| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥992.0B | ¥942.4B | +5.3% |
| Operating Income | ¥62.9B | ¥56.4B | +11.6% |
| Profit Before Tax | ¥73.9B | ¥63.2B | +16.9% |
| Net Income | ¥53.0B | ¥47.5B | +11.4% |
| ROE | 1.5% | 1.4% | - |
For Q1 of the fiscal year ending March 2026, Lion achieved year-on-year revenue and profit growth: Revenue ¥992.0B (¥942.4B prior year, +¥49.8B +5.3%), Operating Income ¥62.9B (¥56.4B prior year, +¥6.5B +11.6%), Ordinary Income ¥76.4B (¥58.1B prior year, +¥18.3B +31.5%), and Net Income attributable to owners of the parent ¥42.1B (¥40.3B prior year, +¥1.8B +4.5%). The Overseas Business drove growth with Revenue ¥419.6B (+11.1%) delivering double-digit growth, and gross margin improved to 46.1% (prior year 44.6% +1.5pt) as price revisions and cost reductions materialized. SG&A increased to ¥397.6B (+8.2%), outpacing sales growth, so Operating Margin improvement was limited to 6.3% (prior year 6.0% +0.3pt). Ordinary Income rose significantly supported by equity-method investment income of ¥6.9B and financial income of ¥6.7B, but higher tax burden at an effective tax rate of 28.3% constrained final profit growth to +4.5%.
[Revenue] Revenue was ¥992.0B (+5.3%). By segment, Overseas Business led with ¥419.6B (+11.1%), driven by demand expansion in local currencies and forex effects. The Household Consumer Products Business recorded ¥481.8B (+2.3%) with modest growth as price revisions in domestic daily goods and pharmaceuticals partially offset demand declines. The Industrial Products Business was ¥88.0B (-2.4%) due to weakness in chemical raw materials and commercial supplies markets. Company-wide sales mix: Household 48.6%, Overseas 42.3%, Industrial 8.9%; Overseas share rose +2.2pt from 40.1% a year earlier.
[Profitability] Cost of sales was ¥534.3B (cost of sales ratio 53.9%), improving -1.5pt from prior year cost of sales ratio 55.4%; gross margin improved to 46.1% (prior year 44.6%) (+1.5pt), mainly from easing raw material prices and pass-through of price increases. SG&A was ¥397.6B (SG&A ratio 40.1%), deteriorating +1.1pt from prior SG&A ratio 39.0% as advertising, logistics and labor costs rose, partially offsetting profitability gains. Operating Income was ¥62.9B (Operating Margin 6.3%), only +0.3pt above prior year 6.0%. Financial income ¥6.7B (prior ¥2.9B) increased due to dividends/interest receivable; equity-method investment income ¥6.9B (prior ¥8.1B) was driven by subsidiary contributions; non-operating items expanded to +¥11.0B from +¥8.7B prior year. Profit Before Tax was ¥73.9B (+16.9%); corporate income tax expense was ¥20.9B (effective tax rate 28.3%), resulting in Net Income attributable to owners of the parent ¥42.1B (+4.5%). By segment business profit, Overseas improved materially to ¥28.9B (from ¥18.0B prior, +60.6%) with business profit margin 6.9% (from 4.8% +2.1pt); Household was ¥40.6B (from ¥44.2B prior, -8.1%) with business profit margin 8.4% (from 9.4% -1.0pt) hit by increased promotional investment. In conclusion, high growth in Overseas and improved gross margin drove revenue and profit increases.
Household Consumer Products Business: Revenue ¥481.8B (+2.3%), Business Profit ¥40.6B (-8.1%), Business Profit Margin 8.4% (prior 9.4% -1.0pt). Domestic price revisions supported sales but higher advertising and promotion expenses reduced margins. Overseas Business: Revenue ¥419.6B (+11.1%), Business Profit ¥28.9B (+60.6%), Business Profit Margin 6.9% (prior 4.8% +2.1pt). Demand expansion in local currencies, progress in price pass-through and forex effects combined to substantially improve profitability. Industrial Products Business: Revenue ¥88.0B (-2.4%), Business Profit ¥6.5B (-0.2%), Business Profit Margin 7.4% (prior 7.4% flat). Revenue declined on softer chemical raw material markets, but margin was maintained. Other ¥2.6B (-22.8%), Business Profit -¥0.5B (prior -¥0.2B) saw widening losses in internal service areas such as real estate and staffing. Consolidated Operating Income after corporate allocations was ¥62.9B; Overseas contribution to profit rose from 26.3% to 38.2%, strengthening the global business earnings base.
[Profitability] Operating Margin 6.3% (prior 6.0% +0.3pt), Net Profit Margin 5.3% (prior 5.0% +0.3pt) improved modestly. ROE was 1.5% (from 3.4% at prior fiscal year-end down), which annualized by quarterly characteristics corresponds to about 6.0%, but capital efficiency remains low. ROE decomposition: Net Profit Margin 4.2% × Total Asset Turnover 0.19x × Financial Leverage 1.49x, indicating room to improve both asset efficiency and margins. Gross Margin 46.1% improved +1.5pt from 44.6% due to price pass-through and lower raw material costs. SG&A Ratio 40.1% deteriorated +1.1pt from 39.0%, with higher advertising and logistics costs partially offsetting margin improvements.
[Cash Quality] Operating Cash Flow (OCF) was -¥108.7B versus Net Income ¥53.0B, yielding OCF/Net Income of -2.05x, indicating a materially deteriorated cash conversion. The primary driver was a large decrease in accounts payable -¥194.0B and an increase in inventories -¥53.6B, so working capital outflows exceeded profits. OCF subtotal (before working capital changes) was -¥63.6B; even adding back depreciation ¥56.6B, this is below Profit Before Tax ¥73.9B, meaning cash generation remains weak even after non-cash expense adjustments.
[Investment Efficiency] Simplified ROIC is around 1.5%, well below capital cost. Total Asset Turnover 0.76x (annualized) edged up from 0.72x prior year, but long inventory turnover days and receivables days pressure asset efficiency.
[Financial Soundness] Equity Ratio 62.1% (from 65.9% prior fiscal year-end -3.8pt) remains high. Debt-to-capital ratio 0.49x (prior fiscal year-end 0.52x) shows conservative capital structure. Current Ratio 184.7%, Quick Ratio 136.4% indicate ample short-term liquidity. Interest-bearing debt totals ¥407.3B (short-term borrowings (CP) ¥100.0B + lease liabilities ¥307.3B); Net Interest-Bearing Debt is -¥168.3B (cash and deposits ¥584.2B exceed interest-bearing debt), effectively near net debt-free.
Operating Cash Flow was -¥108.7B (prior -¥101.7B, -6.9%) driven mainly by working capital outflows. OCF subtotal after adding depreciation ¥56.6B to Profit Before Tax ¥73.9B was -¥63.6B; adjustments for interest/dividend received ¥2.1B, interest paid -¥2.4B, equity-method income ¥6.9B still left cash generation short. Working capital movements: Accounts receivable decreased by ¥106.9B (faster collections), inventories increased by -¥53.6B (inventory buildup), accounts payable decreased sharply by -¥194.0B (shortened payment cycle or procurement adjustments), resulting in net working capital outflow of -¥140.7B. Corporate tax payments -¥47.1B further depressed OCF. Investing Cash Flow was -¥177.9B (prior -¥52.5B), with capital expenditures -¥24.6B, acquisition of subsidiary shares -¥135.9B (expanded consolidation scope by 8 companies), and intangible asset acquisitions -¥1.9B as main uses. Net increase in time deposits -¥15.9B also contributed to outflow. Financing Cash Flow was -¥12.3B (prior -¥45.4B) with short-term borrowings net decrease -¥9.6B, long-term debt repayments -¥54.4B, CP issuance +¥100.0B, dividend payments -¥41.6B, and lease repayments -¥6.7B as main items. Including forex effect +¥2.2B, cash and cash equivalents decreased ¥296.7B to ¥575.6B (from ¥880.9B prior fiscal year-end -34.6%). Free Cash Flow was -¥286.6B, significantly negative as M&A outlays and working capital drains heavily compressed liquidity. Cash and deposits remain ample, but normalization of working capital is urgent.
The difference between Operating Income ¥62.9B and Ordinary Income ¥76.4B (+¥13.5B) was driven primarily by financial income ¥6.7B and equity-method investment income ¥6.9B, indicating inclusion of structural non-operating income. Financial income reflects dividends/interest received; equity-method income stems from equity investments of ¥150.0B in equity-method affiliates. Net other income +¥2.8B (other income ¥4.5B less other expenses ¥1.7B) also contributed modestly to non-operating income; one-off factors are limited. The small gap between Ordinary Income and Profit Before Tax was -¥2.5B, indicating negligible special gains/losses. Against Profit Before Tax ¥73.9B, corporate income tax expense ¥20.9B (effective tax rate 28.3%) produced post-tax profit ¥52.9B and Net Income attributable to owners of the parent ¥42.1B (non-controlling interests ¥10.9B). Comprehensive income was ¥53.8B; other comprehensive income ¥0.9B (foreign currency translation adjustments ¥5.8B, fair value changes -¥0.2B, remeasurements of defined benefit plans -¥4.5B, equity-method other -¥0.2B) was minor, so divergence between net income and comprehensive income was small. OCF of -¥108.7B significantly lagged Net Income ¥53.0B due to large working capital outflows, indicating a substantial divergence between accrual-based profit and cash generation and leaving questions over earnings quality. The sharp decrease in accounts payable -¥194.0B may reflect shortened payment cycles or temporary procurement adjustments; continuity should be verified.
Full Year guidance is unchanged: Revenue ¥4,300.0B (+1.9%), Operating Income ¥400.0B (+10.0%), Net Income attributable to owners of the parent ¥250.0B (-9.4%). Q1 progress rates: Revenue 23.1% (standard 25% -1.9pt), Operating Income 15.7% (standard -9.3pt), Net Income attributable to owners of the parent 16.8% (standard -8.2pt), showing shortfalls in operating profit and net profit versus standard progress. Main reasons for slower progress include front-loaded SG&A (concentration of advertising and promotion costs early in the year), temporary burden from M&A integration costs, and working capital seasonality (inventory buildup and shortened accounts payable cycle). From Q2 onward, recovery in progress is expected through continued high growth in Overseas Business, improved promotion efficiency in Household Consumer Products, normalization of SG&A, and working capital normalization. However, given the progress shortfall of around -9pts, achieving the full year plan will require Operating Margin improvement and expanded contribution from Overseas Business from Q2 onward. Dividend forecast remains unchanged at annual ¥17.0 per share; payout ratio versus full year EPS forecast ¥90.38 is 18.8%, a sustainable level.
Dividend payments this quarter totaled ¥41.6B, with a quarterly dividend of ¥15.0 per share (unchanged from prior year quarter ¥15.0). Full year dividend forecast remains ¥17.0 per share (unchanged from prior year ¥17.0), implying a payout ratio of approximately 18.8% against full year forecast Net Income attributable to owners of the parent ¥250.0B, a conservative level. Total dividend payout is estimated at approximately ¥47B calculated from shares outstanding; given Q1 OCF -¥108.7B and Free Cash Flow -¥286.6B, dividends are not covered by cash flow this quarter, but abundant cash and deposits of ¥584.2B and expected improvement in OCF over the year make dividend maintenance feasible. No share buybacks were conducted this quarter (treasury stock acquisitions ¥0.0B); shareholder returns have been executed via dividends only. Assessment should be based on dividend payout ratio 18.8% rather than total return ratio, and medium- to long-term sustainability depends on normalization of working capital and OCF turning positive. Dividends to non-controlling interests are unpaid, but the policy for returns to parent company shareholders is clear.
Working Capital Management Vulnerability: OCF this quarter was -¥108.7B, with a sharp decrease in accounts payable -¥194.0B and inventories increase -¥53.6B as main drivers. The decrease in accounts payable could reflect shortened payment cycles or temporary procurement adjustments; if persistent, this could structurally weaken cash generation. Extended inventory turnover days raise inventory stagnation risk, indicating potential for impairment or disposal losses. OCF/Net Income -2.05x shows inadequate cash conversion and makes working capital normalization urgent.
Profitability Pressure from SG&A Inflation: SG&A ¥397.6B (+8.2%) rose faster than sales growth +5.3%, worsening SG&A ratio to 40.1% (prior 39.0% +1.1pt). If structural upward pressures on advertising, logistics and labor costs persist, improvement in Operating Margin may stall, making achievement of full year Operating Margin target 9.3% (Operating Income ¥400.0B / Revenue ¥4,300.0B) difficult. Deterioration of promotional ROI or sustained logistics cost increases would impede sustainable margin improvement.
M&A Integration and Goodwill Impairment Risk: Consolidation scope expanded by 8 companies this quarter, and goodwill rose to ¥380.1B (prior fiscal year-end ¥195.8B +94.1%), a substantial short-term increase. ¥135.9B was spent on subsidiary share acquisitions; if integration synergies are delayed, goodwill impairment risk could materialize. Goodwill/Net Assets ratio is 10.9% and within benchmarks, but rapid short-term increase raises integration risk. Improvements in Overseas Business business profit margin (+2.1pt) are early wins, but delays in cultural or operational integration or adverse forex moves could prevent planned profit contributions, increasing the risk of impairment charges and ROIC declines.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.3% | 6.8% (2.9%–9.0%) | -0.5pt |
| Net Profit Margin | 5.3% | 5.9% (3.3%–7.7%) | -0.6pt |
Profitability is slightly below industry median, mainly due to high SG&A ratio.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.3% | 13.2% (2.5%–28.5%) | -7.9pt |
Revenue growth rate is -7.9pt below industry median, placing growth pace low within the sector.
※ Source: Company compilation
Overseas Business has emerged as a clear earnings driver, with business profit margin rising to 6.9% (+2.1pt year-on-year). Revenue ¥419.6B (+11.1%) maintains high growth, making it a core segment accounting for roughly 46% of consolidated Operating Income. Continued demand expansion in local currencies and progress in price pass-through should further increase Overseas contribution. Conversely, Household Consumer Products Business saw business profit margin decline -1.0pt to 8.4%, making promotion efficiency a key challenge.
Gross margin improved to 46.1% (prior +1.5pt), reflecting realized effects of price revisions and lower raw material costs. SG&A ratio worsened to 40.1% (prior +1.1pt), but smoothing SG&A over the full year could leave room for Operating Margin improvement. Against full year Operating Income forecast ¥400.0B (Operating Margin 9.3%), Q1 at 6.3% is below target, but improvement in SG&A efficiency and Overseas contribution from Q2 onward should enable recovery in progress.
Improving working capital management is the top priority. OCF -¥108.7B and Free Cash Flow -¥286.6B were significantly negative, driven by a sharp decrease in accounts payable -¥194.0B and inventory increase -¥53.6B. If accounts payable cycle normalizes and inventories are optimized from Q2 onward delivering positive OCF, dividend sustainability and financial flexibility will be secured. Strong cash and deposits ¥584.2B and near net-debt-free balance sheet provide time to implement working capital improvements.
This report is an earnings analysis document automatically generated by AI analyzing 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 based on public financial statement data. Investment decisions should be made at your own responsibility; consult a professional advisor as necessary.