| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥800.8B | ¥851.6B | -6.0% |
| Operating Income / Operating Profit | ¥75.8B | ¥111.2B | -31.8% |
| Ordinary Income | ¥79.6B | ¥112.5B | -29.3% |
| Net Income / Net Profit | ¥32.9B | ¥47.6B | -30.9% |
| ROE | 4.0% | 6.1% | - |
For the fiscal year ended March 2026, Revenue was ¥800.8B (YoY -¥50.8B, -6.0%), Operating Income was ¥75.8B (YoY -¥35.4B, -31.8%), Ordinary Income was ¥79.6B (YoY -¥32.9B, -29.3%), and Net Income attributable to owners of the parent was ¥32.9B (YoY -¥14.7B, -30.9%), representing year-on-year declines in both sales and profits. Operating margin fell to 9.5% (prior year 13.1%), a decline of 3.6ppt, driven by a simultaneous 1.8ppt decline in gross margin to 36.9% (prior year 38.7%) and a 1.8ppt increase in SG&A ratio to 27.4% (prior year 25.6%). The core Pipe & Fitting Systems (管材システム事業) business led the downturn, with sales down 8.3% and operating profit down 30.6%, dragging consolidated performance. Special losses of ¥21.9B (including impairment losses of ¥19.8B) squeezed bottom-line profit, and net margin declined to 4.1% (prior year 5.6%). Operating Cash Flow (OCF) was ¥104.5B (YoY -7.8%), about 3.2x net income, supported by progress in accounts receivable collections, but capital expenditures of ¥86.6B (10.8% of Revenue) kept Free Cash Flow at ¥9.1B.
[Revenue] Revenue declined ¥50.8B YoY (YoY -6.0%) to ¥800.8B. By segment, Pipe & Fitting Systems business was ¥481.9B (YoY -8.3%), Resin business ¥229.8B (YoY -0.3%), and Water Treatment & Resource Development business ¥89.9B (YoY -8.6%), with all segments recording revenue declines. The Pipe & Fitting Systems segment’s external customer sales were ¥481.2B, down ¥42.3B from ¥523.9B last year, accounting for 83% of the consolidated revenue decline. By region, Japan was ¥495.4B (prior year ¥534.4B) and the U.S. ¥140.9B (prior year ¥161.5B), both down; Other regions rose to ¥164.5B (prior year ¥155.7B) but did not offset declines. Sales to major customer Harrington Process Solutions were disclosed at ¥85.5B, confirming concentration at about 10.7% of Revenue.
[Profitability] Gross profit was ¥295.2B (prior year ¥329.4B), with gross margin down 1.8ppt to 36.9%. Cost of goods sold ratio rose to 63.1%, driven by higher raw material and logistics costs and reduced utilization due to lower volumes. SG&A was ¥219.4B (prior year ¥218.2B), essentially flat in absolute terms, but SG&A ratio rose 1.8ppt to 27.4% due to lower sales, reversing operating leverage. Operating Income was ¥75.8B (YoY -31.8%), with an operating margin of 9.5%. Non-operating items included interest income ¥2.0B, dividend income ¥1.1B, and foreign exchange gains ¥0.5B, offset by interest expense ¥0.8B and foreign exchange losses ¥0.8B, resulting in net non-operating income of ¥3.8B. Ordinary Income was ¥79.6B (YoY -29.3%). Extraordinary items included impairment losses ¥19.8B (prior year ¥0.4B) and business restructuring expenses ¥1.3B, totaling special losses of ¥21.9B; special gains of ¥0.7B (gain on sale of fixed assets) partially offset these, compressing pretax income to ¥58.3B (prior year ¥108.7B, YoY -46.4%). Income taxes were ¥24.0B (effective tax rate 41.1%), and after non-controlling interests of ¥1.1B, Net Income attributable to owners of the parent was ¥32.9B (YoY -30.9%). In summary, reduced sales combined with lower gross margin and higher SG&A ratio led to operating decline, and the recognition of special losses plus high tax burden materially pressed down final profit.
Pipe & Fitting Systems business reported Revenue ¥481.9B (YoY -8.3%) and Operating Income ¥62.9B (YoY -30.6%), a margin of 13.0%. Operating Income fell ¥27.6B from ¥90.5B last year, the largest decline. The Resin business was virtually flat at Revenue ¥229.8B (YoY -0.3%) but Operating Income declined to ¥9.2B (YoY -17.9%), lowering margin to 4.0% (down ¥2.0B from ¥11.2B last year). Water Treatment & Resource Development business had Revenue ¥89.9B (YoY -8.6%) and Operating Income ¥5.8B (YoY -25.1%), margin 6.4%, down ¥1.9B from ¥7.7B last year. After adjustments for corporate expenses, consolidated Operating Income was ¥75.8B. Pipe & Fitting Systems accounts for roughly 83% of consolidated operating profit and also showed the largest decline; falling gross margin and fixed cost burden pressured margins. While Resin and Water Treatment are smaller, they also showed declining profitability, weakening segment-wide returns.
[Profitability] Operating margin 9.5% (prior year 13.1%), Ordinary Income margin 9.9% (prior year 13.2%), Net margin 4.1% (prior year 5.6%) — declines across the board. ROE deteriorated to 4.0% (prior year 10.3%), mainly due to lower Net margin (special losses and high tax burden). ROA decreased to 7.4% (prior year 10.9%). [Cash Quality] OCF to Net Income multiple is 3.2x, a high level, supported by accounts receivable collections (contributed ¥33.1B). OCF subtotal (before working capital changes) was ¥128.9B, and cash generation was solid considering non-cash losses (impairment ¥19.8B) and depreciation ¥33.8B. Accrual ratio was -6.6%, indicating appropriate cash realization of profits. [Investment Efficiency] Total asset turnover declined to 0.74x (prior year 0.80x), showing deteriorating asset efficiency. Inventory turnover days were 155 days (prior year 150 days), Accounts Receivable days 46 days (prior year 52 days) improved, while Accounts Payable days shortened to 36 days (prior year 39 days), resulting in a slightly longer CCC of 165 days (prior year 163 days). [Financial Soundness] Equity Ratio 75.1% (prior year 73.4%), Current Ratio 379.7% (prior year 345.0%) — robust. D/E ratio 0.33x (prior year 0.26x), Debt/EBITDA 0.59x (prior year 0.38x) — maintaining low leverage. Cash and deposits ¥232.3B vs. short-term interest-bearing debt ¥28.0B gives a Cash/Short-term Debt ratio of 8.3x, indicating ample liquidity.
OCF was ¥104.5B (prior year ¥113.4B, YoY -7.8%), securing 3.2x net income of ¥32.9B. OCF subtotal was ¥128.9B (prior year ¥149.0B), aided by add-backs of impairment losses ¥19.8B and depreciation ¥33.8B. Working capital changes included a decrease in accounts receivable contributing ¥33.1B to cash (prior year increase of ¥18.9B), inventories rose slightly by ¥1.0B (prior year ¥16.6B increase), while accounts payable decreased ¥9.9B (prior year ¥22.8B decrease). Including income taxes paid ¥26.8B, interest and dividends received ¥3.1B, and interest paid ¥0.7B, OCF quality is high relative to net income. Investing Cash Flow was -¥95.4B (prior year -¥51.6B), led by capital expenditures of ¥86.6B (10.8% of Revenue). Subsidies received ¥3.4B and proceeds from sale of fixed assets ¥1.2B partially offset, and intangible asset investments were ¥11.8B. Construction in progress was ¥64.1B (21.3% of PPE), indicating large ongoing investments. Free Cash Flow (OCF + Investing CF) was ¥9.1B (prior year ¥61.8B), with active investment absorbing funds. Financing Cash Flow was -¥17.1B, with proceeds from long-term borrowings ¥22.5B, long-term repayments ¥6.5B, net repayment of short-term borrowings ¥11.0B, dividends paid ¥21.8B (cash basis), and share buybacks ¥0.0B. Cash and deposits decreased from ¥240.6B at the beginning of the period to ¥232.3B at period-end, a decline of ¥8.3B (including FX effect ¥0.3B). OCF/EBITDA ratio was 0.95x, indicating good cash conversion and appropriate conversion levels.
Against Ordinary Income of ¥79.6B, special losses of ¥21.9B (including impairment losses ¥19.8B and business restructuring expenses ¥1.3B) were recorded, compressing pretax income to ¥58.3B. The ratio of special losses to Net Income is about 67%, indicating one-off factors significantly depressed final profit. Non-operating income was ¥5.1B (0.6% of Revenue), primarily interest income ¥2.0B, dividend income ¥1.1B, and FX gains ¥0.5B. Non-operating expenses were ¥1.3B, mainly interest expense ¥0.8B and FX losses ¥0.8B. Dependency on non-operating items is low, and core ordinary income generation capacity is maintained. Accrual ratio of -6.6% is favorable, and OCF of ¥104.5B substantially exceeded Net Income ¥32.9B, reflecting appropriate cash realization. OCF/EBITDA of 0.95x is healthy; excluding non-cash items such as impairment, earnings quality is preserved. However, the effective tax rate of roughly 41.1% (Income taxes ¥24.0B / Pretax income ¥58.3B) is high, suggesting reversal of deferred tax assets or timing differences. The gap between Ordinary Income ¥79.6B and Net Income ¥32.9B is mainly due to special losses ¥21.9B and high tax burden, and the gap is expected to narrow next year as one-off losses drop out.
Full Year guidance: Revenue ¥900.0B (vs. prior year +12.4%), Operating Income ¥85.0B (vs. prior year +12.1%), Ordinary Income ¥87.0B (vs. prior year +9.3%), Net Income attributable to owners of the parent ¥61.0B. Operating margin assumed to remain around 9.4%, similar to this period. Year-to-date progress rates are Revenue 89.0%, Operating Income 89.2%, Ordinary Income 91.5%, generally on track. Net Income progressed only 53.9% vs. full-year forecast due to concentration of impairment and other special losses this period; the company assumes recovery of net margin next year as one-off losses drop out. Forecast EPS is ¥324.75 vs. current period actual ¥177.05. Dividend forecast ¥65.0 (interim ¥30 + year-end ¥35) implies a cut from this period’s dividend of ¥120 (interim ¥60 + year-end ¥60). Revenue recovery is premised on demand recovery in the core business and progress in price pass-through; Operating Income recovery assumes volume effects and disappearance of one-off costs. With Operating Profit Margin assumed flat, the plan emphasizes volume and mix recovery more than margin improvement.
Annual dividend is ¥120 (interim ¥60 + year-end ¥60), with total dividends approximately ¥21.8B (cash basis). Payout Ratio is 67.8% (total dividends ÷ Net Income attributable to owners of the parent), a high level but reflecting compression of Net Income by one-off losses. With Free Cash Flow ¥9.1B vs. dividends ¥21.8B, FCF coverage is 0.42x, insufficient on a pure FCF basis, but dividends were funded from abundant cash and deposits of ¥232.3B. Share buybacks effectively nil (CF -¥0.0B), so Total Return comprised dividends only. Total Return Ratio (dividend + buybacks) is approximately 66% (total return ¥21.8B ÷ Net Income ¥32.9B). Next fiscal year’s dividend forecast of ¥65.0 implies a cut, indicating a shift to prioritize investment even assuming profit recovery. DOE (Dividend on Equity) is about 2.7% (total dividends ¥21.8B ÷ average shareholders’ equity ~¥809B), preserving consistency with capital efficiency. From a sustainability standpoint, the aggressive CapEx (CapEx/Revenue 10.8%) and significant Construction in Progress (CIP/PPE 21.3%) mean that expanding FCF is a prerequisite to sustain dividends. Inventory reduction and CCC shortening to improve working capital efficiency, along with monetization of investments, are key to future FCF expansion and dividend sustainability.
Dependence on core business and demand volatility: Pipe & Fitting Systems accounts for 60% of Revenue (¥481.9B) and 83% of Operating Income (¥62.9B), indicating concentration. Slowdown in construction and infrastructure investment or delayed price pass-through can cause significant volatility — evidenced by sales down 8.3% and Operating Income down 30.6%. Sales to key customer Harrington are ¥85.5B (10.7% of Revenue), reflecting increased customer concentration. Demand cycle weakness and customer concentration raise revenue volatility risk.
Working capital efficiency deterioration and inventory risk: Inventory days 155 (prior year 150) and CCC 165 days (prior year 163) show lengthening. Inventory ¥21.45B (prior year ¥21.51B) is flat in absolute terms, but slower sales worsen turnover. Inventory buildup risks obsolescence and discounting, pressuring cash flow. Accounts Payable days shortened to 36 (prior year 39), tightening payment terms and further elongating CCC. Delays in inventory reduction and CCC shortening will constrain FCF growth and dividend sustainability.
Monetization risk of aggressive investments and special loss recurrence: CapEx ¥86.6B (10.8% of Revenue, 2.6x depreciation) and CIP ¥64.1B (21.3% of PPE) signal large investment projects; delays or cost overruns could trigger impairment risk and deteriorate capital efficiency. This period recorded impairment losses ¥19.8B (prior year ¥0.4B), which reduced Net Income by about 60%. Investment securities also surged to ¥45.7B (prior year ¥24.0B, +90.1%), increasing fair value volatility risk to equity. Long-term borrowings rose to ¥36.9B (+67.8%), and rising interest rates could increase burden. Progress in monetizing investments and preventing recurrence of special losses are prerequisites for earnings stability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.5% | 7.8% (4.6%–12.3%) | +1.7pt |
| Net Margin | 4.1% | 5.2% (2.3%–8.2%) | -1.1pt |
Operating margin exceeds the industry median by 1.7ppt, preserving structural revenue strength. However, Net margin is 1.1ppt below median, as special losses and high tax burden compressed final profit.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -6.0% | 3.7% (-0.4%–9.3%) | -9.7pt |
Revenue growth trails the industry median by 9.7ppt, with deceleration in the core business dragging consolidated growth. While the sector overall shows growth, the company lags, and defending market share and restoring demand are key challenges.
※ Source: Company aggregation
Elimination of one-off losses and normalization of earnings: This period’s special losses, including impairment of ¥19.8B (total special losses ¥21.9B), depressed Net Income by about 67%, but Net margin is expected to recover next year as one-off losses drop out. The company’s plan assumes Net Income attributable to owners of the parent of ¥61.0B (YoY +¥28.1B), premised on normalization of the effective tax rate and reduction of special items. Reducing earnings volatility is a structural factor that would support sustainability of shareholder returns and improve capital efficiency.
Monetization of investments and room to improve inventory efficiency: Large investments (CapEx ¥86.6B, CapEx/Revenue 10.8%) and CIP ¥64.1B (21.3% of PPE) are expected to contribute to Revenue and EBITDA once operational. Inventory days 155 and CCC 165 have substantial room for improvement; reducing inventory could significantly expand FCF. Given next year’s Revenue plan of +12.4% and assumed flat Operating margin of ~9.4%, recovery in volumes and monetization of investments are key to profit recovery. Progress on working capital efficiency and speed of capital project ramp-up will determine medium-term capital efficiency and Free Cash Flow generation.
Balance between financial soundness and growth investment: The company maintains a robust financial base — Equity Ratio 75.1%, D/E 0.33x, Debt/EBITDA 0.59x — and ample liquidity with Cash ¥232.3B vs. short-term interest-bearing debt ¥28.0B. While aggressive investment is financially supported, the gap between payout ratio 67.8% and FCF coverage 0.42x indicates a shift of cash allocation toward investments. Next year’s dividend forecast of ¥65.0 (reduced) clarifies the shift to prioritize growth investment. If investments are monetized and working capital efficiency improves, FCF can expand and reconcile shareholder returns with investment, enabling sustainable improvements in capital efficiency.
This report is an AI-generated financial analysis document created by analyzing XBRL financial statement data and does not constitute a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the company from publicly disclosed financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed before making investment decisions.