| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥918.3B | ¥902.8B | +1.7% |
| Operating Income / Operating Profit | ¥58.6B | ¥51.5B | +13.7% |
| Ordinary Income | ¥148.1B | ¥146.0B | +1.4% |
| Net Income / Net Profit | ¥41.9B | ¥63.2B | -33.7% |
| ROE | 2.5% | 4.1% | - |
For the fiscal year ended March 2026, Revenue was ¥918.3B (YoY +¥15.6B +1.7%), Operating Income was ¥58.6B (YoY +¥7.1B +13.7%), Ordinary Income was ¥148.1B (YoY +¥2.1B +1.4%), and Net Income attributable to owners of the parent was ¥41.9B (YoY -¥21.3B -33.7%). Despite higher revenue and operating profit, the decline in final profit was primarily due to the reversal of prior-year non-operating gains (such as gains on sale of available-for-sale securities) and changes in income taxes (Prior: ¥24.9B → Current: ¥23.1B). At the operating level, gross margin improved to 28.2% (Prior 26.9% +1.3pt) and operating margin improved to 6.4% (Prior 5.7% +0.7pt), enhancing profitability. Contribution from equity-method investment income of ¥85.9B supported maintaining a high level of Ordinary Income. However, Net Income was lower than the prior year: pre-tax profit of ¥159.0B less income taxes of ¥23.1B (effective tax rate 14.5%) resulted in Net Income below the prior year’s ¥63.2B (pre-tax ¥146.9B, effective tax rate 17.0%).
[Revenue] Revenue of ¥918.3B was up +1.7% YoY, marking the third consecutive year of revenue growth. By region: Japan ¥613.3B (Prior ¥610.7B), Asia & Oceania ¥163.6B (Prior ¥162.4B), North & South America ¥110.9B (Prior ¥99.4B), with North America showing a notable +11.6% increase. By segment, Hose & Tube Products recorded ¥329.8B (+4.6%), Belt & Rubber Products ¥306.4B (+3.1%) driving performance, while Chemical Products recorded ¥116.8B (-11.5%) and underperformed. Hose & Tube benefited from demand capture in North America and FX effects; Belt & Rubber was supported by stable domestic and Asian demand. Chemical Products’ decline was mainly due to reduced construction material demand, centered on construction-related products. Management Consulting business recorded ¥27.9B (+6.6%) and Real Estate business ¥13.2B (+9.0%), with non-manufacturing areas performing steadily. Revenue composition: Hose & Tube 35.9%, Belt & Rubber 33.4%, together accounting for about 70% of revenue.
[Profitability] Operating Income of ¥58.6B was up +13.7% YoY, with operating margin improving to 6.4% (Prior 5.7% +0.7pt). Cost of sales ratio was 71.8% (Prior 73.1% -1.3pt), and gross profit rose to ¥259.0B (Prior ¥242.5B, +6.8%), outpacing revenue growth. SG&A was ¥200.3B (Prior ¥190.9B, +4.9%) but gross margin expansion delivered operating leverage. By segment, Hose & Tube Products’ Operating Income improved markedly to ¥10.7B (Prior ¥1.5B, +629.9%), doubling margin from 1.5% to 3.3%. Belt & Rubber Products delivered ¥34.7B (-0.2%, margin 11.3%), essentially flat, while Management Consulting delivered ¥19.0B (+2.2%, margin 68.1%) maintaining high profitability. Chemical Products recorded ¥9.3B (-8.5%, margin 8.0%) with declining revenue and profit; Other Industrial Products also showed margin pressure with ¥2.3B (-10.3%). Ordinary Income of ¥148.1B was up +1.4% YoY, materially supported by Non-operating income of ¥99.9B (Prior ¥98.9B). The breakdown of Non-operating income centers on equity-method investment income ¥85.9B (Prior ¥86.7B, -0.9%), with dividend income ¥5.1B and FX gains ¥1.7B. Non-operating expenses rose to ¥10.4B (Prior ¥4.4B), mainly due to miscellaneous losses. Extraordinary gains were ¥19.8B (Prior ¥5.3B), chiefly gains on sale of available-for-sale securities ¥17.7B and gains on disposal of fixed assets ¥2.1B. Extraordinary losses were ¥8.9B (Prior ¥4.4B), mainly impairment losses ¥8.0B (Prior ¥3.5B). Pre-tax profit was ¥159.0B (Prior ¥146.9B, +8.2%), but after income taxes of ¥23.1B (effective tax rate 14.5%) and non-controlling interests ¥0.6B, Net Income attributable to owners of the parent was ¥41.9B, down -33.7% from ¥63.2B. The prior year benefited from a high ratio of Net Income to pre-tax profit (43.0%), whereas the current period ratio was 26.4%, and the reversal of prior special gains pressured final profit. In conclusion, while revenue and operating profit increased, volatility in special items and tax burden changes led to a decline in final profit.
Belt & Rubber Products is the largest profit source with Operating Income ¥34.7B (margin 11.3%). Although nearly flat YoY (-0.2%), it maintained high profitability. Hose & Tube Products achieved a sharp recovery with Operating Income ¥10.7B (margin 3.3%), up +629.9% from ¥1.5B prior; profit rose disproportionately to sales (+4.6%) due to North American demand capture and cost improvements. Chemical Products posted Operating Income ¥9.3B (margin 8.0%), with revenue -11.5% and profit -8.5% due to weakened construction material demand, causing margin deterioration. Other Industrial Products had Operating Income ¥2.3B (margin 2.0%), with revenue +1.8% but profit -10.3% as competitiveness in HVAC and medical products intensified. Management Consulting is highly profitable with Operating Income ¥19.0B (margin 68.1%), where most of ¥27.9B revenue translates to profit, driven by management advisory services to affiliates with low fixed-cost burden. Real Estate produced Operating Income ¥3.6B (margin 27.1%), with revenue +9.0% and profit +13.0%, supported by steady rental income from land and buildings. After company-wide cost adjustments, consolidated Operating Income was ¥58.6B, underpinned by high-margin Management Consulting and Belt & Rubber segments.
[Profitability] Operating margin is 6.4% (Prior 5.7% +0.7pt), showing a three-year improving trend. Gross profit margin is 28.2% (Prior 26.9% +1.3pt) due to lower cost ratio, offsetting an increase in SG&A ratio to 21.8% (Prior 21.1% +0.7pt). ROE is 2.5% (Prior 4.1% -1.6pt), driven down by lower net margins. Net profit margin is 4.6% (Prior 7.0% -2.4pt), compressed by the reversal of special gains and tax changes. ROA (on an Ordinary Income basis) is 7.9% (Prior 8.4% -0.5pt); despite high Ordinary Income, total assets increased (¥1799.3B → ¥1924.3B, +6.9%) leading to slight decline. Equity-method investment income ¥85.9B represented 54.0% of pre-tax profit ¥159.0B, indicating a substantial contribution from non-operating sources. [Cash Quality] Operating Cash Flow (OCF) of ¥96.1B is 1.64x Operating Income ¥58.6B, indicating strong cash generation. Relative to Net Income ¥41.9B, OCF is 2.29x, as non-cash adjustments from equity-method investment income buoy OCF. OCF subtotal (before working capital changes) was ¥98.2B; working capital provided cash via Accounts Receivable collection ¥12.6B and inventory reduction ¥4.0B, partially offset by reduction in Accounts Payable -¥3.4B, resulting in net cash generation. Accrual ratio ((Net Income - OCF)/Total Assets) = -2.8%, indicating high quality of earnings. [Investment Efficiency] Total asset turnover was 0.48x (Prior 0.50x), suppressed by large holdings of investment securities ¥714.2B (37.1% of total assets) and cash & deposits ¥335.1B (17.4%). Inventory days were 86 days (Prior 86 days), and receivables days improved to 70 days (Prior 75 days), reflecting modest working capital efficiency gains. Cash Conversion Cycle (CCC) = Inventory 86 + Receivables 70 - Payables 30 = 126 days, slightly improved from 128 days. [Financial Soundness] Equity Ratio is 86.1% (Prior 85.6% +0.5pt), indicating extremely strong capital structure. Interest-bearing debt was ¥0.19B (long-term borrowings only), effectively debt-free; Debt/EBITDA is 0.00x. Net cash reached ¥398.6B (Cash & Deposits ¥335.1B + Short-term securities ¥64.9B - Interest-bearing debt ¥0.19B). Current ratio is 475.6% (Prior 468.1%), quick ratio 389.2% (Prior 380.0%), indicating very high short-term solvency.
Operating Cash Flow was ¥96.1B (Prior ¥70.1B, +37.2%). From OCF subtotal ¥98.2B, payments for income taxes ¥24.2B, receipts of interest & dividends ¥22.7B, and interest payments ¥0.6B were netted. Working capital provided cash via reduction in Accounts Receivable ¥12.6B and inventory ¥4.0B, while reduction in Accounts Payable -¥3.4B was a use of funds. Non-cash adjustment from equity-method investment income ¥85.9B caused OCF subtotal to be below pre-tax profit ¥159.0B, but working capital improvement complemented it. Investing Cash Flow was -¥31.3B (Prior -¥69.3B), mainly capital expenditures -¥41.2B (Prior -¥65.1B). CapEx was 1.28x depreciation ¥32.1B, indicating both maintenance and growth investments. Proceeds from sale/redemption of securities ¥22.3B were cash inflows in investing CF, exceeding acquisition of available-for-sale securities -¥9.9B. Free Cash Flow was ¥64.8B (Prior ¥0.8B), markedly improved, covering dividends ¥40.6B and share buybacks ¥14.6B (total ¥55.2B) by 1.17x. Financing Cash Flow was -¥54.6B (Prior -¥52.2B), consisting mainly of dividend payments -¥40.6B, treasury stock purchases -¥14.6B, and treasury stock sales ¥4.97B. Cash and cash equivalents rose from ¥350.6B at the beginning of the period to ¥363.9B at the end (+¥13.3B), including FX-driven increase of ¥3.1B, preserving ample liquidity.
Of Ordinary Income ¥148.1B, Operating Income accounted for ¥58.6B (39.6%), meaning the remaining ¥89.5B (60.4%) depends on non-operating items. Non-operating income ¥99.9B is dominated by equity-method investment income ¥85.9B, making affiliate performance a major determinant of Ordinary Income. Equity-method income is a non-cash item and not realized until dividends are received, which explains why OCF (¥96.1B) exceeds Net Income (¥41.9B). Dividend receipts ¥22.7B are recorded in Investing CF and thus not included in OCF. Extraordinary gains ¥19.8B (chiefly gains on sale of available-for-sale securities ¥17.7B) are one-off. Extraordinary losses ¥8.9B (mainly impairment losses ¥8.0B) were recorded across Real Estate (¥5.79B), Other segments (¥1.62B), and Hose & Tube (¥0.58B). The divergence between Ordinary Income and Net Income is primarily due to net extraordinary items (+¥10.9B) and income taxes ¥23.1B; the effective tax rate of 14.5% is below prior-year 17.0%. Accrual ((Net Income ¥41.9B - OCF ¥96.1B)/Total Assets ¥1924.3B) = -2.8%, indicating limited accounting discretion. Comprehensive Income ¥166.6B exceeds Net Income ¥41.9B significantly, with valuation and translation adjustments totaling ¥30.6B (Available-for-sale securities valuation difference ¥21.1B, foreign currency translation adjustments ¥7.8B, actuarial gains/losses adjustments ¥1.3B), boosting equity. The gap between Net Income and Comprehensive Income reflects unrealized gains on investment securities and yen depreciation, resulting in shareholder equity growth beyond recurring operating earnings.
Full-year guidance anticipates Revenue ¥940.0B (YoY +2.4%), Operating Income ¥62.0B (YoY +5.8%), Ordinary Income ¥150.0B (YoY +1.3%), Net Income attributable to owners of the parent ¥123.0B, EPS ¥445.89, and annual dividend ¥85. Actual results were Revenue ¥918.3B (achievement rate 97.7%), Operating Income ¥58.6B (94.5%), Ordinary Income ¥148.1B (98.7%), and Net Income ¥41.9B. Operating-stage results slightly missed targets while Ordinary Income stayed roughly on plan. The progress toward full-year Net Income forecast ¥123.0B is 34.1%, reflecting the impact of recording impairment and other extraordinary losses in H1; it is presumed the plan incorporates recording of extraordinary gains or normalization of tax burden in H2. The shortfall in Operating Income was mainly due to weaker Chemical Products and higher SG&A, but recovery is expected in H2 through sustained profitability improvement in Hose & Tube Products and stable earnings from Management Consulting. The dividend forecast of ¥85 (no interim forecast, year-end ¥85) contrasts with actual payouts totaling ¥160 (interim ¥72, year-end ¥88), significantly exceeding forecast due to a commemorative dividend of ¥5 for the 140th anniversary. To meet the full-year guidance, H2 requires incremental revenue of ¥21.7B (H2 vs H1 +2.4%) and Operating Income increase of ¥3.4B (H2 vs H1 +5.8%), assuming Ordinary Income remains approximately at H1 level.
Annual dividend was ¥160 (interim ¥72, year-end ¥88), a substantial increase of +¥94 from prior ¥66. Of this, ¥5 was a 140th-anniversary commemorative dividend; excluding the commemorative amount, ordinary dividend was ¥155 (Prior ¥66 +¥89 increase). Payout Ratio is 32.1% (based on EPS ¥490.47 and annual dividend ¥160), unchanged from prior-year 32.1% (based on EPS ¥436.73 and dividend ¥140, excluding commemorative dividend). Total dividends amounted to ¥40.6B (Prior ¥37.2B), and dividend cover relative to Free CF ¥64.8B was 1.60x, a sustainable level. Treasury stock purchases amounted to ¥14.6B, bringing total shareholder returns to ¥55.2B (dividends ¥40.6B + buybacks ¥14.6B). Total Return Ratio, including buybacks, is approximately 39% equivalent relative to payout ratio 32.1%, and total return to Free CF is 85%, within acceptable range. DOE is approximately 2.6%; together with an Equity Ratio of 86.1%, the financial base is robust and risk of dividend cut is extremely low. Full-year dividend guidance was ¥85, but actual payout ¥160 (including commemorative dividend) far exceeded guidance; the guidance was conservative, incorporating possible reversal in H2 of the commemorative dividend. Given effectively no net debt and net cash ¥398.6B, dividend sustainability is high, and stable or modestly increasing dividends are expected in coming years.
High dependence on equity-method investment income: Equity-method investment income ¥85.9B represents 54.0% of pre-tax profit ¥159.0B, meaning affiliate performance fluctuations directly affect Ordinary Income. If equity-method profits decline due to worsening affiliate business conditions or FX volatility, maintaining Ordinary Income levels on Operating Income ¥58.6B alone may be difficult. Limited disclosure by equity-method investees increases forecasting uncertainty for investors.
Valuation fluctuation risk of investment securities: Investment securities of ¥714.2B (37.1% of total assets) represent a high exposure; market declines could trigger valuation losses or impairments. Of Comprehensive Income ¥166.6B, Available-for-sale securities valuation difference ¥21.1B bolsters equity; adverse market conditions could materially reduce equity and ROE. Deferred tax liabilities ¥54.6B are linked to valuation differences and could fluctuate, posing future tax burden risk.
Deterioration in profitability and slow structural reform in Chemical Products: Chemical Products recorded revenue -11.5% and Operating Income -8.5%, with margin 8.0% declining YoY, driven by reduced construction material demand. If structural reforms or profitability measures underperform, it could exert ongoing pressure on group-wide profitability. Low return on segment assets (Segment assets ¥120.4B) also raises capital efficiency concerns and potential impairment risk.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.4% | 7.8% (4.6%–12.3%) | -1.4pt |
| Net Profit Margin | 4.6% | 5.2% (2.3%–8.2%) | -0.6pt |
Both Operating Margin and Net Profit Margin are below the industry median, placing profitability at mid-to-lower range within manufacturing. High dependence on equity-method investment income underscores the need to strengthen operating-stage profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 1.7% | 3.7% (-0.4%–9.3%) | -2.0pt |
Revenue growth underperforms the industry median, and top-line expansion lags manufacturing peers. Growth in North America is a positive, but domestic and Chemical Products slowdown restrains overall growth.
※Source: Company compiled data
Improvement in Operating Margin and reduction of equity-method dependency: Operating Margin improved to 6.4% (Prior 5.7% +0.7pt), marking three consecutive years of improvement, but still below industry median 7.8%. Profitability support comes from Hose & Tube margin improvement (1.5% → 3.3%) and highly profitable Management Consulting (68.1%), yet delayed structural improvement in Chemical Products (margin 8.0%, YoY decline) could limit overall margin expansion. The structure in which equity-method investment income ¥85.9B accounts for 54.0% of pre-tax profit indicates insufficient core operating profitability; raising core business operating margins to industry median levels (7% range) is key to reducing equity-method dependency and enhancing earnings stability.
Working capital efficiency improvements and sustainability of cash generation: OCF ¥96.1B produced Free CF ¥64.8B and covered total returns ¥55.2B by 1.17x, a solid level, but further working capital efficiency gains are possible. CCC 126 days (Prior 128 days) improved slightly due to shorter DSO (70 days) and stable DIO (86 days); initiatives to optimize DPO (30 days) and compress working capital remain focal. With Revenue growth 1.7% below industry median 3.7%, improving working capital efficiency can boost cash generation more than growth alone, and H2 trends in DSO/DIO will affect sustainability of shareholder returns.
Balance between investment securities holdings and capital efficiency: Large investment securities balance ¥714.2B (37.1% of assets) and net cash ¥398.6B greatly enhance financial safety but suppress capital efficiency (ROE 2.5%, total asset turnover 0.48x). Of Comprehensive Income ¥166.6B, valuation difference on securities ¥21.1B increases equity; realizing unrealized gains or strategically reallocating assets may improve capital efficiency and shareholder returns. Leveraging effectively debt-free balance sheet to balance growth investments (M&A, capacity expansion) and shareholder returns (dividends, buybacks) is a medium-term theme for enhancing enterprise value.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. 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; consult a professional advisor as necessary before making investment decisions.