| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥2358.9B | ¥2068.2B | +14.1% |
| Operating Income | ¥155.1B | ¥146.5B | +5.8% |
| Ordinary Income | ¥163.8B | ¥155.3B | +5.5% |
| Net Income | ¥94.6B | ¥92.6B | +2.2% |
| ROE | 3.7% | 3.9% | - |
For the fiscal year ending March 2026, revenue was ¥2,358.9B (YoY +¥290.7B +14.1%), Operating Income was ¥155.1B (YoY +¥8.6B +5.8%), Ordinary Income was ¥163.8B (YoY +¥8.5B +5.5%), and Net income attributable to owners of parent was ¥125.5B (YoY +¥31.0B +30.9%). Revenue increased in all regions securing strong top-line growth, but the operating margin deteriorated to 6.6% from 7.1% the prior year (a 0.5pt decline), so despite higher revenue and profit, profitability weakened slightly. Net income was boosted by a special gain on sale of securities of ¥13.7B and a reduction in the effective tax rate (35.1% → 26.0%), resulting in a double-digit large increase. Operating Cash Flow was solid at ¥238.2B (YoY +33.8%); the company continued an active investment stance including Capital Expenditure of ¥239.3B, producing Free Cash Flow of -¥54.1B.
[Revenue] Revenue reached ¥2,358.9B (YoY +14.1%), delivering strong growth. By segment, Japan totaled ¥1,173.6B (composition 49.8%, external customer sales) up +22.3% markedly, Americas ¥684.9B (29.0%) up +8.7%, Asia Pacific ¥156.9B (6.7%) up +13.2%, and Europe ¥343.5B (14.6%) up +1.5%, achieving revenue growth across all regions. Including internal sales, total sales in the Japan segment were ¥1,811.2B, up +8.0% YoY, supported by recovery in machine tool demand and increased shipments due to shortened lead times. Regional mix saw a slight rise in Japan’s share while weaker growth in Europe partially constrained overall growth. Gross profit was ¥693.0B (gross margin 29.4%), down 2.3pt from the prior year (31.7%), with higher cost of sales likely reflecting raw material price increases and cost inflation.
[Profitability] Operating Income was ¥155.1B (YoY +5.8%) and the operating margin declined 0.5pt to 6.6% (prior year 7.1%). Selling, General & Administrative expenses were ¥538.0B (SG&A ratio 22.8%), up +5.5% YoY; this increase was substantially below revenue growth (+14.1%), but the decline in gross margin prevented operating leverage from fully materializing. By segment Operating Income: Japan ¥88.3B (margin 4.9%, YoY -4.4%), Americas ¥29.6B (margin 4.3%, YoY -1.9%), Asia Pacific ¥8.6B (margin 3.5%, YoY -9.5%), Europe ¥6.8B (margin 2.0%, YoY -32.3%) — with notable margin deterioration in Europe dragging corporate margins. Ordinary Income was ¥163.8B (YoY +5.5%), supported by non-operating income of ¥21.7B (including dividend income ¥11.7B and interest income ¥5.8B), which absorbed non-operating expenses of ¥13.0B (including foreign exchange losses ¥3.5B and interest expense ¥1.5B). Profit before income taxes was ¥170.6B (YoY +13.4%), aided by special gains ¥13.7B (gain on sale of investment securities) and net of special losses ¥7.0B (loss on disposal of fixed assets ¥4.2B, impairment loss on investment securities ¥1.0B). Income taxes were ¥44.3B, with an effective tax rate of 26.0% down materially from 35.1% last year, contributing to higher net income. Net income attributable to owners of parent was ¥125.5B (YoY +30.9%), and net income margin improved 0.7pt to 5.3% (prior year 4.6%), achieving growth in both revenue and profit. However, the improvement in net margin and part of profit growth are attributable to temporary items and the lower tax rate; sustainable core profitability will require future margin improvements.
Japan segment: Revenue ¥1,811.2B (YoY +8.0%), Operating Income ¥88.3B (YoY -4.4%) producing a margin of 4.9%. Although revenue increased, higher SG&A and changes in cost structure within the segment led to margin deterioration from prior-year Operating Income ¥92.3B (margin 5.5%). Americas segment: Revenue ¥685.2B (YoY +8.5%), Operating Income ¥29.6B (YoY -1.9%), margin 4.3%; revenue rose but profit slightly declined, trimming margin 0.5pt from 4.8% the prior year. Europe segment: Revenue ¥344.9B (YoY +1.5%), Operating Income ¥6.8B (YoY -32.3%), margin 2.0% with significant deterioration (down 0.9pt from prior-year 2.9%); Europe showed the weakest revenue growth and was materially impacted by intensifying competition and rising costs, weighing on consolidated margins. Asia Pacific segment: Revenue ¥246.1B (YoY +7.1%), Operating Income ¥8.6B (YoY -9.5%), margin 3.5% (down 0.6pt from 4.1% prior year). While all regions secured revenue growth, margin compression across regions—driven by delayed cost pass-through and adverse regional mix—pressed consolidated profitability.
[Profitability] Operating margin was 6.6% versus 7.1% prior year (down 0.5pt); gross margin was 29.4% (prior year 31.7%), down 2.3pt. Cost absorption lagged revenue growth, limiting operating leverage. EBITDA was ¥247.9B (Operating Income ¥155.1B + Depreciation ¥92.9B), yielding an EBITDA margin of 10.5%, maintaining double-digit cash generation. ROE was 4.9% (Net Income ¥125.5B ÷ average shareholders’ equity during period ¥2,568.0B), improving 0.7pt from 4.2% but still low versus industry peers. ROA (based on Ordinary Income) was 5.1%, essentially flat from 5.2% prior year.
[Cash Quality] Operating Cash Flow was ¥238.2B, 1.90x Net Income ¥125.5B, indicating high quality and OCF/EBITDA ratio of 0.96x demonstrating solid cash conversion. Working capital efficiency: Days Sales Outstanding (DSO) 69 days, Days Inventory Outstanding (DIO) 180 days, Days Payable Outstanding (DPO) 32 days, yielding a Cash Conversion Cycle (CCC) of 217 days—highlighting material inventory and receivables buildup.
[Investment Efficiency] Total asset turnover was 0.693x (Revenue ¥2,358.9B ÷ Total Assets ¥3,403.9B), with asset efficiency broadly stable. Capital Expenditure was ¥239.3B, 2.58x depreciation ¥92.9B, reflecting an active investment stance and tangible fixed assets rising substantially to ¥744.7B (prior year ¥543.9B).
[Financial Soundness] Equity Ratio was 75.2% (prior year 79.8%), remaining high, and the debt-to-equity ratio was low at 0.33x. Current ratio was 365.2%, and quick ratio 207.9%, indicating very strong liquidity and limited short-term refinancing risk. Interest-bearing debt (corporate bonds ¥50B + long-term borrowings ¥200B + corporate bonds due within one year ¥50B) totaled ¥300B, with Debt/EBITDA 1.21x and Interest Coverage 102x (Operating Income ¥155.1B ÷ interest expense ¥1.5B), showing excellent debt-servicing capacity.
Operating Cash Flow was ¥238.2B (YoY +33.8%). Operating CF before working capital changes (Operating Income ¥155.1B + Depreciation ¥92.9B) totaled ¥245.4B. Working capital movements: inventory reduction contributed ¥72.2B cash inflow, while increase in trade receivables caused a ¥55.2B cash outflow and decrease in trade payables caused a ¥40.3B cash outflow, resulting in net working capital pressure on cash flow. Income taxes paid were ¥25.1B, down significantly from ¥64.7B prior year, positively affecting cash flow. Investing Cash Flow was -¥292.3B, driven by acquisitions of tangible fixed assets ¥239.3B and intangible assets ¥55.6B as part of aggressive investment. CapEx was aimed at increasing production capacity and automation, at 2.58x depreciation. Purchases of investment securities were ¥0.5B, proceeds from sales ¥18.4B, with a gain on sale of ¥13.7B recorded as a special gain. Free Cash Flow was -¥54.1B (Operating CF ¥238.2B + Investing CF -¥292.3B) reflecting investment-led outflows. Financing Cash Flow was ¥29.2B, primarily funded by long-term borrowings of ¥150B, while shareholder returns included dividends paid ¥60.5B and share buybacks ¥50.0B. Cash and deposits were ¥530.1B (prior year ¥530.8B), essentially unchanged, including foreign exchange effects of ¥19.7B that helped maintain year-end liquidity.
Operating Income ¥155.1B versus Ordinary Income ¥163.8B reflects non-operating income of ¥21.7B (dividend income ¥11.7B, interest income ¥5.8B, other ¥2.5B) offsetting non-operating expenses ¥13.0B (foreign exchange losses ¥3.5B, interest expense ¥1.5B, other ¥8.0B). The lift at the ordinary income level was ¥8.7B, with most non-operating income being recurring financial income from dividends and interest; the foreign exchange loss ¥3.5B was a temporary volatility factor. In special items, gain on sale of investment securities ¥13.7B was recorded, net of special losses ¥7.0B (loss on disposal of fixed assets ¥4.2B and valuation loss on investment securities ¥1.0B), producing a net positive contribution of ¥6.8B. Pre-tax income ¥170.6B with income taxes ¥44.3B yields an effective tax rate of 26.0%, down sharply from 35.1% prior year, which increased net income by approximately ¥9.1B. Comprehensive income was ¥289.1B, significantly above Net Income ¥125.5B, driven by Other Comprehensive Income ¥162.8B (foreign currency translation adjustments ¥62.6B, valuation gains on securities ¥79.4B, retirement benefit adjustments ¥20.8B). The ¥79.4B increase in unrealized gains on securities reflects fair value appreciation of investment securities totaling ¥451.3B, and introduces future volatility around potential sale gains or valuation losses. Operating Cash Flow ¥238.2B was 1.90x Net Income, indicating low accruals and good cash realization of earnings. Overall, the main drivers of Net Income growth were temporary special gains and tax rate decline; sustainable improvement in core earnings requires margin gains at the operating level.
Full-year forecast for fiscal 2026: Revenue ¥2,450.0B (YoY +3.9%), Operating Income ¥190.0B (YoY +22.5%), Ordinary Income ¥195.0B (YoY +19.0%), Net income attributable to owners of parent ¥130.0B, EPS ¥219.33, dividend ¥50.0. First-half results (Revenue ¥2,358.9B) represent 96.3% of the full-year revenue forecast, and Operating Income ¥155.1B is 81.6% of the full-year Operating Income forecast, indicating strong progress. The plan calls for second-half Revenue ¥91.1B and Operating Income ¥34.9B, implying a significant deceleration versus the first half. The full-year operating margin is forecast at 7.8%, an improvement of 1.2pt from first-half 6.6%, but the second-half assumed profit margin is an extremely low 38.3% (note: original Japanese likely intended a different measure—preserve numeric value as provided), so assumptions for cost reductions and efficiency improvements are strict. Dividend is planned at ¥50.0 per share (pre-split), with a payout ratio of 53.8%; if current performance continues, the expected payout ratio of 22.8% (annual ¥50 ÷ EPS ¥219.33) may diverge downward. Achieving guidance requires substantial second-half margin improvement and profitability recovery in Europe and Asia Pacific.
Year-end dividend is ¥50.0, combined with interim dividend ¥50.0 (equivalent to ¥100 pre-share-split), making annual dividend ¥100.0 (post-split). Payout ratio is 53.8% (total dividends ¥60.5B ÷ Net Income attributable to owners of parent ¥125.5B), down from 63.1% prior year, maintaining stable dividends while retaining earnings. Share buybacks of ¥50.0B were executed, bringing the Total Return Ratio to 88.0% ((dividends ¥60.5B + buybacks ¥50.0B) ÷ Net Income ¥125.5B), indicating an aggressive shareholder return stance. Free Cash Flow was -¥54.1B and fell short of total returns of ¥110.5B, so returns were financed by Operating Cash Flow and borrowings. With cash and deposits of ¥530.1B and low leverage (Equity Ratio 75.2%), return capacity is high in the near term, but sustainable returns will require monetization of investments and Free Cash Flow turning positive.
Risk of inventory buildup and deterioration in working capital efficiency: DIO is high at 180 days and inventory ¥821.1B represents 24.1% of total assets. Prolonged inventory holding carries discounting pressure and obsolescence risk, and a CCC of 217 days reduces capital efficiency. DSO at 69 days is also trending up YoY; strengthening credit control and inventory reduction are urgent.
Risk from adverse regional mix and weak Europe profitability: Europe’s operating margin deteriorated to 2.0% (prior year 2.9%) with Operating Income down 32.3% YoY. Europe’s share is 14.6% which is limited now, but an increase in Europe’s weighting could further depress consolidated margins. Intensifying competition and delayed cost pass-through are drivers; improving pricing strategy and cost control in Europe is critical.
Risk of not realizing returns from aggressive CapEx and impact of rising interest rates: CapEx ¥239.3B (2.58x depreciation) continues aggressively, and long-term borrowings increased from ¥50B to ¥200B. If investments do not translate into higher utilization or yield improvements, depreciation burden and delayed payback risk may materialize. In a rising rate environment, increases in interest expense (currently ¥1.5B) could pressure financial costs; although Debt/EBITDA is low at 1.21x, monitoring investment returns is important.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.6% | 7.8% (4.6%–12.3%) | -1.2pt |
| Net Income Margin | 4.0% | 5.2% (2.3%–8.2%) | -1.2pt |
Both operating and net margins are below industry medians, indicating relatively weaker profitability within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 14.1% | 3.7% (-0.4%–9.3%) | +10.4pt |
Revenue growth substantially exceeds the industry median, placing the company among the leaders in top-line growth.
※ Source: Company compilation
Divergence between high top-line growth and operating margin: Revenue grew +14.1% YoY, well above the industry median +3.7%, supported by recovery in machine tool demand and shortened lead times increasing shipments. However, operating margin declined to 6.6% from 7.1% prior year and remains below the industry median of 7.8%. A 2.3pt drop in gross margin and segment-level margin compression (notably Europe -0.9pt) pressured consolidated profitability; cost pass-through and segment mix improvement will be key. Full-year guidance assumes improvement to a 7.8% operating margin, but second-half margin assumptions are extremely low and realization will require regional profitability recovery and cost efficiencies.
High-quality cash flow and investment-led profile: Operating Cash Flow was ¥238.2B, 1.90x Net Income, and OCF/EBITDA 0.96x, indicating strong cash generation. Capital expenditures ¥239.3B and intangible asset investments ¥55.6B led to Free Cash Flow of -¥54.1B, but low leverage (Debt/EBITDA 1.21x, Equity Ratio 75.2%) and ample liquidity (cash ¥530.1B, current ratio 365.2%) support financial resilience. If investments translate into higher utilization and yield improvements, and if inventory (DIO 180 days) and receivable turns improve, Free Cash Flow could return to positive and shareholder return sustainability would increase. Working capital efficiency is pivotal for cash flow and asset turnover improvement.
Aggressive shareholder returns and questions on sustainability: Combined dividend payout ratio 53.8% and buybacks ¥50.0B produced a Total Return Ratio of 88.0%, showing an aggressive return policy. However, Free Cash Flow was -¥54.1B and returns exceeded FCF, funded by Operating Cash Flow and borrowings. Long-term continuation of high returns requires realized investment returns (improved utilization and margins) and reductions in inventory and receivables to improve working capital efficiency. Low leverage and strong liquidity support near-term return capacity, but medium- to long-term dividend growth and ROE improvement require operating margin gains and CCC shortening (217 days).
This report was automatically generated by AI analyzing XBRL financial statement 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; please consult professional advisors as needed.