| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥211.7B | ¥199.5B | +6.1% |
| Operating Income / Operating Profit | ¥1.6B | ¥-3.0B | +993.9% |
| Ordinary Income | ¥3.5B | ¥-1.4B | +199.9% |
| Net Income | ¥55.3B | ¥17.0B | +225.4% |
| ROE | 15.2% | 5.0% | - |
For the fiscal year ended February 2026, Revenue was ¥211.7B (¥+12.2B YoY, +6.1%), Operating Income was ¥1.6B (¥+4.6B YoY, turning to profit from ¥-3.0B in the prior year), Ordinary Income was ¥3.5B (¥+4.9B YoY, turning to profit from ¥-1.4B in the prior year), and Net Income attributable to owners of parent was ¥55.3B (¥+38.3B YoY, +225.4%). Revenue maintained an upward trend and gross margin improved to 15.1% (up +1.9pt from 13.2% prior year), enhancing profitability. Operating Income turned positive absorbing SG&A of ¥30.4B (SG&A ratio 14.4%), but Operating Margin remained low at 0.8%. Net Income was significantly affected by non-recurring items, including a negative goodwill gain of ¥19.3B within special gains totaling ¥37.0B, and special losses of ¥19.9B including asset write-downs associated with subsidy-related asset compressions. The effective tax rate was low at 5.1%, and the recognition of deferred tax assets further boosted Net Income.
The ¥211.7B Revenue (+6.1%) increase was mainly driven by progress in order fulfillment and improvements in project mix. Cost of sales totaled ¥179.7B, producing Gross Profit of ¥32.0B (Gross Margin 15.1%), an improvement of +1.9pt from 13.2% a year earlier. The gross margin improvement is attributed to changes in product mix and advances in cost control. SG&A was ¥30.4B (SG&A ratio 14.4%, +3.6% YoY), contained below Revenue growth of +6.1%, but absorbed most of gross profit, leaving Operating Income at ¥1.6B (Operating Margin 0.8%). Non-operating income was ¥2.7B (interest income ¥1.2B, foreign exchange gain ¥0.5B, etc.), while non-operating expenses were ¥0.8B (interest expense ¥0.4B, foreign exchange loss ¥0.9B, etc.), yielding a net positive contribution of ¥1.9B to Ordinary Income. Ordinary Income turned positive at ¥3.5B (prior year ¥-1.4B). In extraordinary items, the company recorded special gains of ¥37.0B, including a negative goodwill gain of ¥19.3B from the acquisition of the spunlace nonwoven fabric business from Unitika and subsidy income of ¥17.7B. Special losses amounted to ¥19.9B, including asset compression losses of ¥17.7B, impairment losses ¥1.0B, and litigation settlement ¥1.3B. Profit before tax was ¥20.5B; after corporate taxes of ¥1.0B (effective tax rate 5.1%), Net Income was ¥55.3B. The bulk of Net Income derived from the net special items of +¥17.0B and the low effective tax rate, while the recurring earning power is reflected in improvements at the operating and ordinary levels. In conclusion, although top-line growth and an operating profit turnaround indicate improvement, Net Income was driven by one-off items; sustainable profitability requires further improvement in Operating Margin.
Profitability: ROE of 15.2% is decomposed as Net Profit Margin 26.1% × Total Asset Turnover 0.40 × Financial Leverage 1.44x. The high Net Profit Margin is largely due to special items; recurring profitability as proxied by Operating Margin is low at 0.8%. EBITDA was ¥10.5B (Operating Income ¥1.6B + Depreciation & Amortization ¥8.8B) giving an EBITDA margin of 4.9%, indicating that improving operating-level profitability is a key challenge. Gross Margin at 15.1% improved +1.9pt from 13.2% but remains low compared to industry standards. ROA 6.7% and ROIC 0.5% indicate low capital efficiency, and Total Asset Turnover of 0.40x and an asset-heavy business structure (contract assets and work-in-progress centered) are constraining factors. Cash quality: Operating Cash Flow (OCF) was ¥11.3B versus Net Income ¥55.3B, yielding an OCF/Net Income ratio of 0.20x; Free Cash Flow (FCF) was ¥14.0B, indicating cash generation but a low ratio due to much of Net Income being non-cash special items. Cash conversion (OCF/EBITDA) was 1.08x, an acceptable level. Investment efficiency: Capital expenditures ¥3.7B vs. Depreciation ¥8.8B, CapEx/Depreciation ratio 0.42x, indicating restrained CAPEX with investments focused on business acquisitions including M&A. Financial soundness: Equity Ratio 69.3%, Current Ratio 371.9%, Quick Ratio 371.0%—extremely strong. Interest-bearing debt (long-term borrowings ¥58.8B + bonds due within one year ¥50.0B) totaled ¥108.8B; net debt was -¥25.2B after deducting cash and deposits of ¥134.0B, effectively debt-free. Gross Debt/EBITDA was 10.38x (high due to low EBITDA), but net debt of -¥25.2B shows a cash-rich balance sheet. Interest Coverage (EBIT / Interest Expense) was 3.8x, within an acceptable range. Debt/Capital was 13.9%, indicating a conservative capital structure.
OCF was ¥11.3B (¥+0.4B YoY, +3.7%). Adjustments to profit before tax ¥20.5B included Depreciation & Amortization ¥8.8B, negative goodwill gain -¥19.3B, asset compression loss ¥17.7B and other non-cash items. Changes in working capital absorbed cash: increase in trade receivables -¥11.7B, decrease in inventories +¥2.5B, decrease in trade payables +¥10.4B, decrease in contract liabilities +¥6.6B. After tax payments of -¥4.7B, OCF totaled ¥11.3B. Investing Cash Flow was +¥2.6B, mainly from subsidy receipts +¥17.7B, payments for business acquisition -¥21.5B, and capital expenditures -¥3.7B. FCF was ¥13.9B (OCF ¥11.3B + Investing CF ¥2.6B), indicating ample cash generation. Financing Cash Flow was -¥17.1B, including borrowings +¥40.0B, repayments -¥3.7B, bond redemptions -¥50.0B, and dividend payments -¥2.9B. Cash and cash equivalents decreased from ¥97.3B at the beginning of the period to ¥94.0B at the end (-¥3.3B), but liquidity remained ample. The OCF/Net Income ratio of 0.20x reflects the large share of special items in Net Income, while OCF ¥11.3B against EBITDA ¥10.5B (cash conversion 1.08x) demonstrates substantive cash generation. On the working capital side, increases in accounts receivable and decreases in accounts payable and contract liabilities absorbed cash, and a high level of WIP of ¥52.4B (69.8% of inventories) persists. CCC 146 days and DIO 152 days show lengthening trends; given the project-based business profile, improving working capital efficiency remains a priority.
Of Net Income ¥55.3B, net special items of +¥17.0B (Special Gains ¥37.0B - Special Losses ¥19.9B) account for roughly 31%, which is material and warrants attention regarding earnings quality. Key one-off factors are the negative goodwill gain ¥19.3B and asset compression loss ¥17.7B (accounting treatment related to subsidy receipt). The gap between Ordinary Income ¥3.5B and Net Income ¥55.3B is ¥+51.8B, driven mainly by one-off items and a low effective tax rate (5.1%). The low effective tax rate results from recognition of deferred tax assets (income tax adjustments -¥4.3B), reflecting tax-effect accounting based on expected future taxable income. Non-operating income ¥2.7B (1.3% of Revenue) was mainly interest income ¥1.2B and foreign exchange gains ¥0.5B; distortions at the ordinary level are limited, though FX net was -¥0.42B (foreign exchange gains on non-operating income ¥0.5B - foreign exchange losses on non-operating expenses ¥0.9B), indicating variability. The accrual ratio (Net Income - OCF) / Total Assets is 8.4%, reflecting low OCF/Net Income of 0.20x, but OCF exceeds EBITDA, providing some cash backing. Equity-method gains/losses were -¥0.2B and immaterial. For sustainability assessment, focus should be on the improving trend in Operating Income ¥1.6B and Ordinary Income ¥3.5B; Net Income ¥55.3B should be evaluated excluding one-off effects.
The FY2027 plan projects Revenue ¥270.0B (¥+58.3B YoY, +27.5%), Operating Income ¥17.8B (¥+16.2B YoY, +993.9%, Operating Margin 6.6%), Ordinary Income ¥18.2B (¥+14.7B YoY, +419.1%), Net Income attributable to owners of parent ¥12.8B (¥-42.5B YoY, -76.8%), EPS ¥48.35, and dividend ¥12.00. The +27.5% Revenue increase is assumed to reflect full-year contribution from the spunlace nonwoven fabric business acquired from Unitika and accelerated order fulfillment in existing businesses. Operating Income ¥17.8B (Operating Margin 6.6%) assumes an improvement of +5.8pt from the current 0.8%, contingent on further Gross Margin enhancement, realization of synergies from the acquired business, and cost improvements. Net Income ¥12.8B—significantly lower than ¥55.3B this year—reflects the absence of this year’s one-off negative goodwill gain and other non-recurring items; EPS ¥48.35 reflects normalized earning power. Dividend ¥12.00 maintains the same level as this year, implying a Payout Ratio around 25% on the plan basis. Progress assessment is difficult due to lack of disclosed first-half results against the full-year plan, but achieving Operating Margin 6.6% will be the key verification point. Neutralizing FX impacts and improving working capital efficiency (shortening CCC, reducing WIP) are also prerequisites for plan achievement.
Annual dividend is planned at ¥12.00 (interim ¥6.00 + year-end ¥6.00), an increase of ¥7.00 from prior year ¥5.00. The year-end dividend ¥6.00 is classified as ordinary dividend; the FY2027 interim dividend is planned as ordinary dividend ¥8.00 + commemorative dividend ¥4.00 totaling ¥12.00. Payout Ratio is 16.1% (on Net Income ¥55.3B, EPS ¥74.51) indicating a conservative level. Given the large one-off items in Net Income this year, plan-based Payout Ratio is raised to about 25% (dividend ¥12.00 on EPS ¥48.35). DOE (Dividend on Equity) is 0.8%. With FCF ¥13.9B vs. total dividends ¥2.9B, FCF coverage is 4.8x, indicating ample capacity, and cash on hand ¥134.0B supports dividend sustainability. No share buyback has been disclosed; shareholder returns are focused on dividends. Total Return Ratio is the same as Payout Ratio at 16.1% (on the current-year basis). Going forward, as OCF improves (CCC shortening, EBITDA expansion), scope for dividend increases is expected to expand.
[Industry Position] (reference information, company analysis) Relative to the manufacturing sector median for FY2025 (n=244): Equity Ratio 69.3% exceeds industry median 60.9%, indicating strong financial safety; Current Ratio 371.9% far exceeds industry median 2.66x. Conversely, Operating Margin 0.8% is well below the industry median 7.8%, showing inferior profitability. Net Profit Margin 26.1% far exceeds the industry median 5.2% but is driven by one-off items and lacks sustainability. ROE 15.2% exceeds industry median 6.3%, but caution is warranted given Net Income quality. Total Asset Turnover 0.40x is below industry median 0.76x, indicating substantial room to improve asset efficiency. DIO 152 days greatly exceeds industry median 67.77 days, reflecting long inventory/WIP retention typical of project-based businesses. CCC 146 days also exceeds industry median 85.48 days, underscoring the need to improve working capital efficiency. Payout Ratio 16.1% is below industry median 33%, though planned to increase to 25% in the next fiscal year. Revenue growth +6.1% outperformed the industry median +3.7%, and with contributions from the acquired business, is expected to accelerate to +27.5% next year. Overall, financial safety ranks high in the industry, profitability ranks low, and working capital efficiency is also below industry; achieving the FY2027 Operating Margin target of 6.6% will be the watershed for recovery to industry median performance.
Key points in the financial results are as follows. First, the turnaround to Operating Income profitability and Gross Margin improvement of +1.9pt indicate early signs of structural improvement, but Operating Margin remains low at 0.8%, and achieving the 6.6% target next year will be the litmus test for sustainable improvement. Second, most of Net Income ¥55.3B is driven by one-off items such as negative goodwill gains; evaluation should distinguish this from the improving trend at the ordinary level (Ordinary Income ¥3.5B). Third, while maintaining ample cash generation with OCF ¥11.3B and FCF ¥13.9B, there is substantial room to improve working capital efficiency given CCC 146 days and DIO 152 days; attention is needed for short-term cash volatility due to WIP reductions and contract liability unwind. Fourth, Equity Ratio 69.3% and Current Ratio 371.9% indicate very strong financial safety, supporting resilience to M&A integration risks. Fifth, Payout Ratio 16.1% (plan basis 25%) is conservative, but with FCF coverage 4.8x and ample liquidity, scope exists for dividend increases as OCF improves.
This report is an AI-generated earnings analysis document produced from XBRL earnings release 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; consult a professional advisor as needed.