| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥722.4B | ¥707.5B | +2.1% |
| Operating Income / Operating Profit | ¥77.6B | ¥73.9B | +4.9% |
| Ordinary Income | ¥85.3B | ¥80.0B | +6.5% |
| Net Income | ¥36.0B | ¥39.8B | -9.4% |
| ROE | 4.2% | 4.9% | - |
For the fiscal year ended March 2026, Revenue was ¥722.4B (YoY +¥14.9B +2.1%), Operating Income was ¥77.6B (YoY +¥3.6B +4.9%), Ordinary Income was ¥85.3B (YoY +¥5.3B +6.5%), and Net Income attributable to owners of parent was ¥56.4B (YoY -¥0.1B -0.1%). The slight increase in Revenue was converted into higher operating profit through an improvement in operating margin (+0.3pt → 10.7%), and expansion of non-operating income (+¥1.6B) pushed profits at the ordinary income stage. Conversely, Net Income landed roughly flat year-on-year due to the disappearance of tax effects and changes in non-controlling interests. The Japan business supported company-wide margins with solid Revenue and profit, the Americas saw Revenue growth with flat margins, and Asia and Europe diverged with declines and continued losses respectively. Operating Cash Flow (OCF) was ¥44.8B (YoY -38.8%), significantly lower due to working capital outflows from increases in accounts receivable and inventories and a decrease in accounts payable. Financially, liquidity and solvency are extremely strong with a current ratio of 473% and an equity ratio of 81.6%, and the company paid a dividend of ¥100 plus repurchased ¥10.0B of treasury stock.
[Revenue] Revenue was ¥722.4B (+2.1% YoY), showing modest increases both domestically and internationally. By region, Japan was solid at ¥565.0B (+3.2%), and the Americas drove growth at ¥175.9B (+6.2%). Asia declined to ¥90.3B (-4.8%) and Europe fell sharply to ¥3.0B (-21.8%), highlighting polarization in overseas operations. By customer location, domestic was ¥408.5B, Americas ¥224.8B, Asia ¥65.9B, and Other ¥23.3B; domestic revenue showed a slight decrease of -3.1% YoY while the Americas grew +16.2%, supporting overall expansion. Gross profit was ¥179.4B (gross margin 24.8%) up ¥1.5B YoY, with gross margin improving +0.1pt.
[Profitability] Operating Income was ¥77.6B (+4.9% YoY), with operating margin improving to 10.7% (+0.3pt). SG&A was contained at ¥101.8B (YoY -2.1%), allowing the increase in gross profit to flow through to operating profit. Ordinary Income was ¥85.3B (+6.5%), supported by non-operating income of ¥8.8B (dividend income ¥2.9B, interest income ¥2.7B, foreign exchange gains ¥0.6B, etc.), with higher interest income contributing to improved profit at the ordinary stage. Profit before tax was ¥85.4B; after corporate taxes of ¥26.2B (effective tax rate 30.7%) and deduction of Net Income attributable to non-controlling interests of ¥2.7B, Net Income attributable to owners of parent was ¥56.4B (-0.1% YoY), roughly unchanged from the prior year. The flat Net Income was mainly due to the shrinkage of prior-year special gains of ¥3.6B (gain on sale of available-for-sale securities ¥3.5B) to ¥0.5B this period, and corporate taxes rising by ¥2.6B YoY. Special gains/losses were minor (net +¥0.1B) and the divergence between Ordinary Income and Net Income is primarily due to higher tax burden and non-controlling interests, remaining within structural norms. In conclusion, the company achieved revenue and operating/ordinary income growth while Net Income remained flat.
Japan posted Revenue of ¥565.0B (+3.2% YoY) and Operating Income of ¥52.7B (+15.4%), with an operating margin of 9.3% improving +1.0pt from 8.3% the prior year. SG&A restraint and cost management boosted margins, and Japan continued stable growth as the core business generating about 68% of consolidated operating income. The Americas reported Revenue of ¥175.9B (+6.2%) and Operating Income of ¥16.5B (-1.1%), with an operating margin of 9.4% (down -0.7pt from 10.1%) — Revenue expanded, notably sales to major customer Multiquip reached ¥171.6B, but cost increases pressured profitability and margin improvement remains a challenge. Asia recorded Revenue of ¥90.3B (-4.8%) and Operating Income of ¥4.5B (-30.0%), with an operating margin of 5.0% (down -1.8pt from 6.8%), showing clear deceleration; the dual pressure of declining Revenue and margin deterioration requires urgent rebalancing of pricing and costs. Europe had Revenue of ¥3.0B (-21.8%) and an operating loss of ¥0.6B (widened loss; prior year -¥0.03B), with an operating margin of -19.2%, facing severe scale disadvantage. Regionally, Japan and the Americas support margins in the high-9% range, Asia at 5%, and Europe in loss, indicating clear disparities and the necessity of improving overseas profitability to sustain consolidated margins.
[Profitability] Operating margin improved to 10.7% from 10.4% a year ago (+0.3pt), supported by gross margin of 24.8% (+0.1pt) and SG&A ratio of 14.1% (-0.4pt). ROE (based on Net Income attributable to owners of parent) was 7.1%, down from 7.5% (-0.4pt), driven by increases in shareholders’ equity outpacing profit growth. ROA (based on Ordinary Income) improved to 8.2% from 8.0% (+0.2pt). [Cash Quality] The Operating Cash Flow to Net Income ratio was 0.79x (¥44.8B ÷ ¥56.4B), below 1.0x, indicating weaker cash generation due to working capital outflows. EBITDA (Operating Income + Depreciation & Amortization) was ¥96.7B, with an EBITDA margin of 13.4% and OCF/EBITDA of 0.46x, low and indicating a need to improve cash conversion efficiency. The accrual ratio ((Net Income - OCF) ÷ Total Assets) ≒ 1.1% is low, signaling high earnings quality. [Investment Efficiency] Capital expenditures were ¥9.5B against depreciation of ¥19.1B, a CapEx/Depreciation ratio of 0.50x, indicating modest reinvestment; tangible fixed asset turnover was 3.18x (Revenue ¥722.4B ÷ tangible fixed assets ¥227.2B), and total asset turnover was 0.69x (Revenue ¥722.4B ÷ total assets ¥1,045.4B), with asset inefficiency weighing on ROE. [Financial Soundness] Equity ratio improved to 81.6% (prior 78.3%), with very strong liquidity: current ratio 473% and quick ratio 418%. Debt/Equity was 0.23x and Debt/EBITDA 0.29x, indicating low leverage, and interest coverage was 109x (Operating Income ¥77.6B ÷ interest expense ¥0.7B), showing strong interest-bearing debt resilience. Cash and deposits were ¥211.3B versus short-term borrowings ¥7.3B and long-term borrowings ¥20.7B, keeping the company in a net cash position.
OCF was ¥44.8B (YoY -38.8%), with substantial working capital outflows weighing on pre-tax profit of ¥85.4B. Specifically, operating cash flow before working capital changes (subtotal) was ¥67.1B, while increases in accounts receivable/bills receivable of -¥5.4B, increases in inventories of -¥4.4B, and decreases in accounts payable of -¥24.4B produced a total working capital contribution of -¥34.2B; additionally, corporate tax payments of -¥27.3B occurred. Investing cash flow was -¥23.8B, primarily due to CapEx -¥9.5B and acquisition of intangible fixed assets -¥14.5B (increased digital investments such as software). Financing cash flow was -¥43.2B, mainly comprising dividend payments -¥19.1B, treasury stock purchases -¥10.0B, long-term borrowings repayments -¥12.7B, and net decrease in short-term borrowings -¥17.2B. Free Cash Flow (OCF + Investing CF) was ¥21.0B, which was below total shareholder returns (dividends + buybacks) of about ¥29B, so part of cash on hand was used to fund returns. Cash and cash equivalents decreased by -¥23.7B from ¥244.97B at the beginning of the period to ¥221.28B at the end. The working capital outflow was notable for the reduction in accounts payable (-¥24.4B), suggesting either shortened supplier payment terms or slower procurement pace. Along with increases in accounts receivable (-¥5.4B) and inventories (-¥4.4B), rising DSO and DIO squeezed the cash conversion cycle (CCC), resulting in OCF/Net Income 0.79x and OCF/EBITDA 0.46x at low levels. CapEx restraint (CapEx/Depreciation 0.50x) improves financial conservatism but calls for evaluation of mid-to-long-term growth investment capacity.
Against Ordinary Income of ¥85.3B, special gains/losses had a net effect of +¥0.1B (special gains ¥0.5B - special losses ¥0.4B), making their impact on Net Income negligible (<1%). Special gains included gain on sale of investment securities ¥0.3B and gain on sale of fixed assets ¥0.2B, both one-off and not recurring operating income. Non-operating income was ¥8.8B, about 1.2% of Revenue, a low level (below the 5% threshold), composed mainly of dividend income ¥2.9B, interest income ¥2.7B, and foreign exchange gains ¥0.6B, indicating stable income from financial assets. The increase in interest income (prior ¥1.9B → current ¥2.7B) reflects a favorable interest environment and accumulation of cash and investment securities, making it closer to recurring income. The divergence between Ordinary Income ¥85.3B and Net Income attributable to owners of parent ¥56.4B is mainly explained by tax expense ¥26.2B (effective tax rate 30.7%) and Net Income attributable to non-controlling interests ¥2.7B, within structural norms. The accrual ratio ((Net Income - OCF) ÷ Total Assets) ≒ 1.1% is low, indicating good earnings quality, but short-term concerns remain due to weak cash conversion: OCF/Net Income 0.79x and OCF/EBITDA 0.46x. Working capital outflows are pressuring OCF, and improvements in receivables collection and supply chain efficiency are key to improving earnings quality.
Full-year forecast: Revenue ¥745.0B (YoY +3.1%), Operating Income ¥80.0B (+3.1%), Ordinary Income ¥87.0B (+2.0%), and Net Income attributable to owners of parent ¥59.0B (+4.6%). The operating margin is assumed to remain around 10.7% in line with current performance, representing a stable growth scenario predicated on maintaining current margins and modest Revenue expansion. The Revenue growth rate of +3.1% slightly exceeds current period performance (+2.1%) and assumes resilience in domestic and overseas markets. Forecast dividend is ¥60 (down from ¥100 this period), implying a payout ratio of about 20.5% relative to forecast EPS ¥292.29, a conservative range below this period’s payout ratio of 27.4%. While the rationale for the dividend cut has not been disclosed, it may reflect strengthening internal reserves for working capital improvement or restoring investment pace. Progress against the forecast is not evaluated here as it is a single-year plan, but with current margins and financial position maintained, the forecast appears achievable. However, if recovery in Asia and Europe profitability or working capital efficiency improvements are not realized, stagnation in OCF could weaken cash backing and present downside risk.
Annual dividend was ¥100 (interim ¥45 + year-end ¥55), with total dividends about ¥19.1B relative to Net Income attributable to owners of parent ¥56.4B (based on weighted average shares 20.4 million), implying a payout ratio of 27.4% (and dividend yield on BPS basis of 2.1%). This represents a significant increase from prior-year dividend of ¥30, with total dividends up ¥6.0B YoY. Dividends were covered 0.43x by OCF ¥44.8B and 0.91x by Free Cash Flow ¥21.0B, roughly self-funded. The company conducted ¥10.0B of share buybacks, bringing total shareholder returns (dividend + buybacks) to about ¥29B, exceeding Free Cash Flow ¥21.0B and indicating active returns funded partly by cash on hand. Total Return Ratio (dividends + buybacks ÷ Net Income) was about 51%, balancing shareholder returns and growth investment. Next fiscal year’s forecast dividend is ¥60, a cut from this period, with a forecast payout ratio of about 20.5% conservative and leaving room for increases depending on performance. With cash and deposits of ¥211.3B and a strong balance sheet, dividend sustainability is high, but restoring OCF via working capital efficiency is key to expanding medium-to-long-term dividend upside.
Regional concentration risk: The Japan segment accounts for about 68% of operating income, making the company exposed to domestic economic cycles and public investment trends. While Japan’s operating margin of 9.3% is high, market contraction or intensifying competition domestically could materially impact consolidated profitability. The Americas showed Revenue growth but a -0.7pt decline in margin, indicating that expanding overseas profit contribution may take time.
Working capital efficiency deterioration: OCF ¥44.8B is 0.79x of Net Income ¥56.4B, below 1.0x, and declining receivables/inventory combined with reduced payables weakened cash generation. The working capital outflow of -¥34.2B is large relative to Revenue growth, raising risk of collection delays or inventory stagnation. With OCF/EBITDA at 0.46x and low, failure to improve CCC could reduce liquidity flexibility and constrain dividends and investment capacity.
Continued investment restraint risk: CapEx ¥9.5B is only 0.50x of depreciation ¥19.1B, showing a restrained pace of physical reinvestment. While investment in intangible assets ¥14.5B (digitalization, etc.) is active, insufficient tangible investment could impair medium-to-long-term production capacity and competitiveness. With ongoing losses/declines in Europe and Asia, structural reforms or reinvestment in overseas sites may be required, and continued CapEx restraint might delay resolution.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.7% | 7.8% (4.6%–12.3%) | +3.0pt |
| Net Margin | 5.0% | 5.2% (2.3%–8.2%) | -0.2pt |
Operating margin exceeds the industry median by +3.0pt, placing profitability relatively high. Net margin is near the median, affected by tax burden and non-controlling interests.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.1% | 3.7% (-0.4%–9.3%) | -1.6pt |
Revenue growth rate trails the industry median by -1.6pt, indicating a somewhat slower growth pace, attributable to high domestic market dependence and slower overseas expansion.
※ Source: Company compilation
Stable earnings in the Japan business and polarization in overseas operations are pronounced; maintaining consolidated margins requires margin recovery in the Americas and profitability improvement in Asia and Europe. With Japan contributing about 68% of operating income, accelerating growth by increasing overseas share is expected to take time.
The decline in working capital efficiency (OCF/Net Income 0.79x, OCF/EBITDA 0.46x) is a near-term concern; improving receivables and inventory management and shortening the CCC are key to restoring cash generation from the next fiscal year onward. Although dividends and buybacks totaling ¥29B are supported by a strong balance sheet, without OCF improvement the capacity for total returns could be constrained.
The balance between restrained CapEx (CapEx/Depreciation 0.50x) and active intangible investment (¥14.5B) will determine future competitiveness. While digitalization and development investments are commendable, delayed renewal/expansion of tangible assets may hinder production capacity and efficiency improvements. Achieving modest growth in the next fiscal year will require both a recovery in investment pace and improvement in working capital efficiency.
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 specific securities. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as appropriate.