| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1262.6B | ¥1300.9B | -2.9% |
| Operating Income / Operating Profit | ¥35.7B | ¥125.7B | -71.6% |
| Ordinary Income | ¥40.3B | ¥132.2B | -69.5% |
| Net Income | ¥41.8B | ¥93.8B | -55.4% |
| ROE | 2.9% | 6.9% | - |
For the fiscal year ended March 2026, Revenue was ¥1262.6B (YoY -¥38.3B, -2.9%), Operating Income was ¥35.7B (YoY -¥90.0B, -71.6%), Ordinary Income was ¥40.3B (YoY -¥91.9B, -69.5%), and Net Income Attributable to Owners of Parent was ¥41.8B (YoY -¥52.0B, -55.4%), representing revenue decline and a large drop in profits. While sales were only slightly down, gross margin fell from 45.8% to 40.9% (-4.9pt), and fixed SG&A of ¥480.6B could not be absorbed, causing Operating Margin to plunge from 9.7% to 2.8% (-6.9pt). In non-operating items, one-off gains such as dividend income ¥5.0B, foreign exchange gains ¥1.7B, and gains on sales of investment securities ¥3.7B supported Ordinary Income of ¥40.3B, but could not fully offset the marked deterioration in core operating profitability. At the Net Income level, comprehensive income effects including ¥41.7B gain on remeasurement of retirement benefit obligations helped maintain final profit at a certain level.
[Revenue] Revenue was ¥1262.6B, down ¥38.3B (‑2.9%) year-on-year. The company operates a single segment (manufacturing and sale of pharmaceuticals, etc.), and four domestic wholesalers (Alfresa Holdings ¥224.1B, Medipal Holdings ¥211.9B, Suzuken ¥175.9B, Toho Pharmaceutical ¥138.3B) account for approximately 60% of sales. Compared with the prior year, sales to major customers were flat to slightly up, but a softer overall demand environment and a deterioration in product mix weighed on total revenue. Cost of goods sold was ¥746.3B, resulting in a gross margin of 40.9%, down -4.9pt from 45.8% a year earlier, as higher raw material costs and a shift toward lower-margin products pressured profitability.
[Profitability] Gross profit was ¥516.2B, down ¥79.2B from ¥595.4B a year earlier, while SG&A expanded in absolute terms to ¥480.6B (up ¥10.9B from ¥469.7B). SG&A ratio rose to 38.1% (prior year 36.1%), increasing the burden of fixed costs amid declining sales. As a result, Operating Income declined sharply to ¥35.7B (prior year ¥125.7B), a -71.6% decrease, and Operating Margin fell substantially to 2.8% (prior year 9.7%). In non-operating items, dividend income ¥5.0B and foreign exchange gains ¥1.7B contributed non-operating revenue of ¥8.1B, offset by non-operating expenses of ¥3.5B including interest expense ¥2.5B, yielding Ordinary Income of ¥40.3B (prior year ¥132.2B), a -69.5% decline. Extraordinary gains included ¥3.7B gain on sales of investment securities and ¥0.1B gain on sales of fixed assets (total ¥4.7B), while extraordinary losses included ¥3.0B impairment loss on investment securities and ¥0.5B loss on disposal of fixed assets (total ¥0.5B), resulting in Profit Before Tax of ¥44.5B (prior year ¥127.7B). After income taxes of ¥10.0B, Net Income was ¥41.8B (prior year ¥93.8B), down -55.4%. The deterioration in operating profitability was decisive, and despite support from non-operating and extraordinary items, the result was lower sales and a marked decline in profits.
[Profitability] Operating Margin 2.8%, Gross Margin 40.9%, Net Margin 3.3%, each down from the prior year (Operating 9.7%, Gross 45.8%, Net 7.2%), with price and product mix deterioration and reduced fixed-cost absorption depressing margins. ROE was 2.9%, sharply down from 6.8% a year earlier, and ROA (on an Ordinary Income basis) was 2.1% (prior year 7.1%), indicating lower capital efficiency. [Cash Quality] Operating Cash Flow (OCF) was ¥63.8B, 1.5x Net Income ¥41.8B, indicating reasonable cash backing of earnings, but OCF/EBITDA (Operating CF / (Operating Income + Depreciation)) was 0.78x, below the benchmark 0.9x, with working capital build-up impeding cash conversion efficiency. DSO (days sales outstanding) 133 days, DIO (days inventory outstanding) 332 days, CCC (cash conversion cycle) 394 days are prolonged, suggesting significant room to improve receivables and inventory management. [Investment Efficiency] Capital expenditure was ¥38.6B, below depreciation ¥46.6B, indicating maintenance/selection investment phase. Free Cash Flow was ¥47.4B, covering dividend payments ¥33.1B by 1.4x, supporting short‑term dividend sustainability. [Financial Soundness] Equity Ratio 72.9% (prior year 70.4%) remains high and stable; current ratio 460% and quick ratio 379% show very strong short‑term liquidity. With long‑term borrowings of ¥204.4B and cash & short‑term investments of about ¥151B, interest coverage was 14.0x, indicating ample interest‑paying capacity. Debt/EBITDA (interest‑bearing debt / (Operating Income + Depreciation)) was 2.80x, slightly above the investment‑grade upper limit of 2.5x, but capital structure remains conservative and financial vulnerability is low.
Operating CF was ¥63.8B, up 82.0% from ¥35.1B in the prior year, comprised of Profit Before Tax ¥44.5B plus depreciation ¥46.6B to subtotal ¥89.7B, less cash tied in working capital changes (inventory -¥20.6B, trade receivables +¥2.4B, trade payables -¥10.8B) for working capital cash absorption of -¥29.0B, and income taxes paid -¥28.6B. Despite lower profits, CF increased mainly due to a reversal of the prior year’s large working capital build (inventory -¥123.3B), with a reduced inventory increase this period. However, inventory ¥238.7B (DIO 332 days) and receivables ¥459.2B (DSO 133 days) remain high, and CCC 394 days indicates room to improve working capital efficiency. Investing CF was -¥16.4B, primarily capital expenditure -¥38.6B and intangible assets -¥1.1B, partially offset by recoveries from sale of securities and similar +¥22.6B. Financing CF was -¥79.6B, driven by short‑term borrowings repayments -¥48.0B, long‑term borrowings repayments -¥2.2B, and dividend payments -¥33.0B. Short‑term borrowings were sharply reduced from ¥74.0B to ¥26.0B, lowering short‑term funding dependence. As a result, cash and deposits declined from ¥150.2B at the end of the prior period to ¥118.0B at period end (‑¥32.2B), while maintaining sufficient liquidity.
Ordinary Income ¥40.3B comprised Operating Income ¥35.7B plus non‑operating income such as dividend income ¥5.0B and foreign exchange gains ¥1.7B (non‑operating income ¥8.1B), less non‑operating expenses including interest ¥2.5B (non‑operating expenses ¥3.5B), so net non‑operating items contributed +¥4.6B to support operating performance. Extraordinary gains were ¥4.7B (gain on sales of investment securities ¥3.7B, gain on sales of fixed assets ¥0.1B), while extraordinary losses were ¥0.5B (impairment loss on investment securities ¥3.0B, loss on disposal of fixed assets ¥0.5B) resulting in net one‑off gain of ¥4.2B contributing to Profit Before Tax ¥44.5B. The gap between Net Income ¥41.8B and Comprehensive Income ¥94.1B is due to valuation gains amounting to ¥52.3B, including remeasurement gain on retirement benefits ¥41.7B and valuation difference on available‑for‑sale securities ¥16.7B; these comprehensive income items largely lack cash flows and exceed Net Income. The ratio of Operating CF ¥63.8B to Net Income ¥41.8B (1.5x) indicates solid cash backing of earnings, but prolonged working capital retention suppresses cash conversion efficiency. Recurring earning power is concentrated at the operating level; contributions from non‑operating, extraordinary, and comprehensive items are deemed temporary, and structural improvement in operating margin is essential.
The company’s Full Year plan calls for Revenue ¥1218.0B (YoY -3.5%), Operating Income ¥20.0B (YoY -43.9%), Ordinary Income ¥23.0B (YoY -42.9%), Net Income ¥22.0B (YoY -47.4%), EPS 26.11円, Dividend ¥10.00円. Actual results were Revenue ¥1262.6B (vs plan +3.7%), Operating Income ¥35.7B (vs plan +78.5%), Ordinary Income ¥40.3B (vs plan +75.2%), Net Income ¥41.8B (vs plan +90.0%), materially above plan on all items. The outperformance was largely driven by contributions from non‑operating/extraordinary/comprehensive items such as gains on sales of investment securities, foreign exchange gains, and remeasurement gains on retirement benefits, although operating gross margin improvements or better SG&A control may also have exceeded assumptions. However, Operating Margin 2.8% and ROE 2.9% remain low relative to industry standards, and the beat versus plan does not imply structural recovery in earning power but rather reflects accumulation of temporary gains. Sustainable growth going forward requires stabilization of gross margin and normalization of working capital efficiency.
Annual dividend is ¥57 (interim ¥20, year‑end ¥37). With Net Income Attributable to Owners of Parent ¥41.8B and total dividends ¥33.1B, the reported payout ratio is 36.5%. However, on a shares‑outstanding basis at period end of 57.4 million shares, the total annual dividend is approximately ¥33B, implying a payout ratio of about 79% relative to Net Income ¥41.8B. In any case, Free Cash Flow ¥47.4B covers dividend payments by 1.4x, supporting short‑term dividend sustainability. Although detailed dividend policy disclosure is lacking, the prior year also reported a payout ratio of 36.5%, indicating a degree of dividend stability. Share repurchases have been minimal and total shareholder returns are centered on dividends. The prior year special dividend of ¥5 was not continued, and this period only ordinary dividends were paid, which can be seen as flexible dividend policy responding to earnings levels. While a payout ratio around 36.5% is generally healthy, under ROE 2.9% and Debt/EBITDA 2.80x, maintaining dividend capacity will require improvement in profitability and cash generation.
Profitability risk: Gross Margin fell from 45.8% to 40.9% (-4.9pt) and Operating Margin plunged from 9.7% to 2.8% (-6.9pt). Price declines, adverse product mix, and rising raw material costs are pressuring profitability, and a structure that cannot absorb fixed SG&A of ¥480.6B is taking hold. Operating Margin 2.8% raises concerns of declining ROIC and possible underperformance versus cost of capital; without structural margin improvement, dividend and investment capacity will be constrained.
Working capital risk: DSO 133 days, DIO 332 days, CCC 394 days are prolonged, with trade receivables ¥459.2B and inventories ¥238.7B tying up funds. Inventory stagnation carries risks of demand forecast errors, discounting, and obsolescence, while extended receivables increase collection delays and bad debt risk. If normalization of working capital is delayed, the low OCF/EBITDA 0.78x will persist, reducing capacity for growth investment and returns.
Customer concentration risk: Four major wholesalers (Alfresa HD, Medipal HD, Suzuken, Toho Pharmaceutical) account for approximately 60% of sales. While this provides distribution stability, it also constrains pricing power; relationships with consolidated wholesalers can pressure gross margins and changes in trade terms or demand reductions will directly impact performance. High domestic dependency and limited overseas diversification increase vulnerability to domestic drug price revisions and market contraction.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.8% | -94.2% (-358.4%–8.6%) | +97.1pt |
| Net Margin | 3.3% | -101.5% (-373.7%–5.9%) | +104.8pt |
Profitability metrics show that while industry medians remain in negative territory, the company remains profitable and materially above the median.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -2.9% | -0.6% (-22.4%–13.3%) | -2.3pt |
Revenue growth is slightly weaker than the industry median of -0.6%, indicating relatively weaker top‑line expansion within the sector.
※ Source: Company aggregation
The material declines in Gross Margin to 40.9% (YoY -4.9pt) and Operating Margin to 2.8% (YoY -6.9pt) indicate structural issues in price competitiveness, product mix, and cost management. Non‑operating and extraordinary gains (dividends received, foreign exchange gains, gains on sales of investment securities, remeasurement gains on retirement benefits) supported Net Income, but sustainable growth is unlikely without recovery in operating profitability. Stabilizing gross margin and correcting SG&A ratio are directly linked to improvements in ROE and ROIC.
Deterioration in working capital efficiency (DSO 133 days, DIO 332 days, CCC 394 days) suppresses cash conversion; OCF/EBITDA 0.78x is below the target 0.9x. Normalization of inventory and receivables would avoid additional cash tie‑ups and could free resources for growth investment, debt reduction, and enhanced shareholder returns. Large reduction in short‑term borrowings (¥74B → ¥26B) has improved financial flexibility, but normalization of Debt/EBITDA 2.80x requires recovery in Operating Income.
Although payout ratio 36.5% and Free Cash Flow coverage 1.4x support short‑term dividend sustainability, low ROE 2.9% and Operating Margin 2.8% limit long‑term dividend capacity. The upside to company guidance was largely due to one‑off gains, so until structural margin improvement is confirmed, scope for dividend growth is limited. Concentration of sales to the four major wholesalers (approx. 60%) trades distribution stability for constrained pricing power, and high domestic dependency weakens resilience to drug price revisions and market contraction.
This report is an AI‑generated earnings analysis based on XBRL financial statement 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 own responsibility; please consult a professional advisor as needed.