| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥772.3B | ¥680.6B | +13.5% |
| Operating Income / Operating Profit | ¥107.2B | ¥102.5B | +4.5% |
| Ordinary Income | ¥136.0B | ¥104.9B | +29.6% |
| Net Income / Net Profit | ¥76.9B | ¥55.3B | +39.1% |
| ROE | 7.4% | 5.8% | - |
For the fiscal year ended March 2026, Revenue was ¥772.3B (YoY +¥91.7B +13.5%), Operating Income was ¥107.2B (YoY +¥4.6B +4.5%), Ordinary Income was ¥136.0B (YoY +¥31.1B +29.6%), and Net Income attributable to owners of the parent was ¥51.6B (YoY -¥36.7B -41.2%). Despite higher revenue and operating profit, Operating Margin contracted to 13.9% (down -1.2pt from 15.1% prior year). At the ordinary income level, gains were materially improved to a 17.6% margin (+2.2pt) mainly due to foreign exchange gains of ¥17.7B. Net income declined sharply due to recognition of special losses totaling ¥46.2B, including impairment losses of ¥44.3B, resulting in a Net Margin of 6.7% (down -6.2pt from 12.9%). Operating Cash Flow (OCF) was ¥94.5B (+34.5%), Free Cash Flow (FCF) was ¥48.4B, cash and equivalents were ¥352.9B, interest-bearing debt was ¥148.4B, indicating an extremely healthy financial position.
[Revenue] Revenue was ¥772.3B (+13.5%) with expansion across broad regions. The Japan segment recorded ¥575.5B (+2.7%), representing 74.5% of the total, composed of point-in-time revenue of ¥366.8B and long-term contracts of ¥66.4B. North America was ¥155.6B (+26.9%), and Asia was ¥172.9B (+10.3%), each achieving double-digit growth. Europe grew to ¥68.2B (+93.5%), roughly doubling year-on-year, primarily because ZENIT INTERNATIONAL S.P.A. was acquired as a subsidiary in 2024 mid-term and its results were consolidated from Q3. Regional revenue mix was Japan 50.0%, US 15.1%, Other 34.9%, expanding overseas revenue ratio to about 50%. Gross profit was ¥291.1B (gross margin 37.7%), a contraction of -0.7pt YoY.
[Profitability] Operating Income was ¥107.2B (+4.5%) with an Operating Margin of 13.9% (-1.2pt YoY). Selling, General & Administrative expenses totaled ¥184.0B (SG&A ratio 23.8%); increases included salaries and allowances ¥65.8B (+19.0%), freight ¥13.1B (+13.2%), and advertising ¥4.3B (+32.0%), which outpaced revenue growth and compressed operating leverage. By segment, Japan operating income ¥84.3B (+9.2%), North America ¥14.7B (+7.0%), Asia ¥19.1B (+7.4%) increased, while Europe returned an operating loss of ¥3.1B (YoY -152.5%) turning negative, reflecting deterioration in profitability after integration. Ordinary Income rose substantially to ¥136.0B (+29.6%), driven by non-operating income of ¥31.1B (4.0% of Sales), notably foreign exchange gains of ¥17.7B. Non-operating expenses were limited to ¥2.2B, primarily interest expense ¥1.5B. Special losses totaled ¥46.2B, comprising impairment losses ¥44.3B (Japan ¥4.2B, Europe ¥40.2B) and loss on disposals of fixed assets ¥1.9B, concentrated on goodwill and customer-related intangible impairments following the European subsidiary integration. Profit before tax was ¥90.8B (YoY -25.0%); after income taxes ¥36.9B (effective tax rate 40.6%) and non-controlling interests ¥2.3B, Net Income attributable to owners of the parent was ¥51.6B (-41.2%). In summary, revenue and operating improvements were offset at the bottom line by special losses.
Japan segment: Revenue ¥575.5B (+2.7%), Operating Income ¥84.3B (+9.2%, margin 14.6%) — core business profitability stable. North America: Revenue ¥155.6B (+26.9%), Operating Income ¥14.7B (+7.0%, margin 9.4%) — led top-line growth but margin remains in single digits. Asia: Revenue ¥172.9B (+10.3%), Operating Income ¥19.1B (+7.4%, margin 11.0%) — steady expansion. Europe: Revenue ¥68.2B (+93.5%) doubled YoY, but Operating Loss ¥3.1B (margin -4.6%) — profitability failed to normalize post-ZENIT integration. Other: Revenue ¥66.0B (+1.0%), Operating Income ¥9.9B (+23.3%, margin 15.0%) — highest margin. Corporate adjustments totaled -¥17.7B, including inventory valuation adjustments of -¥3.0B. The swing to loss in Europe was the largest contributor to the decline in consolidated operating margin; restoring European profitability is a key priority for next year.
[Profitability] Operating Margin 13.9% (down -1.2pt from 15.1%), Ordinary Income Margin 17.6% (up +2.2pt from 15.4%), Net Margin 6.7% (down -6.2pt from 12.9%). ROE 7.4% under a conservative capital structure with an Equity Ratio of 74.9%. Gross Margin 37.7% (down -0.7pt YoY), indicating rising cost of goods sold. EBITDA (Operating Income + Depreciation & Amortization) ¥132.9B, EBITDA Margin 17.2%. [Cash Quality] Operating Cash Flow ¥94.5B is 1.23x of Net Income ¥76.9B, FCF ¥48.4B secured. OCF/EBITDA ratio 0.71x; increases in working capital (Inventory -¥21.6B, Trade Receivables +¥10.4B, Trade Payables -¥15.6B) pressured cash conversion. Accrual ratio -12.8% ((OCF ¥94.5B - Operating Income ¥107.2B) / Net Assets ¥1,020.5B), indicating cash generation below operating profit. [Investment Efficiency] Total Asset Turnover 0.56x, Capital Expenditure ¥35.6B (1.39x Depreciation ¥25.7B), maintaining renewal and growth investments. Days Inventory Outstanding (DIO) 127 days, Days Sales Outstanding (DSO) 81 days, Days Payables Outstanding (DPO) 56 days, Cash Conversion Cycle (CCC) 152 days, deteriorated YoY. [Financial Soundness] Equity Ratio 74.9%, Current Ratio 374%, Quick Ratio 360% — extremely healthy. Interest-bearing debt Short-term borrowings ¥69.0B + Long-term borrowings ¥79.4B = ¥148.4B; Debt/Equity 0.15x, Debt/EBITDA 1.12x — conservative leverage. Interest Coverage 72.9x (Operating Income ¥107.2B / Interest Expense ¥1.5B) — very high interest-bearing capacity. Cash & deposits ¥352.9B + Marketable securities ¥15.5B = ¥368.4B, well exceeding interest-bearing debt ¥148.4B, yielding Net Cash ¥220.0B.
OCF was ¥94.5B (+34.5%). Starting from Profit before tax ¥90.8B, non-cash items such as Depreciation & Amortization ¥25.7B and Impairment losses ¥44.3B were added back. Working capital movements resulted in cash outflow totaling -¥26.8B (Inventory increase -¥21.6B, Trade receivables decrease +¥10.4B, Trade payables decrease -¥15.6B), mainly due to inventory build-up related to European integration and sales expansion. After cash taxes paid of -¥29.0B, OCF was ¥94.5B. Investing Cash Flow was -¥46.1B, with Capital Expenditure -¥35.6B (tangible asset acquisitions -¥35.6B, intangible asset acquisitions -¥2.5B) as primary outflows. Acquisition of subsidiary shares -¥11.3B relates to additional European subsidiary purchases. Proceeds from sale of marketable securities +¥7.0B and net changes in time deposits +¥1.1B were inflows, delivering FCF ¥48.4B (+22.4% YoY). Financing Cash Flow was -¥29.4B, including dividends paid -¥13.5B, share buybacks -¥9.9B, long-term borrowings repayments -¥17.0B, and short-term borrowings increase +¥2.0B. Total shareholder returns (dividends + buybacks) amounted to ¥23.4B, a payout of 48.3% against FCF ¥48.4B. Cash increased from ¥281.4B at the beginning of the period to ¥321.5B at period-end, a rise of ¥40.1B, maintaining ample liquidity.
Of Ordinary Income ¥136.0B, non-operating income ¥31.1B (4.0% of Sales) accounts for 22.8%, with foreign exchange gains ¥17.7B (13.0% of Ordinary Income) constituting a significant one-off contribution. Breakdown of non-operating income: Interest income ¥5.1B, Dividend income ¥4.3B, FX gains ¥17.7B, Other ¥4.0B. FX gains stem from yen depreciation valuation gains and lack sustainability, posing downside risk to non-operating income next year. Special items net to -¥45.2B, with impairment losses ¥44.3B (Europe ¥40.2B, Japan ¥4.2B) comprising 32.6% of Ordinary Income as a one-off loss. Impairment detail reflects reassessment of goodwill and customer-related intangible assets following European subsidiary integration; goodwill balance decreased -99.0% from ¥31.8B at the beginning of the period to ¥0.3B at period-end. Operating Income ¥107.2B vs. OCF ¥94.5B yields OCF/Operating Income ratio 0.88x, indicating cash conversion deterioration due to working capital. Comprehensive income was ¥101.5B, exceeding Net Income ¥76.9B by ¥24.6B; components include Foreign currency translation adjustments +¥30.3B, Valuation difference on available-for-sale securities +¥15.7B, Remeasurements of defined benefit plans +¥1.6B, Equity-method associates OCI -¥1.9B. Positive contributions from translation adjustments and valuation differences suggest a healthier picture on a comprehensive income basis. In conclusion, Ordinary Income is highly FX-sensitive and the bottom line is depressed by impairments; sustainable earning power should be assessed on Operating Income ¥107.2B (margin 13.9%).
Full Year guidance: Revenue ¥778.0B (+0.7%), Operating Income ¥73.0B (-31.9%), Ordinary Income ¥82.0B (-39.7%), Net Income attributable to owners of the parent ¥56.0B, EPS ¥116.75. Versus guidance, actual Revenue ¥772.3B was -0.7% short (nearly met), Operating Income ¥107.2B outperformed guidance by +46.8%, Ordinary Income ¥136.0B outperformed by +65.9%. Net Income attributable to owners of the parent was ¥51.6B vs. forecast ¥56.0B (-7.9%) — slight shortfall due to special losses (impairment ¥44.3B) not incorporated at the time of forecasting. Upside at the operating and ordinary levels was significantly driven by FX gains ¥17.7B; the shortfall at the bottom line reflects special losses. Dividend guidance is annual ¥16 per share; combining interim dividend at end of Q2 ¥26 (pre-split) and year-end forecast ¥16 (post-split) equals ¥58 per share on a pre-split basis, consistent with actual dividend payout total ¥13.5B. While the FY guidance was materially beaten on operating and ordinary lines, key risks for next year are the potential erosion of FX-related gains and progress on European profitability improvements.
Dividends: Interim (end-Q2) ¥26 (pre-split), Year-end ¥16 (post-split), equivalent to ¥58 per share annual (pre-split). Total dividends paid ¥13.5B; Dividend Payout Ratio against Net Income attributable to owners of the parent ¥51.6B is 26.2%, a conservative level. Coverage of dividends by FCF is 3.6x, indicating ample capacity. Share buybacks totaled ¥9.9B; combined with dividends ¥13.5B, total shareholder returns were ¥23.4B, with Total Return Ratio 45.3%. A 2-for-1 stock split was executed on October 1, 2025; year-end dividend ¥16 is on a post-split basis. Shareholders’ equity ¥1,020.5B, treasury stock -¥24.0B (5.6% of outstanding shares); disposal/cancellation of treasury stock improved shareholders’ equity YoY. Dividend policy indicates maintenance of stable dividends with tactical buybacks to improve capital efficiency. Given cash ¥352.9B and FCF generation ¥48.4B, there is substantial room for dividend increases and additional returns.
European segment profitability risk: Europe expanded rapidly to Revenue ¥68.2B (8.8% of total) but incurred an operating loss ¥3.1B (margin -4.6%) and impairment losses ¥40.2B. If integration costs and remediation of profitability following the ZENIT transaction are delayed, Europe may continue to depress consolidated profits going forward. Goodwill has been impaired down to ¥0.3B at period-end, but remaining intangible assets related to customer relationships of ¥19.6B remain, so further impairment risk, while limited, is not zero.
Working capital efficiency deterioration risk: Inventory rose +37.1% YoY to ¥33.8B (DIO 127 days), Trade Receivables ¥172.2B (DSO 81 days), and CCC worsened to 152 days. Prolonged inventory obsolescence could crystallize valuation losses and impair both profitability and cash generation. Inventory increases during growth can be rational, but if return to appropriate levels is delayed, OCF/EBITDA could fall further from 0.71x.
Foreign exchange volatility risk: Of Ordinary Income ¥136.0B, FX gains ¥17.7B (13.0%) materially boosted results; in a yen appreciation scenario, non-operating income could decline substantially. With approximately 50% of revenue overseas, FX sensitivity is high and operating-level profitability (margin 13.9%) could swing materially with FX. Hedge disclosures are limited; improving FX policy transparency is a challenge.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 13.9% | 7.8% (4.6%–12.3%) | +6.1pt |
| Net Margin | 10.0% | 5.2% (2.3%–8.2%) | +4.8pt |
The company’s Operating Margin 13.9% exceeds the manufacturing median 7.8% by +6.1pt, and Net Margin 10.0% (based on current period net income) also materially exceeds the median 5.2%. Profitability ranks in the upper tier within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 13.5% | 3.7% (-0.4%–9.3%) | +9.8pt |
Revenue growth 13.5% outpaces the manufacturing median 3.7% by +9.8pt, placing the company in the upper growth cohort.
※ Source: Company compilation
Continuation of revenue and operating income growth and progress on European profitability remediation: Revenue grew +13.5% domestically and internationally, and Operating Income increased +4.5%. Operating Margin 13.9% remains well above the industry median 7.8%. The European segment recorded an operating loss (¥3.1B) and impairment of ¥44.3B, but goodwill has been written down to ¥0.3B at period-end, increasing resilience against future impairment. If integration benefits and profitability improvements in Europe materialize next fiscal year, there is substantial scope for recovery in consolidated operating margin.
Normalization of earnings as FX contribution and special losses dissipate: Ordinary Income rose +29.6% due to FX gains ¥17.7B, but excluding that one-off, Operating Income increased only +4.5%. Net Income fell -41.2% due to impairment ¥44.3B; as this special loss drops out next year and assuming FX-neutral conditions, Operating / Ordinary / Net Income are expected to revert to a stable growth trajectory. Outperformance versus full-year guidance at Operating and Ordinary levels confirms underlying earnings resilience.
Strong financial health and ample shareholder return capacity: Equity Ratio 74.9%, cash & deposits ¥352.9B, interest-bearing debt ¥148.4B (Debt/EBITDA 1.12x) — very conservative structure. Stable FCF ¥48.4B enabled total returns of Dividends ¥13.5B + Buybacks ¥9.9B = ¥23.4B (Total Return Ratio 45.3%) while retaining Net Cash ¥220.0B. If working capital is optimized and OCF/EBITDA improves, there is ample room for dividend increases or additional returns. Payout Ratio 26.2% is conservative, supporting potential mid-term increases in return policy.
This report is an earnings analysis document 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 based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor if necessary.