| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2437.6B | ¥2616.5B | -6.8% |
| Operating Income / Operating Profit | ¥320.4B | ¥229.2B | +39.8% |
| Ordinary Income | ¥342.5B | ¥266.5B | +28.5% |
| Net Income | ¥279.9B | ¥283.0B | -1.1% |
| ROE | 7.7% | 7.9% | - |
For the fiscal year ended March 2026, Revenue was ¥2437.6B (YoY -¥178.9B, -6.8%), Operating Income was ¥320.4B (YoY +¥91.2B, +39.8%), Ordinary Income was ¥342.5B (YoY +¥76.0B, +28.5%), and Net income attributable to owners of the parent was ¥266.8B (YoY -¥0.3B, -0.1%). Despite a revenue decline, gross margin improved to 21.4% (up +4.7pt from 16.7%) and operating margin to 13.1% (up +4.3pt from 8.8%), delivering higher operating profit. The swing to profitability in the North America segment (Operating Income ¥54.6B, from -¥15.1B prior year, +461%) and improved profitability in the Japan segment (Operating Income ¥218.5B, +11.7%) were the primary drivers. Ordinary Income was supported by dividend income ¥13.2B and interest income ¥7.9B, partially offset by foreign exchange losses ¥3.0B. Net income benefited from special gains including investment securities disposal gains ¥58.5B (total special gains ¥64.2B), but after income taxes ¥114.4B (effective tax rate 29.0%) and non-controlling interests ¥13.1B, net income finished slightly lower.
Revenue: Revenue was ¥2437.6B (-6.8%). By segment, Japan ¥1457.6B (-6.4%, 59.8% of total) was slightly down; Asia ¥451.6B (-17.7%, 18.5%) contracted double-digits; North America ¥548.4B (+6.0%, 22.5%) increased. Japan was affected by weaker domestic construction and piping demand; Asia saw softer local demand and intensified price competition. North America's growth reflected recovery in shipment volumes and improved margins, creating a clear regional divergence. After inter-segment eliminations, external revenue declined company-wide but the decrease remained in single digits.
Profitability: Cost of goods sold was ¥1916.2B, producing a gross margin of 21.4% (up +4.7pt from 16.7%) driven by stabilization of raw material prices and improved selling prices/mix. SG&A was ¥201.0B (prior year ¥208.9B, -3.8%), compressing fixed costs despite lower sales. Operating Income rose to ¥320.4B (+39.8%). Operating margin improved to 13.1% (up +4.3pt), led by North America's turnaround (from -¥15.1B to ¥54.6B) and improved margins in Japan (from 12.6% to 15.0%). Non-operating items were net +¥22.1B (prior year +¥37.3B), reduced year-on-year. Recurring income sources—dividend income ¥13.2B, interest income ¥7.9B, equity-method investment income ¥3.1B—contributed steadily, while foreign exchange losses ¥3.0B and investment partnership operation losses ¥1.6B offset part of that. Ordinary Income was ¥342.5B (+28.5%). Special items were net +¥51.8B (special gains ¥64.2B, special losses ¥12.4B). Most special gains were investment securities disposal gains ¥58.5B, a one-off capture of favorable market conditions. Major special losses included ¥3.8B loss on disposal of fixed assets and ¥4.2B impairment on investment securities. Income before income taxes was ¥394.3B (prior year ¥404.6B, -2.5%). After income taxes ¥114.4B (effective tax rate ~29.0%) and adjusting for net income attributable to non-controlling interests ¥13.1B, net income attributable to owners of the parent was ¥266.8B (-0.1%), essentially flat. The investment securities disposal gains elevated pre-tax profit, so on an ordinary basis net income was below the prior year. In summary, the company achieved higher operating profit amid declining revenue, with operating-level margin improvements notable, but net income was supported by one-off special gains.
Japan segment: Revenue ¥1457.6B (-6.4%), Operating Income ¥218.5B (+11.7%), Margin 15.0% (up +2.4pt from 12.6%). Despite weaker domestic demand, higher proportion of high-margin projects and fixed-cost compression drove profit growth. Operating income accounted for 68.2% of consolidated operating income, preserving its leading role.
North America segment: Revenue ¥548.4B (+6.0%), Operating Income ¥54.6B (turnaround from -¥15.1B prior year, +461%), Margin 10.0%. Demand recovery and price/mix improvements dramatically enhanced profitability, with the North America turnaround the largest contributor to consolidated profit growth.
Asia segment: Revenue ¥451.6B (-17.7%), Operating Income ¥41.6B (-6.4%), Margin 9.2% (down -0.7pt from 9.9%). Softer local demand and intensified price competition led to declines in revenue and profit and lower profitability. Regional profitability ranking: Japan (15.0%) > North America (10.0%) > Asia (9.2%), with North America’s sharp recovery and Japan’s stable high margins underpinning consolidated results.
Profitability: Operating margin 13.1% (up +4.3pt from 8.8%), high by historical standards. Gross margin 21.4% (up +4.7pt from 16.7%) reflects lower raw material costs and maintained selling prices/mix improvements. Revenue-to-Ordinary Income ratio 14.0% (up +3.8pt from 10.2%), Revenue-to-Net Income ratio 10.9% (up +0.6pt from 10.3%). ROE 7.7% (prior year 7.8%, broadly flat). DuPont decomposition: Net Margin 10.9% (prior 10.3%) × Total Asset Turnover 0.577x (prior 0.615x) × Financial Leverage 1.17x (prior 1.18x); the decline in asset turnover constrained ROE improvement.
Cash quality: Operating Cash Flow (OCF) ¥204.1B is 0.77x of Net Income ¥266.8B, signaling a warning on cash quality. Drivers include inventory increase (-¥41.9B) and high income tax payments ¥216.1B; working capital subtotal was far below the pre-tax operating cash subtotal of ¥397.3B. OCF/EBITDA ratio 0.51x (EBITDA ¥399.6B) indicates low cash conversion efficiency. Free Cash Flow (FCF) was positive ¥215.5B.
Investment efficiency: Total Asset Turnover 0.577x (prior 0.615x, -6%) deteriorated due to inventory increases and lower sales. Tangible Fixed Asset Turnover 1.86x (prior 2.11x, -12%) also declined. Construction in progress ¥175.5B (prior ¥151.3B) indicates ongoing capital expenditure for asset renewal.
Financial soundness: Equity Ratio 85.7% (prior 84.5%, +1.2pt), Current Ratio 483.3%, Quick Ratio 483.3% reflect a very strong balance sheet. Cash and deposits ¥918.6B, short-term investment securities ¥139.4B provide ample liquidity. Interest-bearing debt ¥43.9B (short-term borrowings ¥36.0B + long-term borrowings ¥7.9B) against cash ¥918.6B results in large net cash. Debt/EBITDA ratio 0.11x, Interest Coverage ~445x (Operating Income ¥320.4B / Interest expense ¥0.72B) indicate excellent solvency. Short-term debt ratio 82.1% suggests short-term funding concentration but liquidity risk is limited given cash resources.
OCF ¥204.1B (prior year ¥281.4B, -27.5%) declined, with cash conversion weak at 0.77x of Net Income ¥266.8B. Operating cash subtotal before tax/interest/dividend adjustments was ¥397.3B, reflecting depreciation ¥79.2B, goodwill amortization ¥0.7B, equity-method investment income -¥3.1B, and securities disposal gains -¥58.5B, among others. Working capital movements: inventory increase -¥41.9B (inventory build-up) was the largest negative, partially offset by decrease in trade receivables +¥27.8B and increase in trade payables +¥27.4B. Income taxes paid ¥216.1B (prior year ¥84.9B, +155%) reflected concentrated payments on prior period profits and higher tax burdens, significantly reducing OCF. Interest and dividends received ¥23.6B and interest paid ¥0.7B were steady positive contributors. Investing Cash Flow recorded net inflow ¥11.4B (prior year ¥137.0B, -91.7%); acquisitions of tangible and intangible fixed assets -¥154.7B were more than offset by investment securities sales ¥151.4B and receipts of construction deposits ¥104.6B. FCF (OCF + Investing CF) was positive ¥215.5B. Financing Cash Flow was net outflow -¥278.8B (prior year -¥262.9B), mainly due to share buybacks -¥153.1B and dividend payments -¥109.6B as major components of total shareholder returns. Net increase in short-term borrowings +¥14.2B and long-term borrowings repayments -¥7.2B led to a small net increase in interest-bearing debt. Cash and cash equivalents decreased from ¥951.3B at the beginning of the period to ¥886.8B at year-end, a decline of -¥64.5B.
Recurring earnings comprised Operating Income ¥320.4B and non-operating income ¥33.2B (dividend income ¥13.2B, interest income ¥7.9B, equity-method investment income ¥3.1B), making non-operating income ~1.4% of revenue—limited and indicating low dependence on non-core business. One-off items: net special items +¥51.8B (special gains ¥64.2B, mainly investment securities disposal gains ¥58.5B) represent about 19.4% of Net Income ¥266.8B, implying reversal risk next year. OCF below Net Income raises accrual quality concerns: OCF/Net Income 0.77x and OCF/EBITDA 0.51x point to deterioration in working capital efficiency (inventory build-up and receivables aging). Total Comprehensive Income was ¥297.4B (Net Income ¥266.8B + Other Comprehensive Income ¥17.6B); OCI contributors included unrealized gains on securities +¥34.1B and actuarial gains on retirement benefits +¥1.8B, while foreign currency translation adjustments -¥9.2B and equity-method investees’ OCI share -¥9.1B were negatives. Unrealized gains on investment securities improved capital quality but carry market volatility risk. The gap between Ordinary Income ¥342.5B and Net Income ¥266.8B is largely explained by net special items +¥51.8B, income taxes ¥114.4B, and non-controlling interests ¥13.1B. Overall, operating-level profitability structurally improved, but about 20% of Net Income depended on one-off disposal gains, and weak cash generation raises concerns over sustainability.
For FY ending March 2027, guidance is: Revenue ¥2745.0B (YoY +12.6%), Operating Income ¥369.0B (YoY +15.2%), Ordinary Income ¥380.0B (YoY +11.0%), Net income attributable to owners of the parent ¥257.0B (YoY -3.7%), EPS ¥117.22, annual dividend ¥26.00 per share (after stock split consideration; pre-split equivalent annual dividend ¥134.50, YoY +¥3.50 increase). Planned operating margin is 13.4% (vs. current 13.1%, +0.3pt). Assumptions include continued margin recovery in North America, maintained high margins in Japan, and demand bottoming in Asia. Against current FY results (Revenue ¥2437.6B, Operating Income ¥320.4B), progress rates toward the full-year forecast are Revenue 88.8% and Operating Income 86.8%, generally on track. The Net Income forecast ¥257.0B is below current-year Net Income ¥266.8B, reflecting conservative assumptions incorporating the reversal of this year’s special gains (investment securities disposal gains ¥58.5B). Revenue recovery assumptions depend on inventory adjustments and bottoming of North American and domestic demand; sustaining operating profit growth requires maintaining raw material/price spreads and controlling SG&A.
Annual dividend is ¥55.00 per share (interim ¥0, year-end ¥55.00), with the year-end dividend adjusted for the 1-for-3 stock split implemented October 2025. Pre-split equivalent year-end dividend is ¥67.50; assuming year-end only (no interim), the effective annual dividend equates to ¥135.00. Prior year dividend was ¥55.00 (pre-split basis), equivalent to ¥134.50 pre-split, representing a YoY increase of ¥3.50. Total dividend payout is approximately ¥103.6B (derived from dividend payments ¥109.6B), and the payout ratio relative to Net Income ¥266.8B is about 38.8%, a sustainable range. Share buybacks totaled ¥153.1B (cash flow statement), and combined with dividends (¥103.6B), total shareholder returns amounted to approximately ¥256.7B. Total Return Ratio is about 96.2% (total returns / Net Income), a high level exceeding FCF ¥215.5B. Given cash ¥918.6B and net cash position, short-term sustainability of returns is high, but medium-term continuation depends on working capital normalization and stable operating cash generation. Treasury stock balance at year-end was -¥346.5B (from -¥208.5B at beginning, +66.1% increase), reflecting active capital policy aimed at enhancing per-share value and capital efficiency.
Working capital inefficiency and inventory build-up risk: Inventory was ¥588.9B (prior year ¥547.9B, +7.5%) and estimated inventory turnover days ~112 days (Inventory / COGS × 365). Trade receivables ¥470.5B, turnover days ~70 days, together lengthen the cash conversion cycle and pressure OCF (OCF/Net Income 0.77x, OCF/EBITDA 0.51x). If inventory obsolescence or selling price declines materialize, impairment losses may be required and cash flow quality could deteriorate further.
Dependence on one-off special gains and earnings volatility: Special gains ¥64.2B (investment securities disposal gains ¥58.5B) accounted for ~19.4% of Net Income ¥266.8B; a reversal is expected next year (forecast Net Income ¥257.0B, -3.7%). Market volatility or valuation losses on held equities (this year investment securities impairment ¥4.2B) could increase Net Income volatility. While operating-level profitability improved structurally, investment income volatility threatens shareholder return stability.
Segment disparities and regional concentration risk: Japan accounts for 59.8% of revenue and 68.2% of operating income, while Asia recorded a substantial revenue decline (-17.7%) and low margin 9.2%. Prolonged domestic demand weakness would slow the core business growth and continued Asia underperformance would limit geographic diversification benefits. North America’s sharp recovery (Operating Income +461%) is positive but may be subject to single-year variability and uncertain sustainability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 13.1% | 7.8% (4.6%–12.3%) | +5.4pt |
| Net Margin | 11.5% | 5.2% (2.3%–8.2%) | +6.3pt |
Profitability significantly exceeds the manufacturing industry median, reflecting advantages in gross margin and cost management.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -6.8% | 3.7% (-0.4%–9.3%) | -10.5pt |
Revenue growth lags the industry median, impacted by soft domestic and Asian demand.
※ Source: Company compilation
Structural improvement in profitability amid revenue decline: Despite Revenue decline (-6.8%), gross margin improved +4.7pt and operating margin +4.3pt, reflecting stabilized raw material environment and price/mix optimization. North America’s turnaround (Operating Income ¥54.6B, prior year -¥15.1B) and improved Japan margins (15.0%, +2.4pt) were the main drivers of consolidated operating profit, placing operating-level profitability at a high level versus historical results. Compared with manufacturing benchmarks, operating margin +5.4pt and net margin +6.3pt highlight relative strength. However, Revenue growth -6.8% is -10.5pt below the industry median, and top-line recovery is the next growth driver.
Need to improve working capital management and cash generation: OCF ¥204.1B is 0.77x of Net Income, a caution signal. Inventory increases (-¥41.9B) and high tax payments (-¥216.1B) were primary factors; OCF/EBITDA 0.51x shows poor cash conversion efficiency. FCF remained positive at ¥215.5B and strong cash ¥918.6B and net cash support return capacity. Payout ratio 38.8% is sustainable, but Total Return Ratio 96.2% (Total returns ¥256.7B / Net Income ¥266.8B) exceeds FCF, so medium-term continuation requires normalization of inventory and receivables and improved working capital efficiency. Construction in progress ¥175.5B indicates CAPEX underway that could improve efficiency and value-added activities; if utilization and turnover improve, cash generation recovery potential is significant.
Sustainability of one-off gains and regional disparities: Approximately 19% of Net Income was due to investment securities disposal gains (¥58.5B), and the company forecast implies a -3.7% decline in Net Income next year reflecting expected reversal. While operating-level profit improvement appears structural, stability of Net Income is threatened by volatility in investment gains/losses. Segment-wise, Japan (59.8% of revenue, 15.0% margin) is the stable high-margin core; North America’s dramatic recovery (Operating Income +461%, margin 10.0%) drove consolidated gains; Asia remains weak (Revenue -17.7%, margin 9.2%). FY2027 guidance assumes Revenue +12.6% and Operating Income +15.2%, but sustainability depends on continued North America recovery and Asia stabilization; regional growth and margin gaps remain key medium-term earnings volatility factors.
This report was automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are company-compiled reference information based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as appropriate.