| Indicator | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥250.5B | ¥270.5B | -7.4% |
| Operating Income / Operating Profit | ¥-7.0B | ¥6.3B | -90.9% |
| Ordinary Income | ¥2.7B | ¥7.4B | -63.9% |
| Net Income / Net Profit | ¥-19.3B | ¥8.2B | -79.9% |
| ROE | -3.7% | 1.5% | - |
The fiscal year ended May 2026 reported Revenue ¥250.5B (YoY -¥20.1B -7.4%), Operating Income ¥-7.0B (YoY -¥13.3B -90.9%), Ordinary Income ¥2.7B (YoY -¥4.7B -63.9%), and Net Income ¥-19.3B (YoY -¥28.1B -79.9%), resulting in year-over-year revenue decline, operating loss and final loss. The swing from prior-year operating profit ¥6.3B to operating loss ¥7.0B was mainly driven by slowing sales and rigidity in SG&A, producing an operating margin of -2.8% (about 5.1pt deterioration from prior-year +2.3%). At the ordinary income level, non-operating income ¥9.7B, led by foreign exchange gains ¥7.0B, provided support, but recognition of extraordinary losses ¥37.1B (including subsidiary liquidation losses ¥36.4B) produced a pre-tax loss ¥34.2B and a final loss ¥19.3B. Gross margin deteriorated to 24.1% (about 2.5pt down from 26.6% a year earlier), and heavy cost structure with SG&A ¥67.3B representing 26.9% of sales pressured profitability. Financial strength remains very solid with cash and deposits ¥283.7B, Equity Ratio 86.1% and Current Ratio 1128%, although ROE worsened to -3.7%.
[Revenue] Revenue was ¥250.5B, down ¥20.1B YoY (-7.4%). By region, Japan ¥140.0B (¥-25.2B -15.3%) was the main factor, reflecting notable domestic demand slowdown. Overseas sales partially mitigated the decline with North America ¥18.9B (¥+3.0B +18.6%), Europe ¥64.1B (¥+1.5B +2.3%), and Asia ¥27.4B (¥+0.7B +2.7%) performing steadily. By product, Unit Power Supplies ¥127.1B (¥-12.6B -9.0%) and On-board Power ¥58.0B (¥-13.4B -18.8%) contracted, while PRBX products ¥52.5B (¥+3.7B +7.5%) grew, and product mix shifts impacted gross margin. Gross margin worsened to 24.1% (about 2.5pt down from 26.6%), suggesting intensified price competition, product-mix effects, and lower fixed-cost absorption.
[Profitability] Cost of goods sold was ¥190.1B, producing gross profit ¥60.4B (gross margin 24.1%), but SG&A ¥67.3B (SG&A ratio 26.9%) exceeded gross profit, resulting in an operating loss ¥7.0B (operating margin -2.8%). This represents a ¥13.3B deterioration from prior-year operating income ¥6.3B. SG&A increased ¥1.5B from ¥65.8B a year earlier, and expense rigidity amid lower sales drove the operating-stage loss. Non-operating income ¥9.7B (including foreign exchange gains ¥7.0B, interest income ¥1.0B, dividend income ¥0.6B) supported an ordinary income ¥2.7B, down ¥4.7B from prior-year ¥7.4B. Extraordinary losses ¥37.1B were largely subsidiary liquidation losses ¥36.4B, a one-off item related to restructuring of the European operations. As a result, pre-tax loss was ¥34.2B, corporate tax benefit -¥0.2B, and net loss attributable to owners of the parent was ¥-19.3B. Comprehensive income was ¥-14.1B; the difference versus net loss ¥-19.3B was driven by foreign currency translation adjustments ¥14.3B and valuation gains on securities ¥6.6B, partially offset by retirement benefit adjustments ¥-1.0B. In conclusion, revenue and profit declines plus the burden of extraordinary losses produced a substantial final loss.
Japan Production & Sales recorded Revenue ¥175.9B (YoY -12.2%) and Operating Loss ¥3.2B (turned into loss from prior-year profit ¥5.2B), with an operating margin of -1.8% as domestic demand decline and fixed-cost burden pressured profitability. Europe Production & Sales posted Revenue ¥64.1B (YoY +2.3%) but Operating Loss ¥7.2B (worsened from prior-year -¥4.0B), with operating margin -11.3%, indicating structural deficits in Europe are the largest drag on consolidated earnings. North America Sales achieved Revenue ¥19.0B (YoY +18.6%) and Operating Income ¥0.9B (YoY +11.4%), with operating margin 4.6% and solid performance. Asia Sales posted Revenue ¥27.4B (YoY +2.7%) and Operating Income ¥1.0B (YoY +28.4%), with operating margin 3.8%, maintaining revenue and profit growth. China Production achieved Revenue ¥20.1B (YoY +10.6%) and Operating Income ¥0.1B (YoY -78.8%), with operating margin 0.5%—revenue rose but profit fell significantly, suggesting higher production costs and changes in intercompany transaction terms. Structurally, deficits in Japan and Europe drove consolidated operating loss; notably, Europe’s operating margin -11.3% requires urgent fixed-cost reductions and business-model restructuring.
Profitability: Operating margin -2.8% and Net margin -7.7% shifted from prior-year profits to losses, substantially deteriorating profitability. Gross margin 24.1% fell about 2.5pt from 26.6% due to price competition and product-mix shifts. SG&A ratio 26.9% rose about 2.6pt from 24.3%, reflecting expense rigidity against falling sales. ROE was -3.7% (worsened from -0.2% prior-year), driven mainly by net margin deterioration, and total asset turnover was low at 0.413x, indicating poor asset efficiency. Cash quality: Operating Cash Flow (OCF) ¥30.4B remained positive, but OCF/Net Income equals -1.58x against net loss ¥-19.3B, a flag on quality. However, the primary cause of the net loss was one-off extraordinary losses ¥37.1B, and cash generation at the operating stage was preserved. In working capital, inventory reduction ¥25.0B boosted cash, while accounts receivable increase -¥12.2B was a drag; CCC (AR days + Inventory days - AP days) is about 254 days, indicating deterioration in efficiency. Investment efficiency: Total asset turnover 0.413x and fixed asset turnover 3.13x are weak, leaving room for improvement. Capital expenditures ¥17.3B were 1.17x depreciation ¥14.8B, focusing on renewal investment but somewhat heavy amid declining sales. Investment securities decreased to ¥24.1B (from ¥33.6B, -28.1%), lowering their share of total assets due to valuation and disposals. Financial soundness: Equity Ratio 86.1% (down from 93.1% but still very high), Current Ratio 1128%, Quick Ratio 1070% indicate very ample liquidity. Cash and deposits ¥283.7B versus current liabilities ¥43.0B show no short-term funding risk. Interest-bearing debt is minimal; D/E ratio is about 0.16x, effectively near net cash-free and demonstrating very strong financial resilience.
Operating Cash Flow was ¥30.4B (down 21.3% from prior-year ¥38.6B), remaining positive despite a pre-tax loss ¥34.2B. Operating CF subtotal ¥21.3B plus working capital changes (inventory decrease +¥25.0B, accounts receivable increase -¥12.2B, accounts payable increase +¥1.8B) contributed, and tax refunds +¥9.1B also boosted cash. Inventory reduction appears to be intentional working-capital management, but accounts receivable increases reflect overseas sales expansion and longer collection terms; DSO (days sales outstanding) is about 104 days, indicating worsening efficiency. Investing CF was -¥14.1B, mainly capex -¥17.3B, exceeding depreciation ¥14.8B, though proceeds from tangible asset sales +¥1.0B and investment securities redemptions +¥3.0B partly offset outflows. Free Cash Flow was positive ¥16.3B (OCF ¥30.4B + Investing CF -¥14.1B) but could not fully cover dividend payments ¥22.6B; FCF dividend coverage was 0.72x. Financing CF was -¥24.0B, driven by dividend payments -¥22.6B and lease liability repayments -¥1.3B. Cash and cash equivalents at period-end were ¥268.7B (up ¥3.1B from beginning ¥265.5B), with foreign exchange effects +¥10.8B contributing. While OCF ¥30.4B is positive, it depends on the one-off inventory compression, and future cash-generation sustainability will hinge on sales recovery and normalization of working capital (shortening DSO and optimizing DIO).
Of Ordinary Income ¥2.7B, Operating Income was ¥-7.0B and non-operating income ¥9.7B (including foreign exchange gains ¥7.0B) lifted ordinary income into positive territory. Foreign exchange gains are temporary and dependent on FX conditions, indicating vulnerability in the quality of ordinary earnings. The majority of extraordinary losses ¥37.1B were subsidiary liquidation losses ¥36.4B, one-off items related to European restructuring. Impairment losses ¥0.5B were also recorded in the European segment, reflecting asset-value reassessment. The difference between comprehensive income ¥-14.1B and net income ¥-19.3B was due to foreign currency translation adjustments +¥14.3B and valuation gains on securities +¥6.6B; these are valuation gains and not realized cash. OCF ¥30.4B is positive but driven by inventory compression +¥25.0B and tax refunds +¥9.1B; sustainable cash generation depends on returning to operating profitability and improving working-capital efficiency. Accrual (Net Income - OCF) is -¥49.7B, large and mainly attributable to extraordinary losses and working-capital movements, indicating earnings quality is heavily influenced by one-off factors.
The company plans for the next fiscal year (FY2027 ending May 2027) to recover to Revenue ¥288.8B (YoY +15.3%), Operating Income ¥13.3B, Ordinary Income ¥15.4B (YoY +475.9%), and Net Income ¥12.0B (YoY +8.6%, on a forecast basis). The +15.3% sales growth assumes continued overseas sales growth in Europe, North America and Asia and recovery in Japan; operating profit recovery assumes reduced losses in the European segment, fixed-cost cuts, and gross margin improvement (presumed target recovery to the 26% range). Ordinary Income ¥15.4B exceeds Operating Income ¥13.3B, suggesting some FX effects are incorporated while there remains risk if FX is neutral. Recovery to Net Income ¥12.0B assumes the disappearance of one-off extraordinary losses; EPS is forecast ¥38.99 and DPS ¥30 (payout ratio about 77%), a relatively high payout but reasonable in a rebound-from-loss scenario. The targets (Revenue +15.3%, Ordinary Income +475.9%) are ambitious, so quarterly progress monitoring is important. Improvement in Europe segment operating margin and normalization of working capital (shortening DSO and DIO) are key to achieving the plan.
This period’s dividends were Interim ¥27, Year-end ¥28, annual ¥55, with total dividends approximately ¥22.6B. Against a net loss ¥-19.3B, the payout ratio is negative on a profit basis and unsustainable from earnings alone. On a cash basis, OCF ¥30.4B can cover dividends ¥22.6B, but Free Cash Flow ¥16.3B cannot fully cover them, yielding an FCF dividend coverage of 0.72x which is insufficient. DOE (Dividends / Equity) is about 4.3%, indicating modest burden on capital efficiency. Given cash and deposits ¥283.7B and a strong balance sheet, short-term continuation of dividends is possible, but sustained dividends require operating profitability and expanded FCF. The company plans DPS ¥30 against EPS ¥38.99 for the next fiscal year (payout ratio about 77%), which is a reasonable policy in a profit-recovery phase. No share buyback disclosure was made, and total return ratio is not applicable.
Structural deficit risk in Europe Production & Sales segment: Operating loss ¥7.2B and operating margin -11.3% are extremely low, with fixed-cost burden and adverse product mix pressuring earnings. If fixed-cost reduction and business-model restructuring in Europe do not progress, this will exert a persistent downward pressure on consolidated earnings. An impairment loss ¥0.5B was recorded in Europe, indicating asset-value reassessment; uncertainty remains until restructuring completes.
Working capital efficiency deterioration and collection-delay risk: DSO ~104 days, DIO ~177 days, CCC ~254 days indicate a significant deterioration in working-capital efficiency. Accounts receivable ¥71.5B (up from ¥56.6B, +26.2%), inventory ¥25.3B (products), raw materials ¥58.6B, and work-in-progress ¥8.2B show a notable expansion of current assets. If collection term elongation from overseas sales expansion and inventory stagnation persist, the quality of OCF may decline and liquidity rigidity could occur.
FX volatility and dependence on non-operating income risk: Of Ordinary Income ¥2.7B, Operating Income was ¥-7.0B and non-operating income ¥9.7B (driven by FX gains ¥7.0B) supported results. If FX reverses toward yen appreciation, ordinary-level profitability could turn negative, making earnings sustainability highly dependent on FX trends. Foreign currency translation adjustments ¥14.3B boosted comprehensive income but are valuation gains that may be reversed by FX moves.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | -2.8% | 7.8% (4.6%–12.3%) | -10.5pt |
| Net Margin | -7.7% | 5.2% (2.3%–8.2%) | -12.9pt |
Profitability is well below industry median; both operating and net margins rank low in the industry. Europe segment deficits and SG&A rigidity are primary causes, and short-term profit improvement is urgent.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -7.4% | 3.7% (-0.4%–9.3%) | -11.1pt |
Revenue growth rate is 11.1pt below the industry median, reflecting a decline. Domestic demand slowdown is the main cause, though overseas sales remain solid and there is potential for rebound next year.
※ Source: Company aggregation
Transitory nature of extraordinary losses and potential rebound next year: The main cause of this period’s net loss ¥-19.3B was extraordinary losses ¥37.1B (including subsidiary liquidation losses ¥36.4B), one-offs tied to European restructuring. Next year should see recovery to Net Income ¥12.0B as these one-offs disappear; the company’s dividend policy (EPS ¥38.99 vs DPS ¥30) also assumes profit recovery. Achieving operating profitability (Operating Income recovery to ¥13.3B) is key, relying on Europe fixed-cost reductions and gross margin improvement; quarterly monitoring is important.
Execution certainty of European restructuring and earnings improvement: Europe Production & Sales incurred Operating Loss ¥7.2B (Operating Margin -11.3%), the largest consolidated drag. An impairment ¥0.5B and parts of subsidiary liquidation loss point to European reorganization, but execution certainty on fixed-cost reductions and revenue-model restructuring is the major driver for achieving next year’s plan. Japan segment also turned to an operating loss ¥3.2B, so domestic demand recovery and cost optimization are challenges. North America, Asia and China segments maintained slim profits, providing regional diversification support.
Improvement of working-capital efficiency and sustainability of cash generation: OCF ¥30.4B is positive but depends on inventory compression +¥25.0B and tax refunds +¥9.1B, while accounts receivable increase -¥12.2B pressured cash. DSO 104 days, DIO 177 days, CCC 254 days indicate marked deterioration in working-capital efficiency; sustainable OCF depends on sales recovery and normalization of working capital (shortening DSO and DIO). Free Cash Flow ¥16.3B does not fully cover dividends ¥22.6B, with FCF coverage 0.72x, so dividend continuation requires operating profitability and cash-generation recovery. Strong balance sheet (cash and deposits ¥283.7B, Equity Ratio 86.1%) provides short-term capacity to continue dividends, but medium- to long-term sustainability requires persistent recovery in earnings and cash flow.
This report is an AI-generated financial analysis document created by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information aggregated by the company from public financial statements. Investment decisions should be made at your own responsibility and, as necessary, after consulting a professional advisor.