| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥403.2B | ¥450.4B | -10.5% |
| Operating Income | ¥-46.9B | ¥22.6B | -24.6% |
| Ordinary Income | ¥-49.9B | ¥25.9B | -23.9% |
| Net Income | ¥-61.9B | ¥2.1B | -92.8% |
| ROE | -6.0% | 0.2% | - |
The FY2026 results were severe: Revenue ¥403.2B (YoY -¥47.2B -10.5%), Operating loss ¥46.9B (YoY -¥69.5B), Ordinary loss ¥49.9B (YoY -¥75.8B), Net loss ¥61.9B (YoY -¥64.0B), marking a sharp decline in revenue and a large deficit. In addition to the double-digit decline in Revenue, SG&A increased to ¥249.5B (YoY +¥11.5B +4.8%), worsening operating profit by ¥69.5B and turning an operating profit of ¥22.6B in the prior year into a loss of ¥46.9B. Extraordinary losses of ¥43.2B (mainly impairment losses of ¥38.8B) expanded the final loss, and Net Income deteriorated significantly from ¥2.1B to a loss of ¥61.9B. Gross profit margin remained high at 50.3% (down -7.6pt from 57.9% prior year), but the increase in SG&A ratio to 61.9% (up +9.0pt from 52.9%) heavily pressured profitability.
[Revenue] Revenue was ¥403.2B (YoY -¥47.2B -10.5%), a substantial decline. Because the company has a single-segment structure, detailed segment breakdowns are not disclosed, but overall weakening demand and reduced sales volumes are presumed primary causes. Gross margin remained at 50.3%, sustaining the 50% range, indicating pricing policy and product mix remained at a certain level; however, the contraction of the top line caused gross profit in absolute terms to fall to ¥202.6B (from ¥260.7B prior year, -¥58.1B -22.3%). Cost of goods sold ratio rose to 49.7% (up +7.6pt from 42.1% prior year), and reduced fixed-cost absorption pressured margins.
[Profit & Loss] SG&A increased to ¥249.5B (YoY +¥11.5B +4.8%), worsening the SG&A-to-Revenue ratio to 61.9% (up +9.0pt from 52.9%). R&D expense was maintained at ¥68.1B (16.9% of Revenue), indicating continued investment in the medium- to long-term technology base, but this acted as a short-term fixed-cost burden on profits. Goodwill amortization increased to ¥10.2B (from ¥6.9B prior year, +¥3.3B +47.8%), and M&A integration costs depressed results. Operating results deteriorated by ¥69.5B from prior year, producing an operating loss of ¥46.9B (prior year operating income ¥22.6B), and operating margin plunged to -11.6% (from +5.0% prior year, -16.6pt). Non-operating items included interest expense of ¥5.8B (from ¥0.2B prior year, +¥5.6B), increasing borrowing costs and expanding total non-operating expenses to ¥7.3B (YoY +¥4.4B). Ordinary loss was ¥49.9B (prior year ordinary income ¥25.9B, YoY -¥75.8B). Extraordinary losses included impairment losses of ¥38.8B (from ¥3.8B prior year, +¥35.0B), a one-off factor that significantly pressured final results. Loss before tax was ¥-92.0B (from profit before tax ¥20.0B prior year, deterioration of ¥112.0B), and Net Income was ¥-61.9B (from Net Income ¥2.1B prior year, deterioration of ¥64.0B), concluding in a large revenue decline and significant losses.
[Profitability] Operating margin was -11.6% (from +5.0% prior year, -16.6pt deterioration), and Net margin was -15.4% (from +0.5% prior year, -15.9pt deterioration), both declining substantially; ROE turned negative at -6.0% (from +0.9% prior year, -6.9pt deterioration). Gross profit margin remained at 50.3% (from 57.9% prior year, -7.6pt), but the rise in SG&A ratio to 61.9% (from 52.9% prior year, +9.0pt) caused operating-stage losses and manifested negative operating leverage. R&D-to-Revenue was high at 16.9% (from 15.3% prior year, +1.6pt), indicating continued medium- to long-term investment posture.
[Cash Quality] Operating Cash Flow (OCF) was ¥35.8B versus a Net loss of ¥61.9B, yielding OCF/Net Income of -0.58x, indicating weak cash backing for accounting losses. Free Cash Flow was -¥151.0B (OCF ¥35.8B − Investing CF ¥186.8B), a large negative figure, making investment recovery a challenge. Working capital efficiency deteriorated with DSO 90 days, DIO 211 days, and CCC 275 days, indicating inventory buildup and slower receivables collection that hinder cash generation.
[Investment Efficiency] Total asset turnover was 0.30x (down from 0.36x prior year), showing worsened asset efficiency. Construction-in-progress (CIP) was ¥270.5B (43.1% of tangible fixed assets), a high level that increases the risk of delayed commissioning, asset turnover deterioration, and impairment risk. Intangible fixed assets rose sharply to ¥248.0B (from ¥79.7B prior year, +¥168.3B +211%), and goodwill increased to ¥124.3B (from ¥65.2B prior year, +¥59.2B +91%), raising dependence on M&A-related assets.
[Financial Soundness] Equity Ratio was 77.8% (from 92.4% prior year, -14.6pt) and remains high, but Net Assets decreased to ¥1039.7B (from ¥1158.5B prior year, -¥118.8B -10.3%), reflecting capital erosion from losses. Current ratio was 576.4% and quick ratio 488.1%, indicating very strong short-term liquidity, and Cash & Deposits stood at ¥204.5B. Long-term borrowings of ¥100.0B were newly raised, bringing interest-bearing liabilities to ¥100.0B; however, debt-to-equity ratio was 0.29x and Debt/Capital ratio 8.8%, keeping leverage low. Interest coverage was -8.05x, indicating interest burden cannot be covered by earnings and recovery of earnings is a prerequisite.
OCF was ¥35.8B (from ¥58.4B prior year, -38.7%) and remained positive, but OCF/Net Income was -0.58x vs. a Net loss of ¥61.9B, showing very weak cash backing. OCF subtotal (pre-working capital changes) was ¥37.9B, and non-cash expenses (depreciation ¥41.4B, goodwill amortization ¥10.2B, impairment ¥38.8B) supported the gap between profit/loss and cash. In working capital, a decrease in trade receivables provided cash inflow of ¥33.3B, whereas inventory increase was -¥10.7B and decrease in trade payables was +¥3.0B cash outflow, so inventory buildup and worsening DPO hindered cash generation. Investing CF was -¥186.8B (from -¥109.1B prior year, -71.2% deterioration), driven mainly by acquisitions of tangible and intangible fixed assets ¥125.8B and acquisition of subsidiary shares ¥64.2B. Recovery from M&A investments and capital expenditures is expected to take time, leaving Free Cash Flow at -¥151.0B (from -¥51.0B prior year, -196% deterioration). Financing CF was ¥61.2B (from -¥22.6B prior year, a reversal), supported by long-term borrowings raised of ¥99.5B, while dividend payments ¥20.5B and lease repayments ¥2.1B pressured cash. Cash & Deposits decreased to ¥204.5B (from ¥295.5B prior year, -¥90.98B -30.8%), revealing that internal funds were insufficient to cover investment needs and the company responded by drawing down cash balances and raising borrowings.
Ordinary loss was ¥-49.9B and Net loss ¥-61.9B, indicating structural issues in the core business as losses are entrenched from the ordinary-income stage. Non-operating loss was net -¥3.0B, mainly due to increased interest expense of ¥5.8B (from ¥0.2B prior year, +¥5.6B) associated with fundraising, which depressed ordinary income. Interest income ¥1.7B and foreign exchange gains ¥0.5B partially offset this, but the increase in non-operating expenses expanded ordinary-stage losses. Extraordinary losses included impairment losses of ¥38.8B (from ¥3.8B prior year, +¥35.0B), materially pressuring Net Income; these are expected to be temporary and not to have a persistent effect on future results. Comprehensive income was ¥-97.7B (from ¥61.1B prior year, deterioration of ¥-258.8B), with foreign currency translation adjustments of -¥0.9B and pension adjustments of -¥1.2B further reducing comprehensive income. The divergence between comprehensive income and Net Income was small at -¥2.1B, indicating limited FX and pension impacts. The maintenance of positive OCF ¥35.8B was supported by additions of non-cash expenses (depreciation ¥41.4B, goodwill amortization ¥10.2B, impairment ¥38.8B) and a decrease in receivables ¥33.3B; although loss-making on a profit basis, the company retains some cash-generation ability, suggesting one-off losses like impairments had a large effect. However, inventory increase of ¥10.7B and decrease in payables ¥3.0B strained funds, leaving room for improvement in working capital management.
Full Year guidance forecasts Revenue ¥440.0B (YoY +9.1%), Operating loss ¥27.0B, Ordinary loss ¥30.0B, Net loss ¥64.0B. The plan is conservative, assuming a Revenue recovery relative to current results but continued deficits. Compared with current results, Revenue progress rate is 91.6% (¥403.2B ÷ ¥440.0B), implying an assumed revenue recovery in the second half. Operating loss for the full year is expected at ¥-27.0B versus the current period loss of ¥-46.9B, implying assumed improvement in profitability (narrowing of loss) in the second half. Net loss is expected at ¥-64.0B for the full year versus ¥-61.9B current, a slight deterioration, presumably assuming the disappearance of extraordinary losses. Forecast EPS is -¥53.15, improving from actual -¥79.72 but remaining negative. Because a tender offer by parent company Takara Holdings has been completed and delisting is planned, dividend forecasts are undecided. The forecasts are based on certain assumptions; demand recovery, cost-reduction progress, and monetization of commissioned assets will be key.
No dividends were paid this period (interim dividend ¥0, year-end dividend ¥0). Because the tender offer by parent company Takara Holdings succeeded and the company is scheduled to become a wholly owned subsidiary and be delisted, no dividend forecast for the fiscal year ending March 2027 is provided. Reported payout ratio is shown as 2.0%, but the company incurred a Net loss of ¥61.9B, so substantive dividend distributable funds do not exist. Free Cash Flow of -¥151.0B is deeply negative, and under current cash generation the company cannot secure dividend resources. Future dividend policy is expected to depend on the parent company's capital allocation policy. No share repurchases were executed, so Total Return Ratio is not applicable. Dividend sustainability depends on recovery of earnings and cash flow improvement.
Deterioration of revenue structure and weakened cash generation: Operating margin -11.6% (from +5.0% prior year, -16.6pt deterioration) and entrenched operating losses, with Interest Coverage -8.05x indicating inability to cover interest burden from earnings. Free Cash Flow -¥151.0B is a large negative, and delayed investment recovery or working capital improvement raises liquidity risk. SG&A-to-Revenue ratio of 61.9% (from 52.9% prior year, +9.0pt) represents a structural cost burden requiring urgent SG&A restraint and fixed-cost reductions.
Declining asset efficiency and impairment risk: CIP ¥270.5B (43.1% of tangible fixed assets) and inventory ¥68.7B remain elevated, and total asset turnover 0.30x (down from 0.36x prior year) shows deteriorating asset efficiency. Sharp increases in intangible assets ¥248.0B (YoY +211%) and goodwill ¥124.3B (YoY +91%) raise the possibility of additional impairment if monetization of M&A-related assets is delayed. The company recorded impairment losses of ¥38.8B this period; delayed commissioning and stricter profitability verification could continue to be loss drivers.
Deterioration of working capital efficiency and prolonged cash conversion cycle: DSO 90 days, DIO 211 days, CCC 275 days show worsening working capital efficiency, with inventory buildup and slow receivables collection hindering cash generation. Inventory increase ¥10.7B and decrease in payables ¥3.0B compressed OCF; without improvement in working capital management, dependency on additional financing may rise. There is also inherent risk of inventory write-downs and increased doubtful receivables, making compression to appropriate inventory levels and strengthening collections essential.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | -11.6% | 7.8% (4.6%–12.3%) | -19.4pt |
| Net Margin | -15.4% | 5.2% (2.3%–8.2%) | -20.5pt |
Profitability is well below the manufacturing median, with both operating and net profits in negative territory, placing the company near the bottom within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -10.5% | 3.7% (-0.4%–9.3%) | -14.2pt |
Revenue growth lags the manufacturing median by -14.2pt, indicating significantly low growth relative to peers.
※Source: Company aggregation
Phase-out of one-off impairment losses ¥38.8B and progress in earnings normalization: Extraordinary losses ¥43.2B this period (mainly impairment ¥38.8B) expanded the Net loss of ¥61.9B, so it is important to assess the effect of these one-off losses falling away. Full-year forecast projects Net loss ¥64.0B, only slightly worse than current results, implying an assumption that extraordinary losses will dissipate. If the profitability reconstruction of impaired assets progresses, improvement in operating-stage profitability will be the focus.
Escape from SG&A ratio 61.9% and negative operating leverage: While Revenue fell -10.5%, SG&A rose +4.8%, worsening the SG&A ratio from 52.9% to 61.9% (+9.0pt), the main cause of deteriorating profitability. Full-year guidance assumes recovery to Revenue ¥440.0B (+9.1%), and restraint of SG&A plus revenue recovery to reverse into positive operating leverage will be key to narrowing the operating loss (current -¥46.9B → full year -¥27.0B). Maintaining R&D at 16.9% is positive for medium- to long-term growth investment, but in the short term it burdens profits as a fixed cost, and timing of commercialization for investment payback is notable.
Improvement in working capital efficiency and recovery of cash generation: With DIO 211 days, DSO 90 days, CCC 275 days showing deterioration, inventory buildup and delayed receivables collection are hindering cash generation. Although OCF remained positive at ¥35.8B, Free Cash Flow was -¥151.0B and investment recovery is a burden. Commissioning of CIP ¥270.5B (43.1% of tangible fixed assets) and commencement of depreciation could limit the cash impact and improve asset efficiency. Shortening CCC through inventory reduction and collection strengthening would directly contribute to restoring cash generation from internal funds.
This report was generated by AI analyzing XBRL financial statement data and is an automatically produced financial analysis document. It does not constitute 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 responsibility; please consult a professional advisor as needed prior to making any investment decisions.