| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3437.2B | ¥3086.2B | +11.4% |
| Operating Income / Operating Profit | ¥411.2B | ¥382.3B | +7.5% |
| Ordinary Income | ¥479.7B | ¥397.2B | +20.8% |
| Net Income | ¥248.8B | ¥188.6B | +31.9% |
| ROE | 7.8% | 6.7% | - |
The fiscal year ending March 2026 delivered revenue of ¥3,437B (YoY +¥351B, +11.4%), Operating Income of ¥411B (YoY +¥29B, +7.5%), Ordinary Income of ¥480B (YoY +¥83B, +20.8%), and Net income attributable to owners of parent of ¥342B (YoY +¥31B, +11.0%), achieving top- and bottom-line growth. Revenue growth was driven by double-digit expansion in Asia (+23.9%) and Europe (+24.6%). Although the operating margin declined modestly to 12.0% (down 0.4pt from 12.4% a year earlier), an expansion in non-operating income (dividends received ¥44.1B, foreign exchange gains ¥13.4B, etc.) led to a substantial +20.8% increase at the ordinary income level. Net income recorded high growth of +31.9% due to lower corporate tax burden and compression of extraordinary losses.
Revenue of ¥3,437B (+11.4%) achieved growth across all segments. Japan ¥1,740B (+3.0%) showed stable growth in a mature market; Asia ¥1,311B (+23.9%) benefited from expanded distribution and brand penetration in China and Southeast Asia; Europe ¥241B (+24.6%) owed growth to M&A effects and stronger local sales; Americas ¥232B (+2.5%) finished with modest growth amid market fluctuations. By product, Skincare ¥1,969B (57.3% of total) remained the core, Oral / Food ¥543B grew substantially (+36.3%), and Medical ¥381B (+11.4%) expanded driven by CDMO operations and prescription ophthalmic products.
Profit-wise, Operating Income ¥411B (+7.5%) underperformed revenue growth (+11.4%), yielding an operating margin of 12.0% (down 0.4pt from 12.4% a year earlier). Gross margin remained resilient at 56.1% (prior year 56.5%) through pricing measures and product mix, but SG&A ¥1,516B (+11.3%) rose in line with sales growth; front-loaded investments in advertising ¥409B (11.9% of sales) and R&D ¥137B (4.0% of sales) limited operating leverage. The European segment’s margin of 4.2% (prior year 5.9%) notably depressed the company-wide average. Ordinary Income ¥480B (+20.8%) was aided by expanded non-operating income ¥90B (prior year ¥35B), primarily dividends received ¥44.1B (up from ¥5.6B) and foreign exchange gains ¥13.4B (up from ¥5.2B). Extraordinary items improved as valuation losses on investment securities narrowed to ¥12.3B (prior year ¥20.5B), resulting in profit before tax ¥468B (+12.5%). After corporate taxes ¥124B (effective tax rate 26.5%, improved from 26.8% prior year), Net income attributable to owners of parent settled at ¥342B (+11.0%). In conclusion, revenue and profit increased, with non-operating income making a large contribution at the ordinary income level.
Japan segment: Revenue ¥1,740B (+3.0%), Operating Income ¥221B (-1.5%), margin 12.7% (down 0.6pt from 13.3%).
Asia segment: Revenue ¥1,311B (+23.9%), Operating Income ¥150B (+29.8%), margin 11.5% (improved 0.6pt from 10.9%). Expansion of distribution and recovery of brand investment in China and Southeast Asia positioned Asia as a company-wide growth driver.
Europe segment: Revenue ¥241B (+24.6%), Operating Income ¥10B (-28.8%), margin 4.2% (worsened 1.7pt from 5.9%). Despite revenue growth, structural higher costs at local entities and new market investment burdens compressed profits.
Americas segment: Revenue ¥232B (+2.5%), Operating Income ¥17B (+10.6%), margin 7.4% (improved 0.6pt from 6.8%). Cost efficiency measures paid off amid market volatility.
Profitability: Operating margin 12.0% (down 0.4pt from 12.4%), Net margin 10.0% (flat at 10.0%), ROE 7.8% (down 0.2pt from 8.0%). The operating margin reflects the balance between an SG&A ratio of 44.1% (flat at 44.1%) and a gross margin of 56.1% (down 0.4pt from 56.5%), with front-loaded investments and Europe’s low profitability weighing on results. ROE remained near prior-year levels due to maintained net margin and unchanged total asset turnover of 0.71x (prior year 0.71x).
Cash quality: Operating Cash Flow (OCF) ¥477.9B equals 1.92x of Net income ¥248.8B, indicating good cash conversion. OCF to EBITDA ratio — OCF ¥477.9B vs. EBITDA (Operating Income ¥411.2B + Depreciation ¥153.3B = ¥564.5B) — stands at 84.7%, with working capital build (AR -¥51.8B, inventory -¥20.7B, AP -¥1.4B; total -¥73.9B) limiting contribution.
Investment efficiency: CapEx ¥114.9B vs. Depreciation ¥153.3B suggests an investment recovery phase. Total asset turnover 0.71x indicates scope to improve asset efficiency. Goodwill ¥342.4B represents 10.7% of shareholders’ equity — a conservative level.
Financial soundness: Equity Ratio 65.9% (improved 5.7pt from 60.2%), Current Ratio 203.9%, Quick Ratio 171.4%, Debt/EBITDA 0.50x (short-term borrowings ¥247.4B + long-term borrowings ¥28.7B = ¥276.1B vs. EBITDA ¥564.5B) — indicating strong financial resilience. Cash and deposits ¥868.2B cover 74.0% of short-term liabilities ¥1,173.5B, limiting practical liquidity risk.
Operating Cash Flow ¥477.9B (YoY +29.4%) was calculated from a subtotal of ¥555.2B less working capital changes -¥73.9B (AR -¥51.8B, inventory -¥20.7B, AP -¥1.4B) and corporate tax payments ¥119.4B. Working capital changes were driven by inventory accumulation and increased receivables associated with sales growth. Investing Cash Flow was -¥297.8B, including CapEx -¥114.9B, intangible asset acquisitions -¥147.6B, and acquisition of subsidiary shares -¥744.8B (M&A execution), partially offset by proceeds from sale of investment securities ¥13.2B. Financing Cash Flow was -¥118.5B, influenced by increases in short-term borrowings ¥26.4B and long-term borrowings ¥18.5B, alongside long-term debt repayments -¥26.1B, dividend payments -¥92.6B, and shares issued to non-controlling interests ¥316.2B (subsidiary capital raising). Free Cash Flow (OCF + Investing CF) was positive at ¥180.1B, providing capacity above dividend payments. Cash and deposits increased ¥96.6B from ¥771.6B at the beginning of the period to ¥868.2B at the end, with foreign exchange effects contributing ¥33.3B.
Ordinary Income ¥479.7B exceeded Operating Income ¥411.2B by ¥68.5B, primarily due to non-operating income ¥90.1B (dividends received ¥44.1B, foreign exchange gains ¥13.4B, investment partnership gains ¥4.0B). Dividends received rose sharply from ¥5.6B the prior year and boosted ordinary income. Extraordinary items netted -¥11.5B (gains on sales of investment securities ¥3.4B, valuation losses on investment securities -¥12.3B, losses on disposal of fixed assets -¥2.0B, etc.), improving from -¥17.5B the prior year. Other comprehensive income ¥487.9B exceeded Net income ¥248.8B by ¥239.1B, driven by foreign currency translation adjustments ¥83.5B, valuation differences on available-for-sale securities ¥48.1B, and actuarial adjustments related to retirement benefits ¥12.2B. The quality of OCF shows a structure where OCF ¥477.9B is derived from an OCF subtotal ¥555.2B less working capital changes -¥73.9B, meaning inventory and receivable increases tied to revenue growth act as accruals and leave some room for improvement in cash conversion efficiency. Dependence of ordinary income on non-operating income has risen, making maintenance of core operating profitability critical for earnings sustainability.
Full Year (FY) forecast: Revenue ¥3,695B (+7.5%), Operating Income ¥438B (+6.5%), Ordinary Income ¥461B (-3.9%), Net income attributable to owners of parent ¥345B. Progress against the full-year forecast based on current results is: Revenue 93.0%, Operating Income 93.9%, Ordinary Income 104.1%, Net Income 99.3%, with Ordinary Income showing progress ahead of plan. The projected year-on-year decline in Ordinary Income reflects an assumption of a reversion of the one-off non-operating income (dividends received and FX gains) recorded in the current period. Actual Operating Income ¥411B is 6.2% below the forecasted ¥438B, assuming an incremental ¥27B (+6.6%) in H2.
Total annual dividend consists of an interim dividend of ¥21 and a year-end dividend of ¥25 (prior year year-end was ¥16; increase of ¥9), totaling ¥46, yielding a Payout Ratio of 30.3% (based on EPS ¥151.56). Prior year annual dividend was ¥16, so this represents a significant full-year increase. Based on the full-year forecast dividend of ¥25, the payout ratio on this period’s results is 26.6% (calculated from Net income ¥248.8B and total dividends ¥92.6B). Dividend payments ¥92.6B are covered 1.95x by Free Cash Flow ¥180.1B, indicating high sustainability. No share buybacks were executed this period; shareholder returns remain dividend-focused. A dividend revision (increase of the year-end dividend from ¥23 to ¥25) was announced on the earnings release date, confirming a progressive dividend policy linked to profit growth.
Structural low profitability risk in the Europe segment: Operating margin 4.2% (down 1.7pt from 5.9%) shows profitability deterioration despite revenue growth. Fixed-cost burdens at local entities and new market investment costs are heavy; without improvement, this will cap company-wide margins. Segment Operating Income ¥10.1B accounts for only 2.5% of consolidated profits, requiring returns commensurate with its 7.0% share of revenue.
Deterioration of working capital efficiency and reduced cash-generating capacity: Working capital changes -¥73.9B (AR -¥51.8B, inventory -¥20.7B) eroded 13.3% of the OCF subtotal ¥555.2B. Inventory ¥381.3B (prior year ¥363.9B) equates to approximately 92 days of inventory (based on Cost of Sales ¥1,510.3B), and deteriorating inventory efficiency contributed to an OCF/EBITDA ratio of 84.7%, below the >90% benchmark. Without working capital improvements, cash generation in a growth phase may be constrained.
Earnings volatility risk from increased reliance on non-operating income: Dividends received ¥44.1B (prior year ¥5.6B) represent 9.2% of Ordinary Income ¥479.7B, indicating earnings are sensitive to dividends from equity-method investees and investment securities. Including foreign exchange gains ¥13.4B, total non-operating income ¥90.1B equals 21.9% of Operating Income ¥411.2B. The assumption of a decline in non-operating income is embedded in the full-year Ordinary Income forecast. Maintaining core operating profitability is essential for earnings stability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.0% | -94.2% (-358.4%–8.6%) | +106.2pt |
| Net Margin | 7.2% | -101.5% (-373.7%–5.9%) | +108.8pt |
Both operating and net margins substantially exceed industry medians, indicating high profitability within the pharmaceutical sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 11.4% | -0.6% (-22.4%–13.3%) | +12.0pt |
Revenue growth outperforms the industry median by 12.0pt, driven by high growth in Asia and Europe.
※ Source: Company aggregation
Sustainability of high growth in the Asia segment is key to lifting consolidated ROE: Asia Operating Income ¥150B (+29.8%), margin 11.5% (up 0.6pt from 10.9%) accounts for 36.5% of consolidated Operating Income ¥411B, establishing it as a growth driver. Deeper distribution and recovery of brand investment in China and Southeast Asia support sustainable double-digit growth and margin improvement, which should raise consolidated ROE.
Opportunity to expand next-period OCF via inventory and working capital efficiency improvements: Inventory days 92 and working capital changes -¥73.9B are primary reasons OCF/EBITDA stands at 84.7% below the >90% benchmark. If inventory optimization and accelerated receivables collection can compress working capital changes to less than -¥50B, Operating Cash Flow could exceed ¥500B, improving Free Cash Flow margin (FCF / Revenue) from the current 5.2% to above 7%.
This report is an earnings analysis document automatically generated by AI using 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 publicly disclosed financial statements. Investment decisions are your responsibility; please consult a professional advisor as appropriate.