ROHTO PHARMACEUTICAL CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The April–June 2026 period (Q1) was a quarter characterized by “strong operating performance but a decline in the bottom line due to a reversal effect,” as Revenue and Operating Income increased while Ordinary Income and Net Income declined owing to the reversal of high non-operating income recorded in the previous year. Revenue was ¥91.62B (up +11.8% YoY), and Operating Income was ¥13.66B (up +16.8% YoY, with an Operating Income margin of 14.9%, improving by +0.6pt from 14.3% in the previous year). Meanwhile, Ordinary Income was ¥14.49B (down -10.1% YoY), and Net Income attributable to owners of the parent was ¥10.65B (down -9.5% YoY). The primary reason for the decline in profit was the sharp decrease in non-operating income from ¥5.04B to ¥1.49B, as dividend income declined from ¥4.11B in the same period of the previous year to ¥0.81B in the current period.

Factors Affecting Results

【Revenue】Revenue of ¥91.62B increased by +11.8% YoY, marking double-digit growth. By segment, Asia at ¥36.55B (+17.4%) and Europe at ¥6.79B (+20.8%) led growth, while the core Japan segment also remained solid at ¥43.81B (+4.7%). The Americas generated ¥5.88B (+8.5%), while Other, outside the reportable segments, generated ¥1.01B (+13.6%), with all regions securing Revenue growth.

【Profit and Loss】Operating Income was ¥13.66B (+16.8%), as the +11.0% increase in SG&A expenses was below the +11.8% growth in Revenue, resulting in operating leverage. The gross margin improved by +0.3pt to 56.3% (56.0% in the previous year), apparently reflecting effective cost-of-sales management and product mix. Meanwhile, Ordinary Income of ¥14.49B (-10.1%) declined primarily due to the decrease in non-operating income resulting from lower dividend income (¥4.11B → ¥0.81B), while Profit Before Tax remained at ¥14.80B (-1.8%). The effective tax rate increased to 25.4% from 20.0% in the previous year, and income taxes increased to ¥3.75B from ¥3.02B. Extraordinary income was limited to a modest gain on the sale of investment securities of ¥0.31B, and its impact on Net Income was limited to a minor temporary factor. In conclusion, the operating level delivered higher Revenue and Operating Income, while Ordinary Income and Net Income declined due to the reversal of non-recurring non-operating income; overall, the results are classified as higher Revenue but lower profit.

Segment Analysis

Japan (the largest segment by composition) generated Revenue of ¥43.81B (+4.7%) and Operating Income of ¥6.87B (+8.8%), with a profit margin of 15.7% (15.1% in the previous year), achieving moderate Revenue and profit growth while maintaining profitability. Asia generated Revenue of ¥36.55B (+17.4%) and Operating Income of ¥5.68B (+18.8%), with a profit margin of 15.5% (15.3% in the previous year), driving growth as one of the two main pillars alongside Japan. Europe recorded sharp expansion, with Revenue of ¥6.79B (+20.8%) and Operating Income of ¥0.66B (+395.5%); its profit margin improved substantially to 9.8% from 2.4% in the previous year. Although its scale is small, the improvement in its earnings structure is notable. The Americas generated Revenue of ¥5.88B (+8.5%) and Operating Income of ¥0.23B (+22.8%), with a profit margin of 3.8% (3.4% in the previous year), remaining on a growth trajectory but at a lower level than the other regions. With all reportable segments achieving higher Revenue and Operating Income, the sustainability of Europe’s margin improvement will be a key focus going forward.

Key Financial Metrics

【Profitability】The Operating Income margin was 14.9%, improving by +0.6pt from 14.3% in the previous year, while the gross margin also rose by +0.3pt to 56.3% (56.0% in the previous year). In contrast, the Net Income margin (on a basis attributable to owners of the parent) was 11.6%, down -2.8pt from 14.4% in the previous year, reflecting the impact of lower non-operating income.【Cash Flow Quality】Days sales outstanding (DSO) was 50.4 days (58.5 days in the previous year), days inventory outstanding (DIO) was 86.5 days (96.1 days in the previous year), and the cash conversion cycle (CCC) was 83.8 days (101.8 days in the previous year). All three metrics shortened from the previous year, indicating an improving trend in working capital efficiency.【Investment Efficiency】ROE was 3.4% (quarterly actual), while total asset turnover was approximately 0.19x and has been gradually increasing in line with Revenue growth.【Financial Soundness】The Equity Ratio remained high at 67.4% (approximately 66.0% in the previous year), while the current ratio was 216.8% and the quick ratio was 181.6%, indicating strong short-term payment capacity. Interest-bearing debt was modest, comprising short-term borrowings of ¥22.15B and long-term borrowings of ¥2.71B. The ratio of Operating Income to interest expense (¥0.32B) was 42.7x, indicating a conservative financial structure.

Cash Flow Analysis

Cash and deposits were ¥84.77B, virtually unchanged at -2.4% compared with the end of the same period of the previous year. Short-term borrowings were ¥22.15B, down -10.5% YoY, indicating progress in reducing interest-bearing debt. Investment securities increased by +4.9% to ¥58.64B, suggesting that a portion of funds was allocated to investment assets. Income taxes payable decreased by -32.6% YoY to ¥4.43B, reflecting progress in cash outflows related to tax payments. In terms of working capital, both accounts receivable and inventory turnover days shortened from the previous year, indicating an improving trend in the efficiency of cash generation from operating activities. Given the substantial liquidity on hand, reflected in an Equity Ratio of 67.4% and a current ratio of 216.8%, the Company’s ability to meet funding needs for capital expenditures, dividends, and other purposes remains relatively stable.

Quality of Earnings

The primary factor creating the difference between Ordinary Income and Net Income was non-operating income and expenses. Dividend income accounted for ¥0.81B of non-operating income of ¥1.49B, but declined substantially from ¥4.11B in the previous year, making this reversal the central factor behind the declines in Ordinary Income and Net Income. Extraordinary income consisted solely of a gain on the sale of investment securities of ¥0.31B. Although this increased from ¥0.04B in the previous year, the amount was small and did not constitute a temporary factor that materially distorted current-period profit or loss. Comprehensive Income was ¥13.93B, a +¥2.66B variance from Net Income attributable to owners of the parent of ¥10.65B, primarily due to foreign currency translation adjustments of +¥2.66B (−¥5.33B in the previous year). Whereas Comprehensive Income was below Net Income in the previous year due to the yen-appreciation trend, the current period saw Comprehensive Income exceed Net Income as the trend shifted toward yen depreciation. This indicates that foreign exchange valuation had a relatively significant impact on earnings quality during the quarter. The effective tax rate increased to 25.4% from 20.0% in the previous year, and the higher tax burden also contributed to the lack of growth in Net Income.

Earnings Forecast and Guidance

Progress against the full-year plan was 24.6% for Revenue (¥91.62B/¥372.30B), 30.4% for Operating Income (¥13.66B/¥45.00B), 30.6% for Ordinary Income (¥14.49B/¥47.40B), and 30.3% for Net Income attributable to owners of the parent (¥10.65B/¥35.20B). Compared with a simple quarterly allocation benchmark of 25%, Revenue was slightly below the benchmark, while all profit indicators were above it, indicating that profit performance was ahead of schedule as of Q1. The full-year Ordinary Income forecast calls for a -1.2% YoY decline, while the -10.1% decline in Q1 represents a faster pace of decline. However, the full-year plan itself may have been set at a conservative level. Although the earnings forecast was revised during the quarter, there was no revision to the dividend forecast, and the annual dividend forecast remained unchanged at ¥50.

Shareholder Returns

The annual dividend forecast is ¥50 per share, and no revision to the dividend forecast was made during the quarter. Using the weighted-average number of shares outstanding during the period of 225,964 thousand shares, the estimated annual total dividend is approximately ¥11.30B, resulting in an estimated Payout Ratio of approximately 32.1% against the full-year Net Income forecast of ¥35.20B (on a basis attributable to owners of the parent). Considering the financial foundation represented by an Equity Ratio of 67.4% and a current ratio of 216.8%, the current dividend level does not place an excessive burden on the balance of cash and deposits of ¥84.77B.

Risk Factors

1. Non-operating income volatility risk: Dividend income declined from ¥4.11B in the same period of the previous year to ¥0.81B in the current period, becoming the primary factor behind the YoY changes in Ordinary Income and Net Income (-10.1% and -9.5%, respectively). Going forward, the structure remains susceptible to quarter-to-quarter fluctuations in Ordinary Income and Net Income due to factors such as the seasonality of dividend receipt timing.

2. Regional growth dependency risk: The primary drivers of Revenue growth were Asia (+17.4%) and Europe (+20.8%), with these two regions accounting for more than half of overall growth. Foreign exchange movements and changes in local demand could affect Revenue and profit margins in these regions.

3. Increase in retirement benefit obligations: The liability for retirement benefits was ¥2.25B, up +218% YoY (¥0.71B → ¥2.25B). Changes in actuarial assumptions, such as the discount rate, may affect the Company’s financial position going forward.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (pharma)

Profitability and Returns

The Operating Income margin is slightly below the industry median, while the Net Income margin is substantially above the industry median, indicating relatively higher profitability at the Net Income level than at the operating level.

Growth and Capital Efficiency

The Revenue growth rate is above the industry median and is tracking close to the upper bound of the IQR (13.0%).

※Source: Company compilation

Key Takeaways from the Financial Results

1. The improvement in the Operating Income margin to 14.9% (from 14.3% in the previous year, +0.6pt) and the gross margin to 56.3% (+0.3pt) indicates a structural improvement in profitability driven by improved pricing and product mix, as well as relative control of SG&A expenses.

2. The declines in Ordinary Income and Net Income were primarily attributable to the non-recurring reversal of high dividend income in the previous year (¥4.11B → ¥0.81B), a factor different in nature from the underlying operating performance.

3. Full-year progress was 24.6% for Revenue, compared with 30.4% for Operating Income, 30.6% for Ordinary Income, and 30.3% for Net Income. All profit indicators exceeded the Revenue progress rate, indicating that profit generation was ahead of schedule as of Q1.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type, explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,510–¥1,599 at ±1% for the cost of equity, and ¥1,551–¥1,557 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a time discrepancy from the full-year forecast).
• Since net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: residual income model / Interest rate reference month: 2026-07 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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 discretion and responsibility, after consulting with a professional as necessary.

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