MANDOM (4917) FY2026 Q3 Earnings Report

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Executive Summary

In addition to higher revenue, the substantial improvement in profitability, primarily driven by a lower cost ratio, was the most important feature of this earnings result. Revenue was ¥591.9B (+3.6% YoY), Operating Income was ¥28.9B (+116.4%), Ordinary Income was ¥36.8B (+71.0%), and Net Income attributable to owners of the parent was ¥21.2B (+16.6%). The gross margin improved by approximately 4.0pt to 46.7%, driving the increase in Operating Income; however, the increase rate narrowed from the operating level to the net income level due to higher SG&A expenses and the recognition of ¥5.5B in extraordinary loss.

Factors Affecting Performance

【Revenue】Revenue of ¥591.9B increased +3.6% YoY. By region, Japan recorded ¥310.3B (+0.4%), Indonesia ¥115.6B (+22.5%), and Other Overseas ¥166.0B (-1.2%). Strong growth in Indonesia lifted overall performance, while Other Overseas recorded lower revenue.

【Profit and Loss】The gross margin improved to 46.7% from 42.7% in the previous year due to the lower cost of sales ratio, and Operating Income was ¥28.9B (+116.4% YoY; Operating Margin 4.9%). SG&A expenses were ¥247.7B, up +7.5% YoY, exceeding revenue growth and offsetting part of the benefit from the improved gross margin. Ordinary Income, including ¥8.5B in non-operating income such as interest and dividend income, was ¥36.8B (+71.0%); however, the recognition of ¥5.5B in extraordinary loss (including losses on disposal of fixed assets) reduced Profit Before Tax to ¥31.3B, leaving Net Income at ¥21.2B (+16.6%). Although revenue and profit increased, the growth rate of Net Income was significantly below that of Operating Income.

Segment Analysis

Segment profit was ¥15.5B in Japan (+12.0% YoY; profit margin 4.4%), ¥2.9B in Indonesia (a turnaround to profitability from a loss of ¥13.2B in the same period of the previous year), and ¥10.9B in Other Overseas (-19.5% YoY; profit margin 6.5%, the highest among the three regions). The turnaround from a loss to profitability in Indonesia was a major factor behind consolidated profit growth, while Other Overseas fell short of the previous year in both revenue and profit, indicating variation in performance among regions.

Key Financial Indicators

【Profitability】The Operating Margin was 4.9%, improving by approximately 2.5pt from 2.3% in the same period of the previous year; however, the improvement was partially offset because the SG&A ratio also increased by 1.6pt, compared with a 4.0pt improvement in the gross margin. The Net Profit Margin was approximately 3.6%. 【Cash Quality】Operating Cash Flow (OCF) was ¥35.1B, approximately 1.65 times Net Income, indicating strong cash backing for earnings; however, OCF declined -28.2% YoY, as working capital absorbed cash due to an increase in inventories and a decrease in accounts payable. 【Investment Efficiency】Annualized ROE was 4.0%, and the Equity Ratio was 80.2%, indicating a strong capital base. Interest-bearing debt was minimal, leaving the company effectively debt-free. Capital expenditures of ¥10.4B were approximately 40% of depreciation and amortization of ¥28.1B. 【Financial Soundness】Cash and deposits were ¥295.4B, compared with current assets of ¥602.9B and current liabilities of ¥133.1B, indicating a high level of liquidity.

Cash Flow Analysis

OCF was ¥35.1B, down 28.2% from ¥48.9B in the same period of the previous year, moving in the opposite direction from the substantial increase in Operating Income. An increase of ¥7.3B in inventories and a decrease of ¥4.8B in accounts payable were sources of cash absorption through working capital. Investing Cash Flow was -¥21.7B, of which capital expenditures were ¥10.4B, remaining below depreciation and amortization of ¥28.1B. Financing Cash Flow was -¥11.0B, including ¥9.0B in dividend payments. Free Cash Flow, combining OCF and Investing Cash Flow, remained positive at ¥13.4B, indicating that investments and shareholder returns were covered within the scope of OCF.

Earnings Quality

Ordinary Income of ¥36.8B includes ¥8.5B in non-operating income, including ¥3.5B in interest income and ¥1.1B in dividend income, which represent relatively stable income generated from financial assets. Meanwhile, Profit Before Tax of ¥31.3B was reduced from Ordinary Income by ¥5.5B in extraordinary loss (including losses on disposal of fixed assets), which can be distinguished as a temporary factor. OCF was 1.65 times Net Income, providing limited indication that accounting earnings are excessively dependent on non-cash accruals; however, attention should be paid to the fact that working capital changes, including the increase in inventories and decrease in accounts payable, restrained OCF growth relative to the increase in Operating Income.

Earnings Forecast and Guidance

The full-year forecasts are Revenue of ¥786.0B, Operating Income of ¥27.0B, Ordinary Income of ¥36.0B, and Net Income attributable to owners of the parent of ¥21.0B. The Q3 cumulative progress rates were 75.3% for Revenue, 107.1% for Operating Income, 102.2% for Ordinary Income, and 101.0% for Net Income. While Revenue was tracking in line with the standard progress rate of 75%, all profit items had already exceeded their full-year plans. This early progress in profit reflects the improved gross margin and improved profitability of the Indonesia Business. If the company’s forecasts remain unchanged, this may indicate that promotional expenses or temporary costs are expected to arise in Q4.

Shareholder Returns

The dividend per share for Q2 was ¥0, and the full-year forecast for dividend per share is also ¥0. Cash dividend payments of ¥9.0B were recorded in the Q3 cumulative Financing Cash Flow and were covered within Free Cash Flow of ¥13.4B. Based on the company’s forecasts, the Payout Ratio is currently 0%. The execution status of share repurchases during the current period is not included in the disclosed information.

Risk Factors

1. Inventory accumulation risk: Inventories were ¥136.2B, of which products accounted for ¥136.2B. The high inventory level warrants attention because it may result in risks of obsolescence and inventory write-downs characteristic of personal care products.

2. Regional variation in performance: Other Overseas recorded revenue of -1.2% YoY and segment profit of -19.5% YoY, becoming a constraint on consolidated growth in contrast to the improvement in Indonesia.

3. Risk of margin offset from higher SG&A expenses: SG&A expenses increased +7.5% YoY, exceeding the revenue growth rate of +3.6%, and partially offset the benefit of the improved gross margin. If this trend continues, it may affect the sustainability of the improvement in the Operating Margin.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The company’s profitability is below the industry median, with both its Operating Margin and Net Profit Margin positioned relatively low within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate slightly exceeds the industry median, placing the company approximately in the middle of the industry in terms of growth.

※Source: Compiled by the company

Key Points from the Earnings Results

1. Operating Income increased +116.4% YoY, centered on an approximately 4.0pt improvement in the gross margin; however, the Operating Margin of 4.9% remains below the industry median of 8.6%, indicating that profitability improvement remains incomplete.

2. The Indonesia Business turned profitable from a loss in the same period of the previous year and became a major driver of consolidated profit growth. In contrast, Other Overseas recorded declines in both revenue and profit, showing differences in the degree of recovery across the regional portfolio.

3. The progress rate against the full-year Operating Income forecast was 107.1%, already exceeding the plan; however, OCF was -28.2% YoY, with the increase in inventories and other factors putting pressure on working capital. The linkage between earnings improvement and cash generation will be an area to monitor going forward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,369–¥1,450 at Cost of Equity ±1%; ¥1,398–¥1,415 at ω±0.1.

Notes:

• Goodwill amortization of ¥6.5 per share is added back to earnings (due to its nature as a non-cash expense and to improve comparability with IFRS companies).
• Since the progress of Net Income against the full-year forecast (101%) exceeds the standard level (75%), Forecast EPS is adjusted upward within a maximum range of +10% (because companies with early progress tend to exceed their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Since forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• Net assets as of the quarter-end 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 somewhat higher.

(Calculation model: Residual Income Model (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data and is not a forecast of the market share price, a recommendation of any specific investment action, or a prediction or guarantee of future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 disclosed earnings data. Investment decisions should be made at your own responsibility and, where necessary, after consulting with a professional advisor.

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