| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1508.7 B | ¥1721.0 B | -12.3% |
| Operating Income | ¥109.7 B | ¥169.7 B | -35.3% |
| Ordinary Income | ¥96.6 B | ¥162.0 B | -40.4% |
| Net Income | ¥65.1 B | ¥100.6 B | -35.3% |
| ROE | 6.4% | 10.4% | - |
For the fiscal year ended March 2026, Revenue was ¥1,508.7 B (YoY -¥212.3 B -12.3%), Operating Income was ¥109.7 B (YoY -¥60.0 B -35.3%), Ordinary Income was ¥96.6 B (YoY -¥65.4 B -40.4%), and Net Income was ¥65.1 B (YoY -¥35.5 B -35.3%), representing declines in both top-line and profitability. Revenue fell materially due to demand deceleration and a deteriorating price environment, and Operating Margin deteriorated 2.6 percentage points to 7.3% (prior year 9.9%). Gross margin declined 1.0 percentage point to 16.8% (prior year estimate 17.8%), and SG&A increased to ¥143.8 B (YoY +¥7.0 B +5.1%), creating negative operating leverage. In non-operating items, interest expense rose to ¥9.7 B (prior year ¥7.2 B), increasing financial burden. Extraordinary losses of ¥9.3 B (including disaster loss ¥2.3 B) were nearly offset by extraordinary gains of ¥8.6 B (including gain on sales of investment securities ¥1.3 B). Final profit declined 35.3% YoY, and while one-off factors were limited, the primary cause was deterioration in core business profitability.
[Revenue] Revenue of ¥1,508.7 B (YoY -12.3%) reflects simultaneous demand contraction and worsening price environment. As the business is a single segment of stainless steel sheets and processed products, segmental composition is unclear; however, Cost of Goods Sold of ¥1,255.1 B (prior year ¥1,414.5 B) fell by -11.3%, less than the revenue decline, suggesting sustained raw material prices and reduced fixed-cost absorption due to lower utilization. Gross profit was ¥253.6 B (YoY -¥53.5 B -17.4%), gross margin was 16.8% (prior year estimate 17.8%), down about 1.0 point, with insufficient pass-through of product price increases and adverse product mix compressing profitability.
[Profitability] SG&A was ¥143.8 B (YoY +¥7.0 B +5.1%), rising despite lower revenue, pushing SG&A-to-sales to 9.5% (prior year 7.9%), up 1.6 points. Fixed-cost reductions lagged, and Operating Income of ¥109.7 B (YoY -35.3%) showed high sensitivity to revenue decline. In non-operating items, non-operating income was ¥5.4 B (interest income ¥0.2 B, dividend income ¥1.9 B, etc.), while non-operating expenses, including interest expense ¥9.7 B (prior year ¥7.2 B), totaled ¥18.6 B, resulting in a non-operating deficit of -¥13.2 B. Ordinary Income decreased sharply to ¥96.6 B (YoY -40.4%). Extraordinary items were net -¥0.7 B, yielding profit before income taxes of ¥95.8 B and income taxes of ¥23.6 B, with Net Income of ¥65.1 B (YoY -35.3%), reflecting deterioration at the ordinary income level; Net Income attributable to owners of the parent was ¥65.1 B. In conclusion, reduced fixed-cost absorption and weakened pricing power during the revenue downturn manifested in lower revenue and profit.
[Profitability] Operating Margin of 7.3% worsened 2.6 points from 9.9% a year earlier, driven by a decline in Gross Margin to 16.8% (prior year estimate 17.8%) and an increase in SG&A ratio to 9.5% (prior year 7.9%). Net Margin fell to 4.3% (prior year 5.8%). ROE of 6.4% declined substantially from 12.5% in the prior year, indicating deterioration in shareholder capital efficiency.
[Cash Quality] Operating Cash Flow (OCF) was ¥135.4 B (YoY +22.7%), which is 2.08x Net Income of ¥65.1 B, indicating good cash conversion of earnings. OCF subtotal was ¥178.0 B after adding back depreciation ¥65.3 B; working capital movements included inventories +¥5.8 B, trade receivables decrease +¥27.5 B, and trade payables decrease -¥47.1 B, demonstrating underlying cash generation. OCF/Operating Income was 1.23x, indicating limited accrual accumulation.
[Investment Efficiency] Total Asset Turnover was 0.69x (estimate; prior year approx. 0.79x), down due to inventory stagnation and revenue decline. Inventories were ¥132.0 B, representing 8.7% of Revenue, roughly flat YoY; however, work-in-process of ¥313.4 B and raw materials ¥175.9 B bring effective inventory to ¥621.3 B, suggesting worsening inventory efficiency. Trade receivables and notes receivable ¥164.9 B plus inventories ¥132.0 B total ¥296.9 B, versus trade payables ¥73.8 B, indicating working capital stagnation.
[Financial Soundness] Equity Ratio was 46.2% (prior year 44.3%), a slight increase; Net Assets were ¥1,013.1 B (prior year ¥966.1 B) reflecting retained earnings and improvement in other comprehensive income. Interest-bearing debt is estimated at approximately ¥680 B, comprised of short-term borrowings ¥377.2 B, long-term borrowings ¥215.8 B, bonds ¥80.0 B, and lease liabilities, implying a Debt/Equity ratio around 0.67x. Current Ratio was 141.5% (Current Assets ¥992.5 B / Current Liabilities ¥701.5 B), and Quick Ratio was 122.7%, indicating short-term payment capacity, but Cash and Deposits of ¥112.8 B versus short-term borrowings ¥377.2 B yields cash coverage of 0.30x, which is limited and highlights the need to secure refinancing flexibility. Interest Coverage (Operating Income ¥109.7 B / Interest Expense ¥9.7 B) = 11.3x, showing adequate interest payment capacity.
OCF was ¥135.4 B (YoY +22.7%). Starting from profit before income taxes ¥95.8 B and adding non-cash charges including depreciation ¥65.3 B produced a subtotal of ¥178.0 B. Working capital changes included inventories increase -¥5.8 B, trade receivables decrease +¥27.5 B, trade payables decrease -¥47.1 B, and consumption tax payable increase +¥11.9 B, and after corporate tax payments -¥37.7 B, the period ended with OCF of ¥135.4 B. OCF/Net Income of 2.08x indicates high earnings quality, but the large decrease in trade payables (YoY -¥39.2 B -34.7%) implies a contraction of supplier credit and is a driver of longer CCC (Cash Conversion Cycle). Investing Cash Flow was -¥93.8 B, mainly capital expenditures in tangible fixed assets -¥86.9 B and investments in intangible assets. Proceeds from disposals were limited at ¥0.1 B, indicating maintenance and renewal capex. Free Cash Flow was positive at ¥41.6 B, which almost covered shareholder returns of ¥41.7 B (dividends ¥32.2 B + share buybacks ¥9.5 B). Financing Cash Flow was -¥27.3 B, comprising long-term borrowing proceeds ¥104.1 B and repayments -¥97.5 B, net increase in short-term borrowings +¥13.4 B, bond redemption -¥50.0 B, dividend payments -¥32.2 B, and share buybacks -¥9.5 B. Cash and deposits increased from ¥94.7 B at the beginning of the period to ¥112.8 B at the end, an increase of ¥16.7 B; including foreign exchange effects +¥2.4 B, the net increase reconciles. Overall, solid OCF and room to correct inventories and WIP are key to cash generation; recovery of trade payables and shortening CCC will drive improvements in capital efficiency.
With Net Income of ¥65.1 B, extraordinary items were a small net -¥0.7 B (extraordinary gains ¥8.6 B - extraordinary losses ¥9.3 B), indicating that recurring earnings constitute the bulk of final profit. In non-operating items, non-operating income included dividend income ¥1.9 B and forex gains ¥0.5 B among total non-operating income ¥5.4 B, versus non-operating expenses including interest expense ¥9.7 B and forex losses ¥0.5 B among total non-operating expenses ¥18.6 B, producing a non-operating deficit of -¥13.2 B that depressed Ordinary Income. The increase in financial costs of +¥2.5 B YoY reflects higher borrowings and changes in the interest-rate environment. Comprehensive Income was ¥88.0 B (Net Income ¥65.1 B + Other Comprehensive Income ¥15.9 B), including translation adjustments +¥3.9 B, valuation difference on available-for-sale securities +¥12.3 B, and deferred hedge gains/losses +¥0.1 B, and the ¥22.9 B divergence from Net Income indicates balance-sheet valuation improvements. With OCF at 2.08x Net Income, accruals are limited and cash/earnings divergence is small; receivables collection and reduction in trade payables were reflected in working capital movements, supporting high earnings quality. Extraordinary losses including disaster loss ¥2.3 B and impairment and retirement of fixed assets ¥2.7 B are one-off factors and should be excluded when assessing recurring earnings power.
For the fiscal year ending March 2027, the company forecasts Revenue ¥1,690.0 B (YoY +¥181.3 B +12.0%), Operating Income ¥130.0 B (YoY +¥20.3 B +18.5%), Ordinary Income ¥120.0 B (YoY +¥23.4 B +24.3%), and Net Income ¥80.0 B (YoY +¥14.9 B +22.9%), indicating a recovery trend. Operating Margin is planned to improve to 7.7% (this period 7.3%), a 0.4 point increase, but remaining below the prior peak of 9.9%, so margin recovery is expected to be gradual. Revenue progress rate is Current Period Revenue ¥1,508.7 B / Full Year Forecast ¥1,690.0 B = 89.3%, leaving limited upside in the remaining period. Operating Income progress is ¥109.7 B / ¥130.0 B = 84.4%, implying that second-half profit improvement is assumed. Achieving company targets requires demand recovery and price pass-through, normalization of inventories and WIP to improve utilization, and optimization of fixed costs; in particular, restoring gross margin (target: 17% range) and containing SG&A ratio (below 9%) are key. Dividend forecast is annual ¥110.0 (interim undecided), with forecast EPS ¥577.46 implying a Payout Ratio of 19.0%, a conservative level. The reduction from last year’s dividend of ¥220 (estimated payout ratio 42.3%) reflects a cautious dividend policy aiming at profit normalization.
Annual dividend paid was ¥220 (interim ¥110 + year-end ¥110), representing a payout ratio of 42.3% relative to Net Income ¥65.1 B (EPS ¥519.86). The increase from prior dividend ¥100 (actual EPS ¥819.46, payout ratio 12.2%) shows a commitment to maintain shareholder returns even under earnings decline. Share buybacks of ¥9.5 B were conducted, and combined with dividends ¥32.2 B total shareholder returns were ¥41.7 B. Total Return Ratio was 64.0% (Total Return ¥41.7 B / Net Income ¥65.1 B), essentially allocating nearly all FCF ¥41.6 B to returns. FCF coverage of dividends was 1.29x (FCF ¥41.6 B / Dividends ¥32.2 B), indicating dividends are sufficiently covered by OCF. Next fiscal year dividend forecast is annual ¥110 (interim undecided), which versus forecast EPS ¥577.46 implies a payout ratio of 19.0%, representing a significant reduction aimed at preserving dividend capacity during profit recovery and improving the balance sheet. With Equity Ratio 46.2% and cash ¥112.8 B, financial soundness is maintained, but given high short-term borrowing reliance (¥377.2 B), total return levels may be flexibly adjusted based on future performance and FCF generation.
Profitability deterioration risk: Operating Margin fell to 7.3% (prior year 9.9%), a 2.6 point deterioration driven by lower Gross Margin of 16.8% and higher SG&A ratio of 9.5%. Continued demand slowdown, prolonged price competition, sustained high raw material prices, and reduced utilization undermining fixed-cost absorption could further compress Operating Margin. The next fiscal year plan assumes a modest improvement to 7.7%, but delays in price pass-through and utilization recovery would make this difficult to achieve.
Working capital efficiency deterioration risk: Effective inventory including WIP ¥313.4 B and raw materials ¥175.9 B totals ¥621.3 B, representing 41.2% of Revenue and a high level; prolonged inventory days and CCC deterioration are evident. A large reduction in trade payables to ¥73.8 B (YoY -34.7%) signals contraction of supplier credit and increases working capital burden. Delays in inventory correction would pressurize OCF and impair cash generation.
Short-term liquidity risk: Cash and deposits ¥112.8 B versus short-term borrowings ¥377.2 B yields cash coverage of 0.30x, which is limited, and short-term interest-bearing debt ratio (short-term interest-bearing debt / total interest-bearing debt) is about 55%, which is high. While Current Ratio 141.5% and Quick Ratio 122.7% show a degree of payment capacity, reliance on refinancing is high and adverse funding conditions or changes in borrowing terms could tighten liquidity. Interest Coverage of 11.3x shows current interest-paying capacity, but continued increases in interest expense (¥9.7 B this period vs. ¥7.2 B prior) could erode profits and destabilize cash flows.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.3% | 7.8% (4.6%–12.3%) | -0.5pt |
| Net Margin | 4.3% | 5.2% (2.3%–8.2%) | -0.9pt |
Profitability is slightly below industry median, with price competition and weak fixed-cost absorption as relative disadvantages.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -12.3% | 3.7% (-0.4%–9.3%) | -16.0pt |
Revenue growth is significantly below the industry median, suggesting deteriorating demand conditions and possible market share shifts.
※ Source: Company compilation
Confirmation of bottoming and recovery trajectory for Operating Margin: Focus on recovery from 7.3% (prior year 9.9%). The company’s target of 7.7% next year (+0.4 points) implies gradual improvement; achievement depends on gross margin recovery (target: 17% range) and containment of SG&A ratio (below 9%). Quarterly trends in gross margin, progress of price pass-through, and utilization recovery should be monitored. Historical trends show structural deterioration in profitability; the feasibility of structural competitiveness enhancement (product mix improvement, fixed-cost reduction, shift to higher value-added products) is a mid-term evaluation point.
Normalization of working capital efficiency and recovery of cash generation: Effective inventory ¥621.3 B including WIP ¥313.4 B and raw materials ¥175.9 B is high at 41.2% of Revenue; shortening inventory days and improving CCC are urgent. Reversal of the large decline in trade payables (YoY -34.7%) and optimization of supplier credit could compress working capital and increase OCF. If inventory days can be reduced below 90 days and CCC below 120 days, FCF could improve by more than ¥6.0 B annually (target: FCF > ¥60.0 B). OCF/Operating Income of 1.23x is solid, but progress in inventory correction will be the litmus test for sustained cash flows.
Strengthening the balance sheet and reducing short-term liquidity risk: The mismatch between short-term borrowings ¥377.2 B and cash ¥112.8 B (cash coverage 0.30x) indicates funding vulnerability. Expanding revolver capacity, refinancing into longer-term borrowings, and increasing cash holdings (target > ¥150.0 B) are keys to improving financial stability. Reducing Debt/EBITDA (estimate ~3.3x) and raising Equity Ratio above 50% are mid-term goals to enhance creditworthiness and reduce capital costs. The planned restraint on payout ratio (next year forecast 19.0%) signals prioritization of balance-sheet repair; progress in FCF generation and debt reduction will be the benchmarks for balance-sheet strengthening.
This report is an AI-generated financial analysis document created by analyzing XBRL financial statement data. It is not 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 appropriate.