| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥623.1B | ¥605.6B | +2.9% |
| Operating Income | ¥26.4B | ¥41.3B | -36.1% |
| Ordinary Income | ¥23.5B | ¥37.8B | -37.9% |
| Net Income | ¥20.1B | ¥-32.9B | -39.9% |
| ROE | 5.7% | -10.0% | - |
FY2026 results show revenue of ¥623.1B (YoY +¥17.4B +2.9%) with topline growth, while Operating Income was ¥26.4B (YoY -¥14.9B -36.1%), Ordinary Income ¥23.5B (YoY -¥14.3B -37.9%), and Net Income ¥20.1B (YoY -¥53.0B -39.9%; prior year turned from loss to profit due to prior special loss of ¥87.5B), representing a significant decline in profits. Gross margin was 25.7% (prior year 27.3%, -1.6pt) and operating margin was 4.2% (prior year 6.8%, -2.6pt), indicating deteriorated profitability; SG&A ratio rose to 21.4% (prior year 20.5%, +0.9pt). Because prior year included a special loss of ¥87.5B that produced a Net Income loss of ¥-32.9B, the YoY -39.9% for Net Income reflects a move to positive territory but a decline in absolute amount. Operating Cash Flow (OCF) was -¥62.2B (prior year -¥33.1B), widening the cash deficit and highlighting worsened working capital and weakened cash generation.
[Revenue] Revenue was ¥623.1B (YoY +2.9%), a modest increase. Cost of sales was ¥463.1B (prior year ¥440.3B, +5.2%), rising faster than revenue and pushing gross margin down to 25.7% (prior year 27.3%). The main drivers of margin pressure are likely higher raw material & logistics costs and reduced absorption of fixed manufacturing costs. Segment disclosure is not provided, but gross profit declined to ¥159.9B (prior year ¥165.3B, -3.2%).
[Profit & Loss] SG&A was ¥133.6B (prior year ¥124.0B, +7.7%), increasing well above revenue growth (+2.9%), raising the SG&A ratio to 21.4% (prior year 20.5%, +0.9pt). As a result, Operating Income fell to ¥26.4B (prior year ¥41.3B, -36.1%), and operating margin declined to 4.2% (prior year 6.8%, -2.6pt). Non-operating items improved slightly to net -¥2.9B (prior year -¥3.5B), but interest expense increased to ¥3.3B (prior year ¥1.6B, +2.0x), raising financing burden. Ordinary Income was ¥23.5B (prior year ¥37.8B, -37.9%). Extraordinary items were limited to net +¥0.9B (gain on sale of investment securities ¥1.2B), and with the absence of the prior year special loss of ¥87.5B (presumed impairments), Profit Before Tax turned positive at ¥24.4B (prior year -¥49.7B). Corporate taxes were ¥4.3B (prior year -¥16.8B; prior year included deferred tax asset recognition causing negative tax expense), resulting in Net Income of ¥20.1B (prior year -¥32.9B, YoY -39.9%). The YoY -39.9% is compared to last year’s loss (hence a turnaround to profit in headline terms), but in absolute terms profits are substantially lower than two years ago. Conclusion: revenues up but profits down, with weakened profitability.
[Profitability] Operating margin was 4.2% (prior year 6.8%, -2.6pt), and Net Income margin was 3.2% (prior year -5.4%, prior year negative due to special loss), both at low levels. ROE was 5.7% (prior year -9.4%, prior year negative due to net loss), improving year-on-year due to return to profitability but overall returns on equity remain low. EBIT was ¥26.4B, and EBITDA (EBIT + depreciation ¥26.2B) was ¥52.6B, yielding an EBITDA margin of 8.4%. [Cash Quality] OCF/Net Income was -3.09x, indicating poor cash conversion of earnings. Cash Conversion Cycle (CCC) was 249 days (Days Sales Outstanding 158 days + Days Inventory Outstanding 124 days - Days Payable Outstanding 32 days), indicating prolonged working capital tie-up. Accrual (Net Income - OCF) was a positive ¥82.3B, showing large shortfall of cash relative to reported profit. [Investment Efficiency] Total asset turnover was 0.69x (Revenue ¥623.1B ÷ Total Assets ¥903.2B). Capital expenditure was ¥12.7B versus depreciation of ¥26.2B, a CapEx/Depreciation ratio of 0.48x, below depreciation and potentially insufficient to maintain production capacity. [Financial Soundness] Equity Ratio was 38.8% (prior year 40.4%, -1.6pt). Total interest-bearing debt (short-term borrowings ¥260.0B + long-term borrowings ¥18.6B + securitized short/long borrowings ¥6.0B) totaled ¥278.6B, giving Debt/EBITDA of 5.3x, which is high. Interest coverage (EBIT ÷ interest expense) was 8.05x (¥26.4B ÷ ¥3.3B), indicating the ability to cover interest but with limited cushion. Current ratio was 110.9% (current assets ¥573.4B ÷ current liabilities ¥516.8B), and quick ratio was 84.8%, indicating minimal short-term liquidity. Cash & deposits ¥48.5B are only 0.19x of short-term interest-bearing debt ¥260.6B (short-term borrowings + long-term borrowings due within one year), indicating high reliance on borrowings.
Operating Cash Flow was -¥62.2B (prior year -¥33.1B), a large outflow. Subtotal (before working capital changes) was -¥46.9B, and even adding back depreciation ¥26.2B, core cash generation is weak. Working capital movements—inventory increase ¥7.4B, accounts receivable increase ¥4.0B, accounts payable decrease ¥15.5B—resulted in roughly ¥27B of cash being tied up. Corporate tax payments of ¥13.4B also contributed to outflows. Investing Cash Flow was -¥15.2B (CapEx ¥12.7B, intangible asset investment ¥3.9B, proceeds from sale of investment securities ¥2.6B); CapEx was 0.48x of depreciation ¥26.2B. Free Cash Flow was -¥77.4B, a large deficit. Financing Cash Flow was +¥63.2B, mainly due to net increase in short-term borrowings of ¥80.0B, which filled the funding gap, although there were outflows of ¥8.3B for long-term debt repayments and ¥7.3B for dividend payments. As a result, Cash & Cash Equivalents fell from ¥62.6B at the beginning of the period to ¥48.5B at period-end, a decline of ¥14.2B (-22.6%). The large OCF deficit is mainly driven by working capital expansion; optimizing inventory and receivables and managing payable terms are urgent tasks. Negative FCF has been financed by borrowings; sustainable recovery depends on regaining cash-generative ability.
Against Ordinary Income of ¥23.5B, extraordinary items were limited to net +¥0.9B (gain on sale of investment securities ¥1.2B - loss on disposal of fixed assets etc. ¥0.3B), so most profit is from recurring operations. However, non-operating expenses of ¥5.6B include interest expense ¥3.3B and fees ¥1.1B, meaning financial costs are weighing on Ordinary Income. Prior year’s special loss of ¥87.5B (presumed impairments) caused Net Income to be negative, but its absence this period converted Profit Before Tax to positive. There were no one-off profit-boosting items; deterioration in recurring earnings structure (gross margin decline and rising SG&A ratio) accounts for the drop in Net Income. The gap between OCF (-¥62.2B) and Net Income (¥20.1B) shows low cash backing for earnings. Accrual (Net Income - OCF) was +¥82.3B, indicating that working capital increases and tax payments offset reported profits in cash terms. Comprehensive income was ¥27.5B (Net Income ¥20.1B + Other Comprehensive Income ¥7.5B); the main driver of OCI was an increase in valuation difference on available-for-sale securities of ¥7.9B, which supports equity. Overall, while profits are largely from recurring factors, cash conversion is weak and improvements in working capital management are essential.
Full Year guidance is conservative: Revenue ¥632.0B (YoY +1.4%), Operating Income ¥20.0B (YoY -24.2%), Ordinary Income ¥14.0B (YoY -40.4%), Net Income ¥13.0B (YoY -35.4%) — projecting revenue growth but earnings decline. Progress against H1 results (Revenue ¥623.1B, Operating Income ¥26.4B, Ordinary Income ¥23.5B, Net Income ¥20.1B) is 98.6% for Revenue, 132.0% for Operating Income, 167.9% for Ordinary Income, and 154.6% for Net Income, meaning H1 already materially exceeds the full-year forecast. This discrepancy suggests full-year guidance assumes significant profit deterioration in H2. Possible H2 downside drivers include sustained high raw material & logistics costs, continued SG&A increases, and concentrated costs from specific projects. EPS forecast is ¥152.25, well below H1 realized EPS of ¥235.63. Dividend forecast is annual ¥45 (H1 dividend ¥45, H2 forecast ¥0 assumed), with H1 payout ratio at 19.1% and full-year payout ratio at 29.6%. The substantial H1 overperformance versus full-year guidance reflects a cautious outlook for H2; cost control and profitability recovery will be focal points.
Reported annual dividend this period is ¥90 (interim ¥45 + year-end ¥45 assumed), implying a Payout Ratio of 38.2% relative to Net Income ¥20.1B (EPS ¥235.63). However, OCF is a negative ¥62.2B and FCF is negative ¥77.4B, so dividends appear to have been funded by drawing down retained earnings and increased borrowings. Total dividends are approximately ¥7.7B (outstanding shares 9,451 thousand shares - treasury stock 914 thousand shares = 8,537 thousand shares × ¥90), which equals 15.8% of Cash & Deposits ¥48.5B. No share buybacks were conducted (CF shows -¥0.0B), so shareholder returns are dividend-only. Full-year guidance assumes dividend forecast of ¥45 (50% cut YoY), and with forecast Net Income ¥13.0B the payout ratio would be about 29.6%. The dividend cut reflects continued negative FCF prospects and high short-term borrowing dependence, suggesting a priority on financial stabilization. Retained earnings stand at ¥138.8B (prior year ¥126.1B, +10.1%), but given working capital expansion and high short-term liabilities, dividend sustainability depends on OCF recovery.
Working capital expansion risk: Accounts receivable ¥269.0B (prior year ¥264.9B) and inventory ¥135.2B (prior year ¥126.4B) continue to rise, while accounts payable ¥40.7B (prior year ¥40.0B) has only marginally increased. CCC extended to 249 days, and inventory stagnation or delayed receivable collection increases cash strain. Risks include higher inventory write-downs, rising bad debt risk, and further working capital increases that could tighten liquidity.
Short-term liabilities concentration risk: Short-term borrowings ¥260.0B (prior year ¥180.0B, +44.4%) rose substantially and account for 50.3% of current liabilities ¥516.8B. Cash & deposits ¥48.5B are only 0.19x of short-term interest-bearing debt ¥260.6B, leaving thin liquidity cushions and high refinancing dependence. Rising interest rates or tighter financial markets may increase rollover costs, and maturity mismatches could crystallize liquidity risk.
Profitability deterioration risk: Gross margin 25.7% (-1.6pt) and operating margin 4.2% (-2.6pt) have declined, with SG&A ratio at 21.4% (+0.9pt). If raw material & logistics costs remain elevated, price pass-through lags, and fixed cost absorption remains weak, further margin compression and ROE declines could impair the company’s ability to generate funds to service interest-bearing debt. Full-year guidance anticipates operating margin of 3.2% (¥20.0B ÷ ¥632.0B), indicating further deterioration is expected in H2; close monitoring of the profit environment is needed.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.2% | -94.2% (-358.4%–8.6%) | +98.5pt |
| Net Margin | 3.2% | -101.5% (-373.7%–5.9%) | +104.7pt |
The pharmaceutical industry median shows large negative returns (likely due to many R&D-intensive or loss-making companies), so the company’s profitability is relatively high on a peer-relative basis. Nevertheless, absolute levels of operating margin 4.2% and net margin 3.2% are low, leaving significant room for improvement.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 2.9% | -0.6% (-22.4%–13.3%) | +3.5pt |
Revenue growth of 2.9% outperforms the industry median of -0.6%, indicating relatively steady top-line growth. The company ranks among revenue-growing firms in the industry, but converting growth into profit requires strengthening profitability.
※Source: Company compilation based on public financial statements
Despite revenue growth, profits declined significantly and profitability worsened—Operating Margin fell to 4.2% (prior year 6.8%, -2.6pt). Margin compression (Gross Margin 25.7%, -1.6pt) combined with higher SG&A ratio (21.4%, +0.9pt) has reversed operating leverage. Full-year guidance anticipates Operating Margin of 3.2%, so cost correction and SG&A efficiency are top priorities.
OCF was a large negative ¥62.2B and OCF/Net Income is -3.09x, indicating poor cash backing for earnings. Working capital expansion (CCC 249 days; DSO 158 days; DIO 124 days) is tying up cash, resulting in FCF of -¥77.4B. CapEx ¥12.7B is only 0.48x of depreciation ¥26.2B, insufficient for asset renewal, raising medium-to-long-term competitiveness concerns.
Short-term borrowings surged to ¥260.0B (+¥80.0B, +44.4%), expanding short-term liabilities and worsening maturity mismatch (short-term liabilities ratio 93%). Cash & deposits ¥48.5B are only 0.19x of short-term interest-bearing debt, leaving a thin liquidity cushion and high refinancing dependence. Full-year dividend guidance of ¥45 is a planned cut, indicating a priority on financial stabilization. Optimizing inventory and receivables and shifting to longer-term funding are keys to restoring financial soundness.
This report was auto-generated by AI analyzing XBRL financial disclosure data. It is not 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; please consult a professional advisor as needed.