| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥7776.0B | ¥7531.3B | +3.2% |
| Operating Income / Operating Profit | ¥1047.0B | ¥1070.4B | -2.2% |
| Profit Before Tax | ¥1080.2B | ¥1084.8B | -0.4% |
| Net Income / Net Profit | ¥794.4B | ¥792.0B | +0.3% |
| ROE | 7.9% | 8.5% | - |
FY2026 results: Revenue ¥7,776B (YoY +245B +3.2%), Operating Income ¥1,047B (YoY ▲23B ▲2.2%), Ordinary Income ¥752B (YoY +293B +63.7%), Net Income attributable to owners of the parent ¥794B (YoY +2B +0.3%). Revenue increased for the third consecutive year, maintaining an uptrend, but Operating Income declined for the first time in two years due to higher SG&A (YoY +149B +9.1%) and heavy inventory-related costs. Operating margin decreased to 13.5% from 14.2% a year earlier, down 0.7pt. Meanwhile, improvement in financial income ¥69B (YoY ▲6B) and financial expenses ¥36B (YoY ▲24B) drove a substantial increase in Ordinary Income. Comprehensive income was ¥1,574B (YoY +1,092%) as foreign currency translation differences added ¥738B, expanding shareholders’ equity to ¥10,045B (YoY +721B). Business structure shifted toward a higher aftermarket sales mix at 22.9% (prior year 22.1%), improving revenue stability. By region, Europe accounted for 50.6% of revenue and was the largest source of profit with Operating Income ¥390B (+3.8%), Japan’s Operating Income improved to ¥389B (+40.8%) with a large margin improvement, while North America saw revenue decline ▲6.0% and a low Operating Margin of 2.8%.
[Revenue] Revenue ¥7,776B (YoY +245B +3.2%) rose on both product sales ¥6,000B (+2.3%) and parts/repair/accessories ¥1,776B (+6.5%). The aftermarket sales mix rose to 22.9%, contributing to revenue stability. By region, Europe ¥3,933B (+5.0%) and Asia ¥343B (+8.3%) led growth, and Japan ¥1,515B (+3.4%) remained solid. Conversely, North America ¥816B (▲6.0%) declined due to weakening demand. Foreign currency translation differences of +¥738B (via comprehensive income) were recorded, and FX impacts were also embedded in regional revenues at the operating level. By segment, Europe is the largest market at 50.6% of revenue; Asia’s total revenue including intercompany sales was ¥3,264B (+4.7%), reflecting the sizable role of regional manufacturing bases.
[Profitability] Operating Income ¥1,047B (YoY ▲23B ▲2.2%) declined as SG&A increased to ¥1,793B (YoY +149B +9.1%) despite Gross Margin improvement to 36.5% (up +0.5pt from 36.0%). SG&A ratio rose to 23.1% from 21.8% a year earlier (+1.3pt), with rising personnel, promotion and logistics costs compressing operating leverage. Operating margin fell to 13.5% (prior year 14.2%). Ordinary Income ¥752B (+63.7%) was driven mainly by lower financial expenses (¥60B → ¥36B, ▲40.4%), narrowing non-operating losses by ¥33B. Profit Before Tax ¥1,080B (▲0.4%) incurred income taxes of ¥286B (effective tax rate 26.5%, prior year 27.0%), resulting in Net Income attributable to owners of the parent ¥794B (+0.3%). Net margin was 10.2%, down 0.3pt from 10.5% but remained in double digits. Comprehensive income ¥1,574B (+1,092%) was boosted by foreign currency translation differences of ¥738B and other comprehensive income ¥780B. In summary: revenue up, slight decline in operating profit; margins compressed at the operating level, but improvements in financial results and FX effects produced large increases on a comprehensive basis.
Japan segment: Revenue ¥1,515B (+3.4%), Operating Income ¥389B (+40.8%), margin 25.7% (improved +6.8pt from 18.9%) showing marked profitability improvement. Europe: Revenue ¥3,933B (+5.0%), Operating Income ¥390B (+3.8%), margin 9.9% (prior 9.5%), the largest profit contributor at 37.3% of consolidated Operating Income. North America: Revenue ¥816B (▲6.0%), Operating Income ¥23B (prior ¥0.2B — large increase but margin low at 2.8%) highlighting demand slowdown and heavy cost structure. Asia: Revenue ¥343B (+8.3%), Operating Income ¥304B (+5.3%), margin 88.4% — an outsized margin reflecting profit concentration in regional manufacturing bases when measured on total sales including intercompany sales (total ¥3,264B). Other: Revenue ¥1,168B (+3.1%), Operating Income ¥55B (▲24.3%), margin down to 4.7% (prior 6.4%). Sum of segment Operating Income before inter-segment eliminations ¥1,161B; after adjustment of ▲¥114B, consolidated Operating Income ¥1,047B.
[Profitability] Operating margin 13.5% (prior 14.2%, down 0.7pt). Gross margin improved to 36.5% (prior 36.0%), but SG&A ratio rose to 23.1% (prior 21.8%) and compressed margins. Net margin 10.2% (prior 10.5%) slightly down but stays in double digits. ROE 8.3% (prior 8.8%, down 0.5pt) — shareholders’ equity increased (¥9,325B → ¥10,045B) while net income only marginally increased, slightly reducing capital efficiency. [Cash Quality] Operating Cash Flow ¥1,023B is 1.29x of Net Income ¥794B, indicating healthy cash backing of profits; OCF/EBITDA estimated ~0.76x (EBITDA = Operating Income ¥1,047B + Depreciation ¥305B ≈ ¥1,352B) and falls short of an ideal >0.9x due to working capital buildup. [Investment Efficiency] Total asset turnover 0.66x (prior 0.68x) declined due to higher inventories: Inventories ¥3,758B (31.8% of total assets) weigh on efficiency. Inventory turnover days ~278 days (COGS ¥4,936B ÷ Inventories ¥3,758B × 365), Receivables days 57 days (Revenue ¥7,776B ÷ Trade Receivables ¥1,220B × 365), Payables days 41 days (COGS ¥4,936B ÷ Trade Payables ¥554B × 365), leading to CCC ~294 days, elongated. [Financial Soundness] Equity Ratio 84.4% (prior 83.7%), interest-bearing debt ¥24B (prior ¥102B, ▲76.5%) — effectively net cash-free of debt; Cash and Cash Equivalents ¥2,574B and Current Ratio 581%, extremely robust.
Operating Cash Flow was ¥1,023B (YoY ▲21.2%), with subtotal ¥1,277B reduced by working capital increases (trade receivables ▲¥56B, inventories ▲¥27B, trade payables ▲¥44B, total approx ▲¥127B) and corporate tax payments ¥311B (YoY +¥88B). Investing Cash Flow was ▲¥176B, driven by purchase of property, plant and equipment ¥215B (capex-to-sales 2.8%), a reduced spending pace from prior year ▲¥379B reflecting capex restraint. Financing Cash Flow was ▲¥992B driven by dividend payments ¥295B (prior ¥180B) and share repurchases ¥559B (prior ¥0.03B), executing large shareholder returns. Free Cash Flow was ¥847B (Operating CF ¥1,023B + Investing CF ▲¥176B) sufficient to cover dividends; FCF/dividend ratio 2.87x indicating high sustainability. Adding FX translation effects +¥186B, cash & equivalents rose slightly to ¥2,574B (YoY +¥41B). Operating CF/Net Income 1.29x shows good cash conversion, but OCF/EBITDA ~0.76x indicates funds tied in inventories and receivables; normalizing working capital could significantly accelerate cash generation.
Operating Income ¥1,047B is mainly driven by core segment profits and is largely recurring. Financial income ¥69B (including interest/dividends ¥59B) less financial expenses ¥36B (including interest ¥12B) yields a net +¥33B — modest among non-operating items — and Ordinary Income ¥752B shows financial improvements partially offset operating decline. No material special gains/losses disclosed; the gap between Profit Before Tax ¥1,080B and Ordinary Income ¥752B (¥328B, primarily equity-method investment results and other non-operating items) is within routine range. The ¥780B difference between Comprehensive Income ¥1,574B and Net Income ¥794B is attributable to Other Comprehensive Income (foreign currency translation differences ¥738B, remeasurement of defined benefit plans ▲¥31B, fair value adjustments of financial assets ¥73B), largely transient. Operating CF ¥1,023B exceeds Net Income ¥794B, indicating small accrual-cash divergence and high earnings quality. No large inventory write-downs or allowances for doubtful receivables were disclosed, supporting high profit stability.
FY2027 full-year forecast: Revenue ¥8,200B (YoY +5.5%), Operating Income ¥1,100B (+5.1%), Net Income attributable to owners of the parent ¥810B (+2.0%). Progress vs current year results: Revenue 94.8%, Operating Income 95.2%, Net Income 98.1%. Revenue growth assumes inventory normalization and a North America market recovery; Operating Income expansion depends on SG&A control and inventory efficiency improvements. Forecast EPS ¥313.45 (current period ¥299.95 +4.5%), forecast dividend ¥79 (current period ¥150 comprised of interim ¥20 + year-end ¥130; interim next year undecided but full-year ¥79 shown as forecast). Forecasts are based on current information and assumptions and may vary with FX rates, raw material prices, and regional demand trends.
Annual dividend ¥150 (interim ¥20 + year-end ¥130), a large increase from prior year ¥70 (interim ¥20 + year-end ¥50, adjusted annualized), with payout ratio 50.0% (annual dividend ¥150 ÷ EPS ¥299.95), strengthening shareholder returns. Total dividends ¥295B, up +64% from prior year ¥180B. Share repurchases ¥559B were executed, bringing total shareholder returns to ¥854B and Total Return Ratio to 107.5% (Total Return ¥854B ÷ Net Income ¥794B), exceeding net income in this single year. FCF ¥847B covers total returns; cash ¥2,574B and net cash position support high-level returns. Next fiscal year dividend forecast ¥79 appears lower than current ¥150, but current-year figure may include special dividends; comparisons on a normal basis should be confirmed with future disclosures. Dividend policy appears to balance profit growth and financial soundness, aiming to maintain a sustainable payout range (around 40–50%), though continuation of share repurchases depends on performance and investment opportunities.
Risk of sustained high inventory levels and deteriorating working capital efficiency: Inventories ¥3,758B (31.8% of total assets) with inventory days 278 and CCC 294 indicate elongation; in demand downturns this raises pressure for discounts, impairment losses and storage costs, which would compress margins and cash generation. Delays in inventory reduction risk impeding operating margin improvement from the current 13.5%.
Regional concentration and North America weakness risk: Europe revenue share 50.6% creates high geographic concentration and exposure to European economic slowdown, regulatory tightening and FX volatility. North America is weak (Revenue ▲6.0%, Operating Margin 2.8%); prolonged weakness in that region could downside FY2027 revenue target (+5.5%).
Structural SG&A increase and pressure on operating leverage: SG&A ¥1,793B (YoY +9.1%) grew much faster than revenue (+3.2%), with personnel, promotion and logistics costs becoming more fixed. If revenue underperforms, operating margin could further decline and target Operating Income ¥1,100B may be missed.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 8.3% | 6.3% (3.2%–9.9%) | +2.0pt |
| Operating Margin | 13.5% | 7.8% (4.6%–12.3%) | +5.7pt |
| Net Margin | 10.2% | 5.2% (2.3%–8.2%) | +5.0pt |
ROE, Operating Margin and Net Margin all exceed manufacturing medians, placing profitability toward the top within the sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 3.2% | 3.7% (-0.4%–9.3%) | -0.5pt |
Revenue growth is slightly below the median, indicating standard growth pace within the sector.
※Source: Company compilation
Normalization of inventories and working capital is the top theme for next-year margin improvement: Extended DIO 278 days and CCC 294 days pressure Operating Margin 13.5% (▲0.7pt) and OCF/EBITDA 0.76x. Inventory reduction and North America demand recovery will be keys to achieving Operating Income ¥1,100B; progress should be monitored via quarterly inventory and CCC trends.
Sustainability of high shareholder returns and flexibility in capital allocation: Total Return Ratio 107.5% is supported by abundant FCF ¥847B, cash ¥2,574B and net cash position. However, the two-pronged approach of 50% payout and share repurchases can be flexibly adjusted depending on performance and investment opportunities. Confirm next-year dividend forecast ¥79 (full-year basis) and continuity of buybacks in next disclosures.
Room to improve regional profit structure: Europe margin 9.9% and Japan 25.7% are solid, but North America 2.8% drags overall performance. Profitability improvement in North America (SG&A control, pricing measures) could raise consolidated operating margin; the rising aftermarket ratio 22.9% contributes to revenue stability and is a positive structural trend.
This report is an earnings analysis document automatically generated by AI using XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm from public financial disclosures. Investment decisions are your own responsibility; consult a professional advisor as needed.