| Indicator | Current Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue | ¥121.6B | ¥131.1B | -7.2% |
| Operating Income | ¥1.2B | ¥2.3B | -48.6% |
| Ordinary Income | ¥0.9B | ¥2.5B | -62.7% |
| Net Income | ¥1.1B | ¥-1.0B | - |
| ROE | 1.1% | -1.1% | - |
In FY2026 Q3 consolidated results, Revenue was ¥121.6B (YoY ▲¥9.5B ▲7.2%), Operating Income was ¥1.2B (YoY ▲¥1.1B ▲48.6%), Ordinary Income was ¥0.9B (YoY ▲¥1.6B ▲62.7%), and Net Income Attributable to Owners of the Parent was ¥1.1B (vs. ▲¥1.0B in the prior year). In addition to the decline in Revenue, SG&A remained elevated, pushing the operating margin down to 1.0%, while interest expense of ¥0.61B compressed profit at the ordinary level. Although Net Income returned to profit, Extraordinary Income of ¥1.66B supported the bottom line, and a high Effective tax rate of 56.7% also pressured profitability. Full-year guidance is maintained at Revenue ¥180.0B (YoY +6.3%) and Operating Income ¥2.3B (YoY ▲11.8%), which assumes a recovery in Q4.
[Profitability] ROE 0.9% (negative in the prior year due to net loss; in five-factor decomposition, deterioration in the tax burden coefficient 0.368 and interest burden coefficient 2.058 are the main drivers), Operating Margin 1.0% (down ▲0.8pt from 1.8% in the prior year), Net Profit Margin 0.9% (turned positive from ▲0.8% in the prior year), Gross Profit Margin 16.7% (with an SG&A ratio of 15.7% weighing on Operating Income). [Cash Quality] Cash and deposits ¥45.58B (YoY +¥16.5B), Short-Term Debt Coverage 0.94x (cash/short-term borrowings), Interest Coverage 1.97x (EBIT/interest expense; debt-servicing capacity at a cautionary level). [Investment Efficiency] Total Asset Turnover 0.474x (annualized), Financial Leverage 2.66x. [Financial Soundness] Equity Ratio 36.1% (down from 43.4% in the prior year), Current Ratio 168.1%, Quick Ratio 134.2%, Debt-to-Equity Ratio 1.66x, Interest-Bearing Debt ¥96.5B (up +¥41.0B from ¥55.5B in the prior year), Debt/Capital 50.0%.
Cash and deposits increased from ¥29.08B to ¥45.58B, up +¥16.5B, but in the same period short-term borrowings increased by +¥13.0B and long-term borrowings by +¥28.0B, indicating that the primary driver of cash growth is presumed to be funding from borrowings. In operating activities, although Net Income of ¥1.1B was recorded and returned to profit, the operating margin remained low at 1.0%, and the capacity to generate Operating Cash Flow (OCF) is considered limited. In working capital, inventories stood at ¥31.34B, a high inventory level, suggesting that inventory buildup amid declining sales may be impairing capital efficiency. In financing activities, Interest-Bearing Debt increased by +¥41.0B, and interest expense of ¥0.61B (up +¥0.33B from ¥0.28B in the prior year) as a funding cost is compressing profits. Cash coverage of short-term borrowings of ¥48.5B is 0.94x, indicating that cash headroom for short-term debt repayment is not sufficient, necessitating ongoing refinancing.
Against Ordinary Income of ¥0.91B, Operating Income was ¥1.20B, resulting in non-operating net loss of ¥0.28B. This comprised non-operating income of ¥0.63B and non-operating expenses of ¥0.91B, mainly driven by interest expense of ¥0.61B. Non-operating income is small at 0.5% of Revenue, indicating low dependence on non-recurring income. Meanwhile, Profit Before Tax of ¥2.47B was supported by Extraordinary Income of ¥1.66B (presumed to include gains on sales of fixed assets, etc.), and excluding Extraordinary Income, profit remains around ¥0.91B at the ordinary level. The Effective tax rate of 56.7% significantly exceeds the statutory rate, suggesting possible impacts from the reversal of deferred tax assets or taxable income adjustments. In the absence of OCF disclosure, it is difficult to assess the cash backing of profits; however, given the alignment between increased borrowings and cash growth, the cash conversion quality of earnings is weak, with a profit structure dependent on Extraordinary Income and borrowings.
[Position within the Industry] (Reference Information / Our Research) Profitability: Operating Margin 1.0% (well below the industry median of 7.3%, positioned in the lower tier), Net Profit Margin 0.9% (well below the industry median of 5.4%), ROE 0.9% (well below the industry median of 4.9%), indicating low profitability within the industry. Soundness: Equity Ratio 36.1% (well below the industry median of 63.9%, indicating high leverage), Current Ratio 1.68x (well below the industry median of 2.67x), with financial soundness below the industry average. Efficiency: Revenue growth rate ▲7.2% (negative growth versus the industry median of +2.8%), Return on Assets 0.4% (annualized, well below the industry median of 3.3%), indicating that both sales and asset efficiency lag within the industry. The Net Debt/EBITDA multiple is calculated to be high, confirming a structure with high dependence on borrowings, and compared with the industry median of ▲1.11 (many effectively net-cash companies), the debt burden is heavy. The company’s indicators of profitability, soundness, and growth are in the lower tier within the industry, and structural profit improvement and strengthening of the financial base are key challenges. ※Industry: Manufacturing (65 companies), Comparison: Q3 2025, Source: our aggregation
First, the low Operating Margin of 1.0% stems from the elevated SG&A ratio of 15.7% and the low Gross Profit Margin of 16.7%. Reducing fixed costs and improving mix toward higher value-added products are key to profit recovery. By segment, Ductile Cast Iron-related recorded Revenue of ¥106.2B, accounting for 87% of the total, but posted an Operating Loss of ¥0.06B, underperforming, making profit improvement in the core business an urgent task. Second, the sharp increase in Interest-Bearing Debt (YoY +¥41.0B, +73.9%) and the doubling of interest expense (¥0.61B) are concerns for both profit pressure and deterioration in financial soundness. Future debt repayment plans and interest rate trends are directly linked to business performance and dividend sustainability. Third, with a high Payout Ratio of 90.5% and no disclosure of OCF, and given that cash growth is borrowing-derived, maintaining dividends will require either improvement in OCF or a review of capital policy. It is important to confirm the sustainability of the shareholder return policy in the next earnings release.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not constitute a recommendation to invest in any particular security. The industry benchmark is reference information aggregated by our firm based on publicly available financial statements. Investment decisions are your own responsibility; please consult a professional as necessary before investing.