| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥568.1B | ¥506.2B | +12.2% |
| Operating Income / Operating Profit | ¥99.8B | ¥110.0B | -9.3% |
| Ordinary Income | ¥105.1B | ¥104.1B | +0.9% |
| Net Income / Net Profit | ¥74.3B | ¥74.2B | +0.1% |
| ROE | 4.0% | 4.0% | - |
The 2026 FY Q1 results showed Revenue of ¥568.1B (YoY +¥61.9B +12.2%), Operating Income of ¥99.8B (YoY ▲¥10.2B ▲9.3%), Ordinary Income of ¥105.1B (YoY +¥0.9B +0.9%), and Net Income of ¥74.3B (YoY +¥0.1B +0.1%), resulting in higher sales but lower operating profit. Revenue achieved double-digit growth, but SG&A jumped sharply from ¥44.4B last year to ¥58.1B (+30.9%, 10.2% of sales). In addition, transportation costs rose from ¥14.8B to ¥19.9B (+34.5%) and provisions for product warranties increased from ¥4.1B to ¥4.9B, causing the operating margin to deteriorate from 21.7% to 17.6% (▲4.1pt). At the non-operating level, recording foreign exchange gains of ¥3.6B led to a slight increase in Ordinary Income, and with an effective tax rate of 29.3%, Net Income remained largely flat.
[Revenue] Top-line expanded steadily to ¥568.1B (+12.2%). By region, Japan was ¥496.4B (▲0.2%) and essentially flat, while the US ¥311.8B (+16.0%), UK ¥56.4B (+34.0%), China ¥13.5B (+33.0%), and France ¥27.2B (+13.3%) all grew broadly and drove overall performance. Japan remains the largest base with a sales mix of 87.4% (external customers 30.5%, including inter-segment), but growth has slowed; high growth in the US, UK, and China diversified the regional mix. Gross margin decreased to 27.8% (prior 30.5%, ▲2.7pt), with an increased cost of sales ratio to 72.2% being the primary factor compressing profitability.
[Profitability] Operating Income declined to ¥99.8B (▲9.3%). SG&A rose to ¥58.1B (prior ¥44.4B, +30.9%), significantly outpacing sales growth, bringing SG&A to sales ratio from 8.8% to 10.2% (▲1.4pt). Main increases were transportation costs ¥19.9B (prior ¥14.8B), salaries and allowances ¥10.1B (prior ¥8.5B), and provisions for warranties ¥4.9B (prior ¥4.1B); rising logistics and quality costs pressured margins. Operating margin fell to 17.6% (prior 21.7%, ▲4.1pt), with rising SG&A offsetting revenue gains. Non-operating items included interest income ¥0.6B and foreign exchange gains ¥3.6B (total non-operating income ¥5.6B), offset by non-operating expenses ¥0.3B (including impairment/retirement loss on fixed assets ¥0.3B), resulting in Ordinary Income of ¥105.1B (+0.9%). Last year included foreign exchange losses of ¥7.7B, so an ¥11.3B swing in forex supported the ordinary level. After deducting corporate taxes of ¥30.8B (effective tax rate 29.3%), Net Income was ¥74.3B (+0.1%) and effectively flat. In conclusion, sales increased but operating profit decreased; however, improvements in non-operating items preserved slight increases in ordinary and net income.
The Japan segment generated Operating Income of ¥92.2B (+17.0%) with a margin of 18.6%, remaining the high-profit core business and contributing the majority of consolidated operating profit. The US segment posted Revenue of ¥311.8B (+16.0%) but Operating Income fell to ¥15.2B (▲31.9%), with margin collapsing to 4.9%, indicating notable profitability deterioration. The UK achieved Revenue ¥56.4B (+34.0%) and Operating Income ¥3.3B (+12.5%) with a 5.9% margin—revenue and profit up, but profit growth lagging sales. France had Revenue ¥27.2B (+13.3%) but Operating Income ¥0.8B (▲49.7%) and margin 2.9%, showing large profit decline. China posted Revenue ¥13.5B (+33.0%) and Operating Income ¥1.5B (+115.5%) with an 11.3% margin, demonstrating high-growth, high-profit improvement. Segment contrast is clear: Japan’s high profitability (18.6%) versus lower margins in the US/UK/France (3–6%) has created a regional mix that depresses consolidated margins.
[Profitability] Operating margin 17.6% (prior 21.7%, ▲4.1pt), Net Profit Margin 13.1% (prior 14.6%, ▲1.5pt)—margins deteriorated across the board. ROE 4.0% (prior 4.0%) remains low and flat, explained by Net Profit Margin 13.1% × Total Asset Turnover 0.26x × Financial Leverage 1.17x. The decline in operating margin was mainly due to higher SG&A ratio (+1.4pt) and lower gross margin (▲2.7pt); SG&A growth (+30.9%) far outpaced Revenue growth (+12.2%), reversing operating leverage. [Cash Quality] Cash and deposits ¥284.4B (prior ¥571.7B, ▲50.3%) fell sharply, while Accounts Receivable ¥551.5B (prior ¥448.3B, +23.0%) and Inventories ¥559.5B (prior ¥490.4B, +14.1%) increased and Accounts Payable ¥172.0B (prior ¥253.0B, ▲32.0%) decreased, expanding working capital and causing short-term cash outflow. Days Sales Outstanding (DSO) 354 days (prior 323 days), Days Inventory Outstanding (DIO) 498 days (prior 509 days), Days Payables Outstanding (DPO) 153 days (prior 263 days), and Cash Conversion Cycle (CCC) extended to 699 days (prior 569 days), an increase of 130 days. [Investment Efficiency] Total Asset Turnover 0.26x (prior 0.22x) improved slightly but remains low, indicating room to improve capital efficiency. Fixed Asset Turnover 1.36x (prior 1.23x) shows improving utilization. [Financial Soundness] Equity Ratio 85.7% (prior 83.0%, +2.7pt) is very high, interest-bearing debt is zero, Current Ratio 582% (prior 492%), Quick Ratio 397% (prior 360%)—liquidity is robust. Total assets ¥2,173.6B, Net assets ¥1,863.6B, Liabilities ¥310.0B indicate substantial financial capacity.
Operating Cash Flow was likely weakened by working capital expansion—Accounts Receivable +¥103.2B and Inventories +¥69.1B increases, Accounts Payable ▲¥81.0B decrease—resulting in levels well below Net Income ¥74.3B. The main cause of the year-on-year cash and deposits decrease of ▲¥287.3B (▲50.3%) was working capital absorption, driven by simultaneous builds in receivables and inventory and a reduction in payables. Provisions for product warranties ¥32.0B (prior ¥32.5B) are a forward-looking accrual that can widen timing differences between profit and cash. Although details of investing and financing activities are not provided, given the strong balance sheet and debt-free position, external financing or large-capex outlays are likely limited. In the near term, normalization of inventory and receivables turnover and management of payable terms are key to restoring cash generation.
Most revenue is recurring operating revenue from customer contracts (¥568.1B). Non-operating income ¥5.6B (1.0% of sales) was mainly interest income ¥0.6B and foreign exchange gains ¥3.6B. Last year included foreign exchange losses of ¥7.7B, so an ¥11.3B swing in forex boosted current Ordinary Income while offsetting deterioration in operating performance. Extraordinary items were minor—only impairment/retirement loss on fixed assets ¥0.3B. The gap between Ordinary Income ¥105.1B and Net Income ¥74.3B is primarily due to corporate taxes ¥30.8B (effective tax rate 29.3%), with tax burden within a normal range. Within SG&A, increases in transportation costs, salaries and allowances, and warranty provisions are clear; the drivers of the profit decline are not one-off but core cost increases and adverse mix. Comprehensive income was ¥91.4B (Net Income ¥74.3B + Other Comprehensive Income ¥17.1B), with Other Comprehensive Income driven mainly by translation adjustments ¥17.0B from overseas subsidiaries.
Full Year forecast is Revenue ¥2,440.0B (+8.3%), Operating Income ¥373.0B (▲1.0%), Ordinary Income ¥365.0B (▲6.9%), Net Income ¥259.0B. Q1 progress rates vs. full year are: Revenue 23.3%, Operating Income 26.7%, Ordinary Income 28.8%, Net Income 28.7%. Compared with a standard Q1 progress benchmark (Q1 = 25%), Revenue is behind by ▲1.7pt, while Operating Income is ahead by +1.7pt, Ordinary Income +3.8pt, and Net Income +3.7pt—profitability is ahead on a progress basis. Q1 saw SG&A and logistics overshoots that reduced operating margin, but the company assumes margin improvement for the full year through price pass-through and cost normalization. However, continued working capital pressure could affect H2 cash and investment capacity; normalization of inventory and receivables is a precondition for maintaining guidance. No forecast revisions have been made.
Dividend forecast is annual ¥110.0 (interim ¥55.0, year-end ¥55.0), implying a Payout Ratio of 19.6% against company EPS forecast ¥560.69—conservative. No dividend was paid in Q1; payments begin from the interim dividend. Given the strong balance sheet (Equity Ratio 85.7%, debt-free) and low payout ratio, the company has ample capacity to continue dividends even under normal recession scenarios. The Q1 cash decline appears driven mainly by temporary working capital increases, and dividend coverage from medium-term free cash flow is judged sustainable. No share buyback execution or plan has been disclosed.
US Segment Profitability Risk: The US grew to Revenue ¥311.8B (+16.0%) but Operating Income fell to ¥15.2B (▲31.9%) and margin to 4.9% (prior 7.2%). As it accounts for 15.2% of consolidated operating profit and is a major market, prolonged weak profitability would structurally pressure consolidated margins. Restoring the US segment margin to the 8–10% level is a priority for improving profitability.
Rising Quality Cost Risk: Provisions for product warranties stand at ¥32.0B (5.6% of sales) with current period provision ¥4.9B (prior ¥4.1B), keeping warranty costs elevated. These provisions equal about 20.3% of gross profit ¥157.9B and 32.0% of Operating Income ¥99.8B; if quality issues exceed assumptions, profits would be significantly impacted. Reducing warranty costs to below 2% of sales is key to margin recovery.
Working Capital Expansion and Cash Flow Deterioration Risk: Accounts Receivable +¥103.2B, Inventories +¥69.1B, and Accounts Payable ▲¥81.0B expanded working capital, causing Cash and Deposits to fall by ▲¥287.3B (▲50.3%). CCC extended to 699 days (prior 569 days, +130 days); if receivables and inventory turnover do not normalize, cash generation will be impaired, potentially constraining investment capacity and shareholder returns.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 17.6% | 8.8% (4.4%–14.3%) | +8.7pt |
| Net Profit Margin | 13.1% | 7.3% (3.3%–10.6%) | +5.8pt |
| Profitability substantially exceeds the industry median, maintaining a high-return business model. |
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 12.2% | 6.6% (-0.3%–14.8%) | +5.6pt |
| Growth outpaces the industry median, aided by overseas market expansion. |
※ Source: Company aggregation
Q1 showed higher sales but lower operating profit, while improvements in non-operating items kept Ordinary and Net Income slightly up; profit progress vs. full-year forecast stands at 26.7–28.8%, above the standard 25%. However, operating margin dropped to 17.6% (prior 21.7%, ▲4.1pt) with SG&A ratio up +1.4pt and gross margin down ▲2.7pt, indicating worsening revenue structure. The main cause is rapid SG&A increase (+30.9%)—transportation, salaries, and warranty provisions—and a sharp fall in US segment margin to 4.9%, pressuring consolidated margins. Price pass-through, cost normalization, and US profitability recovery in H2 are prerequisites for achieving full-year guidance.
Financial soundness remains extremely high—Equity Ratio 85.7%, debt-free, Current Ratio 582%—but rapid working capital expansion (Accounts Receivable +¥103.2B, Inventory +¥69.1B, Accounts Payable ▲¥81.0B) led to Cash and Deposits down ▲¥287.3B (▲50.3%). CCC extended to 699 days (prior 569 days, +130 days), weakening cash-generating capacity. Normalizing inventory and receivables turnover and managing payable terms are the top short-term priorities; failure to normalize could constrain investment capacity and shareholder returns. With a conservative Payout Ratio of 19.6%, dividend continuity is likely, but monitoring cash flow trends is necessary.
This report is an AI-generated earnings analysis document created by analyzing XBRL financial disclosure 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 as needed.