KOBAYASHI PHARMACEUTICAL (4967) FY2026 Q1 Earnings Report

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Executive Summary

FY2026 Q1 results showed a substantial decline in profit despite higher revenue, due to the increased burden of selling, general and administrative expenses. Revenue maintained growth at ¥336.6億 (up +3.2% YoY, +¥10.6億), while Operating Income declined to ¥13.5億 (down -46.7% YoY, -¥11.8億), Ordinary Income to ¥16.7億 (down -30.4% YoY), and Net Income attributable to owners of the parent to ¥10.4億 (down -36.1% YoY), with all three measures recording double-digit declines. The gross profit margin remained largely stable at 51.8%, and the primary cause of the deterioration in profitability was the increase in the SG&A expense ratio from the previous year. Other extraordinary income included a gain on the sale of investment securities of ¥4.6億, providing a temporary boost to final profit.

Factors Driving Earnings Changes

【Revenue】Revenue of ¥336.6億 represented a +3.2% YoY increase. By segment, the Domestic Business generated revenue of ¥244.4億 (up +3.8% YoY, composition ratio 72.6%), while the International Business generated ¥105.6億 (up +4.6% YoY, composition ratio 31.4%), with both segments recording higher revenue. By region, China increased by +33.6% YoY and other regions by +33.8% YoY, while the United States declined by -9.0% YoY and Southeast Asia by -1.2% YoY. Accordingly, growth in the International Business was significantly uneven across regions.

【Profit and Loss】Operating Income declined sharply to ¥13.5億 (down -46.7% YoY). Segment profit in the Domestic Business was ¥16.8億 (down -33.7% YoY), with its profit margin declining from 11.2% in the previous year to 6.9%, making it the primary cause of the consolidated profit decline. The International Business fell into an Operating Loss of ¥3.4億, deteriorating from break-even in the previous year. Extraordinary income of ¥4.7億, including a ¥4.6億 gain on the sale of investment securities, and extraordinary losses of ¥4.0億 were recorded, resulting in only a modest net contribution to Profit Before Tax. The effective tax rate was high at approximately 40.2%, restraining the recovery of profit after tax. Revenue increased, but profit declined.

Segment Analysis

The Domestic Business recorded revenue of ¥244.4億 (composition ratio 72.6%, up +3.8% YoY) and Operating Income of ¥16.8億 (down -33.7% YoY, profit margin 6.9%). Although it remains the primary contributor to consolidated profit, its margin decline was pronounced. The International Business recorded revenue of ¥105.6億 (composition ratio 31.4%, up +4.6% YoY) and an Operating Loss of ¥3.4億, moving into the red despite higher revenue, compared with break-even in the previous year. Other Businesses recorded revenue of ¥16.4億 and Operating Income of ¥0.9億 (up +163.9% YoY); although small in scale, they remained profitable. The factors pressuring consolidated profit were both the decline in the profit margin of the core Domestic Business and the International Business falling into the red.

Key Financial Indicators

【Profitability】The Operating Income margin was 4.0%, down 3.8pt from 7.8% in the same period of the previous year, while the Net Income margin also declined to 3.1% from 5.0% in the previous year. The gross profit margin was largely unchanged at 51.8%, indicating that the deterioration in profitability was attributable to the increase in the SG&A expense ratio (47.8%).【Cash Flow Quality】ROE was 0.5% and ROIC was 2.1%, both remaining at low levels, indicating weak conversion of profit after tax into capital efficiency. The effective tax rate was high at approximately 40.2%, with the tax burden acting as a drag on Net Income.【Investment Efficiency】The total asset turnover ratio was low, and revenue-generating capacity was limited relative to the substantial asset base, including cash and deposits of ¥567.3億 and investment securities of ¥315.4億. EPS was ¥13.95 (¥21.86 in the previous year, down -36.2% YoY).【Financial Soundness】The Equity Ratio was 82.0% and the current ratio was 304.4%, both extremely high, while the D/E ratio also remained low, indicating a conservative and stable financial foundation.

Cash Flow Analysis

Although the statement of cash flows was not disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥567.3億, a decrease of ¥62.3億 from ¥567.3億 in the previous year. While movements such as the sale of investment securities, which resulted in the recognition of extraordinary income of ¥4.6億, occurred, total assets declined overall from ¥2753.3億 to ¥2548.6億. Accounts receivable and notes receivable stood at ¥334.4億, while inventories stood at ¥177.0億, including finished goods of ¥177.0億; both balances were large relative to the scale of revenue, indicating funds tied up in working capital. On-hand liquidity remains substantial, and concerns regarding short-term funding are limited. However, a lengthening collection cycle for receivables and inventory may constrain cash-generation capacity during periods of revenue growth.

Quality of Earnings

It is important to note that the quarter’s profit included temporary factors. Of the ¥4.7億 in extraordinary income, the gain on the sale of investment securities accounted for ¥4.6億, equivalent to more than 44% of Net Income of ¥10.4億. Non-operating income totaled ¥4.0億, including interest income of ¥1.4億, while non-operating expenses were small at ¥0.8億, with the net financial result supporting profit from core operations. However, Operating Income, which reflects the earning power of the core business, deteriorated significantly by -46.7% YoY, confirming weakness in the recurring earnings base. Comprehensive income was ¥23.6億, exceeding Net Income of ¥10.4億, primarily due to the valuation-related increase of ¥12.7億 in foreign currency translation adjustments; this does not reflect the underlying earning power of the business.

Earnings Forecast and Guidance

Against the full-year earnings forecast of revenue of ¥1730.0億, Operating Income of ¥125.0億, and Ordinary Income of ¥130.0億, the progress rates for Q1 were 19.5% for revenue, 10.8% for Operating Income, and 12.9% for Ordinary Income, all below the standard quarterly progress benchmark of 25%. The full-year plan itself assumes a -16.2% YoY decline in Operating Income, indicating that downward pressure on profitability is also anticipated for the full year. The low progress rates are consistent with the possibility of a downside to the plan, while recovery of the Domestic Business’s profit margin and a reduction in the International Business’s losses from Q2 onward will be key to achieving the full-year targets. Neither the earnings forecast nor the dividend forecast had been revised as of the current quarter.

Shareholder Returns

The full-year dividend forecast is ¥106.00 per share, representing a planned increase from the previous year’s dividend of ¥44 (actual result before the aggregation of the interim and year-end dividends). Based on forecast full-year EPS of ¥134.52, the Payout Ratio is 78.8%, above the general benchmark of 60%. The strong financial foundation, including cash and deposits of ¥567.3億 and an Equity Ratio of 82.0%, supports dividend-paying capacity. However, if the declining profit trend seen in Q1 continues through the full year, the Payout Ratio may rise further, requiring monitoring of earnings trends.

Risk Factors

1. Decline in the Domestic Business’s profit margin: The core Domestic Business recorded higher revenue of ¥244.4億 (up +3.8% YoY), but segment profit declined to ¥16.8億 (down -33.7% YoY), with the profit margin falling to 6.9%. If the increased SG&A burden continues, recovery in consolidated profit may be delayed.

2. Deterioration in the International Business’s profitability: The International Business recorded higher revenue of ¥105.6億 (up +4.6% YoY), but posted an Operating Loss of ¥3.4億. With U.S. revenue declining by -9.0% YoY, dependence on China and other regions is increasing, and differences in regional demand and cost structures may amplify earnings volatility.

3. Working capital tie-up: Inventories of ¥177.0億 and accounts receivable and notes receivable of ¥334.4億 were recorded at levels large relative to the scale of revenue. The risk of inventory valuation losses during demand fluctuations and a lengthening cash collection cycle may constrain efforts to improve profitability.

Industry Benchmarks (For Reference; Company Analysis)

Profitability and Returns

The company’s profitability is below the industry median and is positioned in the lower-tier group within the industry.

Growth and Capital Efficiency

The revenue growth rate also slightly trails the industry median and is positioned toward the lower end of the IQR central range.

※Source: Company analysis

Key Points from the Financial Results

1. Although the revenue growth trend was maintained, the increase in the SG&A expense ratio caused the Operating Income margin to decline to 4.0%, a deterioration of 376bp YoY. The key issue going forward is whether revenue growth can be converted into profit growth.

2. While the decline in the profit margin of the core Domestic Business led the consolidated profit decline, the International Business fell into the red despite higher revenue. Differences in regional earnings structures and the improvement of International Business profitability are observed as structural challenges.

3. The ¥4.6億 gain on the sale of investment securities included in extraordinary income accounted for more than 44% of Net Income, and it is important to note that the quarter’s final profit included non-recurring factors.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,435–¥2,570 for ±1% in the cost of equity, and ¥2,491–¥2,507 for ±0.1 in ω.

Notes:

• 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 difference from 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 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on 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, after consulting with professionals as necessary.

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AI Financial Analysis

Executive Summary

FY2026 Q1 was a weak earnings start despite modest top-line growth, as the operating-profit decline was driven by a sharp increase in selling, general and administrative expenses. Revenue increased 3.2% year on year to ¥33.665bn. Gross profit rose 4.5% to ¥17.438bn, and the gross margin improved by approximately 63bp to 51.8%. However, SG&A increased 13.7% to ¥16.087bn, substantially exceeding revenue growth. Consequently, operating income fell 46.7% to ¥1.350bn. The operating margin compressed by approximately 376bp year on year to 4.0%, below the 5% efficiency threshold. Ordinary income declined 30.4% to ¥1.671bn, while profit attributable to owners fell 36.2% to ¥1.036bn. Domestic business remained the core business, generating segment profit of ¥1.684bn, but this was down 33.7% year on year despite 2.3% revenue growth. International revenue grew 5.1% to ¥10.203bn, led by China, but the segment moved to a ¥0.338bn loss from break-even profit in the prior-year quarter. Other businesses increased revenue by 36.2% and segment profit to ¥0.095bn, but their contribution remains small relative to the domestic business. The quarter included a ¥0.461bn gain on sale of investment securities within extraordinary income, largely offset by ¥0.400bn of extraordinary losses, leaving pre-tax profit broadly flat year on year at ¥1.737bn. The effective tax rate rose to 40.2%, reducing the tax burden factor to 0.596 and contributing materially to the larger decline in net income than in pre-tax profit. Annualized ROE was only 2.0% and annualized ROIC was 2.1%, reflecting weak earnings generation rather than balance-sheet stress. The balance sheet remains exceptionally liquid and lightly levered, with a 304.4% current ratio, ¥56.729bn of cash and deposits, and a 0.22x debt-to-equity ratio. Working-capital efficiency is the principal balance-sheet operating issue, with elevated receivable days, inventory days and cash-conversion-cycle indicators. Full-year guidance was maintained, but Q1 progress is below a standard 25% run rate for operating profit, ordinary income and net income. The key issue for the remainder of FY2026 is whether revenue growth, particularly overseas, can be converted into profit through SG&A discipline and normalization of the international business loss.

Profitability Analysis

The annualized three-factor DuPont decomposition is 2.0% ROE = 3.1% net profit margin × 0.528x asset turnover × 1.22x financial leverage. The principal constraint is profitability: the annualized net margin is only 3.1%, while the conservative 1.22x financial leverage indicates that the group is not relying on debt to generate returns. Asset turnover of 0.528x is also modest for a consumer-healthcare manufacturer with a large cash, securities and fixed-asset base. The largest adverse year-on-year change is operating-margin compression, with operating income down 46.7% versus revenue growth of 3.2%. Gross-margin expansion to 51.8% demonstrates that the earnings pressure was not caused by deterioration in gross profitability. Instead, SG&A growth of 13.7%, versus 3.2% sales growth, indicates negative operating leverage and is the direct reason operating margin fell to 4.0%. Domestic business is the core earnings contributor, accounting for ¥1.684bn of segment profit, but its profit decline of 33.7% shows that the pressure is not confined to overseas operations. International business recorded a ¥0.338bn segment loss despite a 5.1% revenue increase, indicating that sales expansion has not yet covered the segment's cost base. The five-factor analysis also shows a tax burden of 0.596, below the normal 0.70 benchmark, due to the 40.2% effective tax rate. Interest burden is not a concern: net interest income and 337.5x interest coverage support the conclusion that financing costs are immaterial. The low 4.0% EBIT margin is a quality alert because it leaves limited buffer against advertising, input-cost, foreign-exchange or volume volatility. Annualized ROIC of 2.1% is also below the 5% warning threshold, indicating that current operating earnings are not adequately monetizing the capital employed. The ¥0.461bn securities-sale gain supported pre-tax income, but it is non-recurring and does not alter the underlying weakness in operating income.

Growth Assessment

Revenue growth of 3.2% in Q1 was supported by domestic sales growth of 2.3%, international sales growth of 5.1%, and 36.2% growth in other businesses. Regionally, China increased 33.6% to ¥2.662bn and other international markets increased 33.8% to ¥1.123bn, partially offsetting a 9.0% decline in US sales to ¥4.404bn and a 1.2% decline in Southeast Asia sales to ¥2.013bn. This regional mix indicates that international growth is uneven rather than broad-based. The core domestic business generated ¥23.288bn of external sales, or roughly 69% of consolidated revenue, and remains the primary determinant of group earnings recovery. International revenue represented approximately 30% of consolidated revenue but generated a segment loss, making margin recovery in overseas operations more important than revenue expansion alone. Gross profit growth exceeded sales growth, which is constructive for pricing and product-mix quality. Nevertheless, SG&A growth absorbed the gross-profit increase and prevented revenue growth from translating into operating leverage. The maintained FY2026 forecast calls for revenue of ¥173.0bn, operating income of ¥12.5bn, ordinary income of ¥13.0bn and profit attributable to owners of ¥10.0bn. Q1 revenue progress is 19.5% of the full-year forecast, 5.5 percentage points below the standard 25% first-quarter pace. Operating-income progress is 10.8%, 14.2 percentage points below the standard pace; ordinary-income progress is 12.9%, 12.1 points below; and net-income progress is 10.4%, 14.6 points below. The below-standard profit progress implies that delivery of the maintained guidance requires a material improvement in quarterly profitability after Q1. The full-year forecast itself anticipates 4.4% revenue growth but a 16.2% decline in operating income, suggesting management also expects earnings pressure to persist on a full-year basis. No forecast revision was announced, so subsequent evidence of SG&A containment, domestic margin recovery and international loss reduction will be central to assessing forecast execution.

Financial Health

Financial health is strong. Current assets of ¥127.581bn exceed current liabilities of ¥41.911bn by ¥85.670bn, producing a 304.4% current ratio and a 262.2% quick ratio. Accordingly, there is no current-ratio warning and no apparent short-term maturity mismatch. Cash and deposits of ¥56.729bn alone exceed current liabilities by ¥14.818bn. Total liabilities represent only 18.0% of total assets, while total equity is ¥208.926bn and the equity ratio is 81.7%. The 0.22x debt-to-equity ratio is well below the 2.0x leverage-warning threshold, and interest coverage of 337.5x confirms negligible debt-service pressure. Lease obligations total ¥0.727bn across current and non-current portions and are immaterial relative to liquidity. Receivables decreased by ¥18.742bn, or 35.9% year on year, to ¥33.438bn; this reduced current assets but also indicates a substantially smaller receivables balance at quarter-end. Current liabilities decreased by ¥18.226bn year on year, principally alongside lower other payables and electronically recorded obligations, further strengthening the liquidity profile. Property, plant and equipment of ¥68.337bn represents 26.8% of assets, while construction in progress of ¥18.223bn equals 26.7% of PPE. The high-CIP alert is material because a large construction pipeline ties up capital before it contributes to operating output or cash returns. Goodwill is ¥7.503bn, equal to only 3.6% of equity and 2.9% of assets, while total intangible assets are 6.6% of assets; these levels imply limited balance-sheet dependence on acquired intangible values. Investment securities of ¥31.535bn, or 12.4% of assets, provide financial flexibility but also expose comprehensive income and equity to market-value movements. Comprehensive income of ¥2.357bn exceeded net income because foreign-currency translation adjustments contributed positively, supporting reported equity during the quarter.

Notable B/S Changes

Accounts receivable: -¥18.742bn (-35.9%) to ¥33.438bn - sharply lower receivables reduced the working-capital asset base, though annualized DSO remains elevated at 91 days. Total assets: -¥20.465bn (-7.4%) to ¥254.864bn - the balance-sheet contraction was driven primarily by lower current assets, including receivables and cash. Current liabilities: -¥18.226bn (-30.3%) to ¥41.911bn - liabilities declined broadly, reinforcing the already strong current ratio and reducing refinancing or maturity-mismatch risk. Other payables: -¥14.768bn (-47.8%) to ¥16.148bn - lower accrued or other operating payables contributed materially to the current-liability reduction and may absorb operating cash. Electronically recorded obligations: -¥3.517bn (-54.6%) to ¥2.923bn - reduced supplier-financing balances may contribute to the extended cash-conversion-cycle pressure. Property, plant and equipment: +¥0.970bn (+1.4%) to ¥68.337bn, including construction in progress of ¥18.223bn - ongoing investment is significant because CIP equals 26.7% of PPE and must generate adequate returns after commissioning.

Cash Flow Quality

The Q1 cash-flow statement does not provide operating cash flow, investing cash flow, financing cash flow or free cash flow figures, so cash conversion and free-cash-flow coverage cannot be quantified. Earnings quality can nevertheless be assessed from profit composition and working-capital indicators. Operating income of ¥1.350bn was the weakest major earnings line, declining 46.7% year on year, whereas pre-tax profit of ¥1.737bn was broadly stable because non-operating income and a ¥0.461bn gain on sale of investment securities provided support. The securities-sale gain is non-recurring and represents approximately 44% of net income attributable to owners, so it reduces the recurrence of reported pre-tax earnings. Extraordinary income of ¥0.466bn was nearly offset by ¥0.400bn of extraordinary losses, limiting the net income-statement effect but increasing quarter-to-quarter volatility. The effective tax rate of 40.2% is the explicit high-tax-burden alert: it reduced net income conversion from pre-tax profit to 59.6%, versus a more normal tax-burden factor above 70%. Receivable days are flagged at 91 days on an annualized basis, above the 60-day warning threshold, indicating relatively slow customer cash collection. Inventory days are also explicitly flagged at 149 days in one supplied efficiency measure and at 100 days in another annualized measure; both exceed the relevant 90-day and 60-day warning thresholds. The long cash-conversion-cycle alert of 196 days is therefore a material cash-efficiency concern, as capital remains tied up in receivables and inventories for an extended period. Finished goods are ¥17.702bn, while raw materials are ¥6.569bn and work in process is ¥2.227bn, pointing to substantial finished-goods exposure. Elevated finished-goods holdings create risks of slower sell-through, promotional pressure and inventory obsolescence if product demand weakens. Trade payables of ¥7.684bn and electronically recorded obligations of ¥2.923bn provide some supplier financing, but do not offset the elevated working-capital-cycle risk. The combination of low operating margin, high inventory days and a long cash-conversion cycle means future cash conversion should be monitored closely even though the group has substantial cash reserves.

Dividend Sustainability

The FY2026 full-year dividend forecast is ¥106 per share. Against forecast EPS of ¥134.52, the implied dividend-only payout ratio is approximately 78.8%. This is above the 60% sustainability benchmark, leaving a narrower earnings-retention buffer than a conservative payout policy. The forecast dividend is nevertheless supported by a strong balance sheet, including ¥56.729bn of cash and deposits, an 81.7% equity ratio and very low financial leverage. The maintained dividend forecast is consistent with management not revising its dividend policy at Q1. However, Q1 EPS of ¥13.95 represents only 10.4% of full-year forecast EPS, below the standard 25% seasonal pace. Therefore, dividend coverage under the forecast depends on a substantial recovery in earnings over the remaining three quarters. The absence of quantified operating and free cash flow prevents direct assessment of free-cash-flow coverage for the dividend. Elevated receivable and inventory days also increase the importance of cash conversion in assessing eventual dividend funding. No share-buyback amount is provided, so no total return ratio is calculated. The key sustainability determinants are achievement of the ¥10.0bn full-year profit forecast, conversion of working capital into cash, and avoidance of persistent international losses or further operating-margin erosion.

Risk Assessment

Business risks include Domestic business profitability risk: the core domestic segment's profit fell 33.7% to ¥1.684bn despite 2.3% sales growth, showing that cost pressure is affecting the principal earnings engine., International execution risk: international revenue increased 5.1% to ¥10.203bn but the segment moved to a ¥0.338bn loss, with US sales down 9.0% despite strong growth in China and other markets., Consumer-healthcare inventory risk: elevated inventory-days alerts of 149 days and 100 days, together with ¥17.702bn of finished goods, raise the risk of slower sell-through, discounting and product obsolescence., Manufacturing and construction-execution risk: construction in progress is ¥18.223bn, or 26.7% of PPE, above the 20% high-CIP alert threshold; delayed commissioning or weak returns on new capacity would further depress capital efficiency., FX and overseas-market risk: approximately 30% of revenue is international, and foreign-currency translation adjustments materially contributed to comprehensive income, leaving equity and overseas profitability sensitive to currency movements..

Financial risks include Working-capital risk: the 91-day receivable-days alert, high inventory days and 196-day cash-conversion-cycle alert indicate that operating capital remains tied up for an extended period., Profit-conversion risk: the 40.2% effective tax rate reduced the tax burden factor to 0.596, causing net income to decline faster than pre-tax income., Non-recurring earnings support: the ¥0.461bn gain on sale of investment securities supported pre-tax profit but is not a recurring operating earnings source., Investment-security valuation risk: ¥31.535bn of investment securities, equal to 12.4% of assets, can contribute to volatility in other comprehensive income and equity..

Key concerns include LOW_OPERATING_EFFICIENCY alert: the 4.0% EBIT margin is below the 5% threshold because SG&A rose 13.7%, far above 3.2% revenue growth; this materially weakens operating leverage., CAPITAL_EFFICIENCY alert: annualized ROIC of 2.1% is below 5%, reflecting low operating returns relative to the capital base and construction pipeline., HIGH_TAX_BURDEN alert: the 40.2% effective tax rate lowered net-income conversion and amplified the decline in profit attributable to owners., HIGH_RECEIVABLE_DAYS alert: annualized DSO of 91 days exceeds 60 days, requiring attention to collections and customer-credit discipline., HIGH_INVENTORY_DAYS alerts: the supplied 149-day and 100-day measures both exceed their warning thresholds, signaling elevated inventory carrying and obsolescence exposure., LONG_CCC alert: the supplied 196-day cash conversion cycle indicates weak working-capital efficiency and potential pressure on cash generation., HIGH_CIP alert: construction in progress at 26.7% of PPE exceeds 20%, increasing execution risk until projects are completed and productive..

Investment Implications

Key takeaways include Revenue and gross margin improved, but SG&A growth materially outpaced sales growth, causing a 46.7% operating-income decline and a 4.0% operating margin., The domestic segment remains the core business but experienced a one-third decline in segment profit, while international operations became loss-making., The balance sheet is a major stabilizer, with ¥56.729bn of cash, a 304.4% current ratio, an 81.7% equity ratio and 0.22x debt-to-equity., Low annualized ROE of 2.0% and ROIC of 2.1% indicate that the central issue is earnings and capital productivity rather than solvency., The maintained FY2026 plan requires meaningful profit improvement after Q1 because operating-profit and net-income progress were only 10.8% and 10.4%, respectively, of full-year forecasts., Working-capital efficiency and the high construction-in-progress balance are important determinants of future cash generation and return improvement..

Metrics to watch include Quarterly SG&A growth relative to revenue growth and the resulting operating-margin trajectory, Domestic segment profit recovery and international segment movement from the ¥0.338bn Q1 loss toward profitability, US revenue trend after the 9.0% Q1 decline, alongside the sustainability of China growth, Annualized receivable days, inventory days and the cash conversion cycle, Finished-goods balance, inventory provisioning and evidence of discounting or slower sell-through, Construction-in-progress completion, commissioning timing and returns on the ¥18.223bn pipeline, Progress versus full-year operating-income guidance of ¥12.5bn and net-income guidance of ¥10.0bn, Effective tax rate and the recurrence of securities-sale gains or other non-operating/extraordinary items.

Regarding relative positioning, Relative to typical manufacturing and consumer-product benchmarks, Kobayashi Pharmaceutical is financially conservative and highly liquid, with low leverage and limited goodwill-related impairment exposure. Its relative weakness is operating and capital efficiency: a 4.0% EBIT margin, 2.0% annualized ROE, 2.1% annualized ROIC, elevated inventory and receivable-cycle indicators, and a loss-making international segment place profitability below stronger sector peers.