| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥8263.4B | ¥8255.9B | +0.1% |
| Operating Income | ¥310.3B | ¥229.6B | +35.2% |
| Ordinary Income | ¥234.8B | ¥104.8B | +124.2% |
| Net Income | ¥205.9B | ¥-142.6B | +244.3% |
| ROE | 6.6% | -5.7% | - |
For the fiscal year ended March 2026, Revenue was ¥8,263B (YoY +¥8B +0.1%), Operating Income was ¥310B (YoY +¥81B +35.2%), Ordinary Income was ¥235B (YoY +¥130B +124.2%), and Net Income attributable to owners of the parent was ¥206B (turned profitable from ¥-143B in the prior year). While sales were flat, gross margin improved to 18.4% (YoY +1.3pt) and operating margin to 3.8% (YoY +1.0pt), driving substantial profitability improvement. Non-operating items included interest expense of ¥78B and foreign exchange losses of ¥44B as drags, but large one-time losses in the prior year (¥198B) narrowed to ¥113B this year, resulting in Net Income increasing sharply by 244.3%. The Asia & Others segment led with Operating Income of ¥176B, the Americas moved from loss to profit materially, and Europe continued to narrow losses. Operating Cash Flow was ¥572B (YoY +25.3%), indicating strong cash generation from profits, and Free Cash Flow was ¥309B, comfortably covering dividends of ¥58B. Leverage is somewhat high with Debt/EBITDA at 4.04x, and inventory days of 72 suggest room to improve working capital efficiency.
[Revenue] Revenue of ¥8,263B (+0.1%) was essentially flat. By product, Bearings & others were ¥3,489B (from ¥3,407B YoY +2.4%), CVJ Axle was ¥4,775B (from ¥4,849B YoY -1.5%), indicating a mix shift toward Bearings. By region: Japan ¥2,116B (+0.4%), Americas ¥2,672B (-2.2%), Europe ¥1,736B (+3.8%), Asia & Others ¥1,740B (-0.2%). Segmental sales mix: Japan 42.6%, Americas 31.9%, Europe 23.9%, Asia & Others 20.3%. Europe grew on improved realized prices, Americas declined on weaker demand, Asia and Japan were flat. Despite marginal sales growth, gross margin improved to 18.4% (from 17.1% YoY +1.3pt) with gross profit of ¥1,518B (YoY +¥104B +7.4%), forming the basis for profit growth. Drivers included product mix shift to Bearings, price pass-through, and stabilization of raw material and logistics costs.
[Profitability] From gross profit of ¥1,518B, SG&A of ¥1,207B (14.6% of sales, from 14.3% YoY +0.3pt) was deducted, resulting in Operating Income of ¥310B (Operating margin 3.8%, from 2.8% YoY +1.0pt). SG&A included ¥465B in salaries and ¥151B in freight, which rose slightly YoY but were controlled relative to sales, delivering Operating Income growth of +35.2%. Non-operating income was ¥47B (interest income ¥17B, FX gains ¥5B, equity method gains ¥1B) versus non-operating expenses of ¥122B (interest expense ¥78B, FX losses ¥44B) for a net non-operating -¥76B. Ordinary Income was ¥235B (+124.2%). Extraordinary income was ¥31B (gain on sale of fixed assets), extraordinary losses were ¥114B (impairment losses ¥81B, business restructuring costs ¥32B) for a net -¥83B drag. Pre-tax income was ¥152B, income taxes ¥12B (effective tax rate 8.0%, impacted by deferred tax asset adjustment -¥77B), yielding Net Income attributable to owners of the parent of ¥206B (turned profitable from ¥-143B prior year, YoY +244.3%). In conclusion, modest revenue increase and solid profit improvement with clear structural profitability gains, though non-operating and extraordinary burdens remain. Comprehensive income was ¥504B, boosted by ¥287B of FX translation adjustments and ¥71B pension remeasurement gains, significantly increasing equity.
Japan: Revenue ¥3,522B (-0.7%), Operating Income ¥92B (-18.0%, margin 2.6%). Flat demand and rising costs pressured profits. Americas: Revenue ¥2,636B (-3.1%), Operating Income ¥55B (from ¥3B prior year +1484.6%, margin 2.1%). Material improvement from loss to profit, showing the impact of restructuring. Europe: Revenue ¥1,975B (+3.6%), Operating loss ¥11B (from -¥42B prior year, loss narrowed +74.5%, margin -0.5%). Revenue grew but profitability recovery not yet achieved; restructuring continues. Asia & Others: Revenue ¥1,677B (-0.5%), Operating Income ¥176B (+19.1%, margin 10.5%). Maintains high-return profile and accounts for majority of company profit. Large margin dispersion across segments means Europe turning profitable and margin improvement in Americas are key to improving group ROE.
[Profitability] Operating margin 3.8% (from 2.8% YoY +1.0pt), Net margin 2.5% (from -1.7% YoY +4.2pt) indicate substantial earnings improvement. ROE 6.6% (turned positive from -6.1% prior year), ROA 2.7% (from 1.2% YoY +1.5pt) signal recovering capital efficiency. Gross margin improvement to 18.4% (from 17.1% YoY +1.3pt) underpins margin expansion, and SG&A ratio suppression to 14.6% contributed.
[Cash Quality] Operating Cash Flow (OCF) ¥572B is 2.8x Net Income of ¥206B, generated from OCF subtotal ¥751B less tax payments ¥94B and working capital changes. OCF/Sales 6.9%, OCF/EBITDA 0.80x (EBITDA ¥715B = Operating Income + Depreciation ¥405B) are standard. Accrual ratio -5.0% (accrual = (Net Income ¥206B - OCF ¥572B)/Total Assets ¥8,787B) shows high cash quality.
[Investment Efficiency] CapEx ¥291B / Depreciation ¥405B = 0.72x indicates restrained renewal investment. R&D ¥131B (1.6% of sales) is below manufacturing industry standard. CapEx mainly for machinery and equipment; Tangible fixed asset turnover 3.19x (Revenue ¥8,263B / Tangible fixed assets ¥2,593B).
[Financial Soundness] Current ratio 150.6% (Current assets ¥5,450B / Current liabilities ¥3,619B), Quick ratio 113.7% (Quick assets ¥4,115B / Current liabilities) indicate good short-term liquidity. Equity Ratio 35.4% (from 29.0% YoY +6.4pt), Debt-to-Equity 1.82x (from 2.44x improved). Interest-bearing debt ¥2,892B (short-term borrowings ¥1,360B, long-term borrowings ¥1,531B, bonds ¥300B) vs. cash ¥1,326B gives Net interest-bearing debt ¥1,566B. Debt/EBITDA 4.04x, Interest coverage 3.97x (Operating Income ¥310B / Interest expense ¥78B) indicate somewhat high leverage. Short-term debt ratio 47% (short-term borrowings ¥1,360B / interest-bearing debt ¥2,892B) warrants refinancing attention. Working capital: Receivables ¥1,202B (DSO 53 days), Inventory ¥1,335B (Days Inventory 72 days), Payables ¥631B (DPO 34 days) gives CCC 91 days (53+72-34). Inventory is 12 days higher than manufacturing benchmark 60 days. Retirement benefit obligation ¥111B, pension assets ¥118B show improved funded status.
Operating Cash Flow ¥572B (from ¥456B prior year +25.3%) was generated by adjusting OCF subtotal ¥751B (from ¥651B prior year +15.4%) for tax payments ¥94B, interest/dividend received ¥26B, interest paid ¥75B, and working capital changes (inventory reduction ¥146B, receivables increase ¥29B, payables decrease ¥28B). OCF/Net Income 2.8x, OCF/EBITDA 0.80x are standard, but after the one-off inventory reduction of ¥146B, working capital could become a headwind. Investing Cash Flow -¥263B comprised CapEx -¥291B, time deposits net +¥26B, proceeds from sales of securities and fixed assets +¥32B, and intangible asset additions -¥31B. FCF ¥309B (OCF + Investing CF) covers dividends of ¥58B by 5.3x. Financing Cash Flow -¥353B included new long-term borrowings ¥685B, long-term borrowings repayments -¥529B, net short-term borrowings increase ¥35B, bond redemption -¥500B, bond issuance ¥100B, dividend payments -¥58B, and lease repayments -¥48B. Ending cash ¥1,313B (YoY +¥36B). Cash/Short-term borrowings 0.97x indicates tight short-term repayment capacity; realizing inventory reductions and CCC shortening is critical to free up cash.
Ordinary Income of ¥235B vs Operating Income of ¥310B shows a ¥76B gap mainly due to interest expense ¥78B and FX losses ¥44B; non-operating items structurally depress profit. Extraordinary items net -¥83B (impairment ¥81B, restructuring costs ¥32B, gain on sale of fixed assets ¥31B) are one-off. Excluding extraordinary losses of ¥83B from Net Income ¥206B implies an adjusted Net Income of approximately ¥289B in capacity terms, but tax effect adjustment -¥77B resulted in an unusually low effective tax rate of 8.0%. If a normalized pre-tax tax rate of 30% were applied to pre-tax income ¥152B, Net Income would be ~¥100B, implying Net Income has been boosted by extraordinary items and tax adjustments. OCF ¥572B is 2.8x Net Income ¥206B, with accruals -¥366B (Net Income ¥206B - OCF ¥572B) indicating very high cash backing. Non-operating income ¥47B is 0.6% of sales and small, indicating low non-recurring nature. Comprehensive Income ¥504B (Net Income ¥206B plus FX translation ¥287B and pension remeasurement ¥71B) largely drove the increase in shareholders' equity to ¥3,114B (from ¥2,487B YoY +¥627B). The divergence between Ordinary Income and Net Income stems from extraordinary items and tax effects; earnings are expected to converge toward Ordinary Income levels after restructuring is completed.
Full Year guidance: Revenue ¥8,100B (YoY -2.0%), Operating Income ¥330B (+6.3%), Ordinary Income ¥210B (-10.6%), Net Income attributable to owners of the parent ¥150B, EPS ¥25.23, DPS ¥6.5. Compared with this fiscal year’s results, sales are forecast slightly lower while Operating Income is planned to increase by 6.3%, implying an improvement in Operating margin to 4.1%. Ordinary Income is expected to decline by 10.6% due to continued non-operating interest and FX burdens. Progress vs full-year guidance: this fiscal year achieved Revenue 102.0% of guidance, Operating Income 94.0%, Ordinary Income 111.8% — Revenue and Ordinary Income beat while Operating Income slightly lagged, overall roughly on plan. Next fiscal year management expects further margin improvement via inventory reductions and cost efficiency, but assumes continued headwinds from high interest rates and FX. Europe turning profitable and sustained high returns in Asia are key to meeting guidance.
Interim dividend ¥5.5, Year-end dividend ¥5.5 for annual dividend ¥11. Total dividends ¥58B (same as prior year). With Net Income attributable to owners of the parent ¥206B, payout ratio is 28.2%, conservative. Share buybacks effectively zero, so Total Return Ratio equals the payout ratio. Based on next fiscal year forecast EPS ¥25.23 and DPS ¥6.5, payout ratio is ~26%. FCF ¥309B covers dividends ¥58B by 5.3x, indicating room for dividend increases. Shares outstanding 597,533 thousand (treasury stock 3,027 thousand), average shares during period 550,115 thousand. Dividend policy emphasizes stable dividends, with a modest increase planned for next year. Considering CapEx/Depreciation 0.72x and restrained renewal investment, medium-term policy is expected to balance increased investment allocation and dividend returns, targeting payout ratio in the 30–40% range.
Delay in Europe profitability: Europe reported Operating loss ¥11B (improved from -¥42B prior year but still negative), with a -0.5% margin on Revenue ¥1,975B weighing on group ROE 6.6%. If Europe’s return to profitability slips into later periods, overall margin improvement may stall and group deleveraging may be delayed.
Elevated working capital / inventory risk: Days Inventory 72 days (vs benchmark 60 days, +12 days), CCC 91 days, and inventory ¥1,335B (up 5.0% from ¥1,272B) suggest prolonged capital tie-up. In volatile demand, inventory write-downs or discounting pressure could compress profits and, combined with borrowing burden (interest expense ¥78B, interest-bearing debt ¥2,892B), raise ROE and FCF vulnerability in a rising rate environment.
Interest burden and weakened leverage tolerance: Debt/EBITDA 4.04x, short-term debt ratio 47% (short-term borrowings ¥1,360B), Interest coverage 3.97x and cash ¥1,326B at 0.97x of short-term borrowings make the company vulnerable to rising rates or refinancing stress. Interest expense ¥78B of total non-operating expenses ¥122B pressures Ordinary Income. If inventory reduction and CCC shortening are delayed, borrowings could persist and financial flexibility decline.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.8% | 7.8% (4.6%–12.3%) | -4.0pt |
| Net Margin | 2.5% | 5.2% (2.3%–8.2%) | -2.7pt |
Both Operating and Net margins underperform the industry median by 4.0pt and 2.7pt respectively, placing profitability in the lower tier.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 0.1% | 3.7% (-0.4%–9.3%) | -3.6pt |
Revenue growth lags the industry median by 3.6pt, indicating below-average growth.
※ Source: Company compilation of public financial statements
Sustainability of margin improvement trend: Gross margin 18.4% (YoY +1.3pt) and Operating margin 3.8% (YoY +1.0pt) show structural profitability improvement. High-return Asia (margin 10.5%) and Americas returning to profit (¥55B from prior-year loss) led the gains, supported by product mix shift to Bearings and price pass-through. Although Operating margin remains -4.0pt below industry median (7.8%), two consecutive periods of margin improvement suggest sustainability and potential mid-term convergence toward industry norms. The timing of Europe’s return to profitability and sustainability of Asia’s high returns will determine the pace of margin expansion.
Structural issues in leverage and inventory efficiency: Debt/EBITDA 4.04x, short-term debt ratio 47%, cash/short-term borrowings 0.97x indicate remaining vulnerability to rising rates and refinancing stress. Days Inventory 72 (vs benchmark 60, +12 days) and CCC 91 days point to prolonged capital tie-up and substantial scope to reduce inventory of ¥1,335B. OCF ¥572B is 2.8x Net Income and high-quality, but after the one-off inventory reduction of ¥146B, working capital could become a cash headwind. If inventory reduction and CCC shortening enable debt reduction and lower interest expense (¥78B), simultaneous improvement in ROE and FCF is possible; these metrics warrant close monitoring. CapEx/Depreciation 0.72x and restrained renewal investment also require monitoring from the perspective of sustaining medium-term growth.
This report was automatically generated by AI analyzing XBRL financial statement data to produce a financial analysis. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by our firm from public financial statements. Investment decisions are your responsibility; consult a professional as needed.