| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue (Net Sales) | ¥7374.4B | ¥7244.5B | +1.8% |
| Operating Income | ¥537.6B | ¥484.8B | +10.9% |
| Ordinary Income | ¥606.9B | ¥503.7B | +20.5% |
| Net Income | ¥382.3B | ¥125.2B | +205.2% |
| ROE | 7.2% | 2.4% | - |
For the fiscal year ended March 2026, Revenue (Net Sales) was ¥7,374.4B (YoY +¥129.9B +1.8%), Operating Income was ¥537.6B (YoY +¥52.8B +10.9%), Ordinary Income was ¥606.9B (YoY +¥103.2B +20.5%), and Net Income attributable to owners of the parent was ¥402.6B (YoY +¥281.0B +205.2%). Operating margin improved to 7.3% (up 60bp from 6.7% a year earlier) and gross margin improved to 35.6% (up 50bp), indicating improved profitability. The large increase in Net Income was mainly due to the absence of last year’s extraordinary losses of ¥342.51B (including impairment of ¥341B); in the current period special gains and losses netted a loss of ¥20.3B but showed a substantial year-on-year improvement. By segment, Advanced Ceramics led consolidated profits with Revenue +34.0% and Operating Income +41.7%, maintaining a high Operating margin of 42.9%, and Asia & Oceania also posted strong Operating Income growth of +24.3%. Conversely, mainland China recorded Revenue -13.1% and an expanded operating loss of ¥69.3B, while Domestic Housing Equipment and Global Housing Equipment posted slight declines in Revenue and Operating Income. Operating Cash Flow was ¥712.4B (1.77x Net Income), Free Cash Flow was ¥494.2B, and cash increased despite dividend payments of ¥169.7B and share buybacks of ¥200.1B. For the next fiscal year, management forecasts Revenue of ¥7,850B (+6.4%) and Operating Income of ¥600B (+11.6%), while setting a conservative dividend of ¥60 per share.
【Revenue】 Revenue was ¥7,374.4B (YoY +1.8%), securing modest top-line growth. By segment, Advanced Ceramics grew sharply to ¥674.1B (+34.0%), Americas ¥756.3B (+7.3%), Asia & Oceania ¥1,031.0B (+4.4%), and Europe ¥56.8B (+16.2%) drove growth. Conversely, mainland China declined to ¥744.2B (-13.1%), Domestic Housing Equipment ¥4,961.9B (-0.5%), and Global Housing Equipment ¥7,550.3B (-0.4%) recorded slight decreases. Regionally, Domestic Housing Equipment accounted for 67.3% of the total, Overseas Housing Equipment 20.8%, and Advanced Ceramics 9.1%. Softening demand in China and flat performance in core housing equipment constrained overall growth, partially offset by strength in Ceramics and some overseas housing equipment. Foreign exchange translation adjustments contributed a ¥4.4B positive impact, a minor tailwind.
【Profitability】 Operating Income rose to ¥537.6B (YoY +¥52.8B +10.9%). Gross margin improved to 35.6% (YoY +50bp) and SG&A ratio improved to 28.3% (YoY -10bp), resulting in an Operating margin of 7.3% (YoY +60bp). By segment, Advanced Ceramics delivered Operating Income of ¥289.4B (YoY +41.7%) with a high margin of 42.9%, and Asia & Oceania was strong at ¥102.4B (YoY +24.3%). Mainland China, however, expanded its operating loss to ¥69.3B (from -¥35.5B), Americas Operating Income fell to ¥47.9B (YoY -7.0%), Domestic Housing Equipment ¥202.5B (YoY -7.5%), and Global Housing Equipment ¥279.2B (YoY -9.7%), delaying margin recovery in core housing equipment. Non-operating items included foreign exchange gains of ¥43.8B (prior year had foreign exchange losses of ¥17.9B) and dividend income of ¥20.0B, lifting Ordinary Income to ¥606.9B (YoY +20.5%), outpacing operating-level growth. Special items included gain on sales of investment securities of ¥147.3B, while impairment losses of ¥15.8B and loss on retirement of fixed assets of ¥16.4B resulted in a net special loss of ¥20.3B; however, the absence of last year’s large impairment (¥341B) led to a sharp expansion in pre-tax profit to ¥586.6B (from ¥243.3B, +141.1%). After income taxes of ¥204.3B, Net Income attributable to owners of the parent was ¥402.6B (YoY +205.2%), resulting in year-over-year growth in both Revenue and Profit.
Domestic Housing Equipment reported Revenue ¥4,961.9B (-0.5%), Operating Income ¥202.5B (-7.5%), and Operating margin 4.1%, reflecting declines in both Revenue and profit. Americas recorded Revenue ¥756.3B (+7.3%) but Operating Income ¥47.9B (-7.0%), with Operating margin 6.3%, turning into reduced profit. Asia & Oceania posted Revenue ¥1,031.0B (+4.4%), Operating Income ¥102.4B (+24.3%), and Operating margin 9.9%, achieving both Revenue and profit growth and maintaining high profitability. Europe achieved Revenue ¥56.8B (+16.2%) and narrowed its operating loss to ¥4.3B (improved from -¥8.1B). Mainland China remained challenged with Revenue ¥744.2B (-13.1%) and an expanded operating loss of ¥69.3B (from -¥35.5B). On a consolidated basis, Global Housing Equipment Revenue totaled ¥7,550.3B (-0.4%), Operating Income ¥279.2B (-9.7%), and Operating margin 3.7%. Advanced Ceramics delivered Revenue ¥674.1B (+34.0%), Operating Income ¥289.4B (+41.7%), and Operating margin 42.9%, serving as a major profit pillar despite representing 9.1% of Revenue. After intersegment adjustments, consolidated Operating Income was ¥537.6B (YoY +10.9%).
【Profitability】Operating margin was 7.3%, up 60bp from 6.7% a year earlier; gross margin was 35.6% (YoY +50bp) and SG&A ratio 28.3% (YoY -10bp), indicating improved earnings structure. ROE rose to 7.2% from 2.4% last year, driven mainly by improvement in Net Income margin to 5.2% (from 1.7%), largely reflecting the one-off effect of last year’s large impairment. At the operating level, Advanced Ceramics’ high margin (42.9%) drove consolidated results, while margin improvement in core housing equipment (Domestic 4.1%, Global 3.7%) lagged. Interest coverage was 73.0x, indicating very low interest burden and strong solvency. 【Cash Quality】Operating Cash Flow (OCF) was ¥712.4B, 1.77x Net Income, indicating high quality; OCF/EBITDA ratio was 0.81x. Accrual ratio was -3.7% (Operating CF minus Net Income relative to Net Income), showing cash generation exceeded accounting profit. 【Investment Efficiency】Total asset turnover was 0.89x, stable; Capital expenditures were ¥364.8B versus depreciation of ¥343.6B, a CapEx/Depreciation ratio of 1.06x, reflecting balanced growth and renewal investment. Construction in progress was ¥351.4B, representing 13.1% of tangible fixed assets and indicating a sizable investment pipeline. 【Financial Soundness】Equity Ratio was 64.5% (prior year 64.1%), maintaining a high level; current ratio 156.1% and quick ratio 122.5% show strong liquidity. Total interest-bearing debt was ¥245.9B (of which short-term ¥232.7B) versus cash of ¥1,328.6B, implying net cash position and a Debt/EBITDA ratio of 0.28x, reflecting a very conservative capital structure. Inventory turnover days were 62 days (a warning level), and DIO was 93 days, indicating room to improve inventory efficiency.
Operating Cash Flow was ¥712.4B (YoY -0.2%), broadly stable and maintained at 1.77x Net Income of ¥402.6B, indicating high quality. Operating CF subtotal (pre-working capital changes) was ¥839.0B; inventory decrease of ¥141.7B contributed to cash generation, while decrease in trade receivables of ¥4.6B and decrease in trade payables of ¥26.9B partly offset, resulting in net working capital inflow. After corporate tax payments of ¥158.6B, Operating CF totaled ¥712.4B. Investing CF was -¥218.2B, reflecting CapEx of ¥364.8B and intangible asset investment of ¥66.8B, partially offset by proceeds from sale of investment securities of ¥210.8B. As a result, FCF was ¥494.2B (prior year ¥334.0B), a substantial increase. Financing CF was -¥385.6B, with dividends of ¥167.0B and share buybacks of ¥200.1B totaling ¥367.1B returned to shareholders. Cash and cash equivalents at period-end were ¥1,311.9B (up ¥104.9B from ¥1,207.0B at the beginning of the period). Including depreciation of ¥343.6B, the OCF/EBITDA ratio was 0.81x and CapEx/Depreciation ratio 1.06x within an appropriate range. While inventory reduction progressed, DIO of 93 days and inventory turnover days of 62 remain at warning levels, suggesting further inventory efficiency improvements are needed.
Operating Income of ¥537.6B was accompanied by non-operating income of ¥100.2B, notably foreign exchange gains of ¥43.8B (prior year had foreign exchange losses of ¥17.9B), meaning temporary FX effects boosted Ordinary Income. Dividend income of ¥20.0B and equity-method investment income of ¥14.8B are relatively stable earnings sources. Special gains included ¥147.3B from sale of investment securities, while impairment losses of ¥15.8B and loss on retirement of fixed assets of ¥16.4B resulted in a net special loss of ¥20.3B; the absence of last year’s large special loss (¥342.5B including impairment of ¥341B) materially improved pre-tax profit. The sharp expansion in Net Income is mainly attributable to the prior-year special loss cycle, though structural improvements were seen at the operating level with gross margin +50bp and Operating margin +60bp. Operating Cash Flow of ¥712.4B is 1.77x Net Income of ¥402.6B, and the accrual ratio of -3.7% indicates high earnings quality with cash backing. Comprehensive income was ¥405.3B (Net Income ¥382.3B + Other Comprehensive Income ¥23.0B), with translation adjustments ¥4.4B, valuation differences on securities ¥9.8B, and retirement benefit adjustments ¥12.3B contributing positively; divergence from Net Income is small, supporting stable earnings quality.
Management’s plan for the next fiscal year (fiscal year ending March 2027) targets Revenue ¥7,850B (YoY +6.4%), Operating Income ¥600B (YoY +11.6%), Ordinary Income ¥585B (YoY -3.6%), and Net Income attributable to owners of the parent ¥460B (YoY +14.2%). The company aims for an Operating margin of 7.6% (up 30bp from 7.3% this period) but expects Ordinary Income to decline due to the reversal of foreign exchange gains and normalization of non-operating income. Progress toward the plan this period is solid: Revenue at 93.9% of plan (¥7,374.4B/¥7,850B) and Operating Income at 89.6% (¥537.6B/¥600B), suggesting the next fiscal year targets are attainable. Assumptions include reduction of mainland China losses, price/mix improvement in core housing equipment, and advancement in inventory efficiency. The dividend is set at ¥60/share (a substantial cut from ¥110 this period), indicating a conservative stance prioritizing retained earnings and growth investment.
Dividends for the period were Interim ¥50 and Year-end ¥60, total ¥110/share (prior year total ¥50, +120% increase), resulting in a Payout Ratio of 45.3% (¥110 / EPS ¥243.01). The large increase in Net Income provided capacity to raise dividends. Against FCF of ¥494.2B, total dividends were ¥167.0B, giving an FCF coverage of 2.96x, indicating ample coverage. Additionally, ¥200.1B was used for share buybacks, bringing total shareholder returns to ¥367.1B; total return coverage against FCF was 1.35x, a healthy level. Next fiscal year’s dividend plan of ¥60/share is lower than this period, corresponding to an expected Payout Ratio of 21.4% against forecast EPS ¥279.78, reflecting a conservative approach to secure retained earnings for growth investment. Cash of ¥1,328.6B and a net cash position support dividend sustainability and resilience to downturns. Total Return Ratio (dividends + buybacks) on the current-period basis was approximately 91% (¥367.1B / Net Income ¥402.6B), which, given FCF coverage of 1.35x, is within a sustainable range.
Demand downturn and prolonged price competition risk in mainland China: The China segment posted Revenue ¥744.2B (YoY -13.1%) and an operating loss of ¥69.3B (widened from -¥35.5B), remaining under severe pressure. This represents roughly a 13% negative contribution to consolidated Operating Income of ¥537.6B; delayed market recovery or intensified price competition could exert sustained downside pressure on consolidated earnings. Risks also include inventory write-downs or disposal losses from inventory stagnation.
Risk of delayed margin improvement in core housing equipment: Domestic Housing Equipment Operating margin is 4.1% (prior year 4.4%) and Global Housing Equipment 3.7% (prior year 4.1%), both declining year-on-year. SG&A ratio only improved marginally (-10bp), and price pass-through and product mix optimization have not kept pace with demand weakness and competitive pressures. Since housing equipment accounts for over 87% of Revenue, delayed margin recovery would impede sustainable improvement in consolidated ROE.
Risk from deteriorating inventory efficiency: Inventory turnover days of 62 and DIO of 93 are at warning levels. Although inventories declined year-on-year, absolute levels remain high. Prolonged inventory stagnation in weak demand regions (e.g., China) could lead to write-downs, discounted sales pressuring margins, and rigid working capital that reduces cash generation. Shortened product life cycles and slower response to demand volatility would amplify these risks.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating margin | 7.3% | 7.8% (4.6%–12.3%) | -0.5pt |
| Net margin | 5.2% | 5.2% (2.3%–8.2%) | -0.0pt |
The company’s Operating margin is 0.5pt below the industry median, reflecting delayed margin improvement in core housing equipment. Net margin is in line with the industry median, having recovered to average levels following the prior-year impairment cycle.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth rate (YoY) | 1.8% | 3.7% (-0.4%–9.3%) | -1.9pt |
Revenue growth lags the industry median by 1.9pt, driven by weak China demand and flat housing equipment sales relative to manufacturing peers.
※Source: Company compilation
Advanced Ceramics’ high profitability (Operating margin 42.9%, Operating Income +41.7%) is driving consolidated profits; order trends, capacity utilization, and sustainability of margins in this business are key to future performance. Although the segment represents 9.1% of Revenue, it generates 53.8% of Operating Income and is a primary driver of consolidated ROE improvement.
Mainland China’s operating loss of ¥69.3B (widened from -¥35.5B) negatively contributed roughly 13% to consolidated Operating Income; timing of demand recovery and pace of loss reduction in this market are critical for the next steps in margin recovery. Progress in inventory efficiency (DIO 93 days, inventory turnover days 62) is another short-term focal point.
Financial soundness is very high with a net cash position (Cash ¥1,328.6B vs. total interest-bearing debt ¥245.9B), Debt/EBITDA 0.28x, and Equity Ratio 64.5%, maintaining a conservative capital structure. The next fiscal year’s dividend of ¥60 is conservatively set (forecast Payout Ratio 21.4%), ensuring retention for growth investment while preserving medium- to long-term sustainability of shareholder returns.
This report is an AI-generated financial analysis document created from XBRL earnings release 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 needed.