| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥595.6B | ¥556.5B | +7.0% |
| Operating Income / Operating Profit | ¥25.7B | ¥0.1B | -94.4% |
| Ordinary Income | ¥25.4B | ¥1.5B | +469.9% |
| Net Income / Net Profit | ¥7.2B | ¥41.7B | -82.8% |
| ROE | 0.9% | 5.3% | - |
For the fiscal year ended March 2026, Revenue was ¥595.6B (YoY +¥39.1B +7.0%), Operating Income was ¥25.7B (YoY +¥25.6B +42780%), Ordinary Income was ¥25.4B (YoY +¥23.9B +1583%), and Net Income attributable to owners of the parent was ¥7.2B (YoY -¥34.5B -82.8%). Although the company achieved higher sales and profit at the operating and ordinary stages, deterioration in special gains/losses caused a significant decline in bottom-line profit. Gross profit margin improved to 30.4% (prior year 26.7%; +3.7pt) and operating margin rose to 4.3% (prior year 0.0%), but special losses totaling ¥8.5B, including impairment losses of ¥5.3B and inventory valuation losses of ¥2.9B, pressured Net Income.
[Revenue] Revenue of ¥595.6B (+7.0%) increased across all regions: Japan ¥340.1B (+9.5%), North America ¥121.4B (+4.3%), and Europe ¥168.8B (+0.5%). By product, Revenue comprised speed reducers ¥463.3B and mechatronics products ¥132.2B. External customer sales in the Japan segment were ¥266.3B (YoY +23.1%) and acted as a growth driver, supported by domestic market recovery and expanded exports to Asian markets excluding China. Europe saw only slight sales growth but improved its profitability structure due to a turnaround to segment profit.
[Profitability] Cost of sales was ¥414.2B, yielding Gross Profit of ¥181.3B (Gross Margin 30.4%), an improvement of +3.7pt YoY. Selling, general and administrative expenses (SG&A) were ¥155.7B (SG&A ratio 26.1%), improving by -0.6pt YoY, resulting in Operating Income of ¥25.7B (Operating Margin 4.3%). Non-operating items included interest income ¥2.1B, interest expense ¥2.6B and foreign exchange losses ¥1.0B, producing a non-operating net contribution of -¥0.3B. Extraordinary items included special gains of ¥6.0B (gain on sale of fixed assets ¥5.1B, gain on sale of investment securities ¥0.9B) and special losses of ¥8.5B (impairment losses ¥5.3B, loss on retirement of fixed assets ¥0.2B, etc.), resulting in a net special loss of -¥2.5B. After income taxes of ¥6.8B, Net Income attributable to owners of the parent was ¥7.2B (YoY -82.8%), and one-off items caused a large decline in final profit. In conclusion, the company achieved higher sales and profit at the operating and ordinary stages, but final profit decreased due to special losses.
By reportable segment, operating profit/loss were: Japan Revenue ¥340.1B (Segment Profit ¥36.9B), China Revenue ¥40.6B (¥3.8B), North America Revenue ¥121.4B (¥5.3B), and Europe Revenue ¥168.8B (¥6.4B). The Japan segment accounted for 57.1% of Revenue, and segment profit improved substantially by +66% YoY, becoming the core of consolidated profit. Europe turned from a loss of ¥0.5B in the prior year to a profit of ¥6.4B, dramatically improving profitability. North America recorded a slight decrease in profit (prior year ¥5.6B → ¥5.3B). After deducting corporate costs (R&D and corporate overhead) of ¥25.7B, consolidated Ordinary Income was ¥25.4B.
[Profitability] Operating Margin 4.3% (prior year 0.0%), Ordinary Income Margin 4.3% (prior year 0.3%), Net Profit Margin 1.2% (prior year 7.5%), ROE 0.9% (prior year 5.3%), ROA (on Ordinary Income basis) 2.3% (prior year 0.1%). Gross Margin 30.4% improved +3.7pt YoY and SG&A ratio 26.1% declined -0.6pt YoY, substantially improving operating-stage profitability. However, the net special loss of -¥2.5B depressed final profit margin and ROE. [Cash Quality] Operating Cash Flow (OCF) ¥64.2B is 8.9x Net Income ¥7.2B; OCF as a percentage of EBITDA (¥99.3B) is 64.7%, indicating good cash conversion of earnings, though there is room to improve working capital. [Investment Efficiency] Total Asset Turnover 0.54x (prior year 0.49x), Inventory Turnover Days 109 days (prior year 131 days), Days Sales Outstanding (DSO) 71 days (prior year 63 days); inventory efficiency improved but receivables collection period lengthened. [Financial Soundness] Equity Ratio 72.2% (prior year 69.5%), Current Ratio 416% (prior year 383%), D/E Ratio 0.39x (prior year 0.52x), Interest Coverage 38.2x (prior year 33.5x), maintaining a very healthy financial structure.
Operating Cash Flow was ¥64.2B (YoY -14.5%). Pre-tax profit before income taxes was ¥22.9B and depreciation was ¥73.6B, producing an OCF subtotal of ¥83.6B. In working capital, a decrease in inventory of ¥3.1B contributed positively, while increases in accounts receivable of ¥17.9B and decreases in accounts payable of ¥8.7B pressured cash. After income tax payments of ¥21.1B, OCF decreased from ¥75.2B in the prior year to ¥64.2B. Investing Cash Flow was -¥49.4B, mainly capital expenditures of ¥56.9B and acquisition of marketable securities ¥3.4B, partially offset by proceeds from sale of fixed assets ¥8.1B and sale of marketable securities ¥3.3B. Financing Cash Flow was -¥58.7B, with repayments of long-term borrowings ¥18.9B, dividend payments ¥18.9B, share buybacks ¥8.1B, and net decrease in short-term borrowings ¥5.0B as primary outflows. Free Cash Flow was ¥14.8B (OCF ¥64.2B + Investing CF -¥49.4B), which was below total shareholder returns of ¥27.0B, resulting in a decrease in cash on hand of ¥33.4B to ¥215.6B.
Core recurring earnings are driven by Operating Income ¥25.7B, which is Gross Profit ¥181.3B less SG&A ¥155.7B. Non-operating items produced a net negative contribution of -¥0.3B (interest income ¥2.1B vs interest expense ¥2.6B and FX loss ¥1.0B), accounting for only 0.9% of Revenue, indicating high reliance on core operations. One-off factors included special gains ¥6.0B (gain on sale of fixed assets ¥5.1B; gain on sale of investment securities ¥0.9B) versus special losses ¥8.5B (impairment losses ¥5.3B; loss on retirement of fixed assets ¥0.2B, etc.), producing a net special loss of -¥2.5B that reduced final profit. OCF of ¥64.2B is 8.9x Net Income ¥7.2B, and despite inventory valuation losses of ¥2.9B being recognized, the OCF subtotal ¥83.6B substantially exceeded pre-tax profit ¥22.9B, indicating sound accrual quality. Comprehensive income ¥40.8B exceeded Net Income ¥7.2B by ¥33.6B, mainly due to foreign currency translation adjustments ¥25.3B, with yen depreciation boosting shareholders’ equity.
Full Year (FY) forecast: Revenue ¥680.0B (YoY +14.2%), Operating Income ¥62.0B (YoY +141.5%), Ordinary Income ¥62.0B (YoY +144.1%), Net Income attributable to owners of the parent ¥38.0B (YoY +428.2%). Progress against current results is Sales 87.6%, Operating Income 41.5%, Ordinary Income 41.0%, Net Income 18.9%, assuming a significant profit recovery in H2. The full-year Operating Margin is projected at 9.1% (this year 4.3%), reflecting assumptions of maintained Gross Margin and controlled SG&A growth to deliver operating leverage. Dividend forecast is annual ¥10.0 per share; with forecast EPS ¥47.54, the payout ratio is expected to normalize to 21.0%.
Annual dividend was ¥20.0 per share (interim ¥10.0, year-end ¥10.0), with total dividends of ¥18.96B. The payout ratio relative to Net Income attributable to owners of the parent ¥7.2B was 263.9%, extremely high, and dividends were not covered by single-year earnings. However, the ratio of total dividends to OCF ¥64.2B was 29.5%, indicating cash-based sustainability. Share buybacks of ¥8.1B were executed, bringing total shareholder returns to ¥27.1B and Total Return Ratio to 376.4%. Total shareholder returns exceeded Free Cash Flow ¥14.8B, funded by cash on hand drawdown. The full-year forecast assumes dividends of ¥10.0 per share (total approx. ¥9.5B), and with forecast Net Income ¥38.0B the payout ratio is expected to normalize to 21.0%, improving sustainability next fiscal year.
Working capital efficiency deterioration risk: Days Sales Outstanding 71 days (prior year 63 days) extended by 8 days, and accounts receivable balance increased to ¥11,57.0B (115.7億円 converted to ¥115.7B? — Note: preserve original numeric format as requested) with YoY increase of ¥20.1B. Days Payable Outstanding is 21 days, shortened by -6 days YoY, lengthening the cash conversion cycle (CCC). Continued expansion in working capital needs with sales growth could pressure cash generation.
Volatility of one-off gains/losses: Special losses totaling ¥8.5B, including impairment losses ¥5.3B and inventory valuation losses ¥2.9B, caused significant variation in final profit. The impairment occurred in the Japan segment, and the assessment of fixed asset profitability remains an ongoing issue. Although the full-year forecast anticipates a large recovery in Net Income, recurrence of one-off losses could risk missing targets.
Geographic demand concentration risk: The Japan segment accounts for 57.1% of Revenue and 70.3% of segment profit, indicating high dependence on the domestic market and Asian markets excluding China. Although Europe turned profitable, its profit contribution remains limited and North America is flat. Geographic concentration could materially affect consolidated performance if demand in Japan slows.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.3% | 7.8% (4.6%–12.3%) | -3.4pt |
| Net Profit Margin | 1.2% | 5.2% (2.3%–8.2%) | -4.0pt |
Operating Margin is 3.4pt below the median and ranks in the lower range within manufacturing; improving profitability remains a challenge.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 7.0% | 3.7% (-0.4%–9.3%) | +3.3pt |
Revenue growth outperformed the median by 3.3pt, placing the company in the upper range within manufacturing, indicating steady top-line expansion.
※Source: Company compilation
Improvement in Gross Margin to 30.4% (YoY +3.7pt) and SG&A ratio to 26.1% (YoY -0.6pt) restored Operating Margin to 4.3%. The Europe segment’s turnaround to profit and profit growth in the Japan segment drove improvements in the earnings structure, and the company forecasts further Operating Margin improvement to 9.1% for the full year. The sustainability of price corrections and product mix improvements is a key focus.
OCF ¥64.2B is 8.9x Net Income ¥7.2B, demonstrating high cash-generating capacity, but increases in accounts receivable ¥17.9B and decreases in accounts payable ¥8.7B pressured working capital. If forecasted profit recovery materializes, improving working capital efficiency will maximize cash generation, making DSO and DPO management critical.
With a payout ratio of 263.9% and share buybacks of ¥8.1B, Total Return Ratio reached 376.4%, but the company expects normalization to a payout ratio of 21.0% in the full-year forecast. Financial health is very strong (Equity Ratio 72.2%, D/E Ratio 0.39x), leaving substantial room for shareholder returns during a profit recovery phase.
This report is an earnings analysis document automatically generated by AI based on 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 based on public financial statements. Investment decisions are your own responsibility; please consult professionals as necessary before making any investment decision.