| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥489.8B | ¥450.1B | +8.8% |
| Operating Income / Operating Profit | ¥38.8B | ¥45.3B | -14.4% |
| Ordinary Income | ¥38.3B | ¥45.7B | -16.2% |
| Net Income / Net Profit | ¥22.7B | ¥29.2B | -22.2% |
| ROE | 11.3% | 16.4% | - |
For the fiscal year ending December 2025, Revenue was ¥489.8B (YoY +¥39.7B +8.8%), Operating Income was ¥38.8B (YoY -¥6.5B -14.4%), Ordinary Income was ¥38.3B (YoY -¥7.4B -16.2%), and Net Income was ¥22.7B (YoY -¥6.5B -22.2%), resulting in a revenue increase but profit decline. Revenue grew steadily driven by expansion in the domestic business, but SG&A increased significantly by +27.4% (¥+53.5B), causing the SG&A ratio to worsen to 50.8% (prior 43.3%, -7.5pp). This offset improvements in gross margin (58.7%, prior 53.4%, +5.3pp), leading Operating Margin to fall to 7.9% (prior 10.1%, -2.2pp). A rise in the effective tax rate (41.4%, prior 30.3%) and deterioration in non-operating results further reduced Net Income, which declined substantially by 22.2% YoY.
[Revenue] Revenue was ¥489.8B (YoY +8.8%), showing steady growth. By segment, the Domestic Business grew to ¥477.4B (+9.3%) and accounted for 97.5% of total, leading overall performance. Overseas Business declined to ¥12.4B (-7.9%), but its 2.5% share limited its impact. Gross Profit was ¥287.4B (¥+26.3B +10.1%), and Gross Margin rose to 58.7% (prior 53.4%, +5.3pp). The improvement in Gross Margin was driven by a decline in Cost of Sales ratio to 41.3% (prior 46.6%, -5.3pp), likely reflecting product mix improvement and price revision effects.
[Profitability] Operating Income was ¥38.8B (YoY -14.4%). Despite expanded Gross Profit, SG&A rose markedly to ¥248.6B (prior ¥195.1B, +¥53.5B +27.4%), pushing the SG&A ratio to 50.8% (prior 43.3%, +7.5pp). SG&A included goodwill amortization of ¥6.5B (prior ¥1.1B), indicating an incremental intangible amortization burden of ¥+5.4B due to subsidiary acquisitions, which depressed margins. By segment, Domestic Business Operating Income decreased to ¥73.0B (-8.0%), while Overseas Business reported an operating loss of ¥1.2B, narrowing from a loss of ¥6.8B prior year (loss reduction of -83.2%). Ordinary Income was ¥38.3B (-16.2%); non-operating results were a net expense of ¥0.5B (prior net income ¥0.4B). Foreign exchange losses of ¥0.8B offset foreign exchange gains of ¥0.5B, and interest expense of ¥0.6B reduced profits. Extraordinary items produced a net gain of ¥0.5B (extraordinary gains ¥1.1B, extraordinary losses ¥0.6B), with limited impact from the ordinary stage. Profit before income taxes was ¥38.8B, income taxes were ¥16.1B giving an effective tax rate of 41.4% (prior 30.3%, +11.1pp), elevated partly due to an increase in deferred taxes (+¥1.9B). After non-controlling interest of ¥1.7B (prior -¥0.3B), Net Income attributable to owners of the parent was ¥22.7B (-22.2%). In conclusion, the company recorded revenue growth but decreased profits at the operating and net levels due to higher SG&A and tax burden.
Domestic Business: Revenue ¥477.4B (+9.3%), Operating Income ¥73.0B (-8.0%), Segment Margin 15.3% (prior 18.2%, -2.9pp). Although this is pre-allocation of corporate expenses, profit margin declined despite revenue growth, likely pressured by higher promotional expenses and personnel costs. Overseas Business: Revenue ¥12.4B (-7.9%), Operating Loss ¥1.2B (loss narrowed from -¥6.8B, an -83.2% improvement), with Segment Loss Ratio at -10.1% (prior -55.3%), indicating progress in restructuring revenue mix. Corporate expense allocation adjustment was -¥32.9B (prior -¥26.6B), up ¥6.3B YoY (+23.9%), suggesting headquarter function strengthening and expanded administrative functions; increased fixed costs relative to revenue growth contributed to the decline in operating margin.
[Profitability] Operating Margin 7.9% (prior 10.1%, -2.2pp), Net Margin 4.6% (prior 6.5%, -1.9pp). ROE is 11.3%, down sharply from 19.2% prior year, mainly due to increased equity (¥178.1B → ¥201.1B, +12.9%) and lower Net Income. While Gross Margin improved to 58.7% (prior 53.4%, +5.3pp), SG&A ratio deteriorated to 50.8% (prior 43.3%, +7.5pp), pressuring margins through lower expense efficiency. Effective tax rate remained high at 41.4% (prior 30.3%, +11.1pp); despite recording Deferred Tax Assets of ¥13.1B, tax burden weighed on Net Margin. [Cash Quality] Operating Cash Flow (OCF) ¥40.6B is 1.79x of Net Income ¥22.7B, indicating solid cash backing of profits. OCF/EBITDA (EBITDA = Operating Income + Depreciation = 38.8 + 10.9 = 49.7B) is 0.82x, in a standard range, but inventory increase of -¥14.3B pressured working capital and Inventory Days worsened to 86 days (prior 75 days, +11 days). Accounts receivable decreased by ¥8.7B supporting collections, while accounts payable decreased by ¥0.4B with limited change in payables turnover. [Investment Efficiency] CapEx was ¥2.2B, modest, with CapEx/Depreciation at 0.20x, well below maintenance investment levels. Intangibles including goodwill total ¥120.0B (32.4% of total assets); Goodwill ¥57.5B equals 28.6% of Equity ¥201.1B. Goodwill amortization of ¥6.5B equals 16.8% of Operating Income ¥38.8B, and JGAAP amortization burden is pressuring margins. Basic EPS ¥119.64 (prior ¥167.77, -28.7%), BPS ¥1,037.24 (prior ¥941.26, +10.2%). [Financial Soundness] Equity Ratio 54.3% (prior 42.9%, +11.4pp) improved. Current Ratio 239% (prior 122%), Quick Ratio 188% (prior 102%) markedly improved, indicating very strong liquidity. However, Short-term Debt Ratio is 65.1% (Short-term borrowings ¥100.0B + current portion of long-term borrowings ¥12.9B = ¥112.9B / Total Liabilities ¥169.5B), which is high; Cash ¥85.3B / Short-term debt (Current liabilities ¥93.1B) is 0.92x, leaving refinancing risk dependence. Long-term borrowings increased to ¥53.6B indicating longer-tenor funding, but short-term debt level remains elevated. Debt/Equity is 0.84x, Debt/Capital is 43.3%, representing a neutral-to-slightly-aggressive capital structure. Interest Coverage (EBITDA / Interest Expense) is 49.7B / 0.6B = 82.8x, extremely high and indicating strong interest-bearing debt tolerance.
Operating Cash Flow was ¥40.6B (prior ¥0.4B, +10578.9%) a significant increase. Prior year Operating CF subtotal (before working capital changes) was ¥39.4B but was offset by income tax payments of ¥38.9B and working capital deterioration, resulting in only slight increase; in the current period the subtotal expanded to ¥60.9B (+54.5%), and reduced income tax payments of ¥19.8B (YoY -49.1%) contributed. Working capital movements included Inventory increase -¥14.3B (Inventory ¥47.9B, +36.7%) which reduced CF, while Accounts Receivable decrease +¥8.7B (AR ¥74.0B, -10.6%) and Advances received increase +¥3.9B (contract liabilities change ¥0.2B, other current liabilities increase ¥3.4B etc.) supported CF. Investing CF was net inflow ¥8.0B, as decreases in time deposits of ¥11.2B outweighed investment outflows of CapEx -¥2.2B and intangible asset acquisitions -¥0.7B. Financing CF was net outflow -¥35.9B: net decrease in short-term borrowings -¥100.0B and repayments of long-term borrowings -¥23.8B were offset by long-term borrowings raised ¥90.0B; dividend payments -¥2.3B were also made. Free Cash Flow (OCF + Investing CF) was ¥48.6B, ample and provides cushion for dividends and debt repayments. Cash and Deposits increased by ¥12.6B during the period to ¥85.3B (prior ¥72.7B), maintaining an appropriate liquidity buffer given the high short-term debt ratio.
Ordinary Income ¥38.3B is close to Operating Income ¥38.8B, indicating core business earnings constitute the majority of profits. Net non-operating items were minor at -¥0.5B (non-operating income ¥1.0B, non-operating expenses ¥1.5B), with limited inclusion of one-off factors. Main non-operating income items were foreign exchange gains ¥0.5B and insurance income ¥0.3B; non-operating expenses were foreign exchange losses ¥0.8B and interest expense ¥0.6B. Net FX impact was a modest expense of ¥0.3B. Extraordinary items netted +¥0.5B (extraordinary gains ¥1.1B, extraordinary losses ¥0.6B) from asset sales and retirements, minor in amount and with limited impact on ordinary profitability. Comprehensive Income was ¥23.9B (Net Income ¥22.7B + Other Comprehensive Income ¥1.2B), with FX translation adjustments ¥0.5B and deferred hedge gains/losses ¥0.7B adding to Net Income. The divergence between Net Income and Comprehensive Income was 5.3%, small, indicating no major distortions in earnings quality. OCF ¥40.6B is 1.79x Net Income ¥22.7B; together with non-cash expenses Depreciation ¥10.9B and Goodwill Amortization ¥6.5B and limited working capital movement, cash backing of profits is solid. Accrual (Net Income - OCF) is -¥17.9B (negative), reflecting working capital buildup from inventory increases that pressured OCF, but overall cash generation remains strong. However, rapid inventory growth (+36.7%) carries risks of markdowns or write-offs, requiring monitoring for sustainability of earnings.
A full-year dividend forecast of ¥7.0 has been disclosed. Given a fiscal year-end dividend of ¥15.0 (actual) and no interim dividend (¥0), there is inconsistency with the full-year forecast of ¥7.0. Disclosed payout ratio is 7.7% (based on current Net Income), suggesting the full-year dividend forecast of ¥7.0 implies a low payout ratio relative to expected EPS. Forecast figures for Revenue and profits are not included in this dataset, making progress-rate evaluation difficult. The gap between announced dividend forecast ¥7.0 and actual year-end dividend ¥15.0 may indicate the forecast reflects a prior projection or a disclosure inconsistency.
Year-end dividend was ¥15.0 (interim dividend ¥0, total annual dividend ¥15.0), with a payout ratio of 12.5% (Annual dividend ¥15.0 / EPS ¥119.64), a low level. Although prior year dividends are not listed, disclosed payout ratio of 7.7% suggests discrepancies in disclosure; practically, payout ratio is estimated around 12–13%. FCF coverage: annual dividends total ¥2.3B versus FCF ¥48.6B, giving 21.1x coverage, indicating very strong dividend sustainability. No share buybacks were executed this period (Treasury shares 9k shares unchanged YoY), so shareholder returns consist solely of dividends and Total Return Ratio equals the payout ratio. The low payout ratio likely reflects a policy to strengthen the balance sheet given a short-term debt ratio of 65.1% and to retain funds for growth investments. If short-term debt is lengthened and inventory efficiency improves—expanding the financial cushion—scope for dividend increases could widen.
High dependence on Domestic Business: 97.5% of Revenue derives from Domestic Business, exposing the company to domestic demand volatility, intensified competition, and channel shifts. Overseas Business accounts for only 2.5% of Revenue, providing insufficient geographic diversification. Although Overseas Business reduced its operating loss to ¥1.2B, achieving sustained profitability overseas is key to stabilizing results. Under a domestically concentrated revenue structure, FX impact is limited but deterioration in domestic consumption would directly pressure performance.
Inventory increase and deterioration in turnover efficiency: Inventory rose sharply to ¥47.9B (YoY +36.7%), and Inventory Days increased to 86 days (prior 75 days, +11 days). It is unclear whether inventory buildup is strategic based on demand forecasts or unintended accumulation due to weak sales; either scenario carries risk of markdowns or disposals. Working capital increase has reduced OCF by ¥14.3B, and success in inventory normalization will materially affect profitability and cash-flow stability.
Short-term debt dependence and financial risk: Short-term Debt Ratio is high at 65.1% (Short-term borrowings ¥100.0B + current portion of long-term borrowings ¥12.9B), and Short-term debt is ¥112.9B versus Cash ¥85.3B, leaving Cash/Short-term debt at 0.76x. While Current Ratio is 239% and liquidity is solid, reliance on short-term borrowings implies refinancing risk in the event of rising interest rates or tightening credit conditions. Long-term borrowings increased to ¥53.6B extending funding tenor, but high short-term borrowings (¥100.0B) remain and optimizing debt composition is an ongoing challenge.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.9% | – | – |
| Net Margin | 4.6% | – | – |
Industry median data is insufficient for quantitative positioning, but Operating Margin of 7.9% is estimated to be slightly below the typical manufacturing range.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 8.8% | – | – |
Revenue growth of 8.8% likely exceeds the manufacturing sector average, indicating relatively strong growth.
※ Source: Company aggregation
While Revenue expansion and Gross Margin improvement (58.7%, +5.3pp) are positive, the sharp rise in SG&A ratio (50.8%, +7.5pp) leading to a decline in Operating Margin to 7.9% (-2.2pp) is the primary focus of this financial result. The SG&A increase is mainly driven by higher corporate expenses (+23.9%) and increased goodwill amortization (+¥5.4B), suggesting post-M&A integration costs and strengthened administrative functions. Future improvements in expense efficiency and SG&A reduction are directly linked to Operating Margin recovery.
Worsening Inventory Days (86 days, +11 days) and rapid Inventory growth (+36.7%) present risks to working capital efficiency and cash-flow stability. Inventory buildup has reduced OCF by ¥14.3B, and the success of inventory normalization will be critical for profitability and CF quality. Improving Inventory Days should contribute to higher OCF/EBITDA and bolster Operating Margin.
On the financing side, Current Ratio of 239% indicates good liquidity, but the high Short-term Debt Ratio of 65.1% and Cash/Short-term debt of 0.76x suggest refinancing dependence. Although the company has lengthened funding by increasing long-term borrowings, the level of short-term borrowings at ¥100.0B remains substantial and optimizing borrowing composition could improve the financial profile. FCF is ample at ¥48.6B and with a low payout ratio of 12.5%, alongside short-term debt reduction and liability term extension, scope for dividend increases may expand.
This report is an AI-generated earnings analysis document produced from XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information aggregated by the Company from publicly disclosed financial statements. Investment decisions should be made at your own responsibility, and you should consult a professional advisor as necessary.