| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1,793.5B | ¥1,967.0B | -8.8% |
| Operating Income | ¥260.2B | ¥355.0B | -26.7% |
| Ordinary Income | ¥286.1B | ¥344.2B | -16.9% |
| Net Income | ¥209.6B | ¥182.3B | +14.9% |
| ROE | 14.5% | 13.3% | - |
For the fiscal year ending March 2026, Revenue was ¥1,793.5B (¥-173.4B YoY, -8.8%), Operating Income was ¥260.2B (¥-94.8B YoY, -26.7%), Ordinary Income was ¥286.1B (¥-58.1B YoY, -16.9%), and Net Income was ¥209.6B (¥+27.3B YoY, +14.9%). Although top-line and operating profits declined, Net Income increased due to normalization of special gains/losses after the prior-year investment securities valuation loss of ¥123.8B was removed. Operating margin declined by 3.5pt to 14.5% (prior year 18.0%), gross margin was 46.3% (prior year 47.0%), and SG&A ratio rose to 31.8% (prior year 28.9%), indicating pressure on the profit structure. The main drivers of revenue decline were demand slowdowns in Scientific / Measurement Instruments (-6.8% YoY) and Industrial Equipment (-14.8% YoY); regionally China decreased by -20.5% and Other regions by -14.5%. ROE remained at a high level of 14.5%, and the company prioritized capital efficiency in shareholder returns by conducting share buybacks of ¥127.7B.
[Revenue] Revenue of ¥1,793.5B represented a decline of ¥-173.4B (-8.8%) YoY. By segment: Scientific / Measurement Instruments ¥1,163.0B (YoY -6.8%, composition 64.8%), Industrial Equipment ¥481.3B (YoY -14.8%, composition 26.8%), Medical Equipment ¥149.3B (YoY -3.2%, composition 8.3%) — all segments experienced revenue declines. By region, Japan was ¥587.9B (YoY +3.7%) with slight growth, while China was ¥356.1B (YoY -20.5%), Other regions ¥573.2B (YoY -14.5%), and Americas ¥276.4B (YoY -1.9%), reflecting a general slowdown overseas. The largest decline came from the Industrial Equipment segment, primarily due to a pause in demand for electron-beam lithography systems to China. Scientific / Measurement Instruments were affected by lower sales of electron microscopes and analyzers; Medical Equipment saw only a slight decline with limited contribution. Contract liabilities (advances received) were ¥297.7B, maintaining 16.6% of sales, but down ¥-42.7B from ¥340.4B a year earlier, indicating cautious near-term order momentum.
[Profitability] Gross margin decreased by 0.7pt to 46.3% (prior year 47.0%), with gross profit of ¥830.3B (prior year ¥923.9B). This was mainly due to adverse product mix and cost-frontloading (work-in-process ratio high at 70.8%). SG&A was ¥570.1B (prior year ¥568.9B), a slight increase, but SG&A ratio rose to 31.8% (prior year 28.9%) due to lower sales, resulting in negative operating leverage. Consequently, Operating Income fell 26.7% to ¥260.2B (prior year ¥355.0B) and operating margin dropped to 14.5% (prior year 18.0%). Non-operating items included foreign exchange gains of ¥14.2B but also foreign exchange losses of ¥19.5B, resulting in a net currency headwind. Equity-method investment gains contributed ¥4.6B, and Ordinary Income was ¥286.1B (prior year ¥344.2B), down 16.9%. Extraordinary items included gains on sale of investment securities ¥10.2B and impairment loss ¥2.3B (tangible assets in Industrial Equipment), netting to +¥8.8B and normalizing from the prior year’s large special loss (investment securities valuation loss ¥123.8B, net special loss -¥94.6B). Profit before tax was ¥294.9B (prior year ¥249.6B), up 18.1%; effective tax rate was stable at 25.1% (prior year 25.1%). Net Income rose 14.9% to ¥209.6B (prior year ¥182.3B), improving net margin to 11.7% (prior year 9.3%). In summary, operating profit decline from lower sales was offset at the Net Income level by normalization of special items and stable tax burden.
Scientific / Measurement Instruments: Revenue ¥1,163.0B (YoY -6.8%), Operating Income ¥130.7B (YoY -13.0%), margin 11.2% (prior year 12.0%). Demand declines for electron microscopes and mass spectrometers impacted results; by region, China ¥184.9B (-25.0%) and Other ¥367.1B (-4.9%) drove the declines. Margin deterioration was due to higher SG&A ratio and compressed gross margin.
Industrial Equipment: Revenue ¥481.3B (YoY -14.8%), Operating Income ¥193.6B (YoY -26.4%), margin 40.2% (prior year 46.6%) — still high but down 6.4pt. A pause in China demand for electron-beam lithography systems was the main factor; China ¥164.7B (-16.8%) and Other ¥203.8B (-28.1%) both fell double digits. Margin decline was driven by a lower proportion of high-margin projects and cost-frontloading.
Medical Equipment: Revenue ¥149.3B (YoY -3.2%), Operating Income ¥0.6B (YoY -90.3%), margin 0.4% (prior year 4.3%) — a significant deterioration. Reduced sales of automated analyzers and relatively fixed SG&A compressed profits to near zero.
Corporate expenses were ¥-64.8B (prior year -¥65.0B), roughly flat, yielding adjusted Operating Income of ¥260.2B. While the high margin of Industrial Equipment supports overall profitability, Medical Equipment’s contribution is limited, making the business portfolio increasingly polarized.
[Profitability] Operating margin 14.5% (prior year 18.0%), Net margin 11.7% (prior year 9.3%). The operating margin decline was driven primarily by a 0.7pt drop in gross margin and a 2.9pt rise in SG&A ratio. ROE 14.5% (prior year 14.3%) slightly improved, aided by higher net margin and capital reduction from share buybacks. ROA on Ordinary Income basis decreased to 12.3% (prior year 15.2%). The Industrial Equipment segment’s operating margin of 40.2% materially lifts the company average, while Scientific / Measurement Instruments at 11.2% and Medical Equipment at 0.4% show significant disparity.
[Cash Quality] Operating Cash Flow (OCF) was ¥160.0B versus Net Income ¥209.6B, giving an OCF/NI ratio of 0.76x, below the 0.8 threshold, raising concerns about cash conversion efficiency. OCF/EBITDA (Operating Income + depreciation) was 0.51x (EBITDA calculated as ¥315.9B), low due to working capital stagnation. Working capital days worsened: DSO 103 days (prior year 96), DIO 286 days (prior year 222), CCC 353 days (prior year 318). Inventory turnover fell sharply to 1.28x (prior year 1.64x), with work-in-process of ¥534.9B accounting for 70.8% of inventories, suggesting project ramp-up and installation delays.
[Investment Efficiency] Total asset turnover fell to 0.74x (prior year 0.88x), indicating deteriorating asset efficiency. Capital expenditures were ¥134.9B, 2.5x depreciation of ¥53.7B, and Construction in Progress (CIP) stood at ¥127.8B (33.7% of tangible fixed assets), indicating ongoing capacity expansion and new-product investments. Financial leverage modestly increased to 1.67x (prior year 1.63x), Equity Ratio remained high at 59.9% (prior year 61.4%).
[Financial Soundness] Current ratio 214.6% (prior year 232.2%), quick ratio 193.0% (prior year 210.0%) — short-term liquidity remains healthy. Interest-bearing debt was ¥219.0B (short-term borrowings ¥140B + long-term borrowings ¥79B) versus cash and deposits ¥389.5B, yielding net cash of ¥170.5B. Debt/EBITDA was 0.70x and interest coverage was 195.6x (calculated as Operating Income + interest income / interest expense), showing minimal interest burden. Short-term liabilities ratio (current liabilities / total liabilities) was 63.9%, indicating refinancing reliance, but cash / short-term liabilities was 2.78x, providing a substantial liquidity buffer.
OCF was ¥160.0B (prior year ¥231.0B, -30.7%). The subtotal was ¥258.3B (profit before tax ¥294.9B + depreciation ¥53.7B - equity-method adjustments), and working capital changes included collections from trade receivables +¥24.7B and reductions in inventories +¥15.8B as cash inflows, while trade payables -¥36.9B and contract liabilities -¥64.2B (release of advances received) were significant cash outflows. Corporate taxes paid -¥102.6B further weighed on cash, resulting in final OCF of ¥160.0B. With Net Income ¥209.6B, OCF/NI of 0.76x indicates slow cash realization, mainly due to working capital stagnation (DSO 103 days, DIO 286 days, CCC 353 days). Investing Cash Flow was -¥137.6B, largely due to capital expenditures -¥134.9B and accumulation of CIP ¥127.8B, tying up funds. Financing Cash Flow was -¥15.5B: share buybacks -¥127.7B and dividend payments -¥59.1B were partially financed by short-term borrowings ¥140B and long-term borrowings ¥80B. Free Cash Flow (FCF) was ¥22.4B (OCF ¥160.0B - investing CF ¥137.6B), far short of shareholder returns (dividends + buybacks ¥186.8B), so cash and borrowings were used. Cash and cash equivalents at year-end were ¥373.3B (opening ¥346.1B), supported by FX effects +¥20.4B. The decline in cash generation was mainly due to high work-in-process ratio (70.8%) and release of advances; inventory reduction, completion of inspections, and CIP capitalization to fixed assets are key to CF improvement.
Ordinary Income ¥286.1B versus Net Income ¥209.6B — the ¥76.5B difference is largely taxes of ¥73.9B, indicating a sound structure. Non-operating items contributed net +¥25.9B, comprising FX gains ¥14.2B, dividend income ¥2.3B, equity-method gains ¥4.6B offset by FX losses ¥19.5B and interest expense ¥1.3B; net currency effect was -¥5.3B (a headwind). FX effects appear temporary; core earnings should be evaluated at the Operating Income level. Extraordinary items were net +¥8.8B (gain on sale of investment securities ¥10.2B and impairment ¥2.3B). The prior year included large special losses (investment securities valuation loss ¥123.8B) creating a prior-year net special loss of -¥94.6B; current-year normalization contributed to the +18.1% increase in profit before tax. Comprehensive income was ¥268.0B, ¥58.4B above Net Income ¥209.6B, driven by FX translation adjustments ¥20.3B, valuation differences on available-for-sale securities ¥8.4B, and retirement benefit adjustments ¥17.4B. The increase in securities valuation differences reflects unrealized gains not yet monetized. With OCF ¥160.0B versus Net Income ¥209.6B (OCF/NI 0.76x), accruals and CF divergence are significant, mainly due to working capital (WIP ¥534.9B, CIP ¥127.8B). Core earnings quality remains relatively strong at the Operating Income level (14.5% margin), but the Net Income uplift from normalization of extraordinary items is less persistent; recovery at the operating level is critical for sustainability.
For FY ending March 2027, guidance is Revenue ¥1,640.0B (YoY -8.6%), Operating Income ¥265.0B (YoY +1.9%), Ordinary Income ¥262.0B (YoY -8.4%), Net Income ¥213.0B (YoY +1.6%). Despite projected revenue decline, Operating Income is planned to slightly increase assuming fixed-cost optimization and retention of high-margin projects. Planned operating margin is 16.2% (vs. 14.5% this year, +1.7pt), implying SG&A compression and product-mix improvement. The anticipated decline in Ordinary Income reflects the expected drop-off in non-operating income (e.g., FX gains). Progress towards targets: Operating Income has already reached 98.2% of the full-year plan (¥260.2B / ¥265.0B), effectively achieved; Revenue progress is 109.4% (¥1,793.5B / ¥1,640.0B), exceeding the company’s assumed decline, reflecting intra-year demand and order backlog conversion. Key focus areas for next year are conversion of contract liabilities ¥297.7B to sales, inventory (especially WIP) reduction, and CIP start-up to improve productivity; these are critical to achieve the planned operating margin improvement and OCF recovery.
Annual dividend is ¥132 per share (interim ¥53, year-end ¥79), a sizeable increase from prior-year annual dividend ¥44 (increase of ¥88, 3x). The year-end dividend was raised ¥26 from the initial forecast of ¥53 to ¥79, reflecting improved performance and strengthened reserves. Total dividends were ¥59.1B (interim ¥26.3B, year-end ¥32.8B), implying a payout ratio of 29.0% against Net Income ¥209.6B. Share buybacks totaled ¥127.7B, bringing total shareholder returns to ¥186.8B and a Total Return Ratio of 89.1% (total returns / Net Income), representing substantial returns. However, FCF was only ¥22.4B, far insufficient to cover total returns ¥186.8B, requiring use of cash on hand and borrowings. FCF coverage was 0.33x (0.38x for dividends only), raising sustainability concerns. Future sustainability depends on OCF improvement (inventory & WIP reduction, contract liability conversion to sales) and CIP capitalization to curb investing CF. Cash & deposits ¥389.5B and net cash ¥170.5B provide ample short-term capacity to maintain dividends, but medium-term improvement in OCF/Net Income ratio (target > 0.8) and investment efficiency is necessary. Dividend policy targets a payout ratio around 30%; for next year the forecast dividend is ¥66 against projected EPS 432.64 yen (payout ratio 15.3%), a conservative plan but subject to upward revision depending on full-year performance.
Working capital stagnation risk: DIO 286 days, with work-in-process ratio 70.8% (¥534.9B) extremely high, suggesting project ramp-up and installation delays. Decrease in contract liabilities to ¥297.7B (prior year ¥340.4B) implies reduction in advances as a source of near-term sales. DSO 103 days (prior year 96) indicates receivables stagnation and CCC 353 days (prior year 318) signals prolonged cash conversion. With OCF/Net Income at 0.76x, cash realization is slow; if inventory drawdown or inspection delays worsen, OCF could be further pressured. Progress in WIP elimination and speed of contract liability conversion are key to CF improvement.
Capital expenditure execution risk: CIP ¥127.8B (33.7% of tangible fixed assets) is high and CapEx ¥134.9B is 2.5x depreciation ¥53.7B, indicating aggressive investment. Continued delays in CIP commissioning could pressure Operating Income through front-loaded depreciation and costs and reduce capital efficiency due to delayed investment payback. An impairment loss of ¥2.3B was already booked in the Industrial Equipment segment, underscoring the need for careful investment decisions. Monitoring CIP capitalization, commissioning, and productivity/yield improvements is critical. Investment payback delays pose risks to both OCF and ROA.
Demand cycle slowdown risk: Core segments showed significant declines: Scientific / Measurement Instruments -6.8%, Industrial Equipment -14.8%. Regional weakness was pronounced in China -20.5% and Other -14.5%, driven by a pause in R&D and capital investment demand for electron microscopes and electron-beam lithography systems. Operating margin fell from 18.0% to 14.5% largely due to fixed SG&A (+2.9pt) and gross margin compression (-0.7pt). Next year also assumes revenue decline (-8.6%), and timing of demand recovery is uncertain. The business is sensitive to sector-specific R&D and semiconductor equipment investment cycles; external deterioration could accelerate revenue and profit declines.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 14.5% | 7.8% (4.6%–12.3%) | +6.8pt |
| Net Margin | 11.7% | 5.2% (2.3%–8.2%) | +6.5pt |
Both operating and net margins are well above industry medians, placing the company among the higher-profit manufacturing firms.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -8.8% | 3.7% (-0.4%–9.3%) | -12.5pt |
Revenue growth underperforms the industry median by 12.5pt, highlighting the impact of demand cycle slowdown relative to the manufacturing average.
※ Source: Company compiled from public financial statements
Gap between profitability and cash generation: Despite high profitability (Operating margin 14.5%, ROE 14.5%), cash conversion is weak (OCF/Net Income 0.76x, OCF/EBITDA 0.51x). High WIP ratio 70.8%, CIP ratio 33.7%, and CCC 353 days indicate working capital and investment funds are tied up. Progress in inventory reduction and CIP capitalization would materially improve OCF and secure sustainable shareholder returns (dividends + buybacks). In the short term, conversion of contract liabilities ¥297.7B to sales and completion of WIP inspections are key to next-year OCF improvement.
Portfolio polarization and dependence on Industrial Equipment: Industrial Equipment with Operating Income ¥193.6B (margin 40.2%) accounts for 74.4% of company operating profit, while Scientific / Measurement Instruments margin 11.2% and Medical Equipment 0.4% show large disparities. Industrial Equipment maintains high margins via high-value products like electron-beam lithography systems but is sensitive to China and other regional cycles; this segment declined -14.8% this period. Maintaining Industrial Equipment margins and improving Scientific / Measurement Instruments profitability are essential for overall margin sustainability. Medical Equipment is nearly loss-making and may require restructuring or SG&A optimization.
Balancing aggressive shareholder returns and financial capacity: The company distributed dividends of ¥132 (payout ratio 29.0%) and executed share buybacks of ¥127.7B, delivering a Total Return Ratio of 89.1%. With FCF of only ¥22.4B, total returns were funded by cash and borrowings, but net cash ¥170.5B and Debt/EBITDA 0.70x indicate solid financial capacity. Improvement in OCF and investment efficiency should raise FCF coverage and support sustainable high-level returns. The company targets a payout ratio around 30%, and in an earnings recovery scenario, further dividend increases are possible; the shareholder return stance is positively viewed.
This report was automatically generated by AI analyzing XBRL earnings disclosure 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 are your responsibility; consult professional advisors as necessary.