| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1349.1B | ¥1376.1B | -2.0% |
| Operating Income | ¥76.7B | ¥68.0B | +12.9% |
| Ordinary Income | ¥80.0B | ¥77.3B | +3.6% |
| Net Income | ¥25.1B | ¥10.6B | +135.6% |
| ROE | 3.3% | 1.5% | - |
For the fiscal year ended March 2026, Foster Electric Co., Ltd. reported Revenue of ¥1,349.1B (YoY -¥27.0B -2.0%), Operating Income of ¥76.7B (YoY +¥8.7B +12.9%), Ordinary Income of ¥80.0B (YoY +¥2.7B +3.6%), and Net Income attributable to owners of the parent of ¥25.1B (YoY +¥14.5B +135.6%), achieving a substantial increase in profitability despite a slight decline in sales. The primary cause of the revenue decline was a slowdown in the core Speaker Business external environment; however, SG&A was compressed to ¥159.8B (YoY -¥13.5B -7.8%), improving Operating Margin to 5.7% (up +0.8pt from 4.9% a year earlier). Gross margin remained flat at 17.5% (prior year 17.5%), and profitability was enhanced through fixed cost reductions. At the Net Income level, a special gain on sale of investment securities of ¥3.9B and structural changes in tax burden and non-controlling interests relative to the prior year led to EPS of ¥221.04 (from ¥174.98, +26.3%). On the balance sheet, Total Assets increased to ¥1,122.4B (YoY +5.1%) and Net Assets to ¥769.3B (+11.9%), improving the Equity Ratio to 68.5% (up +4.1pt from 64.4%). Operating Cash Flow (OCF) declined to ¥69.4B (YoY -53.2%) but remained above Net Income, and after Investment CF of -¥57.8B, Free Cash Flow (FCF) remained positive at ¥11.6B. Aggressive investment in tangible fixed assets (CapEx ¥66.9B, 1.85x prior year ¥36.2B) and inventory buildup (raw materials +50.5%, work-in-process +27.8%) pressured working capital and was the main driver of the OCF decline.
[Revenue] Revenue was ¥1,349.1B (YoY -2.0%). By segment, the core Speaker Business declined to ¥1,118.7B (-2.3%), Mobile Audio Business contracted to ¥124.7B (-3.3%), while Other Businesses rose slightly to ¥142.0B (+1.2%). The Speaker Business, accounting for 82.9% of consolidated sales, likely saw declines due to automobile production adjustments and weak TV demand. The Mobile Audio Business faced headwinds from intensified competition in overseas smartphone markets. Other Businesses benefited from regulatory-related demand, such as proximity warning speakers and emergency call system speakers. Although regional disclosure is not provided, Foreign Currency Translation Adjustments were a positive ¥34.2B (prior year -¥2.3B), suggesting yen depreciation benefits from overseas subsidiaries supported results.
[Profitability] Operating Income rose to ¥76.7B (+12.9%). Gross profit was ¥236.4B, with Gross Margin steady at 17.5% (prior year 17.5%). SG&A was compressed to ¥159.8B (-7.8%), improving the SG&A ratio to 11.8% (from 12.6%, -0.8pt) and driving operating profit growth. By segment, operating income in the Speaker Business expanded to ¥65.2B (+2.5%), Mobile Audio Business increased to ¥6.7B (+4.8%), and Other Businesses turned substantially profitable to ¥4.8B (from prior ¥1.1B, +329.5%), contributing to improved consolidated margins. Non-operating income included interest income of ¥2.9B and foreign exchange gains of ¥3.5B, while interest expense decreased to ¥3.6B (from ¥6.4B), easing financial cost burden. Ordinary Income was ¥80.0B (+3.6%), with an Ordinary Income margin of 5.9% (up +0.3pt from 5.6%). A special gain on sale of investment securities of ¥3.9B was recorded; impairment losses were limited to ¥0.5B, resulting in Profit before Tax of ¥84.0B (+9.3%). Income taxes were ¥18.8B (effective tax rate 22.4%, down from 24.3%), reducing tax burden, and after deducting Net Income attributable to non-controlling interests of ¥15.6B, Net Income attributable to owners of the parent increased markedly to ¥25.1B (+135.6%). In summary, despite lower sales, SG&A reductions, improved non-operating results, and recognition of special gains led to substantial profit improvement.
The Speaker Business recorded Revenue of ¥1,118.7B (-2.3%), Operating Income of ¥65.2B (+2.5%), and margin of 5.8% (up +0.2pt from 5.6%), achieving profit growth through cost efficiency despite lower sales. The Mobile Audio Business reported Revenue of ¥124.7B (-3.3%), Operating Income of ¥6.7B (+4.8%), and margin of 5.4% (up +0.4pt from 5.0%), offsetting sales declines with margin improvement. Other Businesses posted Revenue of ¥142.0B (+1.2%), Operating Income of ¥4.8B (from ¥1.1B, +329.5%), and margin of 3.3% (vast improvement from -1.5%), turning profitable by capturing regulatory demand and improving revenue structure. Of consolidated Operating Income ¥76.7B, the Speaker Business accounted for 85.0%, Mobile Audio 8.7%, and Other Businesses 6.3%, indicating a very high revenue dependence on the Speaker Business.
[Profitability] Operating Margin 5.7% (up +0.8pt from 4.9%), Gross Margin 17.5% (flat), SG&A Ratio 11.8% (from 12.6%, -0.8pt) — SG&A reductions drove profitability improvement. ROE was 3.3% (down from 6.6%), as growth in Net Assets (+11.9%) outpaced Net Income growth. ROA (on Ordinary Income basis) was 7.3% (from 7.4%), broadly flat.
[Cash Quality] OCF / Net Income ratio was 2.77x (down sharply from 13.9x), with inventory buildup and Accounts Payable decrease pressuring OCF. The accrual ratio was -1.8%, indicating OCF exceeded Net Income and cash backing for earnings is solid, but OCF/EBITDA was low at 0.63x (OCF ¥69.4B vs. EBITDA ¥110.7B), leaving room to improve working capital efficiency.
[Investment Efficiency] Total Asset Turnover was 1.20x (down from 1.29x), Fixed Asset Turnover 4.70x (down from 5.79x), reflecting increased investment and slight revenue decline. EPS was ¥221.04 (from ¥174.98, +26.3%) and BPS ¥3,013.47 (from ¥2,726.13, +10.5%).
[Financial Soundness] Equity Ratio 68.5% (up +4.1pt from 64.4%), Current Ratio 263.7% (from 245.0%), Debt/Equity ratio 10.2% (interest-bearing debt ¥69.0B ÷ Net Assets ¥676.8B, improving from 11.6%). Financial health is very strong. Debt/EBITDA was 0.62x, and Interest Coverage was 21.4x (EBIT ¥76.7B ÷ Interest Expense ¥3.6B), indicating sufficient ability to cover interest.
OCF declined significantly to ¥69.4B (from ¥148.3B, -53.2%). Pre-working-capital subtotal was ¥93.0B, but working capital movements included inventory increase -¥28.6B, trade receivables decrease +¥49.4B, and trade payables decrease -¥46.7B, worsening net working capital. DIO was 99 days (prior estimated ~80 days), DSO 70 days, DPO 49 days, and CCC 120 days (prior estimated ~90 days), indicating lengthening; raw materials inventory rose to ¥109.5B (from ¥72.8B, +50.5%), a primary driver of working capital strain. Investing CF was -¥57.8B, led by CapEx -¥66.9B (1.85x prior year -¥36.2B). Tangible fixed assets increased to ¥242.5B (from ¥193.9B, +25.0%) and Construction in Progress rose sharply to ¥32.2B (from ¥12.2B, +164%), indicating large investment projects underway. With Depreciation of ¥34.0B and CapEx of ¥66.9B, CapEx/Depreciation ratio was 1.97x, signaling continued aggressive investment. Proceeds from sale of investment securities were ¥7.2B, and FCF was positive at ¥11.6B (OCF ¥69.4B + Investing CF -¥57.8B). Financing CF was -¥23.3B, mainly dividends paid -¥16.9B, treasury share acquisition -¥4.9B, and long-term debt repayments -¥6.0B. Cash and cash equivalents were ¥202.3B (from ¥203.9B, slight decline), providing liquidity equivalent to 1.8 months of sales — ample.
Operating Income ¥76.7B vs Ordinary Income ¥80.0B shows non-operating net positive contribution of ¥3.3B, supported by interest income ¥2.9B and FX gains ¥3.5B; interest expense was minor at ¥3.6B. Special gains of ¥3.9B (sale of investment securities) accounted for 15.5% of Net Income ¥25.1B, indicating significant one-off contribution. Impairment losses of ¥0.5B were limited. Total Comprehensive Income was ¥100.1B, considerably larger than Net Income ¥25.1B, driven by Foreign Currency Translation Adjustments of ¥34.2B (improved from -¥2.3B) and Remeasurements of Defined Benefit Plans of ¥0.7B (improved from -¥1.9B), where valuation gains from overseas subsidiaries due to yen depreciation bolstered comprehensive income. Comprehensive Income attributable to owners of the parent was ¥83.1B, 3.3x Net Income of ¥25.1B, showing material impact from FX movements. OCF ¥69.4B exceeded Net Income ¥25.1B (OCF/NI 2.77x), mainly due to Depreciation ¥34.0B, but inventory increase -¥28.6B and trade payables decrease -¥46.7B worsened working capital, resulting in an accrual ratio of -1.8% (favorable). The gap between Ordinary Income ¥80.0B and Net Income attributable to owners ¥25.1B (¥54.9B) is explained by Income Taxes ¥18.8B, Net Income attributable to non-controlling interests ¥15.6B, and net special gains/losses ¥3.4B, making the reconciliation principally attributable to tax burden and allocation of subsidiary profits.
Full Year guidance: Revenue ¥1,400.0B (vs current period +3.8%), Operating Income ¥80.0B (+4.3%), Ordinary Income ¥75.0B (-6.3%), Net Income attributable to owners ¥50.0B (+99.2%), EPS ¥222.54, DPS ¥55.0. Compared with current results, management plans revenue and operating profit growth but forecasts lower Ordinary Income, reflecting conservative assumptions on non-operating items such as FX gains and interest income. Net Income attributable to owners is planned to double year-over-year; even assuming the current period’s special gain (sale of investment securities ¥3.9B) lapses, management expects to sustain profit levels through continued SG&A reductions and sales recovery. EPS is planned at ¥222.54 (slightly above current ¥221.04). Payout Ratio in guidance is 24.7% (DPS ¥55 ÷ EPS ¥222.54), down from the current period’s payout ratio of 36.2% (DPS ¥80 ÷ EPS ¥221.04), reflecting a conservative stance prioritizing securing investment funds and buffering against earnings volatility.
Annual dividend for the period was ¥80.0 (interim ¥35.0, year-end ¥45.0), a 4x increase from ¥20.0 in the prior year. Total dividends amounted to approximately ¥17.9B (outstanding shares 25,000k less treasury shares 2,532k), implying a payout ratio of approximately 36.2% relative to Net Income attributable to owners of ¥25.1B. The forecast dividend for next fiscal year is ¥55.0, a decrease of -31.3% vs the current period, but the forecast payout ratio is 24.7% based on expected EPS ¥222.54, a conservative level. FCF was ¥11.6B, below total dividends ¥17.9B, yielding an FCF coverage of 0.65x and indicating dividend funding shortfall due to working capital swings and investment; however, cash and cash equivalents of ¥202.3B and retained earnings ¥427.4B provide ample buffers to sustain dividend payments. Treasury share purchases of ¥4.9B were executed (treasury share acquisitions), making total shareholder return ¥22.8B when combined with dividends, and Total Return Ratio approximately 90.8% (Total Return ¥22.8B ÷ Net Income attributable to owners ¥25.1B) — high. No treasury share buyback is disclosed for the next fiscal year; the company appears likely to continue shareholder returns primarily via dividends.
Segment concentration risk: The Speaker Business accounts for 85.0% of consolidated Operating Income, making revenue highly sensitive to demand fluctuations in the automobile and TV markets. Vehicle speakers depend on automaker production schedules and TV speakers track global TV shipments; in deteriorating external conditions, sales and profits could drop sharply. The Mobile Audio Business contributes 8.7% and Other Businesses 6.3%, indicating limited revenue diversification.
Deterioration in working capital efficiency: Raw materials inventory surged to ¥109.5B (YoY +50.5%), lengthening DIO to 99 days (from ~80 days). Work-in-process increased to ¥16.7B (+27.8%), revealing risks of inventory stagnation from prolonged production lead times or demand forecast errors. Accounts Payable decreased materially to ¥149.3B (from ¥189.9B, -21.4%), suggesting changes in supplier terms or weakened cash management. CCC lengthened to 120 days (from ~90 days), raising the risk of inventory write-downs, margin erosion from discounts, and cash flow pressure due to increased working capital.
FX volatility and dependence on one-off gains: Of Total Comprehensive Income ¥100.1B, Foreign Currency Translation Adjustments amounted to ¥34.2B (34.2%), indicating significant valuation gains from yen depreciation. A reversal to yen appreciation could produce FX losses or translation losses, compressing comprehensive income and shareholders’ equity. Additionally, the special gain on sale of investment securities ¥3.9B (15.5% of Net Income ¥25.1B) contributed materially; if such special gains disappear, Net Income could decline substantially. It is necessary to separate recurring earnings (Operating Income ¥76.7B, Ordinary Income ¥80.0B) from one-off items in evaluation.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.7% | 7.8% (4.6%–12.3%) | -2.1pt |
| Net Margin | 1.9% | 5.2% (2.3%–8.2%) | -3.3pt |
Profitability is below industry median: Operating Margin -2.1pt and Net Margin -3.3pt versus median, indicating room for improvement.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -2.0% | 3.7% (-0.4%–9.3%) | -5.7pt |
Growth significantly lags the industry median, with Revenue Growth -5.7pt versus median, suggesting delayed market share expansion or new customer acquisition.
※ Source: Company compilation
Sustainability of SG&A reductions and operating margin improvement trend: SG&A ratio fell to 11.8% (from 12.6%, -0.8pt), enabling an Operating Margin of 5.7% (improved +0.8pt) despite revenue decline. The company plans an Operating Margin of 5.7% for the full year (Operating Income guidance ¥80.0B ÷ Revenue guidance ¥1,400.0B), indicating signs that fixed cost reductions and efficiency gains are taking hold. If sales recover, operating leverage could further lift margins — an important upside.
Timing of returns from aggressive investments and scope for capital efficiency improvement: CapEx was ¥66.9B (1.97x Depreciation ¥34.0B) and Construction in Progress ¥32.2B (YoY +164%), signaling large investments, but Tangible Fixed Asset Turnover is down to 4.70x (from 5.79x) and ROE fell to 3.3% (from 6.6%), showing deteriorated capital efficiency. The midpoint for assessing whether these projects will enhance sales, profits, ROE/ROIC, and FCF is the timing of project commissioning (2–3 years).
Inventory correction and CCC shortening progress: Raw materials +50.5%, DIO 99 days, CCC 120 days — a marked deterioration in working capital efficiency. Confirmation in coming quarterly reports of inventory normalization (target DIO ≤ 60 days, CCC ≤ 90 days) would support recovery of OCF and expansion of FCF, stabilizing the dividend base. Continued inventory buildup would increase the risk of write-downs and diminished cash generation.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions should be made at your own responsibility and, where appropriate, after consulting professional advisors.