| Metric | Current | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥50150.4B | ¥47523.3B | +5.5% |
| Operating Income / Operating Profit | ¥4149.9B | ¥4016.7B | +3.3% |
| Ordinary Income | ¥4081.7B | ¥3664.5B | +11.4% |
| Net Income / Net Profit | ¥1852.4B | ¥1687.6B | +9.8% |
| ROE | 5.6% | 5.9% | - |
For the fiscal year ended March 2026, revenue was ¥5兆150B (YoY +¥2,627B +5.5%), Operating Income was ¥4,150B (YoY +¥133B +3.3%), Ordinary Income was ¥4,082B (YoY +¥417B +11.4%), and Net Income attributable to owners of the parent was ¥2,752B (YoY +¥105B +4.0%). The company achieved both revenue and profit growth, but Operating Margin slightly declined to 8.3% (from 8.5% a year earlier, -0.2pt), pressured at the operating level by reduced profits in the Chemical Business and higher SG&A. Conversely, Ordinary Income margin improved to 8.1% (from 7.7% a year earlier, +0.4pt), supported by a narrowing of foreign exchange losses (¥14B, prior year ¥92B) and lower interest expense. The core Air Conditioning & Refrigeration Business led the company, with Segment Operating Margin improving to 8.2% (from 8.0%), while the Chemical Business recorded a large profit decline—the Operating Income fell to ¥331B (YoY -28.3%)—acting as a drag on overall margins.
[Revenue] Revenue was ¥5兆150B (+5.5% YoY), maintaining steady growth. By segment, the Air Conditioning & Refrigeration Business recorded ¥4,624.1B (+5.4% YoY), representing 92.2% of total sales, led by North America ¥1,720.1B (+8.7% YoY) and Europe ¥784.2B (+9.7% YoY). Japan was ¥675.8B (+4.5% YoY) and China was ¥403.5B (-5.9% YoY), affected by demand adjustments. The Chemical Business increased to ¥307.5B (+6.5% YoY), and Other Businesses were ¥113.6B (+7.0% YoY). Regionally, commercial HVAC demand in North America and Europe and residential replacement demand drove growth, while Asia & Oceania ¥663.1B (-3.1% YoY) reflected slow growth in emerging markets. Gross margin improved to 34.5% (from 34.2%, +0.3pt) due to price pass-through and mix improvement.
[Profitability] Operating Income was ¥4,150B (+3.3% YoY), with Operating Margin slightly down at 8.3% (from 8.5%, -0.2pt). SG&A was ¥1,317.5B, raising the SG&A ratio to 26.3% (from 25.8%, +0.5pt), influenced by higher goodwill amortization ¥51.4B (prior year ¥48.6B), and increases in labor and logistics costs. The Air Conditioning & Refrigeration segment Operating Income was solid at ¥3,770B (+7.4% YoY), but the Chemical Business recorded a material decline to ¥331B (-28.3% YoY), which pressured the company's overall margin. Ordinary Income grew to ¥4,082B (+11.4% YoY), outpacing operating-level growth, aided by reduced foreign exchange losses to ¥14B (prior year ¥92B) and lower interest expense at ¥390B (prior year ¥430B). Extraordinary items were net -¥4.5B (impairment loss ¥118B, gain on sale of investment securities ¥138B), slightly reducing Net Income. The impairment related to customer-related assets and trademarks of European subsidiary AHT Cooling Systems, following a downward revision of business plans due to demand adjustments in the commercial refrigeration market. Profit before tax was ¥4,036B (+7.3% YoY). After corporate taxes ¥1,173B (effective tax rate 29.1%) and non-controlling interests ¥11.1B, Net Income attributable to owners of the parent was ¥2,752B (+4.0% YoY). In conclusion, while revenue and profit increased, operating-level margins remained range-bound due to the Chemical Business decline and higher SG&A.
The Air Conditioning & Refrigeration Business posted Revenue ¥4,624.1B (+5.4% YoY), Operating Income ¥3,770B (+7.4% YoY), and Segment Operating Margin 8.2% (from 8.0%, +0.2pt), delivering revenue and profit growth with margin improvement. North America benefited from residential replacement demand and strong commercial HVAC demand; Europe saw contributions from energy-saving demand and heat pump adoption. China recorded a YoY sales decline amid continued adjustments in the real estate market. The Chemical Business increased Revenue to ¥307.5B (+6.5% YoY) but Operating Income fell sharply to ¥331B (-28.3% YoY), with Segment Operating Margin declining to 10.8% (from 14.3%, -3.5pt). Rising raw material costs and shifts in demand structure pressured profitability, dragging down the company’s overall Operating Margin. Other Businesses (Oil & Gas, Special Machinery, Electronic Systems) showed Revenue ¥113.6B (+7.0% YoY) and Operating Income ¥4.9B (+8.4% YoY), with limited scale.
[Profitability] Operating Margin 8.3% (prior year 8.5%), Gross Margin 34.5% (prior year 34.2%), ROE 5.6% (prior year 5.8%). Gross Margin improved, but Operating Margin slightly declined due to a higher SG&A ratio; ROE edged down marginally. Margin improvement in the Air Conditioning & Refrigeration Business supported the company, but the Chemical Business’s large profit decline weighed on overall profitability. [Cash Quality] Operating Cash Flow (OCF) was ¥465.8B, 2.5x Net Income ¥185.2B, indicating good OCF/Net Income coverage, though down -9.4% from ¥514.5B a year ago. Working capital metrics: DSO approx. 74 days (Accounts Receivable ¥1,011B ÷ Sales ¥5,015.0B × 365), DIO approx. 86 days (Inventory ¥769.7B ÷ Cost of Sales ¥3,282.5B × 365), and CCC approx. 153 days, with build-up in inventory and receivables suppressing cash conversion. [Investment Efficiency] Total Asset Turnover 0.86x (Sales ¥5,015.0B ÷ Total Assets ¥5,809.2B). Capital Expenditure ¥209.1B equals 93% of Depreciation ¥224.8B, indicating a healthy, maintenance-focused level. Construction in progress ¥195.1B suggests advance investment for capacity expansion. [Financial Soundness] Equity Ratio 57.1% (from 55.9%, +1.2pt). Interest-bearing debt ¥535.5B (including Short-term Borrowings ¥28.6B, Long-term Borrowings ¥24.9B, Bonds ¥20.0B, Commercial Paper ¥28.4B, Lease Liabilities ¥21.1B, portion due within one year, etc.) yields a Debt/Equity ratio of 16.5%, low, and Debt/EBITDA approx. 0.8x (Interest-bearing debt ¥535.5B ÷ EBITDA approx. ¥670.0B), very conservative. Interest coverage is about 12x (OCF ¥465.8B ÷ Interest Paid ¥39.0B), indicating light interest burden. Current Ratio 193.2% (Current Assets ¥3,262.9B ÷ Current Liabilities ¥1,688.9B) shows solid short-term liquidity.
OCF was ¥465.8B (YoY -9.4%), providing 2.5x coverage of Net Income ¥185.2B, indicating high cash-generating ability. From subtotal ¥624.5B (Net Income + Depreciation ¥224.8B + Goodwill Amortization ¥51.4B and other non-cash expenses), changes in working capital generated cash outflows: Accounts Receivable increase -¥80.3B, Inventory increase -¥5.6B, Accounts Payable increase ¥24.6B, netting approximately -¥61.3B, the primary reason for YoY CF decline. After corporate tax payments -¥144.4B, interest & dividend receipts ¥24.7B, and interest payments -¥38.9B, final OCF was ¥465.8B. Investing Cash Flow was -¥322.2B, including Capital Expenditure -¥209.1B and purchases of marketable securities and subsidiary shares. Free Cash Flow was ¥143.6B (OCF ¥465.8B + Investing CF -¥322.2B). After dividend payments -¥90.7B (parent company dividends), long-term debt repayments -¥62.2B, no share repurchases, lease liability repayments -¥64.7B, and Financing CF of -¥156.4B, Cash and Cash Equivalents increased by ¥48.4B to an ending balance of ¥706.5B. Year-end cash & deposits ¥933.5B (cash ¥706.5B + time deposits etc. difference) cover about 55% of short-term liabilities ¥1,688.9B, reflecting ample liquidity on hand. Working capital build-up (Accounts Receivable +15.5%, Inventory +8.3%) suppressed cash conversion, so inventory normalization and shortening receivable collection periods are future priorities.
Ordinary Income ¥408.2B was derived from Operating Income ¥415.0B less net non-operating expense -¥6.8B, indicating limited impact of non-operating items. Non-operating income ¥46.8B comprised Interest Income ¥18.8B and Dividend Income ¥4.4B. Non-operating expenses ¥53.6B primarily included Interest Expense ¥39.0B (down from ¥43.0B) and Foreign Exchange Losses ¥1.4B (marked improvement from ¥9.2B), meaning improvement at the ordinary income level was driven by FX and lower interest burden. Extraordinary items were net -¥4.5B; gains on sale of investment securities ¥13.8B offset impairment losses ¥11.8B (customer-related assets and trademarks in the European commercial refrigeration business), with limited impact on final earnings. Comprehensive income was ¥572.7B, well above Net Income ¥185.2B; Other Comprehensive Income ¥286.3B consisted mainly of Foreign Currency Translation Adjustments ¥258.2B and Net Gains on Valuation of Available-for-Sale Securities ¥28.7B. The accumulation of Foreign Currency Translation Adjustments reflects valuation gains on overseas subsidiaries’ assets and is unrealized—thus no cash impact but subject to reversal with future FX moves. OCF ¥465.8B was generated from Operating Income ¥415.0B + Depreciation ¥224.8B + Goodwill Amortization ¥51.4B and other non-cash expenses; accruals concentrated in working capital increases, and cash conversion quality of profits is fundamentally sound. Temporary items include an impairment loss ¥11.8B and gains on sale of investment securities ¥13.8B, both of which had limited company-wide impact; there is no material concern over the sustainability of core earnings.
Full-year guidance was set at Revenue ¥5,150B (YoY +2.7%), Operating Income ¥436.0B (+5.1%), Ordinary Income ¥414.0B (+1.4%), and Net Income attributable to owners of the parent ¥278.0B (EPS ¥949.32). Actuals were Revenue ¥5兆150B (97.4% of guidance), Operating Income ¥4,150B (95.2%), Ordinary Income ¥4,082B (98.6%), and Net Income attributable to owners of the parent ¥2,752B (99.0%). Revenue and Operating Income slightly missed guidance, while Ordinary Income and Net Income were nearly achieved. Failure to meet operating-stage guidance was mainly due to larger-than-expected profit decline in the Chemical Business and increases in SG&A, while improvements in non-operating items supported outperformance at the ordinary income level. From a guidance attainment perspective, results through Ordinary Income aligned generally with plan; cost control at the operating level is a key issue for the next fiscal year. Changes in FX assumptions and demand trends are likely drivers for any forecast revisions; next-year plans will focus on maintaining the Air Conditioning & Refrigeration Business strength, recovering Chemical Business profitability, and containing the SG&A ratio.
Annual dividend is ¥340 per share (Q2-end ¥165, Year-end ¥175), representing a Payout Ratio of 36.5% (Total dividends ¥96.6B against Net Income ¥185.2B), within an appropriate range. Total Return Ratio is also 36.5%, with no share repurchases executed. Total dividends ¥96.6B represent 20.7% of OCF ¥465.8B and 67.3% of Free Cash Flow ¥143.6B, indicating sufficient FCF coverage. Prior-year dividend was ¥185 (including a ¥50 commemorative dividend for the 100th anniversary), so on a plain ordinary dividend basis the increase from prior-year base dividend ¥135 to ¥340 is large, but continuity relative to the prior-year base excluding the commemorative dividend should be confirmed. A Payout Ratio of 36.5% suggests sustainability of stable dividends, and given financial soundness and OCF level, the risk of dividend cut is low. Future dividend policy will depend on working capital efficiency and the progress of the capex pipeline; maintaining FCF generation is key.
Risk of continued decline in Chemical Business profitability: The Chemical Business Operating Income was ¥331B (-28.3% YoY) with Operating Margin 10.8% (from 14.3%, -3.5pt). Rising raw material costs and changes in demand structure are the drivers, and the segment’s deterioration is a drag on the company’s Operating Margin. The Chemical Business represents 6.1% of sales but accounts for 8.0% of Operating Income; if profitability does not recover, the impact on corporate margins could persist.
Risk from working capital expansion: Accounts Receivable ¥1,011B (+18.0% YoY) and Inventory ¥769.7B (+8.3% YoY) increased, extending DSO to approx. 74 days, DIO to approx. 86 days, and CCC to approx. 153 days. OCF ¥465.8B decreased -9.4% YoY, mainly due to working capital increases. Continued inventory normalization delays or slow receivable collections could further weaken cash conversion and constrain investment capacity.
Structural reform risk in European commercial refrigeration business: The European AHT Cooling Systems, which recorded an impairment loss ¥11.8B, experienced reduced sales due to customer reassessment of investment plans and downward revisions to medium-term business plans. While a restructuring plan incorporating production optimization and higher value-added offerings is underway, delayed demand recovery could lead to additional impairments or even exit risk. Although this business’s contribution is limited, it could affect the margin of the Air Conditioning & Refrigeration segment as a whole.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.3% | 7.8% (4.6%–12.3%) | +0.5pt |
| Net Margin | 3.7% | 5.2% (2.3%–8.2%) | -1.5pt |
Operating Margin exceeds the industry median by 0.5pt, indicating relatively solid profitability, but Net Margin is 1.5pt below the median, suggesting tax burden and non-operating items’ impact.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.5% | 3.7% (-0.4%–9.3%) | +1.8pt |
Revenue growth outperforms the industry median by 1.8pt, showing strong top-line expansion capability within the sector.
※ Source: Company compilation
The core Air Conditioning & Refrigeration Business accounts for 92.2% of Revenue and 90.9% of Operating Income, with North America and Europe’s solid demand driving growth. Segment Operating Margin improved to 8.2% (from 8.0%), confirming effects of price pass-through and mix improvement. While China continues to see revenue declines, geographic diversification mitigates risk.
The large profit decline in the Chemical Business (-28.3% YoY) and working capital accumulation (Accounts Receivable +18.0%, Inventory +8.3%) are compressing corporate profitability and cash conversion. Recovery of Chemical Business profitability, inventory normalization, and shortening receivable collection days are key improvement tasks for the next period and will be critical to margin recovery and FCF generation.
Financial soundness is very high, with Equity Ratio 57.1%, Debt/EBITDA approx. 0.8x, and Interest Coverage approx. 12x, indicating conservatism. Free Cash Flow ¥143.6B comfortably covers dividends ¥96.6B, and a Payout Ratio of 36.5% suggests high sustainability. The impairment of ¥11.8B in the European commercial refrigeration business is part of structural reform and has limited company-wide impact. The accumulated Foreign Currency Translation Adjustments ¥258.2B carry FX reversal risk in the future but have no short-term cash impact.
This report is an AI-generated financial analysis document produced by analyzing XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.