| Metric | Current Period | Previous Period | YoY |
|---|---|---|---|
| Revenue | ¥10668.0B | ¥10130.7B | +5.3% |
| Operating Income | ¥-371.6B | ¥625.4B | -28.7% |
| Profit Before Tax | ¥-514.5B | ¥608.7B | -184.5% |
| Net Income | ¥-662.8B | ¥389.6B | -270.1% |
| ROE | -16.1% | 8.5% | - |
The key takeaway from this earnings release is that, despite securing revenue growth, the Company’s operating result fell from a profit to a loss due to the recognition of a substantial impairment loss. Revenue was ¥10,668.0B (+5.3% YoY), Operating Income was ¥-371.6B (¥+625.4B in the previous year), and Profit Before Tax was ¥-514.5B (¥+608.7B in the previous year). Net Income attributable to owners of the parent was ¥-639.5B (¥+399.3B in the previous year, YoY -260.2%), resulting in a swing from a net profit to a net loss. The primary factors were the recognition of an impairment loss of ¥1,079.8B, which constituted the core of Other Expenses of ¥999.9B (mainly in the Digital & Industry Business), and an increase in finance costs to ¥184.9B (¥57.8B in the previous year).
【Revenue】Revenue was ¥10,668.0B, representing an increase of +5.3% YoY. Health & Safety led the growth with revenue of ¥2,684.7B (+21.8%), while Energy Solutions also recorded revenue growth at ¥985.0B (+6.3%). Meanwhile, Digital & Industry, the largest segment, recorded a decline in revenue to ¥3,299.4B (-4.2%), while Agri & Foods remained at ¥1,529.9B (+2.2%). Revenue growth was led by expansion in the healthcare and energy areas, while Digital & Industry, centered on industrial gases and electronic materials, acted as a drag.
【Profitability】Gross profit was ¥2,403.0B, with a gross margin of 22.5% (an improvement of +0.4pt from 22.1% in the previous year), indicating improvement in terms of pricing and product mix. However, SG&A expenses were ¥2,015.3B (SG&A ratio of 18.9%, up +2.2pt from 16.7% in the previous year), absorbing the benefits of revenue growth and gross margin improvement. In addition, the recognition of Other Expenses of ¥999.9B (primarily an impairment loss of ¥1,079.8B, of which Digital & Industry accounted for ¥706.5B) resulted in Operating Income falling into the red at ¥-371.6B (¥+625.4B in the previous year). Finance costs also increased to ¥184.9B (¥57.8B in the previous year, +219.8%), resulting in Profit Before Tax of ¥-514.5B and Net Income attributable to owners of the parent of ¥-639.5B (¥+399.3B in the previous year, YoY -260.2%). In conclusion, the Company experienced revenue growth but lower profit, with the primary factor being a swing to an operating loss due to the recognition of impairment losses.
Digital & Industry was the largest factor depressing segment operating results. Digital & Industry recorded revenue of ¥3,299.4B (-4.2%) and an Operating Loss of ¥-408.9B (a swing into the red from ¥+301.1B in the previous year, margin of -12.4%), primarily due to the recognition of an impairment loss of ¥706.5B. Health & Safety recorded revenue of ¥2,684.7B (+21.8%) and Operating Income of ¥104.0B (-13.0%, margin of 3.9%); despite revenue growth, its profit margin declined. Energy Solutions recorded revenue of ¥985.0B (+6.3%) and Operating Income of ¥63.9B (-21.4%, margin of 6.5%), maintaining the highest profit margin among all segments. Agri & Foods recorded revenue of ¥1,529.9B (+2.2%) and Operating Income of ¥36.6B (-26.5%, margin of 2.4%). In terms of asset scale, Digital & Industry accounted for ¥4,379.8B, approximately 36% of total Company assets, creating a structure in which the recovery of this business’s profitability will determine the Company-wide profit and loss outlook.
【Profitability】The Operating Margin deteriorated significantly to -3.5% (¥+6.2% in the previous year), the Net Profit Margin, based on income attributable to owners of the parent, declined to -6.0% (¥+3.9% in the previous year), and ROE fell to -15.4% (¥+9.2% in the previous year). 【Cash Flow Quality】Operating Cash Flow (OCF) remained positive at ¥1,075.8B, and the OCF/EBITDA ratio relative to simplified EBITDA (Operating Income + depreciation and amortization) of approximately ¥199.0B was high at approximately 5.4x. However, this was driven by the non-cash add-back of the ¥1,079.8B impairment loss, and the divergence from the underlying earnings performance should be noted. 【Investment Efficiency】Total Asset Turnover was 0.88x, while capital expenditures of ¥736.1B were 1.29x depreciation and amortization of ¥570.6B, indicating continued growth investment. 【Financial Soundness】The Equity Ratio declined to 32.1% (down -4.4pt from 36.5% in the previous year), while interest-bearing debt increased to ¥4,684.6B (¥4,228.1B in the previous year), resulting in net interest-bearing debt of ¥3,813.2B. As Operating Income was negative, Interest Coverage was effectively below 1x, requiring monitoring from both interest burden and capital base perspectives.
Cash flow from operating activities was ¥1,075.8B (+16.0% YoY), remaining positive despite the net loss. This was supported by the non-cash add-back of the ¥1,079.8B impairment loss and a ¥+266.0B cash inflow from the collection of trade receivables, while increases in inventories (-¥44.7B), decreases in accounts payable (-¥72.3B), and income tax payments (-¥250.1B) partially offset these factors. Cash flow from investing activities was ¥-886.1B. In addition to capital expenditures of ¥736.1B (down from ¥853.2B in the previous year), the acquisition of subsidiary shares of ¥257.9B (up substantially from ¥24.7B in the previous year) was recorded as M&A-related investment. Cash flow from financing activities was ¥-57.1B (improved from ¥-282.6B in the previous year), as a net increase in short-term borrowings (+¥622.6B) offset repayments of long-term borrowings (-¥537.3B) and dividend payments (-¥184.6B). As a result, free cash flow was positive at ¥189.7B; however, this positive result depended on the non-cash add-back of impairment losses, and the sustainability of cash generation from the next fiscal year onward will depend on the recovery of underlying Operating Income.
The current period’s earnings were significantly affected by the temporary and non-cash factor of the ¥1,079.8B impairment loss, which may cause recurring earnings power to appear weaker than it is. In contrast, the increase in finance costs to ¥184.9B (¥57.8B in the previous year, +219.8%) represents a sustained pressure associated with the accumulation of interest-bearing debt and should be distinguished from one-off factors. Comprehensive Income attributable to owners of the parent was ¥-297.2B, creating a ¥342.3B divergence from Net Loss of ¥-639.5B. This resulted from Other Comprehensive Income—fair value changes in financial assets of +¥210.3B, cash flow hedges of +¥102.3B, and foreign currency translation adjustments of +¥32.3B—partially offsetting the loss. The reversal phenomenon of positive OCF alongside negative Profit Before Tax and Net Income resulted from the add-back of non-cash expenses and improvements in working capital. Continued monitoring is necessary to assess progress toward normalizing earnings power in the next fiscal year.
Against the full-year forecast presented by the Company—Revenue of ¥11,400B, Operating Income of ¥480B, Net Income attributable to owners of the parent of ¥280B, and EPS of ¥122.15—the actual results were Revenue of ¥10,668.0B (93.6% progress toward the forecast), Operating Income of ¥-371.6B (substantially below forecast), Net Income attributable to owners of the parent of ¥-639.5B (also below forecast), and EPS of ¥-279.01. The primary reason for the shortfall was the recognition of an impairment loss of ¥1,079.8B, which exceeded the amount assumed in advance. While revenue progress was broadly close to plan, the impact of a structural review of profitability on earnings substantially exceeded expectations.
The annual dividend was ¥75 (interim dividend of ¥37.5 and year-end dividend of ¥37.5), with cash dividend payments of ¥184.6B. As Net Income attributable to owners of the parent was negative for the period, calculating the Payout Ratio is not meaningful; however, the dividend on equity (DOE) was 4.1% (4.0% in the previous year), remaining broadly flat. Share repurchases were effectively zero (-¥0.0B), meaning shareholder returns consisted solely of dividends. Dividend payments of ¥184.6B were sufficiently covered by OCF of ¥1,075.8B; however, the dividend forecast for the following fiscal year (the fiscal year ending March 2027) has not yet been determined. The Company stated that it will disclose the forecast again after considering the details of its new management policy and business portfolio review.
Declining profitability of the Digital & Industry Business: The business recorded an Operating Loss of ¥-408.9B (margin of -12.4%), with ¥706.5B of the ¥1,079.8B impairment loss concentrated in this segment. The key issues going forward will be whether the structural review of profitability in the largest business by revenue will continue and whether the asset valuations are appropriate.
Increase in financial leverage and interest burden: Interest-bearing debt increased to ¥4,684.6B (¥4,228.1B in the previous year), while finance costs expanded to ¥184.9B (¥57.8B in the previous year, +219.8%). As Operating Income was negative, the current level of earnings is insufficient to adequately cover interest payments through Operating Income.
Deterioration of the capital base: Retained earnings declined to ¥2,134.8B (¥2,905.3B in the previous year, -26.5%), and the Equity Ratio fell to 32.1% (36.5% in the previous year, -4.4pt). The recording of a net loss has reduced the capital buffer.
Profitability and Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | -15.4% | 6.9% (4.1%–10.8%) | -22.3pt |
| Operating Margin | -3.5% | 7.5% (4.8%–11.9%) | -11.0pt |
| Net Profit Margin | -6.2% | 5.9% (2.6%–9.2%) | -12.1pt |
The Company’s profitability was significantly below the industry median across all three indicators, placing it in a relatively weak position within the industry, primarily due to the recognition of impairment losses.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.3% | 3.3% (-0.8%–9.1%) | +2.0pt |
The Revenue Growth Rate exceeded the industry median, indicating a relatively solid position in terms of top-line performance.
Source: Compiled by the Company
The swing in Operating Income from a profit of ¥625.4B to a loss of ¥371.6B due to a large-scale impairment loss of ¥1,079.8B represents a temporary review of asset valuations, while also suggesting a change in the assessment of the underlying earnings structure of the Digital & Industry Business.
Despite revenue growth (+5.3%) and gross margin improvement (+0.4pt), the SG&A ratio increased by +2.2pt, causing net operating leverage to have a negative impact. Whether top-line improvement will continue to translate into earnings improvement will depend on fixed-cost control going forward.
The fact that the dividend forecast for the following fiscal year has not yet been determined indicates that the Company is awaiting the results of its new management policy and business portfolio review, and that the process of redesigning its shareholder return policy is underway.
This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥1,601 |
| base | ¥1,633 |
| bull | ¥1,659 |
| Calculation Assumption | Value |
|---|---|
| Book Value per Share (BPS) | ¥1,702 |
| Adjusted Forecast EPS | ¥131.3 |
| Cost of Equity r | 9.15% (10-year Japanese government bond 2.65% + equity risk premium 6.00% + size premium 0.50%) |
| Residual Income Persistence Coefficient ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 30.0% |
| Forecast EPS Confidence Adjustment | ×1.075 (based on the historical guidance achievement rate of peer companies) |
| Implied PBR / PER |
Sensitivity: ¥1,587–¥1,681 at Cost of Equity ±1%, and ¥1,630–¥1,634 at ω±0.1.
Notes:
(Calculation model: Residual Income Model / Interest rate reference month: 2026-06 / This value does not predict or guarantee the future share price)
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 disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.
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| 0.96x / 12.4x |
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.