| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥758.5B | ¥757.5B | +0.1% |
| Operating Income / Operating Profit | ¥59.2B | ¥62.7B | -5.5% |
| Ordinary Income | ¥60.8B | ¥70.5B | -13.8% |
| Net Income / Net Profit | ¥43.2B | ¥48.5B | -10.9% |
| ROE | 5.4% | 6.3% | - |
For the fiscal year ended March 2026, revenue was ¥758.5B (YoY +¥1.1B +0.1%) essentially flat, while Operating Income was ¥59.2B (YoY -¥3.5B -5.5%), Ordinary Income ¥60.8B (YoY -¥9.7B -13.8%), and Net Income ¥43.2B (YoY -¥5.3B -10.9%), representing declines. Revenue held slightly higher as the Automotive Pavement (road paving) Business remained robust (+2.5%) offsetting a decline in the Asphalt Applied Products Business (-4.6%). However, margin deterioration in the Products Business (Operating Income -17.9%) and higher SG&A (¥119.6B, YoY +¥8.6B) reduced the operating margin to 7.8% (down 0.5pt from 8.3% prior year). At the ordinary level, higher interest expense (¥2.7B, prior year ¥0.3B) and reduced equity-method investment income (¥0.7B, prior year ¥4.6B) pressured results, producing double-digit decline in Ordinary Income. At the bottom line, special gains such as ¥1.3B gain on sale of investment securities provided limited support, but could not offset the deterioration in non-operating items, resulting in a final net profit decline.
[Revenue] Revenue amounted to ¥758.5B (YoY +0.1%) — a slight increase. By segment, the Road Paving Business (Road Pavement) was ¥508.6B (+2.5%) and remained solid with steady orders for paving, civil works and related projects. Conversely, the Asphalt Applied Products Business was ¥333.4B (-4.6%) with declines driven by weaker volumes and mix. Other businesses grew to ¥10.4B (+88.0%) but remain small at 1.4% of total and have limited corporate impact. Segment composition shows dependence on Road Paving at 67.0% and Products Business 44.0% (before inter-segment elimination), indicating increased reliance on Road Paving.
[Profitability] Operating Income declined to ¥59.2B (-5.5%). Gross profit was ¥178.8B (gross margin 23.6%), an increase of ¥17.3B YoY, and cost of sales ratio improved to 76.4% from 77.1% (0.7pt improvement). However, SG&A rose to ¥119.6B (SG&A ratio 15.8%), up ¥8.6B YoY, compressing operating-level gains. By segment, Road Paving delivered ¥47.4B (+12.5%, margin 9.3%) and drove gains, while the Products Business recorded ¥35.4B (-17.9%, margin 10.6%) and significant decline, causing the consolidated operating decline. Ordinary Income fell to ¥60.8B (-13.8%); non-operating income contributed ¥6.0B (dividends received ¥3.1B, forex gains ¥1.1B, etc.), but increased non-operating expenses ¥4.4B (mainly interest expense ¥2.7B) and reduced equity-method gains (¥0.7B vs ¥4.6B prior) worsened ordinary margin to 8.0% (prior year 9.3%). Special items were net +¥1.5B (mainly ¥1.3B gain on sale of investment securities and ¥0.3B gain on disposal of fixed assets), supporting net income, but profit before tax declined to ¥62.3B (-12.0%). Applying an effective tax rate of 30.6% resulted in Net Income of ¥43.2B (-10.9%). In summary, the company experienced slightly higher revenue but lower profits across stages: Road Paving margin improvements were insufficient to offset Products margin decline, higher SG&A, and rising non-operating expenses.
The Road Paving Business achieved revenue ¥508.6B (YoY +2.5%), Operating Income ¥47.4B (+12.5%), margin 9.3% — reporting both top-line and bottom-line growth. Order conditions for paving, civil engineering and bridge waterproofing remained firm and construction profitability improved YoY. The Asphalt Applied Products Business reported revenue ¥333.4B (-4.6%), Operating Income ¥35.4B (-17.9%), margin 10.6% — showing declines in sales and profit. Sales volumes of asphalt emulsions, modified asphalt and other pavement materials fell and mix deterioration pressured margins. Other businesses recorded revenue ¥10.4B (+88.0%), Operating Income ¥5.0B (+106.2%), margin 47.9% with high growth, but these are small-scale segments such as real estate leasing and non-life insurance agency, and their contribution to consolidated results is limited. Aggregate segment profit before corporate expenses was ¥87.8B; after deducting corporate expenses ¥28.6B (prior year ¥25.0B), consolidated Operating Income was ¥59.2B.
[Profitability] Operating margin was 7.8%, down 0.5pt from 8.3% prior year; Net Profit margin was 5.7%, down 0.7pt from 6.4%. Gross margin improved to 23.6% (up 0.7pt from 22.9%), but the rise in SG&A ratio to 15.8% (prior year 14.6%) pressured operating margin. ROE was 5.4%, below prior year 6.4%; DuPont decomposition indicates the decline was mainly driven by lower net profit margin (Net Profit margin 5.7% × Total Asset Turnover 0.62 × Financial Leverage 1.54x).
[Cash Quality] Operating Cash Flow (OCF) was ¥24.2B, giving an OCF/NI ratio of 0.56x (OCF/Net Income), which is low. Increases in trade receivables (-¥15.7B) and corporate tax payments (-¥26.0B) were cash outflow factors. OCF subtotal (before working capital changes) was ¥48.4B, and EBITDA was ¥86.7B (Operating Income ¥59.2B + Depreciation ¥27.5B), yielding a cash conversion of 0.56x.
[Investment Efficiency] Capital expenditures totaled ¥53.7B (CapEx/Sales 7.1%, 1.95x depreciation ¥27.5B), representing active growth investment. Tangible fixed assets increased to ¥481.5B (prior year ¥358.2B, +34.4%), and Construction in Progress stood at ¥69.5B (14.4% of PPE), indicating expansion of production and construction capacity.
[Financial Soundness] Equity Ratio was 65.0% (prior year 68.8%) maintaining a high level. Current Ratio was 205% and Quick Ratio 200%, indicating very sound short-term liquidity. Interest-bearing debt was ¥164.0B (short-term borrowings ¥20B + long-term borrowings ¥144B). Debt/EBITDA was 1.89x and Interest Coverage was 22.1x (EBITDA ¥86.7B ÷ interest paid ¥2.7B + OCF interest adjustment), indicating strong financial safety.
Operating Cash Flow was ¥24.2B, down 50.6% from ¥49.0B prior year. The decrease was driven by, relative to OCF subtotal (before working capital changes) ¥48.4B, increases in trade receivables ¥15.7B and corporate tax payments ¥26.0B as primary cash outflows; an increase in trade payables ¥1.8B provided limited inflow. Days Sales Outstanding (DSO) extended to about 85 days, affected by revenue recognition near period end and timing mismatch of collections. Investing Cash Flow was -¥52.9B, mainly due to CapEx ¥53.7B. Large investments in buildings/structures and machinery/equipment raised tangible fixed assets to ¥481.5B (up 34% YoY), and Construction in Progress ¥69.5B indicates ongoing investments pending commencement of operations. Financing Cash Flow was -¥40.1B: while long-term borrowings were raised ¥180.0B and repayments ¥18.2B (net increase ¥161.8B), cash outflows included dividend payments ¥22.6B, share buybacks ¥24.7B, lease repayments ¥1.7B, etc. Free Cash Flow (OCF + Investing CF) was -¥28.7B as active CapEx exceeded OCF; shareholder returns (dividends + buybacks totaling ¥46.7B) were funded by reducing cash and deposits (-¥68.6B). Cash and deposits decreased to ¥247.5B at period end from ¥316.2B at the beginning, yet liquidity remains ample.
Core recurring earnings center on Operating Income ¥59.2B. Non-operating income ¥6.0B (0.8% of revenue) comprised dividends received ¥3.1B, forex gains ¥1.1B, and other ¥0.5B — indicating stable financial income. Non-operating expenses ¥4.4B were mainly interest expense ¥2.7B which rose sharply from ¥0.3B prior year, reflecting rising rates and higher interest-bearing debt levels. Equity-method investment income declined to ¥0.7B from ¥4.6B, contributing to the Ordinary Income decline. Special items were net +¥1.5B, resulting from special gains ¥2.2B (gain on sale of investment securities ¥1.3B, gain on disposal of fixed assets ¥0.3B) less special losses ¥0.7B (impairment/disposal losses), supporting Net Income modestly. Special items contributed roughly 3.5% to Net Income ¥43.2B, thus the bulk of earnings stem from core operations and recurring non-operating income. The accrual ratio ((Net Income - OCF) ÷ Total Assets) is about 1.5%, low; however, increased trade receivables weakened cash conversion in the period and temporarily lowered cash-based earnings quality. Comprehensive Income was ¥69.5B (Net Income ¥43.2B + Other Comprehensive Income ¥26.3B), with valuation differences on securities ¥21.0B and retirement benefit adjustments ¥4.7B producing comprehensive income that significantly exceeded net income and supporting substantive shareholders' equity growth.
The company plans for Full Year (FY March 2027) Revenue ¥800.0B (YoY +5.5%), Operating Income ¥60.0B (+1.3%), Ordinary Income ¥63.0B (+3.7%), and Net Income ¥43.0B (-0.5%). Revenue guidance assumes over 5% growth based on stable order conditions in the Road Paving Business and volume recovery in the Products Business. Operating Income is expected to increase slightly, with an Operating Margin guidance of 7.5% (against 7.8% this period, -0.3pt), reflecting a conservative stance; management will need to control raw material costs and SG&A and improve product mix. Ordinary Income is projected to rise 3.7% assuming stabilization of non-operating items; Net Income is expected to be broadly flat. Dividend forecast is ¥40 per year, implying a cut from this period’s ¥80 (interim ¥40 + year-end ¥40), and the full-year payout ratio is about 59% (based on forecast EPS ¥149.95). Progress toward targets is roughly on track: Revenue 94.8%, Operating Income 98.7%, Ordinary Income 96.5% achieved so far, but recovery in the Products Business and normalization of trade receivable collections are key to meeting full-year forecasts.
Dividends paid were interim ¥40 and year-end ¥40, totaling ¥80 annually, with a payout ratio of about 59% (based on EPS ¥149.74, adjusted). Prior year dividends totaled ¥35 (payout ratio ~21%), so the increase is notable, but the higher payout ratio reflects active returns despite negative Free Cash Flow. Share buybacks amounted to ¥24.7B; combined with dividends ¥22.0B, total shareholder returns were ¥46.7B. The total return ratio relative to Net Income ¥43.2B is about 108%, denoting highly aggressive returns. Treasury stock increased to ¥55.1B at year end (prior year ¥31.7B), indicating clear intent to improve capital efficiency through buybacks. However, current total returns substantially exceeded Free Cash Flow -¥28.7B and were funded by drawing down ample cash and deposits (¥247.5B), suggesting a temporary aggressive posture financed by liquidity. Next fiscal year’s forecast dividend ¥40 (annual) implies a cut and a shift toward prioritizing balance between growth investment and returns. Dividend continuity depends on normalization of OCF (improving trade receivable collection) and returning Free Cash Flow to positive.
Trade Receivables Collection Delay Risk: Trade receivables increased to ¥175.9B (prior year ¥161.2B) and DSO extended to about 85 days. This is the main reason OCF declined to 0.56x of Net Income, and sustained timing mismatches could increase working capital burdens and risk persistent Free Cash Flow deficits.
Segment Concentration and Products Business Profitability Risk: Road Paving accounts for 67% of sales and is sensitive to public investment cycles and weather. The Asphalt Applied Products Business saw Operating Income decline -17.9%; continued adverse movements in raw material prices, volumes and mix would delay recovery of consolidated profitability.
Interest Rate Rise and Increased Non-operating Expense Risk: Interest paid rose sharply to ¥2.7B (prior year ¥0.3B). Combined with interest-bearing debt ¥164.0B and a rising interest rate environment, pressure on Ordinary Income could intensify. Although Interest Coverage is a healthy 22x, persistent weakness in OCF would increase the relative burden of financing costs.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.8% | 7.8% (4.6%–12.3%) | +0.1pt |
| Net Profit Margin | 5.7% | 5.2% (2.3%–8.2%) | +0.5pt |
Profitability is on par with the manufacturing median; Net Profit margin is slightly above.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 0.1% | 3.7% (-0.4%–9.3%) | -3.6pt |
Revenue growth lags the industry median, underscoring the challenge of top-line expansion.
※ Source: Company compilation
Normalizing OCF and improving trade receivable collections are top priorities. This period OCF was ¥24.2B versus Net Income ¥43.2B, with DSO ~85 days constraining cash efficiency. For dividend sustainability and Free Cash Flow recovery, the company needs to shorten trade receivable collection and restore OCF/NI ratio above 1.0x.
Contribution from growth investments can catalyze margin recovery. CapEx ¥53.7B (CapEx/Sales 7.1%, 1.95x depreciation) increased tangible fixed assets by +34% YoY, and Construction in Progress ¥69.5B is awaiting start-up. Although asset efficiency temporarily declined due to investment lead, once operational there is potential for two-stage ROE improvement through gross margin expansion and higher Total Asset Turnover.
Road Paving strength versus Products Business recovery will determine the trend. Road Paving led with Operating Income +12.5% and is key to achieving next year’s ¥800B sales (+5.5%). The Products Business, however, saw Operating Income -17.9% and requires urgent recovery across price, mix and volume. Improving segment mix will directly lift consolidated operating margin.
This report is a financial analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as appropriate.