| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥335.1B | ¥325.2B | +3.0% |
| Operating Income / Operating Profit | ¥-17.2B | ¥-119.1B | +85.6% |
| Ordinary Income | ¥2.9B | ¥-114.8B | +246.3% |
| Net Income / Net Profit | ¥-13.6B | ¥-97.3B | +86.0% |
| ROE | -1.7% | -12.5% | - |
For the fiscal year ended March 2026, Revenue was ¥335.1B (YoY +¥9.9B +3.0%), Operating loss was ¥17.2B (improvement of ¥101.9B YoY), Ordinary Income was ¥2.9B (improvement of ¥117.7B YoY), and Net loss attributable to owners of the parent was ¥13.6B (improvement of ¥83.7B YoY). Although an operating-stage loss persisted, the deficit narrowed by 85.6% YoY and the operating margin improved by 31.5pt from ▲36.6% to ▲5.1%. The shift to Ordinary Income profitability was largely contributed by ¥22.9B of non-operating income, including interest income ¥7.6B, dividend income ¥2.8B, and foreign exchange gains ¥9.4B, and Special Income of ¥13.2B including gain on sales of investment securities ¥12.3B was also recorded. The final deficit remained due to Special Losses of ¥5.0B including impairment losses ¥14.9B and corporate income taxes of ¥2.5B, but the trend toward improved earnings structure is clear.
[Revenue] Revenue of ¥335.1B (+3.0% YoY) was driven by Flat Knitting Machines ¥238.7B (+2.7%, 71.2% of sales) as the core recovery, Design Systems-related ¥30.4B (+7.8%), and Other outside reportable segments ¥60.8B (+6.4%). Glove & Sock Machines contracted to ¥5.2B (▲31.1%) but had limited impact on total amount. By geography, sales were diversified: Asia ¥160.3B (47.8% of sales), Europe ¥82.1B (24.5%), and Japan ¥61.6B (18.4%). Gross profit was ¥119.0B (gross margin 35.5%, improved 9.0pt from 26.5% last year), reflecting notable improvement in cost of sales.
[Profitability] Selling, general and administrative expenses (SG&A) were ¥136.2B against Cost of Sales ¥216.1B (SG&A ratio 40.6%, prior year 63.2%), remaining high but reduced YoY, leading to a substantial narrowing of operating loss to ¥17.2B. Non-operating income ¥22.9B (interest income ¥7.6B, dividend income ¥2.8B, foreign exchange gains ¥9.4B, etc.) significantly exceeded non-operating expenses ¥2.8B (interest expense ¥1.9B, foreign exchange losses ¥6.1B, etc.), securing Ordinary Income ¥2.9B. In extraordinary items, Special Income ¥13.2B mainly from gain on sales of investment securities ¥12.3B was partially offset by Special Losses ¥5.0B including impairment losses ¥14.9B, resulting in Profit before Income Taxes ¥11.1B (effective tax rate 22.5%). Net loss attributable to owners of the parent was ¥13.6B (improved 86.0% from prior year loss of ¥97.3B). While there is a major improvement on the income statement, the company has not achieved operating profitability and remains reliant on non-operating and special items. In conclusion: revenue increase and narrowing operating loss.
The Flat Knitting Machine segment (Revenue ¥238.7B, +2.7%) secured Operating Income ¥25.6B (+151.0%, margin 10.7%) and was the main driver of reduced deficit. The Design Systems-related business (Revenue ¥30.4B, +7.8%) maintained high profitability with Operating Income ¥6.7B (+493.8%, margin 22.1%) and extremely high growth in profits. The Glove & Sock Machines segment (Revenue ¥5.2B, ▲31.1%) had Operating Income ¥0.8B (+204.0%, margin 14.6%); revenue declined but margin improved. The Other category outside reportable segments (components for knitting machines & design systems, repair & maintenance business, etc., Revenue ¥60.8B, +6.4%) recorded Operating Income ¥10.5B (+888.0%, margin 17.2%), with stable contribution from aftermarket revenue. Total segment Operating Income was ¥43.6B, from which corporate expenses ¥60.8B (decrease of ¥6.1B YoY) were deducted, resulting in consolidated Operating loss ¥17.2B.
[Profitability] Operating margin ▲5.1% (improved 31.5pt from ▲36.6% prior year), Ordinary Income margin 0.9% (prior year ▲35.3%), Net margin ▲4.1% (prior year ▲29.9%) — substantial improvement on the income statement, but operating stage remains loss-making. ROE was ▲1.7% (prior year ▲16.8%), with narrower deterioration due to improved net margin. Gross margin rose to 35.5% (prior year 26.5%), up 9.0pt, indicating notable cost reduction effects. [Cash Quality] Operating Cash Flow (OCF) ¥4.1B (turning positive from prior year ▲¥44.6B), Free Cash Flow ¥▲10.6B (OCF ¥4.1B − Investing CF ¥14.7B), indicating CapEx ¥13.0B is not fully funded from internal funds. OCF/Net Income is 0.48x, showing low cash conversion of earnings, mainly due to working capital retention. DSO 206 days, DIO 413 days, CCC 595 days — significantly above industry benchmarks, indicating large room for improvement in asset efficiency. [Investment Efficiency] Total asset turnover 0.31x (prior year 0.33x), Revenue/Total Assets 30.6% is low, with cash ¥212.9B, accounts receivable ¥189.1B, and inventories ¥116.9B dragging down turnover. With depreciation ¥10.8B vs. CapEx ¥13.0B, CapEx/Depreciation is 1.20x, indicating continued maintenance and growth investment. [Financial Soundness] Equity Ratio 75.2% (prior year 78.2%), Current Ratio 501%, Quick Ratio 430% — liquidity is extremely strong. Interest-bearing debt totals ¥137.0B (short-term borrowings ¥62.0B, long-term borrowings ¥66.7B, lease liabilities ¥8.3B), resulting in Net Debt ▲¥75.9B — a net cash position. Interest coverage (EBIT / Interest Expense) is ▲8.96x, indicating inability to cover interest burden from operating profit, a challenge due to operating losses.
OCF was ¥4.1B (improvement of ¥48.7B from prior year ▲¥44.6B) turning positive, but cash generation is limited relative to net loss of ¥13.6B. OCF subtotal (before working capital changes) was ▲¥2.2B; even after adding non-cash expenses such as depreciation ¥10.8B and impairment losses ¥14.9B, operating-stage deficits persist. In working capital, decreases in inventories +¥7.8B and accounts receivable +¥3.8B increased cash, while decrease in accounts payable ▲¥6.6B was a cash outflow; receipt of interest and dividends ¥9.6B boosted OCF. Investing CF was ▲¥14.7B, primarily due to CapEx ▲¥13.0B; time deposit placements ▲¥121.3B and withdrawals +¥105.1B net ▲¥16.2B also affected flows, partly offset by proceeds from sale of investment securities ¥14.3B. Financing CF was +¥54.7B, mainly due to long-term borrowing proceeds ¥100.0B, offset by repayment of short-term borrowings ▲¥26.0B, share buybacks ▲¥9.5B, and dividend payments ▲¥5.1B, increasing cash balances. Cash and deposits at period-end rose substantially to ¥212.9B (YoY +¥71.7B +50.7%), strengthening liquidity.
Quality of earnings is a concern. Against an operating loss of ¥17.2B, non-operating income ¥22.9B (6.8% of Revenue) drove ordinary profitability; breakdown includes interest income ¥7.6B, dividend income ¥2.8B, and foreign exchange gains ¥9.4B — indicating heavy dependence on financial income and FX movements. Foreign exchange losses ¥6.1B are also recorded in non-operating expenses, so FX volatility materially affects results. In special items, one-off gain on sales of investment securities ¥12.3B (93.2% of Special Income) significantly boosted Profit before Income Taxes, while impairment losses ¥14.9B were recorded as Special Losses, indicating write-downs of business assets. Comprehensive income attributable to owners of the parent was ¥56.5B, far exceeding Net loss ¥▲13.6B, with Other Comprehensive Income ¥47.9B (foreign currency translation adjustment ¥31.5B, valuation difference on available-for-sale securities ¥11.9B, adjustments related to retirement benefits ¥4.6B) making major contributions. OCF/Net Income 0.48x and OCF/EBITDA ▲0.64x (EBITDA = Operating loss + Depreciation = ▲¥6.4B) show weak accruals-to-cash conversion, leaving questions about sustainability and stability of earnings. The divergence between Ordinary Income ¥2.9B and Net loss ¥▲13.6B is due to special items and tax effects; core operating profitability remains under development.
Full Year guidance: Revenue ¥410.0B (YoY +22.4%), Operating Income ¥3.0B (operating profitability), Ordinary Income ¥10.0B (YoY +246.3%), Net Income attributable to owners of the parent ¥9.0B, EPS ¥26.53, dividend ¥10.0. Compared with H1 results, H2 assumes order recovery in Flat Knitting Machines and stabilization of aftermarket (maintenance & parts) revenue. Achieving operating profitability requires further discipline in SG&A and suppression of corporate expenses; if working capital improvements (DSO/DIO) do not progress, cash generation could be delayed and may affect guidance achievement. Assumptions regarding FX and one-off items such as sales of investment securities are not disclosed, and volatility in non-operating and special items remains a performance risk.
Annual dividend is ¥20 per share (interim ¥10, year-end ¥10), with a Payout Ratio stated as ▲2.4% (mathematically uncomputable due to net loss, but recorded as ▲2.4% in data), effectively paid from retained earnings (Retained Earnings ¥311.0B). Total dividends amount to ¥6.8B (based on shares outstanding 33,920 thousand), exceeding Free Cash Flow ▲¥10.6B, resulting in FCF coverage of ▲1.52x and not funded from internal cash flow. Share buybacks of ¥9.5B were executed, and Total Return Ratio (dividends + buybacks / Net Income) is uncomputable, but combined dividends and buybacks ¥16.3B substantially exceed Free Cash Flow. With cash and deposits ¥212.9B and low leverage (Equity Ratio 75.2%), short-term return capacity is secured, but sustainability depends on achieving operating profitability and improving working capital efficiency. Full year dividend guidance of ¥10 is a dividend cut and indicates a shift to a more conservative dividend policy.
Working capital efficiency deterioration: DSO 206 days, DIO 413 days, CCC 595 days — well above industry benchmarks — with accounts receivable ¥189.1B and inventories ¥116.9B tying up cash and pressuring OCF. Inventory turnover 0.88x (prior year 0.96x) is deteriorating, posing potential inventory valuation losses and obsolescence risk. Accounts receivable turnover 1.77x (prior year 1.57x) improved but remains low; attention to collection delays and bad debt risk is necessary.
Dependence on non-operating & special items: Against an operating loss of ¥17.2B, non-operating income ¥22.9B (interest & dividends ¥7.6B + ¥2.8B, FX gains ¥9.4B) and gain on sales of investment securities ¥12.3B underpin profitability, creating exposure to FX volatility, interest rate environment, and market prices of investment securities, increasing earnings volatility. Interest coverage ▲8.96x means interest burdens are not covered internally; rising interest rates would increase financial strain.
Business concentration risk: Flat Knitting Machines account for 71.2% of sales and 58.7% of segment profit, making performance sensitive to product cycles and demand in key regions (Asia 47.8%). Glove & Sock Machines are in decline (sales ▲31.1%), limiting portfolio diversification. Contract liabilities (advance receipts) ¥12.8B imply backlog but lack of detailed disclosure on backlog limits predictability of future sales.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | -5.1% | 7.8% (4.6%–12.3%) | -12.9pt |
| Net Margin | -4.1% | 5.2% (2.3%–8.2%) | -9.3pt |
Both operating and net margins are materially below the industry median; restoring profitability is the top priority.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 3.0% | 3.7% (-0.4%–9.3%) | -0.7pt |
Revenue growth is roughly in line with the industry median, but low margins drag down overall assessment.
※ Source: Company compilation
Progress toward operating profitability is the primary focus. Segment profits from Flat Knitting Machines ¥25.6B and Other ¥10.5B show business-unit profitability, and potential reductions in corporate expenses ¥60.8B and compression of SG&A ratio 40.6% are keys to achieving operating profitability. Full year guidance expects Operating Income ¥3.0B, but this assumes cost control in H2 and incremental revenue.
Pace of improvement in working capital efficiency (DSO/DIO/CCC) is the inflection point for cash generation and ROE improvement. Inventory turnover 0.88x and CCC 595 days indicate extreme retention; without shortening product life cycles or advanced inventory management, negative Free Cash Flow may become structural, impacting sustainability of dividends and shareholder returns. Liquidity was secured through long-term borrowing ¥66.7B, but recovery of OCF is essential for medium-term financial soundness.
FX sensitivity and dependence on non-operating income increase earnings volatility. FX gains ¥9.4B and FX losses ¥6.1B materially affect non-operating results; FX tailwinds in a weaker yen scenario boost non-operating income, while yen appreciation has the opposite effect. One-off gains such as gain on sales of investment securities ¥12.3B supported this period’s profitability, but without established recurring core operating earnings, sustainable growth is unlikely. Order trends for Flat Knitting Machines and stable monetization of aftermarket (repairs & maintenance) are key indicators of sustainability.
This report is an earnings analysis document automatically generated by AI from XBRL earnings disclosure data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by our firm based on public financial statements. Investment decisions are your responsibility; please consult professionals as needed before making investment decisions.