| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥923.0B | ¥905.1B | +2.0% |
| Operating Income | ¥86.8B | ¥89.3B | -2.8% |
| Ordinary Income | ¥101.8B | ¥91.5B | +11.2% |
| Net Income | ¥65.2B | ¥82.7B | -21.2% |
| ROE | 6.4% | 8.6% | - |
For the fiscal year ended March 2026, Revenue was ¥923.0B (YoY +¥17.9B +2.0%), Operating Income was ¥86.8B (YoY -¥2.5B -2.8%), Ordinary Income was ¥101.8B (YoY +¥10.3B +11.2%), and Net Income was ¥65.2B (YoY -¥17.5B -21.2%). The result was revenue growth with profit decline. At the operating level, revenue growth in the Overseas Belt Business (+4.2%) led performance, but a sharp slowdown in the Construction Materials Business (revenue -16.5%, profit -87.5%) and increased corporate/head office expenses (segment adjustment △¥35.9B) compressed operating margin to 9.4% (down 0.5pt from 9.9% a year earlier). At the ordinary level, ordinary income expanded double digits due to ¥19.5B of non-operating income—dividends received ¥5.7B, interest received ¥4.0B, and foreign exchange gains ¥4.8B, among others. At the net income level, although there was ¥12.0B of gains on sales of investment securities, recognition of special losses including impairment loss ¥9.3B and loss on disposal of fixed assets ¥1.8B, plus the absence of prior-year securities sales gains of ¥34.5B, resulted in Net Income declining 21.2% year-on-year. Operating Cash Flow (OCF) was ¥103.1B (YoY +33.0%) and healthy, but capital expenditure ¥77.7B and shareholder returns (dividends and buybacks) totaling approximately ¥62.5B exceeded free cash flow of ¥32.6B, so cash on hand (¥277.6B) was used to cover the shortfall. Versus full-year guidance (Revenue ¥950.0B, Operating Income ¥88.0B, Ordinary Income ¥87.0B, Net Income ¥90.0B), Revenue and Operating Income were broadly achieved, Ordinary Income outperformed, and Net Income missed due to special losses.
Revenue was ¥923.0B (YoY +2.0%). By segment, Domestic Belt Business was ¥432.3B (+1.7%) showing flat growth, Overseas Belt Business was ¥526.0B (+4.2%) maintaining an upward trend, Construction Materials Business was ¥67.7B (-16.5%) with a significant decline due to demand slowdown, and Other Businesses were ¥78.0B (+8.2%) showing solid performance. By region, Overseas Belt contributed roughly 60% of the total revenue increase while domestic remained steady but with limited growth. Gross margin was 30.5% (down 0.5pt from 31.0%) impacted by a worsened mix toward overseas operations (Overseas Belt margin 8.5%, Domestic Belt 17.0%) and raw material cost pressure.
Operating Income was ¥86.8B (YoY -2.8%). Margin deterioration and SG&A of ¥194.4B (SG&A ratio 21.1%, improved 0.1pt from 21.2%) resulted in an operating margin of 9.4% (down 0.5pt from 9.9%). By segment, Domestic Belt operating profit was ¥73.4B (margin 17.0%) maintaining high profitability but down YoY -8.8%, Overseas Belt operating profit was ¥44.7B (margin 8.5%) with substantial increase (+36.2%), Construction Materials was ¥0.9B (margin 1.3%) down -87.5%. Increased corporate cost allocation (segment adjustment △¥35.9B, prior year △¥33.9B) pressured operating profits. Ordinary Income was ¥101.8B (+11.2%), as non-operating income ¥19.5B (dividends received ¥5.7B, interest received ¥4.0B, foreign exchange gains ¥4.8B, etc.) significantly exceeded non-operating expenses ¥4.5B (interest paid ¥0.5B, foreign exchange losses ¥4.0B, etc.), improving non-operating balance. Net Income was ¥65.2B (-21.2%); although there was ¥12.0B of special gains (gain on sale of investment securities), recognition of special losses ¥9.9B (impairment loss ¥9.3B, loss on disposal of fixed assets ¥1.8B) and the absence of prior-year high securities sale gains ¥34.5B, plus income taxes ¥30.0B (effective tax rate 28.8%), led to a significant decline. In summary, revenue increased while profits decreased.
OCF was ¥103.1B (YoY +33.0%), 1.58x Net Income ¥65.2B, indicating high quality. Operating cash flow before working capital changes (subtotal) was ¥127.7B, with non-cash charges of depreciation ¥46.0B and impairment loss ¥9.3B added back, offset by income taxes paid ¥33.8B. In working capital, inventory decrease ¥13.4B and accounts receivable decrease ¥6.4B contributed to cash generation, while accounts payable decrease ¥17.8B offset them, so net contribution from working capital to OCF was limited. Investing cash flow was -¥70.5B, reflecting active capital spending of ¥77.7B (8.4% of sales, 1.69x depreciation). Proceeds from sale of investment securities ¥13.3B and sale of tangible fixed assets ¥6.4B partially offset investments. Free Cash Flow was ¥32.6B (OCF ¥103.1B + Investing CF -¥70.5B). Financing cash flow was -¥93.6B, reflecting dividend payments ¥52.5B, share buybacks ¥10.0B, repayment of long-term borrowings ¥10.0B, and net reduction in short-term borrowings ¥23.0B. Cash and cash equivalents decreased from ¥308.4B at the beginning of the period to ¥258.4B at period-end after foreign exchange effects +¥11.0B (YoY -¥50.0B). On a cash & deposits basis, ¥277.6B remains ample, supporting capex and shareholder returns.
Earnings quality is generally sound, but one-off profit and loss volatility increased Net Income volatility. Ordinary Income was boosted by +¥15.0B from non-operating income accumulation (non-operating income ¥19.5B: dividends received ¥5.7B, interest received ¥4.0B, FX gains ¥4.8B, etc.), reaching ¥101.8B (YoY +11.2%). About half of non-operating income is recurring (dividends/interest), while FX gains ¥4.8B were largely offset by FX losses ¥4.0B, so net FX impact was limited. Special items included ¥12.0B gain on sales of investment securities, but this was significantly lower than prior-year ¥34.5B; special losses included impairment loss ¥9.3B, loss on disposal of fixed assets ¥1.8B, and restructuring costs ¥0.6B, making net special items only +¥2.1B. These one-off factors were the primary reason for Net Income ¥65.2B (YoY -21.2%). Conversely, Other Comprehensive Income was ¥119.9B (YoY +163.2% from ¥45.5B), driven by foreign currency translation adjustments ¥33.5B and valuation differences on available-for-sale securities ¥12.6B, adding ¥54.7B of OCI to Net Income. The large divergence between comprehensive income and net income was mainly due to increased valuation/translation differences (total ¥248.6B, up ¥46.0B from ¥202.6B), reflecting improved market conditions and unrealized gains. OCF exceeded Net Income by a wide margin at ¥103.1B, indicating that one-off accounting items did not materially impair cash generation. From an accrual perspective, working capital movements slightly depressed OCF but were offset by non-cash charges such as depreciation, so cash conversion of earnings is generally solid.
Full-year guidance: Revenue ¥950.0B (YoY +2.9%), Operating Income ¥88.0B (YoY +1.4%), Ordinary Income ¥87.0B (YoY -14.5%), Net Income ¥90.0B. Actuals: Revenue ¥923.0B (achievement 97.2%), Operating Income ¥86.8B (98.6%), Ordinary Income ¥101.8B (117.0%), Net Income ¥65.2B (72.4%). Revenue and Operating Income were broadly in line with guidance; Ordinary Income beat due to accumulated non-operating income, while Net Income significantly missed due to special losses and the prior-year securities sale gain reversal. Dividend guidance was annual ¥90.0 but actual paid was ¥191.0 (interim ¥90.0, year-end ¥101.0), substantially above guidance; despite profit shortfall, dividends exceeded plan. Forecast EPS ¥322.45 vs. actual EPS ¥263.35 (achievement 81.7%), reflecting Net Income shortfall. By segment, Overseas Belt likely outperformed plan with revenue and profit above guidance, while the Construction Materials rapid slowdown dragged on consolidated plans. Looking ahead, continued Overseas Belt growth, stable domestic earnings, and a bottoming in Construction Materials are keys to performance recovery.
Annual dividend was ¥191.0 (interim ¥90.0, year-end ¥101.0, up ¥101.0 from prior year ¥90.0). Payout Ratio was 72.5% (total dividends ¥53.6B ※issued shares - treasury shares × year-end dividend ¥101 / Net Income ¥65.2B), relatively high. Despite lower Net Income, the company increased dividends, maintaining shareholder return stance. Dividends materially exceeded the forecast annual ¥90.0. Share buybacks totaled ¥10.0B, and total return amount was approximately ¥62.5B (dividends ~¥52.5B on a cash flow basis + share buybacks ¥10.0B). Total Return Ratio was 95.8% (total return ¥62.5B / Net Income ¥65.2B), extremely high. Free Cash Flow was ¥32.6B, insufficient to cover dividends plus buybacks, so some cash on hand (cash ¥277.6B) was drawn down to fund shareholder returns. Dividend sustainability is supported in the short term by abundant net cash ¥244.6B, but mid- to long-term sustainability would benefit from expanded OCF and improved working capital efficiency so dividends can be funded from internal cash generation. The dividend policy aligns with profit-linked and stable distribution, but this fiscal year increases despite special losses, underscoring the emphasis on shareholder returns.
Low profitability of Overseas Belt Business: Overseas Belt operating margin 8.5% is substantially below Domestic Belt 17.0%, and a rising overseas revenue mix (57.0%) has pressured consolidated operating margin via mix deterioration. Overseas revenue scale is large at ¥526.0B and expected to continue growing; improving overseas profitability is essential to restore consolidated margins. Measures required include cost reduction, appropriate pricing, and production efficiency improvements.
Sharp slowdown in Construction Materials Business: Construction Materials revenue ¥67.7B (YoY -16.5%), Operating Income ¥0.9B (YoY -87.5%), Margin 1.3% — a marked deterioration. If construction demand remains weak or competition intensifies, downside pressure on consolidated results may continue. Consideration of portfolio restructuring or structural reform may be necessary.
Inefficiency in working capital: Days Sales Outstanding 78 days, Inventory Days 143 days, Days Payable Outstanding 52 days, Cash Conversion Cycle 169 days — working capital efficiency is below industry norms. OCF/EBITDA ratio 0.78x is below the industry benchmark 0.9x; working capital expansion is impairing cash generation. Improvements in inventory optimization, faster receivables collection, and optimized payables terms are key to simultaneously improving ROE and OCF.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.4% | 7.8% (4.6%–12.3%) | +1.7pt |
| Net Margin | 7.1% | 5.2% (2.3%–8.2%) | +1.9pt |
Profitability exceeds the industry median, supported by high-margin Domestic Belt Business (margin 17.0%).
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.0% | 3.7% (-0.4%–9.3%) | -1.7pt |
Revenue growth slightly trails the industry median, with the Construction Materials slowdown restraining overall growth.
※Source: Company compilation
Balance between high-margin domestic business and overseas growth: Domestic Belt maintains high profitability with 17.0% margin and is a core earnings pillar but has limited growth (+1.7%). Overseas Belt is a growth driver with revenue +4.2% and profit +36.2% but has low margin 8.5%. Significant capital expenditure (¥77.7B, 8.4% of sales) was mainly allocated to Domestic Belt to improve productivity; future improvements in production efficiency and overseas profitability are key to restoring consolidated operating margin and accelerating growth.
Room to improve working capital efficiency: OCF/EBITDA ratio 0.78x below industry standard and prolonged CCC 169 days. Although inventory decreased ¥13.4B and accounts receivable collections ¥6.4B contributed positively, accounts payable decrease ¥17.8B offset improvements and net working capital improvement was limited. Shortening CCC through inventory optimization and receivables management would expand OCF and improve ROE. With abundant net cash ¥244.6B, there is significant headroom for M&A or additional investment.
Volatility of one-off items and dividend sustainability: Net Income decreased -21.2% due to impairment loss ¥9.3B and the reversal of prior-year high securities sale gains, but Ordinary Income improved +11.2% and OCF improved +33.0%. Comprehensive Income ¥119.9B was 1.84x Net Income, with valuation/translation gains boosting equity. Dividends were high at annual ¥191.0, payout ratio 72.5%, and total return ratio 95.8%; shareholder returns exceeded Free Cash Flow ¥32.6B and some cash was used. Net cash provides short-term support for dividends, but mid/long-term sustainability depends on CCC reduction and OCF expansion to fund dividends internally.
This report is an AI-generated earnings analysis based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by the Company from public financial statements and are for reference only. Investment decisions are your own responsibility; consult a professional advisor as needed.