| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥1593.9B | ¥1595.4B | -0.1% |
| Operating Income | ¥40.7B | ¥48.6B | -16.2% |
| Ordinary Income | ¥30.4B | ¥46.0B | -34.0% |
| Net Income | ¥21.6B | ¥13.9B | +55.4% |
| ROE | 4.2% | 2.9% | - |
For the fiscal year ended March 2026, Revenue was ¥1,593.9B (YoY -¥1.5B, -0.1%) and essentially flat, while Operating Income decreased to ¥40.7B (YoY -¥7.9B, -16.2%) and Ordinary Income fell to ¥30.4B (YoY -¥15.6B, -34.0%). However, Net Income attributable to owners of the parent rose significantly to ¥21.6B (YoY +¥7.7B, +55.4%). The increase in Net Income was driven by non-recurring items such as gain on bargain purchase ¥25.5B and gain on sale of investment securities ¥15.7B, and a negative tax expense (-¥1.1B) due to an increase in deferred tax assets; these were substantial one-time factors. At the operating level, gross profit margin improved slightly to 14.4% (prior year 14.3%, +0.1pt), but SG&A ratio rose to 11.8% (prior year 11.2%, +0.6pt), causing operating margin to decline to 2.6% (prior year 3.0%, -0.4pt). By region, Japan and Asia recorded profit growth supporting the overall result, while North & South America and China remained loss-making, leaving structural profitability improvements as a key issue.
[Revenue] Revenue of ¥1,593.9B was nearly flat YoY (-0.1%). By segment, Japan ¥518.9B (+8.0%) increased on recovery in domestic automobile production, and Asia ¥297.6B (+0.5%) maintained slight growth. Europe ¥200.0B (-10.2%) declined due to local demand slowdown, and China ¥124.8B (-13.1%) posted double-digit decline due to deteriorating market conditions. North & South America ¥678.2B (+0.8%) was only slightly up, showing mixed regional performance. Revenue composition: North & South America 42.6%, Japan 32.6%, Asia 18.7%, Europe 12.5%, China 7.8%. Japan's +8.0% growth partially offset double-digit declines in China and Europe.
[Profitability] Operating Income ¥40.7B (YoY -16.2%) declined as the slight gross margin improvement (+0.1pt) was offset by a rise in SG&A ratio (+0.6pt), lowering operating margin to 2.6% (prior year 3.0%). SG&A ¥188.1B increased by ¥8.9B despite nearly flat Revenue, driven mainly by higher personnel and logistics costs. By segment, Asia recorded Operating Income ¥26.0B (margin 8.7%) and Japan ¥20.5B (margin 4.0%) in the black, while North & South America -¥3.3B (margin -0.5%) and China -¥3.5B (margin -2.8%) remained loss-making. Non-operating items were net expense ¥17.1B (interest expenses ¥9.1B, foreign exchange losses ¥2.6B, etc.) exceeding non-operating income ¥6.8B (dividends received ¥2.1B, foreign exchange gains ¥2.4B, etc.), resulting in Ordinary Income of ¥30.4B (YoY -34.0%). Extraordinary items comprised Extraordinary Income ¥25.9B (gain on bargain purchase ¥25.5B, gain on sale of investment securities ¥15.7B, etc.) and Extraordinary Loss ¥35.8B (impairment losses ¥6.7B, loss on retirement of fixed assets ¥2.5B, provision for loss on liquidation of subsidiaries ¥9.5B, etc.), which roughly offset, yielding pre-tax income ¥20.5B. Income taxes were -¥1.1B due to an increase in deferred tax assets, producing Net Income ¥21.6B (YoY +55.4%). In summary, the core business delivered revenue growth but lower operating profit; one-time gains and tax effects led to the final net profit increase.
Japan reported Revenue ¥518.9B (+8.0%) and Operating Income ¥20.5B (+102.5%), a large profit increase driven by recovery in domestic auto production and improved profitability, with margin improving to 4.0%. North & South America had Revenue ¥678.2B (+0.8%) but Operating Loss -¥3.3B (turning from Operating Income ¥17.4B prior year), a significant deterioration due to higher local costs and lower utilization. Europe Revenue ¥200.0B (-10.2%) declined, but Operating Income ¥2.8B (turning from Operating Loss -¥1.2B prior year) improved profitability. China Revenue ¥124.8B (-13.1%) and Operating Loss -¥3.5B (improved from -¥9.6B prior year) showed a harsh market environment but narrowed loss. Asia Revenue ¥297.6B (+0.5%) and Operating Income ¥26.0B (-8.7%) maintained the highest margin at 8.7% while posting a slight decline in profit. Overall, Japan and Asia supported earnings, while losses in North & South America and China weighed on consolidated margins.
[Profitability] Operating margin 2.6% (down -0.4pt from 3.0%), Net margin 1.4% (up +0.5pt from 0.9%). The improvement in Net margin is due to one-time items and tax effects; core operating profitability declined. ROE 4.2% remains low compared to historical levels, indicating challenges in efficient use of equity. Estimated EBITDA margin about 6.9% (Operating Income ¥40.7B + Depreciation ¥69.8B = ¥110.5B / Revenue ¥1,593.9B), placing cash generation in the mid-to-lower industry range. [Cash Quality] Operating Cash Flow (OCF) ¥14.8B is weak at 0.68x of Net Income ¥21.6B, pressured by working capital increases (inventory +¥23.3B, accounts payable -¥24.5B) and retirement-related payments -¥22.5B. OCF/EBITDA ratio 0.13x (¥14.8B/¥110.5B) is very low, indicating structural cash conversion issues. Working capital metrics: inventory days approx. 80 days (inventory ¥299.4B / Revenue ¥1,593.9B × 365), trade receivable days approx. 44 days (accounts receivable ¥192.7B / Revenue ¥1,593.9B × 365), accounts payable period approx. 28 days (accounts payable ¥104.7B / cost of sales ¥1,365.0B × 365), yielding a Cash Conversion Cycle (CCC) about 96 days—long with significant room for improvement. [Investment Efficiency] Capital expenditures ¥100.9B are 1.45x depreciation ¥69.8B, indicating an investment-leading phase. Construction in progress ¥57.5B (4.1% of total assets) suggests large projects underway. [Financial Soundness] Equity Ratio 36.6% (down -4.5pt from 41.1% prior year), current ratio 157.4% (down from 168.0%) maintains safety but interest-bearing debt ¥547.8B (short-term ¥257.2B + long-term ¥290.6B) increased by ¥156.4B from prior year ¥391.4B. Estimated Debt/EBITDA 4.96x (¥547.8B/¥110.5B) indicates rising leverage, and Interest Coverage (EBIT / interest expense) 4.46x (¥40.7B/¥9.1B) is within an acceptable range but approaching the <5x safety threshold. Cash and deposits ¥245.2B / short-term liabilities ¥529.8B = 0.46x, with short-term liabilities ratio 47%—refinancing management is important.
OCF ¥14.8B (down -82.6% from prior year ¥84.8B) started from pre-tax profit ¥20.5B, adding non-cash items such as depreciation ¥69.8B, but was squeezed by large working capital increases and tax payments -¥18.1B. Working capital changes: inventory increase -¥23.3B (raw materials and WIP buildup), trade receivables decrease +¥4.9B, trade payables decrease -¥24.5B, indicating notable prepayment of payables. Retirement benefit related payments -¥22.5B (special retirement payments, etc.) also temporarily pressured cash. Investing CF was -¥134.7B (prior year -¥81.2B), with CAPEX -¥100.9B and loan disbursements -¥15.1B contributing outflows. Free Cash Flow -¥119.9B (OCF ¥14.8B + Investing CF -¥134.7B) was deeply negative, indicating investments could not be funded internally. Financing CF was +¥129.1B (prior year +¥40.9B), with long-term borrowings ¥200.0B and net increase in short-term borrowings ¥38.6B filling the gap. After dividend payments -¥10.2B and lease liability repayments -¥2.4B, cash balance increased by ¥182.7B to ¥245.2B. Weak OCF combined with large investments means short-term funding dependence continues. Improving inventory/receivables/payables turnover and accelerating returns on CAPEX are key to restoring cash generation.
Earnings quality shows high dependence on one-time items; core operating earnings are limited. Against Ordinary Income ¥30.4B, Extraordinary Income ¥25.9B (gain on bargain purchase ¥25.5B, gain on sale of investment securities ¥15.7B) and Extraordinary Loss ¥35.8B (impairment loss ¥6.7B, provision for loss on liquidation of subsidiaries ¥9.5B, etc.) largely offset, and roughly 40% of Net Income ¥21.6B was influenced by non-recurring items. Non-operating income ¥6.8B (0.4% of Revenue) comprises interest/dividend income and FX gains and is not excessive, whereas non-operating expenses ¥17.1B (1.1% of Revenue) are weighted by interest expense ¥9.1B, with an interest burden ratio (interest expense / Ordinary Income) of 0.50 that pressures profitability. OCF ¥14.8B / Net Income ¥21.6B = 0.68x indicates weak cash backing. Comprehensive income ¥56.0B (Net Income ¥21.6B + Other Comprehensive Income ¥34.4B) includes foreign currency translation adjustments +¥20.8B and actuarial differences on retirement benefits +¥7.0B, showing significant divergence from Net Income and volatility in valuation items. The gap between Ordinary Income ¥30.4B and Net Income ¥21.6B is mainly due to extraordinary items and tax effects (tax expense -¥1.1B from deferred tax asset increases), underscoring the need to confirm sustainable earnings improvement at the ordinary income level.
For FY ending March 2027 management forecasts Revenue ¥1,670.0B (YoY +4.8%), Operating Income ¥55.0B (YoY +35.0%), Ordinary Income ¥35.0B (YoY +15.2%), and Net Income attributable to owners of the parent ¥15.0B (YoY -30.6%, assuming elimination of one-time items). Progress rates at the interim period-end are: Revenue 95.4% (¥1,593.9B / ¥1,670.0B), Operating Income 74.0% (¥40.7B / ¥55.0B), Ordinary Income 86.9% (¥30.4B / ¥35.0B); Revenue is broadly on plan, with profits somewhat front-loaded in the first half. The growth scenario assumes continued strength in Japan and Asia, narrowing losses in North & South America and China, improved price pass-through, and SG&A control. Net Income guidance ¥15.0B assumes the one-time gains drop out. To achieve targets, the company needs an additional ¥14.3B in Operating Income in the second half (first half ¥40.7B), requiring turnaround of loss-making segments and stabilization of interest costs.
Annual dividend of ¥28 per share (interim ¥14 + year-end ¥14). Payout ratio is 1.4% (dividend total ¥10.2B / consolidated Net Income ¥21.6B × 100), but this is based on Net Income including one-time items; on guidance Net Income ¥15.0B the payout ratio would be about 68% (¥10.2B / ¥15.0B). Free Cash Flow coverage is -11.8x (dividend ¥10.2B / Free Cash Flow -¥119.9B), indicating insufficient coverage; dividends were financed partly from OCF (¥10.2B of ¥14.8B, ~69%) and borrowings. Cash balance ¥245.2B and current ratio 157% provide payment capacity, so short-term continuation of dividends is possible, but medium-to-long-term sustainability depends on smoothing CAPEX, improving OCF (through better inventory/receivables turnover), and reducing borrowing dependence. No specific dividend policy disclosure was made; dividend forecast for FY Mar-2027 is undecided. Post one-time item normalization, payout ratio and FCF improvement will determine future shareholder return levels.
Regional revenue concentration risk: North & South America (Revenue composition 42.6%) and China (7.8%) continue to post operating losses, leaving profit highly dependent on Asia (18.7%, Operating Income ¥26.0B) and Japan (32.6%, Operating Income ¥20.5B). North & South America's loss of -¥3.3B, a sharp deterioration from a prior year profit of ¥17.4B, indicates structural issues from local cost increases and utilization declines. China’s -¥3.5B, while narrowed, faces a tough market. Regional imbalance increases volatility of consolidated results.
Working capital efficiency and cash generation fragility: CCC approx. 96 days is long, with inventory days ~80 and accounts payable period ~28 days, tying up funds in working capital. OCF/EBITDA 0.13x is low in the industry; inventory +¥23.3B and accounts payable -¥24.5B have pressured OCF. Continued Free Cash Flow deficit of -¥119.9B, though partly an investment phase, raises liquidity risk if improvements in working capital management are delayed.
High leverage and interest burden risk: Interest-bearing debt ¥547.8B and estimated Debt/EBITDA 4.96x indicate high leverage, with short-term liabilities ratio 47% and cash/short-term liabilities 0.46x making refinancing management critical. Interest expense ¥9.1B accounts for roughly 30% of Ordinary Income ¥30.4B, with an interest burden ratio 0.50. Rising interest rates would materially pressure profits; Interest Coverage 4.46x is approaching the <5x safety threshold. Continued CAPEX combined with weak OCF increases borrowing dependence, and delayed deleveraging would constrain financial flexibility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.6% | 7.8% (4.6%–12.3%) | -5.2pt |
| Net Margin | 1.4% | 5.2% (2.3%–8.2%) | -3.8pt |
Profitability is well below the industry median, with operating margin -5.2pt and net margin -3.8pt. Compared with manufacturing peers, core profit generation is weak, driven by high SG&A ratio and losses in North & South America and China.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -0.1% | 3.7% (-0.4%–9.3%) | -3.8pt |
Revenue growth lags the industry median of +3.7% and is nearly flat. Japan’s +8.0% growth offset declines in China and Europe, resulting in stagnation overall. Growth is low within the industry, and improving regional profitability plus accelerating recovery on new investments are keys to restarting growth.
※ Source: Internal aggregation
Room for improvement in core profitability and progress on structural reform: Operating margin 2.6% (industry median 7.8%, -5.2pt) is low; urgent priorities are to correct losses in North & South America and China and control SG&A. Japan’s +8.0% growth and Asia’s 8.7% margin show significant regional profit disparity; improving utilization and cutting costs in loss regions will determine consolidated profitability. FY Mar-2027 guidance plans a +35% increase in Operating Income; execution of structural reforms and progress on price pass-through are the inflection points.
Normalizing cash generation and leverage management: OCF/EBITDA 0.13x and CCC ~96 days show working capital efficiency problems. Improving turnover in inventory, receivables and payables to lift OCF above Net Income levels (around ¥15B) and recovering CAPEX returns to achieve positive Free Cash Flow are focal points. Estimated Debt/EBITDA 4.96x and short-term liabilities ratio 47% indicate high leverage; reducing borrowing dependence and containing interest costs are prerequisites for ROE improvement and restored financial flexibility.
Assessing sustainable earnings after one-time items drop out: Net Income ¥21.6B heavily depended on one-time items such as gain on bargain purchase ¥25.5B, gain on sale of investment securities ¥15.7B, and tax effects. Guidance Net Income ¥15.0B assumes elimination of these items, so improvement at the Ordinary Income level (Ordinary Income ¥35.0B, +15.2%) is needed to sustainably enhance shareholder value. A payout ratio of about 68% post-normalization is relatively high; without FCF improvement, dividend capacity is limited. In the medium-to-long term, balancing core cash generation and investment recovery will determine sustainable shareholder returns.
This report is an AI-generated earnings analysis prepared by analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are internal references aggregated from public financial statements. Investment decisions are your responsibility; please consult advisors as needed.