| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3334.1B | ¥3392.3B | -1.7% |
| Operating Income | ¥156.2B | ¥163.8B | -4.6% |
| Ordinary Income | ¥184.8B | ¥175.3B | +5.4% |
| Net Income | ¥100.7B | ¥88.8B | +13.4% |
| ROE | 4.2% | 4.2% | - |
FY2026 results: Revenue ¥3,334B (YoY -¥58B -1.7%), Operating Income ¥156B (YoY -¥8B -4.6%), Ordinary Income ¥185B (YoY +¥9B +5.4%), Net Income attributable to owners of the parent ¥101B (YoY +¥12B +13.4%). Operating profit declined due to a slowdown in the China market and margin pressure in Europe, but Ordinary Income turned positive driven by ¥9B foreign exchange gains and ¥9B equity-method investment income. A stable effective tax rate of 25.6% on pre-tax income ¥190B supported a double-digit increase in Net Income. Operating margin remained low at 4.7% (down 0.1pt from 4.8% prior year), and Gross Margin at 10.3% leaves significant room for improvement.
【Revenue】 Revenue was ¥3,334B (-1.7%), a slight decline. By region, Japan ¥593B (+10.2%) led strong growth, and North America ¥1,267B (+1.0%) achieved modest growth. China ¥529B (-7.9%) saw a significant decline due to worsening market conditions; Europe ¥366B (-2.5%) declined on weaker demand; Asia ¥402B (-0.1%) was flat. South America was ¥183B (+1.1%) with modest growth. Segment revenue composition: North America 38.0%, Japan 17.8%, China 15.9%, Asia 12.1%, Europe 11.0%, South America 5.5% — notable rise in Japan's share. Gross margin was 10.3%, flat YoY, with a high cost of sales ratio of 89.7% persisting.
【Profitability】 Operating Income was ¥156B (-4.6%). Japan achieved ¥74B (+29.8%) and maintained high profitability with a 9.7% operating margin, while China posted an operating loss of -¥9.5B (worsened from -¥1.5B prior year), and Europe fell to ¥22B (-24.4%), pressuring consolidated profits. North America secured ¥54B (+7.5%) but margin remained at 4.3%. SG&A was ¥187B (+4.6%) increasing despite lower sales, pushing SG&A ratio to 5.6% and creating negative operating leverage. Ordinary Income rose to ¥185B (+5.4%), with non-operating income of ¥42B comprising ¥9B interest income, ¥9B foreign exchange gains, and ¥9B equity-method investment income. Extraordinary gains included ¥11B from fixed asset sales, while extraordinary losses of ¥6B (loss on disposal of fixed assets and disaster losses) resulted in a net ¥5B positive contribution. After corporate taxes of ¥49B (effective tax rate 25.6%), Net Income attributable to owners of the parent was ¥101B (+13.4%). Consequently, despite lower operating profits, Ordinary and Net Income increased.
Japan segment: Revenue ¥760B (+10.2%), Operating Income ¥74B (+29.8%, margin 9.7%) — significant revenue and profit growth, accounting for 47% of consolidated operating profit and serving as the core segment. North America: Revenue ¥1,270B (+1.0%), Operating Income ¥54B (+7.5%, margin 4.3%) — maintained scale with modest profit growth. Asia: Revenue ¥402B (-0.1%), Operating Income ¥16B (+2.4%, margin 4.0%) — essentially flat. Europe: Revenue ¥366B (-2.5%), Operating Income ¥22B (-24.4%, margin 6.0%) — demand softness and margin deterioration continued. China: Revenue ¥532B (-7.9%), Operating Loss -¥9.5B (worsened from -¥1.5B, margin -1.8%) — significant loss due to market weakness and intensified competition. South America: Revenue ¥183B (+1.1%), Operating Income ¥7B (-46.2%, margin 3.6%) — revenue up but profit halved. Japan’s high profitability underpins consolidated profits, but China’s widening loss and Europe’s profit decline suppress consolidated margin to 4.7%.
【Profitability】Operating margin 4.7% (prior 4.8%), Gross Margin 10.3%, SG&A ratio 5.6% — profitability remains low. ROE 4.2% indicates low capital efficiency. Operating Cash Flow / Net Income ratio 3.48x shows strong cash backing of earnings. 【Cash Quality】Operating Cash Flow ¥350B equals 3.48x Net Income ¥101B; Operating CF/EBITDA ratio is 1.01x (EBITDA ¥346B = Operating Income ¥156B + Depreciation ¥189B), indicating high earnings quality. Accrual ratio -5.8% (Operating CF - Net Income / Total Assets) shows cash generation materially exceeds Net Income. 【Investment Efficiency】Total Asset Turnover 0.90x (Revenue ¥3,334B / Total Assets ¥3,724B), Tangible Fixed Asset Turnover 1.67x, reflecting capital-intensive business. CAPEX ¥402B is 2.13x Depreciation ¥189B, indicating accelerated capacity investments. 【Financial Soundness】Equity Ratio 64.3%, Current Ratio 152.5%, Debt/Equity 21.5% (Interest-bearing debt ¥479B / Net Assets ¥2,232B) — solid financial base. Cash and cash equivalents ¥481B cover short-term interest-bearing debt ¥421B (short-term borrowings ¥285B + long-term borrowings due within one year ¥137B) by 1.14x, limiting liquidity risk.
Operating CF was ¥350B (prior ¥225B, +55.5%), a large improvement. From Operating CF subtotal ¥412B, working capital changes caused an outflow of ¥61B, partly offset by an increase in advance receipts of ¥75B. Trade receivables increased ¥15B, inventories were flat, and trade payables decreased ¥20B — slight working capital headwinds. Investing CF was a large outflow of -¥374B, driven mainly by CAPEX ¥402B. Purchase of investment securities ¥1B and acquisition of intangible assets ¥8B were recorded, and proceeds from sale of tangible fixed assets ¥13B partially offset, reflecting large-scale investments. Free Cash Flow was -¥23B (Operating CF ¥350B - Investing CF ¥374B), turning negative. Financing CF was a net inflow of ¥61B: net increase in short-term borrowings ¥78B and long-term borrowing proceeds ¥118B funded investments, while long-term borrowings repayment ¥89B, dividend payments ¥41B, and share buybacks ¥5B were executed. Cash and cash equivalents rose ¥61B from ¥313B at the beginning of the period to ¥373B at the end, aided by ¥23B of foreign exchange translation gains. Operating CF quality aligns with Net Income ¥101B plus Depreciation ¥189B, showing robust core cash generation excluding temporary working capital movements. However, CAPEX exceeding Depreciation by over 2x is a transitional phase of the investment cycle; Free Cash Flow recovery will require CAPEX to peak out or further Operating CF expansion.
Of Ordinary Income ¥185B, Operating Income ¥156B is the core, with non-operating income ¥42B adding on top. Major components of non-operating income are ¥9B interest income, ¥9B foreign exchange gains, and ¥9B equity-method investment income; FX and equity-method items include non-recurring elements tied to market conditions and partner performance. Extraordinary gain ¥11B (gain on sale of fixed assets) is one-off; after subtracting extraordinary losses ¥6B, the net ¥5B represents roughly 5% of Net Income ¥101B and is limited in impact. Comprehensive income ¥314B far exceeded Net Income ¥101B, driven by Other Comprehensive Income ¥213B, of which ¥164B translation adjustments were the largest contributor. FX translation gains are unrealized valuation gains and could reduce comprehensive income if FX reverses. With Operating CF at 3.48x Net Income, accrual quality is strong and receivables/inventory levels are generally well-managed. The increase in advance receipts ¥75B bolstered Operating CF and can be interpreted as order-backed advances rather than premature revenue recognition. Overall, operating-stage profit generation is sound and business-derived, but Ordinary and Net Income stages benefited from non-operating FX and equity-method items; sustainable earnings enhancement fundamentally requires improvement in Operating Income.
Full Year guidance: Revenue ¥3,590B (YoY +7.7%), Operating Income ¥192B (YoY +22.9%), Ordinary Income ¥189B (YoY +2.3%). Progress versus first-half results: Revenue 92.9%, Operating Income 81.4%, Ordinary Income 97.8% — guidance is backloaded for Operating Income in H2. Actual EPS ¥314.31 already exceeds forecast EPS ¥303.65, and forecast dividend ¥49 implies a Payout Ratio of 16.1%, a conservative level. Revenue growth plan assumes continued growth in Japan and North America, stabilization in China, and increased production capacity from new facilities. Significant Operating Income improvement hinges on full-scale operation of Construction in Progress ¥367B to absorb fixed costs and margin recovery in the China segment. The smaller Ordinary Income growth rate relative to Operating Income may reflect an assumption of reversals in FX gains or equity-method income. Achieving the guidance requires an H2 Operating Income build of ¥36B; quarterly progress monitoring will be important.
Annual dividend ¥96 per share (interim ¥45, year-end ¥51), Payout Ratio 30.1% — sustainable level maintained. Total dividends ¥41B against Net Income ¥101B provide sufficient coverage, and dividends are comfortably covered by Operating CF ¥350B. However, Free Cash Flow was -¥23B, so on an FCF basis dividend coverage is unmet; this is due to temporary large CAPEX ¥402B and investment cycle, while dividends are supported on an Operating CF basis. Share buybacks of ¥5B were executed, total shareholder returns ¥46B, Total Return Ratio 45.6%. The combined dividend and buyback stance is steady, maintaining returns while prioritizing investment. Next fiscal year’s forecast dividend ¥49 is significantly reduced from ¥96, likely conservative guidance, leaving room for dividend increase depending on performance. Policy to maintain a payout ratio around 30% is expected to continue, with dividend growth aligned to Net Income expansion.
Prolonged China segment loss risk: Operating loss -¥9.5B (margin -1.8%), worsening from -¥1.5B prior year, with the ¥532B-scale segment reducing consolidated Operating Income ¥156B by ~6%. Continued market deterioration and intensified competition could necessitate structural reforms or exit decisions for the China business.
Continued FCF deficits during the investment cycle: CAPEX ¥402B is 2.13x Depreciation ¥189B, and Construction in Progress ¥367B accounts for 9.9% of Total Assets. Delays in new line ramp-up or yield issues could delay capital recovery and prolong Free Cash Flow deficits. Increased reliance on short-term borrowings ¥285B (+45.5%) raises refinancing risk and sensitivity to interest rate increases.
FX volatility and reliance on non-operating income risk: FX gains ¥9B and equity-method income ¥9B account for roughly 10% of Ordinary Income ¥185B, making the income structure heavily dependent on non-operating items totaling ¥42B. A shift to yen appreciation or weakened partner performance could reverse the gains at Ordinary/Net Income levels, exposing the low operating profitability (Operating margin 4.7%).
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.7% | 7.8% (4.6%–12.3%) | -3.1pt |
| Net Profit Margin | 3.0% | 5.2% (2.3%–8.2%) | -2.2pt |
Both Operating Margin and Net Profit Margin are below industry medians, placing the company in the lower tier for manufacturing profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -1.7% | 3.7% (-0.4%–9.3%) | -5.4pt |
Revenue growth lags the industry median by 5.4pt, highlighting the current revenue decline relative to peers.
※ Source: Company compilation
Low profitability with Operating Margin 4.7% vs industry median 7.8% (3.1pt gap) is the primary challenge; eliminating China losses and restoring Europe profitability are keys to margin improvement. Japan’s 9.7% operating margin indicates room to lift consolidated margins into the 6% range via regional mix correction and yield improvements.
Strong cash generation with Operating CF ¥350B (3.48x Net Income ¥101B). If Construction in Progress ¥367B linked to CAPEX ¥402B comes online, increased depreciation and fixed cost absorption should expand Operating Income and EBITDA. Post-investment-cycle peak-out, Free Cash Flow turning positive would expand capacity for dividend growth.
Achieving next fiscal year guidance Operating Income ¥192B (+22.9%) requires an H2 build of ¥36B; prerequisites include China stabilization, improved yields on new equipment, and FX stability. Quarterly monitoring and the timing of China segment profitability are key milestones for investment decisions.
This report was auto-generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are compiled by the Company from public financial statements and are provided for reference. Investment decisions are your responsibility; consult a professional advisor as needed.