Fuji Pharma Co.,Ltd. FY2026 Q3 Earnings Report

Quick View

Executive Summary

Operating and ordinary income increased significantly due to revenue growth and an improvement in the SG&A expense ratio; however, Net Income remained roughly at the previous year's level because extraordinary losses, including impairment losses on investment securities, were recorded. Revenue was ¥453.8B (¥369.5B in the previous year, +22.8%), Operating Income was ¥53.9B (+60.2%), and Ordinary Income was ¥54.8B (+73.5%), while Net Income was ¥18.2B (-0.5%), essentially flat. The primary factor behind the earnings growth was the emergence of operating leverage resulting from the lower SG&A expense ratio, while the sluggish growth in Net Income was attributable to the temporary factor of ¥33.7B in extraordinary losses, including ¥33.1B in impairment losses on investment securities.

Factors Affecting Business Performance

【Revenue】The Company operates in a single Pharmaceutical Business segment, and Revenue increased significantly to ¥453.8B (¥369.5B in the previous year, +22.8%). Although a breakdown by segment has not been disclosed, the increase appears to have been driven by higher volume and an improved product mix.

【Profit and Loss】The gross profit margin was 38.9%, down 1.0pt from 39.9% in the previous year; however, the SG&A expense ratio improved by 3.8pt to 27.0% (30.8% in the previous year), and the Operating Income margin increased by 2.8pt to 11.9% (9.1% in the previous year). In non-operating income and expenses, foreign exchange gains of ¥1.3B and other items contributed, resulting in Ordinary Income of ¥54.8B (+73.5%) and an Ordinary Income margin of 12.1%, up 3.5pt from 8.5% in the previous year. Nevertheless, as a result of recording ¥33.7B in extraordinary losses, primarily the ¥33.1B impairment loss on investment securities, Profit Before Tax declined to ¥21.1B (¥27.0B in the previous year, -21.8%), while Net Income remained nearly at the previous year's level at ¥18.2B (-0.5%). This was a case of higher revenue and higher earnings through the Ordinary Income stage, accompanied by significant growth in Operating Income and Ordinary Income but sluggish Net Income due to extraordinary losses.

Key Financial Indicators

【Profitability】The Operating Income margin improved by 2.8pt to 11.9% from 9.1% in the previous year, and the Ordinary Income margin expanded by 3.5pt to 12.1% (8.5% in the previous year), while the Net Income margin declined by 0.9pt to 4.0% from 4.9% in the previous year. 【Cash Flow Quality】Comprehensive Income was ¥28.8B, exceeding Net Income of ¥18.2B by ¥10.6B, with foreign currency translation adjustments of +¥5.9B and valuation difference on available-for-sale securities of +¥5.0B making positive contributions. 【Investment Efficiency】ROE was 3.5%, and EPS was ¥72.11 (¥75.07 in the previous year, -3.9%); the improvement at the operating level has not been fully reflected in ROE because of the extraordinary losses. 【Financial Soundness】The Equity Ratio was 52.7%, up 2.5pt from 50.2% in the previous year, while the Current Ratio was approximately 166%, indicating a sound liquidity position. Cash and deposits increased to ¥99.5B (¥72.5B in the previous year, +37.3%).

Cash Flow Analysis

As cash flow statement data is unavailable, funding trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥99.5B, an increase of +¥27.0B (+37.3%) from ¥72.5B in the previous year. While Revenue increased by +22.8%, the combined balance of accounts receivable and notes receivable increased by only +9.3%, and inventories increased by +10.0%; working capital growth therefore remained below revenue growth. Accounts payable increased by +26.0%, consistent with the expansion of procurement and production activities accompanying revenue growth. Property, plant and equipment and intangible assets were broadly flat, indicating that capital investment remained restrained. Overall, the relatively moderate growth in working capital compared with revenue expansion can be viewed as a positive sign from a funding efficiency perspective.

Earnings Quality

Ordinary Income of ¥54.8B consists of Operating Income of ¥53.9B plus non-operating income and expenses, including foreign exchange gains of ¥1.3B, and is at a level reflecting the Company's core earnings power. Meanwhile, the ¥33.7B in extraordinary losses was primarily the ¥33.1B impairment loss on investment securities, which reduced Profit Before Tax and Net Income as a temporary factor associated with market fluctuations. Excluding this one-time loss, the improvement in earnings through the Ordinary Income stage appears to represent a highly sustainable structural change. Comprehensive Income was ¥28.8B, exceeding Net Income of ¥18.2B by ¥10.6B; the positive contribution from other comprehensive income items, such as foreign currency translation adjustments and valuation difference on securities, indicates an improvement in asset value that cannot be fully captured by Net Income alone.

Earnings Forecasts and Guidance

At the nine-month point, progress rates were 76.6% for Revenue, 88.1% for Operating Income, 93.2% for Ordinary Income, and 81.3% for Net Income. Operating Income and Ordinary Income are progressing at a pace significantly above the 75% benchmark, suggesting potential upside relative to the full-year plan. Although the progress rate for Net Income is somewhat lower, this reflects the temporary impact of the extraordinary losses, and neither the earnings forecast nor the dividend forecast was revised during the quarter.

Shareholder Returns

The interim dividend was ¥23 per share, representing a +15.0% increase from ¥20 in the same period of the previous year. The Payout Ratio against cumulative interim Net Income was 31.9% (¥23 dividend ÷ cumulative EPS of ¥72.11), a reasonable level. The full-year dividend forecast is ¥49, and forecast full-year EPS is ¥91.54. No share repurchases have been confirmed, and shareholder returns currently center on dividends.

Risk Factors

1. Risk of recurring impairment losses on investment securities: As a result of recording an impairment loss of ¥33.1B during the period, the balance of investment securities was halved to ¥25.1B (¥50.9B in the previous year). Additional impairment losses could arise due to market fluctuations in the Company's investment portfolio.

2. Reliance on short-term financing: Short-term borrowings amounted to ¥153.0B, while the ratio to cash and deposits of ¥99.5B was approximately 0.65x. Although the Current Ratio is 166%, a sound level, trends in the refinancing of short-term liabilities will remain an area requiring monitoring.

3. Earnings volatility from extraordinary losses: Profit Before Tax was ¥21.1B, down -21.8% from ¥27.0B in the previous year, indicating a structure in which quarterly Net Income is susceptible to fluctuations depending on whether extraordinary losses arise.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (pharma)

Profitability and Returns

Both the Company's Operating Income margin and Net Income margin are positive and significantly exceed the industry median, which includes many loss-making companies.

Growth and Capital Efficiency

The Company's Revenue growth rate demonstrates an outstanding increase, while the industry median remains in negative territory.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The Operating Income margin improved by 2.8pt to 11.9% (9.1% in the previous year), led by a decline in the SG&A expense ratio (-3.8pt). Progress toward full-year Operating Income is 88.1%, indicating steady progress and a fundamental improvement in earnings power.

2. Net Income remained roughly at the previous year's level (-0.5%) due to extraordinary losses, including the ¥33.1B impairment loss on investment securities. Whether the growth in Operating Income and Ordinary Income will flow through to Net Income will depend on whether additional temporary losses arise.

3. Comprehensive Income exceeded Net Income by ¥10.6B, with foreign currency translation adjustments and valuation difference on securities making positive contributions. An improvement in asset value that is difficult to discern from Net Income alone has been confirmed.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥1,685–¥1,780 at ±1% for the cost of equity, and ¥1,723–¥1,737 at ±0.1 for ω.

Notes:

• Net Income is substantially compressed relative to Operating Income due to tax burden, acquisition-related expenses, non-controlling interests, and other factors (Net Income ÷ Operating Income 37%). This value reflects that compression at face value; if the factors are temporary, underlying earnings power may be higher.
• Because forecast ROE is below the cost of equity, the theoretical value is below Book Value per Share.
• Net assets as of the end of the quarter are used (there is a timing gap relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated at a somewhat high level.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value is not a forecast or guarantee of the future share price)

---

This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.

---End of Report---