| Metric | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue | ¥4532.9B | ¥3988.3B | +13.7% |
| Operating Income | ¥1073.4B | ¥288.0B | +272.6% |
| Pre-tax Income | ¥1003.4B | ¥176.1B | +469.8% |
| Net Income | ¥1068.7B | ¥236.3B | +352.1% |
| ROE | 36.5% | 13.9% | - |
For the fiscal year ended March 2026, the Company reported Revenue of ¥4,532.9B (YoY +¥544.6B +13.7%), Operating Income of ¥1,073.4B (YoY +¥785.4B +272.6%), Ordinary Income of ¥629.4B (YoY +¥509.1B +423.3%), and Net Income attributable to owners of the parent of ¥1,068.7B (YoY +¥832.4B +352.1%), achieving substantial revenue and profit growth. Operating margin improved from 7.2% to 23.7% (+16.5pt). The decline in gross margin to 56.7% (prior 61.6%, -4.9pt) was offset by a significant reduction in SG&A ratio to 35.9% (prior 45.3%, -9.4pt) and Other Income of ¥557.8B (including approximately ¥490B gain on transfer of equity interests in affiliates). By region, North America accounted for 74.5% of revenue, and strong growth in that region (+34.2%) drove consolidated performance. Net assets increased by ¥1,229.9B to ¥2,924.7B, and ROE surged to 46.3% (prior 14.5%). However, Operating Cash Flow was ¥717.1B, only 0.67x of Net Income, indicating weak cash conversion due to increases in working capital.
[Revenue] Revenue was ¥4,532.9B (+13.7%), achieving a second consecutive year of revenue growth. By region, North America expanded significantly to ¥3,225.4B (+31.0%) driven by market expansion and FX effects, and IP income expanded materially to ¥201.6B (prior ¥23.7B, +¥177.9B), contributing to revenue growth. Japan declined to ¥847.7B (-8.4%) due to domestic price pressure, and Asia contracted substantially to ¥193.4B (-53.7%). By segment, North America recorded Revenue of ¥3,379.2B (74.5% of consolidated, +34.2%), Japan ¥923.6B (20.4%, -7.5%), Asia ¥230.1B (5.1%, -51.2%), with North America's dominant growth driving the top line. Gross margin declined to 56.7% (prior 61.6%, -4.9pt), suggesting product-mix changes or pricing pressure.
[Profitability] Operating Income was ¥1,073.4B (+272.6%). SG&A amounted to ¥1,625.6B (SG&A ratio 35.9%), improving from ¥1,806.1B prior and reflecting pronounced effects of restructuring. R&D expense was ¥440.0B (to Revenue ratio 9.7%), reduced from ¥498.7B prior. Other Income rose sharply to ¥557.8B from ¥183.6B, including approximately ¥490B of gains on transfer of equity interests in affiliates. Equity-method investment income swung to a ¥22.9B profit (prior ¥9.1B loss). Ordinary Income was ¥629.4B (+423.3%); financial income was ¥32.0B versus financial expenses of ¥101.9B, resulting in a net non-operating cost of ¥69.9B deducted from Operating Income. Pre-tax Income was ¥1,003.4B; Income Taxes and related amounted to -¥65.2B (effective tax rate -6.5%), with negative tax effects boosting final profit. Net Income attributable to owners of the parent was ¥1,068.7B (+352.1%). However, the main drivers of profit increase were non-recurring Other Income (asset sale gains) and a negative effective tax rate, so assessing sustainability on a core operating-profit basis is important.
The North America segment achieved Revenue of ¥3,379.2B (+34.2%), Operating Income of ¥757.4B (+77.8%), and a margin of 22.4%, marking substantial growth as the core segment. U.S.-directed Revenue was ¥3,206.6B (70.7% of consolidated), with robust sales to the three major wholesalers (Cencora ¥1,024.4B, McKesson ¥935.0B, Cardinal Health ¥691.5B). The Japan segment recorded Revenue of ¥923.6B (-7.5%)—down due to domestic drug price revisions—but Operating Income improved to ¥123.5B (+8.2%) and margin to 13.4% reflecting cost efficiencies. The Asia segment contracted to Revenue ¥230.1B (-51.2%) and Operating Income ¥94.5B (-60.5%) but maintained a high margin of 41.1%; the decline was primarily due to lower sales to China (¥193.4B, -53.7%). North America accounted for approximately 71% of operating income, highlighting regional concentration of earnings.
[Profitability] Operating margin was 23.7%, a 16.5pt improvement from 7.2% prior, and ROE rose sharply to 46.3% (prior 14.5%, +31.8pt). DuPont decomposition shows Net Profit Margin of 23.6% (prior 5.9%, +17.7pt) as the largest contributor, with Total Asset Turnover of 0.56x (prior 0.54x) and Financial Leverage of 2.75x (prior 4.38x). The sharp rise in net margin is largely driven by non-recurring gains (approx. ¥490B gain on transfer of equity interests in affiliates) and a negative effective tax rate; sustainability should be cautioned. ROA (on Ordinary Income basis) improved to 13.0% from 2.1% prior (+10.9pt). [Cash Quality] Operating CF / Net Income was 0.67x, indicating weak cash generation versus profit, mainly due to a large increase in trade receivables (+¥565.7B). Operating CF / EBITDA was 0.63x, and Cash Conversion Cycle (CCC) stretched to 159 days, with DSO 106 days, DIO 159 days, and DPO 105 days, pointing to working capital efficiency issues. Accrual ratio was 4.4% (healthy range), but Operating CF lagging Net Income raises concerns on earnings quality. [Investment Efficiency] Total Asset Turnover improved slightly to 0.56x (prior 0.54x); Fixed Asset Turnover was 1.02x (prior 0.91x). R&D was ¥440.0B, 9.7% of Revenue, below the pharmaceutical industry standard (15-20%), warranting review of reinvestment intensity for pipeline strengthening. [Financial Health] Equity Ratio improved to 36.4% (prior 22.8%, +13.6pt), and Interest-Bearing Debt was reduced to ¥2,177.9B (prior ¥3,053.6B, -¥875.7B). Debt/Equity was 0.74x (prior 1.80x), and Debt/EBITDA was 0.34x, indicating a significant reduction in leverage. Current Ratio was 103% (prior 105%), slightly lower but still tight; with Cash and Cash Equivalents of ¥443.1B and Short-term Borrowings of ¥381.3B, short-term liquidity is secured. Goodwill was ¥2,111.0B, representing 72.2% of Net Assets and 26.2% of Total Assets, indicating high balance sheet sensitivity to future impairments.
Operating CF was ¥717.1B (prior ¥165.0B, +334.6%) and improved materially, but remained only 0.67x of Net Income ¥1,068.7B. Major cash outflows were increases in Trade Receivables of -¥507.7B and decreases in Advance Receipts of -¥131.5B. Inventories decreased by ¥90.1B, improving inventory efficiency, while Accounts Payable increased by ¥244.3B partially offsetting working capital outflows. Subtotal was ¥789.2B, and after interest and dividend receipts ¥11.2B, interest paid -¥44.9B, and corporate tax payments -¥45.6B, Operating CF totaled ¥717.1B. Investing CF was positive ¥225.5B, driven by proceeds of ¥304.8B from loss of control of subsidiaries (disposal of China businesses, etc.) and sale of investments ¥42.1B, outweighing capital expenditures -¥46.1B and intangible asset acquisitions -¥27.0B. Free Cash Flow (Operating CF + Investing CF) was ¥942.6B, ample and supporting dividend and investment capacity. Financing CF was -¥912.7B, with long-term borrowings repayments -¥840.0B and net short-term borrowings reduction -¥44.0B materially lowering interest-bearing debt. Cash and Cash Equivalents increased ¥81.5B from opening balance ¥361.6B (including reclassification from assets held for sale) to closing ¥443.1B, with FX translation effects contributing +¥50.2B. Working capital increases constrained cash generation; strengthening receivables collection and shortening CCC are key priorities.
Current-period earnings structure was supported by recurring income (product sales ¥4,149.1B and IP income ¥201.6B) plus substantial non-recurring Other Income ¥557.8B (including approx. ¥490B gain on transfer of equity interests in affiliates). Among Operating Income ¥1,073.4B, improvements in SG&A ratio and increased IP income are sustainable elements, whereas gains on transfer of equity interests are one-off and pose downside risk in the following year. Financial income ¥32.0B versus financial expenses ¥101.9B created a net non-operating cost burden of ¥69.9B, partially offset by equity-method gains of ¥22.9B. Income Taxes and related -¥65.2B (effective tax rate -6.5%) reflects an unusual negative tax rate, possibly due to recognition of deferred tax assets or prior-year adjustments; sustainability is limited. Operating CF being only 0.67x of Net Income indicates accrual buildup, and increases in trade receivables reduced cash conversion efficiency. Comprehensive Income was ¥1,230.0B, exceeding Net Income by ¥161.3B; Other Comprehensive Income of ¥161.3B (FX translation differences ¥113.3B, remeasurement of defined benefit liabilities ¥35.1B, fair value changes of financial assets ¥12.8B) contributed. The gap between Ordinary Income ¥629.4B and Net Income ¥1,068.7B (~70% divergence) was driven by Other Income and the negative effective tax rate, underscoring the need to verify core earning power sustainability.
Full Year guidance remains Revenue ¥5,400.0B, Operating Income ¥900.0B (YoY -16.2%), Net Income attributable to owners of the parent ¥770.0B (YoY -27.9%), and EPS forecast ¥172.89. Actuals achieved Revenue ¥4,532.9B (84.0% progress), Operating Income ¥1,073.4B (achievement rate 119.3%), and Net Income ¥1,068.7B (achievement rate 138.8%), materially exceeding profit forecasts. The overachievement on Operating Income was mainly due to greater-than-expected SG&A reductions and contributions from Other Income (gains on transfer of equity interests in affiliates). The FY guidance decline in Operating Income YoY likely factors in the loss of non-recurring income; the Revenue guidance progress of 84.0% implies remaining-period seasonality and potential variability in IP income. Actual EPS of ¥268.99 exceeded forecast ¥172.89 by 56%; assessment of achievement on a core EPS basis excluding one-off items is important.
No dividend was paid this period (interim 0, year-end 0), continuing a dividend suspension. Payout Ratio was 0%. Despite abundant liquidity—Free Cash Flow ¥942.6B and Cash & Cash Equivalents ¥443.1B—shareholder returns were deferred. No share buybacks were executed (¥0B on cash flow statement), resulting in a Total Return Ratio of 0%. No disclosure was provided on dividend resumption prospects; given rising working capital (Trade Receivables +¥565.7B), the need to reinforce R&D investment, and high goodwill ratio, management appears to prioritize internal retention to strengthen the financial base and invest in the pipeline. Conditions for dividend resumption likely include convergence of Operating CF toward Net Income, improvement in working capital efficiency, and stabilization of core profits independent of one-off items. Retained earnings rose to ¥1,589.8B (prior ¥467.8B, +¥1,122.0B), indicating expanded medium-to-long-term capacity for shareholder returns.
Regional concentration risk: The North America segment accounts for 74.5% of Revenue and about 71% of Operating Income, making performance highly sensitive to U.S. drug pricing policy, reimbursement systems, and distribution structure. High sales concentration to the three major wholesalers (total ¥2,651.0B, 58.5% of Revenue) raises risk that changes in trading terms or deterioration in wholesaler health could directly impact earnings. Regional Revenue skew also increases FX sensitivity (benefit in JPY weakness, headwind in JPY strength), necessitating monitoring of FX exposure.
Declining cash conversion efficiency risk: With Operating CF / Net Income at 0.67x and Operating CF / EBITDA at 0.63x, earnings are not easily converting to cash. DSO 106 days and DIO 159 days show expanded working capital. If working capital grows further with sales expansion, Free Cash Flow pressure and tighter liquidity could result. If CCC of 159 days is not shortened, financing needs may increase during revenue growth phases, reducing financial flexibility.
High goodwill ratio and impairment risk: Goodwill of ¥2,111.0B represents 72.2% of Net Assets and 26.2% of Total Assets; deterioration in business conditions or profitability could trigger impairment losses, materially eroding equity and sharply reducing ROE. The Company recorded impairment losses of ¥51.9B in the prior year, and monitoring the reasonableness of impairment-test assumptions (discount rates, growth rates, future cash flows) for goodwill, mainly related to North America, is critical. Although Equity Ratio improved to 36.4%, the high goodwill ratio remains a vulnerability to financial stability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 46.3% | -19.7% (-58.1%–4.6%) | +66.0pt |
| Operating Margin | 23.7% | -94.2% (-358.4%–8.6%) | +117.9pt |
| Net Margin | 23.6% | -101.5% (-373.7%–5.9%) | +125.1pt |
The Company’s profitability significantly exceeds industry medians, ranking at the top for ROE, Operating Margin, and Net Margin. However, the large contribution from non-recurring items necessitates evaluation of sustainability on a core basis.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 13.7% | -0.6% (-22.4%–13.3%) | +14.3pt |
Revenue growth outperformed the industry median by 14.3pt, driven by North American market expansion and increased IP income. Relative growth momentum within the industry is high.
※ Source: Company compilation of public financial statements
The sustainability of North America growth and progress in cost-structure reforms are the primary focus areas. North America, accounting for 74.5% of Revenue, posted +34.2% growth, but the decline in gross margin (-4.9pt) suggests product-mix shifts or pricing pressure; SG&A ratio improvement (-9.4pt) helped achieve a 23.7% Operating margin. Expansion of IP income to ¥201.6B also contributed to profit, but its sustainability requires verification. The structure of final profit increase—driven by one-off gains (approx. ¥490B gain on transfer of equity interests in affiliates) and a negative effective tax rate—means monitoring core Operating Income and the balance with R&D investment (R&D to Revenue 9.7%) is critical.
Immediate priorities are improving working capital efficiency and normalizing cash generation. With Operating CF / Net Income at 0.67x and CCC 159 days (DSO 106 days, DIO 159 days), working capital expansion continues to impede cash conversion. Trade Receivables increased by ¥565.7B—far outpacing Revenue growth of 13.7%—suggesting extended collection terms or expanded customer credit. Free Cash Flow ¥942.6B includes one-off asset sale proceeds, so convergence of Operating CF toward Net Income and normalization of working capital are prerequisites for sustainable cash generation. Goodwill of ¥2,111.0B (72.2% of Net Assets) and a tight Current Ratio of 103% are additional financial caution points.
This report is an earnings analysis document automatically generated by AI based on 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 from public financial statements. Investment decisions are your responsibility; consult a professional advisor as necessary.