners of the parent from a profit in the previous year to a loss of ¥2.3B should be evaluated in light of the heavy tax burden (equivalent to an effective tax rate of 87.4%) and the impact of extraordinary gains and losses.
Comprehensive Income was ¥102.7B, substantially exceeding Net Income, primarily due to foreign currency translation adjustments of +¥112.6B. This should be understood separately from the earnings power of the core business.
By segment, the Timber, Building Materials, and Civil Engineering-Related Business serves as the earnings pillar with a margin of 5.1%, while continued losses in the Pulp and Paperboard Business and the sharp decline in profit in the Lifestyle-Related Business are weighing on company-wide profitability, indicating changes in the earnings structure by business.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.
These are mechanically computed values based on a residual income model. They are not a forecast of market prices or a recommendation of any investment action, and do not predict or guarantee future share prices. Historical values are computed retrospectively using current guidance-achievement statistics.