| Indicator | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥395.5B | ¥386.2B | +2.4% |
| Operating Income | ¥11.3B | ¥9.2B | +23.9% |
| Ordinary Income | ¥7.3B | ¥4.1B | +78.1% |
| Net Income | ¥3.2B | ¥2.1B | +54.1% |
| ROE | 0.7% | 0.5% | - |
The fiscal year ended March 2026 closed with Revenue of ¥395.5B (YoY +¥9.3B +2.4%), Operating Income of ¥11.3B (YoY +¥2.2B +23.9%), Ordinary Income of ¥7.3B (YoY +¥3.2B +78.1%), and Net Income attributable to owners of the parent of ¥4.2B (YoY +¥1.4B +47.4%), landing in a revenue- and profit-increasing result. Revenue was driven by solid growth in Japan and the U.S./Europe regions; at the operating level, SG&A containment and significant profitability improvement in the Japan segment raised margins by +0.5pt YoY. At the ordinary level, non-operating items improved significantly (non-operating loss previous year -¥5.0B → current period -¥3.9B), supported by higher interest income and improved foreign exchange gains/losses. Net income was underpinned by special gains from sales of investment securities of ¥3.5B, but the earnings structure is highly dependent on one-off factors. Operating Cash Flow was a large negative at -¥17.8B, primarily due to inventory increase of ¥55.7B and accounts receivable increase of ¥17.7B, leaving issues in cash conversion of profits.
[Revenue] Revenue of ¥395.5B (YoY +2.4%) was a modest increase. By region, Japan ¥306.96B (+4.2%) was the largest contributing segment, driven by recovery in demand from manufacturers and automotive-related demand. Europe ¥43.56B (+11.6%) and North America ¥27.62B (+10.4%) also achieved double-digit growth, expanding sales in overseas markets. Conversely, China ¥163.10B (+0.5%) and Taiwan ¥139.27B (+0.8%) remained flat, and Southeast Asia ¥97.81B (-1.3%) declined. External revenue regional mix was Japan 18.8%, China 32.7%, Taiwan 23.5%, Southeast Asia 7.2%; non-Japan Asia accounts for over 60% of revenue, but growth drivers are shifting toward Japan and U.S./Europe. Gross margin was 23.2%, down 2.2pt from 25.4% a year earlier, suggesting pressure from higher raw material costs, product mix changes, and inventory valuation effects.
[Profit & Loss] Gross profit after Cost of Sales of ¥303.7B (76.8% of revenue) was ¥91.8B (gross margin 23.2%). SG&A was ¥80.5B (20.4% of revenue, down ¥5.9B from ¥86.4B prior year) and was contained through efficiency measures, resulting in Operating Income of ¥11.3B (operating margin 2.9%), a substantial YoY increase of +23.9%. Non-operating items included interest income ¥2.4B and foreign exchange gains ¥2.4B on the income side, offset by interest expense ¥3.8B and foreign exchange losses ¥3.5B, yielding net non-operating loss of -¥3.9B and Ordinary Income of ¥7.3B (ordinary margin 1.9%). At the extraordinary level, special gains from sales of investment securities ¥3.5B boosted Profit Before Tax to ¥10.7B, from which corporate taxes of ¥4.5B (effective tax rate 42.0%) and Net Income attributable to non-controlling interests of ¥2.0B were deducted, resulting in Net Income attributable to owners of the parent of ¥4.2B. Comprehensive income expanded significantly to ¥39.5B, aided by positive foreign currency translation adjustments of ¥30.2B, improving accumulated other comprehensive income and pushing up equity. In conclusion, core business posted revenue and profit growth, but net income depends on one-off securities gains and non-operating interest/FX burdens weigh on performance quality, leaving room for improvement in earnings quality.
The Japan segment posted Revenue ¥306.96B (+4.2%) and Operating Income ¥10.53B (+225.0%, prior year ¥3.24B → current ¥10.53B), achieving a significant profitability improvement and operating margin of 3.4%, becoming the core business generating most of consolidated profit. While the prior year had an operating loss of ¥8.4B, cost reductions in SG&A and fixed-cost leverage led to a turnaround to profitability. North America posted Revenue ¥27.62B (+10.4%), Operating Income ¥0.68B (+75.2%), and margin 2.5%, showing solid double-digit revenue and profit growth. Europe posted Revenue ¥43.56B (+11.6%), Operating Income ¥0.51B (+61.2%), and margin 1.2%, maintaining high growth. Conversely, China was only slightly up at Revenue ¥163.10B (+0.5%) and turned to an operating loss ¥0.49B (from operating income ¥0.09B prior year), worsening profitability to -0.3% margin. Taiwan posted Revenue ¥139.27B (+0.8%) and Operating Income ¥1.61B (-89.7%, prior year ¥15.60B → current ¥1.61B), a sharp decline in profit with margin down to 1.2%. Southeast Asia posted Revenue ¥97.81B (-1.3%) and an operating loss ¥1.49B (prior year operating income ¥0.85B → current -¥1.49B), margin -1.5%, turning into a deficit. Significant disparity in regional margins is evident: Japan and North America drive profits while China and Southeast Asia dilute consolidated operating margin. Improving profitability and cost structure in China and Southeast Asia will be key to raising consolidated margins.
[Profitability] Operating margin 2.9% (improved +0.5pt from 2.4% prior year), Ordinary margin 1.9% (up +0.8pt from 1.1%), Net margin 1.1% (up +0.4pt from 0.7%) all improved across stages. ROE 0.9% (prior year 0.8%) remains low; improvement in net margin and financial leverage of 2.06x was offset by decline in asset turnover (0.400x, prior year 0.430x). ROIC 1.1% (EBIT ¥11.3B ÷ Invested Capital ¥1,044B) indicates capital efficiency remains low and improving asset utilization is a challenge. [Cash Quality] Operating Cash Flow (OCF) -¥17.8B is negative against Net Income ¥4.2B, with OCF/Net Income -4.24x indicating weak cash conversion. Free Cash Flow -¥49.3B (Operating CF -¥17.8B + Investing CF -¥31.5B) is significantly negative, driven by capital expenditures ¥30.4B and working capital increases. Depreciation ¥42.4B vs. CapEx ¥30.4B indicates CapEx is within maintenance levels, but negative OCF pressures overall cash generation. [Investment Efficiency] Total asset turnover 0.400x (down from 0.430x) was driven by inventory increase (¥245.9B, prior year ¥182.6B) and stalled construction in progress (¥82.9B, 8.4% of total assets), reducing operating asset efficiency. Days Inventory Outstanding (DIO) 296 days (¥245.9B ÷ (¥303.7B ÷ 365)) extended, indicating slow inventory digestion. Days Sales Outstanding (DSO) 94 days (¥101.9B ÷ (¥395.5B ÷ 365)), Days Payable Outstanding (DPO) 49 days (¥41.0B ÷ (¥303.7B ÷ 365)), yielding Cash Conversion Cycle (CCC) 341 days (DSO + DIO - DPO), indicating substantial scope for working capital improvement. [Financial Soundness] Equity Ratio 48.5% (prior year 50.3%) remains moderate, but interest-bearing debt ¥291.4B (short-term borrowings ¥150.2B + long-term borrowings ¥141.2B) increased by ¥47.6B from prior year ¥243.8B, with Debt/Equity 0.61x (prior year 0.54x) showing slight rise in leverage. Current Ratio 162.2% (current assets ¥534.3B ÷ current liabilities ¥329.4B) and Quick Ratio 145.1% ((current assets ¥534.3B - inventory ¥245.9B) ÷ current liabilities ¥329.4B) show short-term liquidity secured; however, cash and deposits ¥163.5B vs. short-term borrowings ¥150.2B means short-term interest-bearing debt ratio is high and refinance risk warrants attention. Debt/EBITDA 5.42x (¥291.4B ÷ (¥11.3B + ¥42.4B)) is high, and interest coverage is limited at 2.97x (EBITDA ¥53.7B ÷ interest expense ¥3.8B × 2), indicating constrained buffer and sensitivity to rising rates.
Operating CF was a large negative -¥17.8B, worsening by -¥40.8B from prior year +¥23.0B. Operating CF subtotal, adding non-cash items such as depreciation ¥42.4B to profit before tax before income taxes ¥10.7B, was -¥8.9B, but substantial working capital deterioration led to final negative. The largest cash outflow contributor was inventory increase -¥55.7B (worsened by -¥36.8B from prior year -¥18.9B), with finished goods, work-in-progress, and raw materials totaling an increase from ¥182.6B to ¥245.9B (+¥63.3B), showing notable inventory buildup. Accounts receivable increase -¥17.7B (from prior year +¥4.5B to -¥22.2B deterioration) further expanded outflows, and accounts payable increase +¥11.0B (prior year +¥9.8B, roughly flat) could not fully absorb the outflows. Corporate taxes paid -¥8.0B also contributed to cash outflows. Investing CF was -¥31.5B, led by acquisition of tangible fixed assets -¥30.4B, intangible asset acquisition -¥1.0B, and purchase of investment securities -¥6.3B, partially offset by proceeds from sale of investment securities +¥4.0B and subsidy receipts +¥2.3B. Free Cash Flow was a large negative -¥49.3B; while CapEx itself was within depreciation ¥42.4B, negative operating CF pressured the aggregate. Financing CF was a positive +¥12.5B, funded mainly by net increase in short-term borrowings +¥64.5B and proceeds from long-term borrowing +¥49.9B, which were used to repay long-term borrowings -¥86.9B, pay dividends -¥9.0B, dividends to non-controlling interests -¥4.8B, and repay lease obligations -¥1.3B. Cash and cash equivalents decreased from ¥185.0B at the beginning of the period to ¥159.8B at period-end (including foreign currency translation adjustment +¥11.6B), a decline of -¥25.2B. The deterioration in working capital is mainly due to inventory buildup and accounts receivable increase, and high-level stagnation of construction in progress (¥82.9B) is another factor locking up funds; inventory reduction and earlier ramp-up of equipment are essential to normalize cash flows.
Operating Income ¥11.3B stems from core operations, but at the non-operating level interest expense ¥3.8B and foreign exchange losses ¥3.5B (total ¥7.3B) weighed on earnings, partially offset by interest income ¥2.4B, foreign exchange gains ¥2.4B, and other non-operating income ¥3.4B (total ¥8.1B), resulting in net non-operating loss of -¥3.9B. Foreign exchange gains and losses were both recorded within the same period (FX gains ¥2.4B and FX losses ¥3.5B), meaning FX-related items appear on both sides of non-operating income/expense. Consequently, Ordinary Income ¥7.3B is ¥3.9B lower than Operating Income, indicating operating-stage earnings exceed ordinary-stage earnings. At the extraordinary level, gains on sale of investment securities ¥3.5B made up the bulk of special gains, while special losses totaled ¥0.7B (loss on disposal of fixed assets ¥0.1B and impairment losses ¥0.6B), netting +¥3.4B. As a result, about 33% of Profit Before Tax ¥10.7B is attributable to special gains, indicating high dependence on one-off items. After corporate taxes ¥4.5B (effective tax rate 42.0%), Net Income for the period is ¥6.2B, and after deducting Net Income attributable to non-controlling interests ¥2.0B, Net Income attributable to owners of the parent remains ¥4.2B. Comprehensive income was boosted substantially by foreign currency translation adjustments +¥30.2B, and together with valuation differences on available-for-sale securities -¥1.1B and actuarial gains/losses adjustments related to retirement benefits +¥4.2B, total other comprehensive income amounted to ¥33.3B, making total comprehensive income ¥39.5B (¥31.2B attributable to owners of the parent, ¥8.3B to non-controlling interests), significantly exceeding net income. The fact that Operating CF is -¥17.8B, substantially below Net Income ¥4.2B, also lowers earnings quality and suggests a large accrual (profit–cash) gap. While recurring earnings base centers on Operating Income ¥11.3B, non-operating interest/FX burdens, dependence on special gains, and negative Operating CF constrain earnings quality; strengthening core profitability and improving working capital management are indispensable to enhance quality.
The FY ending March 2027 full-year forecast is Revenue ¥410.0B (YoY +3.7%), Operating Income ¥14.0B (YoY +23.5%), and Ordinary Income ¥7.8B (YoY +6.2%), planning for higher revenue and profits. The operating level anticipates an increase in Operating Income of ¥2.7B YoY, suggesting continued improvement in profitability. However, Ordinary Income is forecasted to rise only ¥0.5B, assuming continued non-operating burden. Net Income attributable to owners of the parent (not disclosed by company) can be approximated as about ¥1.0B by estimating EPS forecast 3.14 yen × shares outstanding 31,797 thousand, implying a large decline from the current period Net Income ¥4.2B. This likely assumes the special gains from sales of investment securities ¥3.5B recorded this period will not recur next year. Dividend forecast is annual ¥14.0 (interim ¥7.0, year-end ¥7.0), halving from ¥28.0 this period and indicating normalization of profit level and dividend policy. Progress rates assumed at Q2 cumulative are Revenue ¥195.9B (47.8% of full-year plan ¥410.0B), Operating Income ¥6.0B (42.9% of ¥14.0B), and Ordinary Income ¥3.6B (46.2% of ¥7.8B), indicating generally steady progress expected. However, the large projected decline in net income next year underscores high dependence on one-off gains and fragility of core profitability; improving non-operating items and establishing profit structure not dependent on special items are key challenges.
This period’s dividend was Interim ¥14.0, Year-end ¥14.0, totaling ¥28.0, maintained at the same level as prior year. Total dividends amounted to ¥8.90B (interim ¥4.45B, year-end ¥4.45B), representing a Payout Ratio of approximately 211.9% versus Net Income attributable to owners of the parent ¥4.2B, an extremely high level and a distribution that substantially exceeds earnings. Free Cash Flow was a negative ¥49.3B, and dividends ¥8.90B could not be covered by internal funds, resulting in dependence on external financing (increase in borrowings +¥47.6B). Coverage of total dividends ¥8.90B by Operating CF -¥17.8B is incalculable (negative), making clear that operating activities could not sustain dividends. No share buybacks were implemented (treasury stock acquisition expenditure ¥0.0B), so shareholder returns consist solely of dividends. Next year’s dividend forecast is annual ¥14.0 (interim ¥7.0, year-end ¥7.0), a plan to halve from this period’s ¥28.0, suggesting normalization of profit levels and adjustment of dividend policy. If next year’s Net Income is ¥1.0B (estimated from EPS 3.14 yen), the payout ratio would be about 140%, still high but substantially lower than this period’s 211.9%. While detailed dividend policy disclosure is limited, consideration of DOE (dividend on equity) is suggested, and a transition to a sustainable dividend policy tied to recovery in earnings and cash generation is required.
Regional profitability disparity and risk of continued losses in China and Southeast Asia: China segment posted operating loss ¥0.49B (margin -0.3%), and Southeast Asia operating loss ¥1.49B (margin -1.5%), continuing deficits that dilute consolidated operating margin of 2.9%. Japan and Western markets’ profitability supports the consolidated results, but prolonged price competition in China and low utilization in Southeast Asia could further pressure consolidated profits. Optimizing regional mix and improving profitability of loss-making locations are urgent tasks.
Expansion of working capital and inventory management risk: Inventory rose substantially to ¥245.9B (up ¥63.3B from prior year ¥182.6B), with DIO extended to 296 days. Inventory breakdown is Finished goods ¥56.2B, Work-in-progress ¥69.9B, Raw materials ¥119.8B, with raw materials the largest contributor to stagnation. Construction in progress of ¥82.9B accounts for 8.4% of total assets, and delays in equipment ramp-up reduce investment efficiency. Risks include inventory obsolescence and valuation losses, and working capital increases that strain liquidity; inventory optimization and earlier commissioning of equipment are essential.
Leverage and short-term debt concentration raising refinancing risk: Interest-bearing debt is ¥291.4B, of which short-term borrowings are ¥150.2B (51.5%), indicating a high proportion of short-term liabilities. Coverage ratio of cash and deposits ¥163.5B to short-term interest-bearing debt is 1.09x, limited; with Operating CF negative -¥17.8B, the financial structure relies on rollover of short-term debt. Debt/EBITDA 5.42x and interest coverage 2.97x offer limited cushion, and there is potential for increased interest payments (current interest expense ¥3.8B) and deterioration of borrowing terms in a rising-rate environment.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.9% | 7.8% (4.6%–12.3%) | -4.9pt |
| Net Margin | 0.8% | 5.2% (2.3%–8.2%) | -4.4pt |
The company’s profitability substantially lags the industry median, with operating margin -4.9pt and net margin -4.4pt, placing it at the lower end within manufacturing.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 2.4% | 3.7% (-0.4%–9.3%) | -1.3pt |
Revenue growth slightly underperforms the industry median, remaining at a modest pace.
※ Source: Company aggregation
Core profitability is improving but remains well below industry averages. Operating margin 2.9% improved +0.5pt YoY but lags the industry median 7.8% by -4.9pt. While large profit gains in the Japan segment drive consolidated performance, deficits in China and Southeast Asia dilute profitability. SG&A containment effects are limited and the decline in gross margin (25.4% → 23.2%) constrains further margin improvement. Going forward, raw material cost control, product mix improvements, and turnaround of loss-making regions are keys to margin enhancement.
Working capital expansion and cash flow deterioration are weighing on capital efficiency and financial flexibility. Operating CF -¥17.8B is a large negative, driven by inventory increase ¥55.7B and accounts receivable increase ¥17.7B, with CCC extended to 341 days. Stagnant construction in progress ¥82.9B also reduces investment efficiency, leaving ROIC at a very low 1.1%. Free Cash Flow -¥49.3B could not cover dividends ¥8.90B, and short-term borrowings increased by ¥64.5B to supplement funding. Inventory reduction, earlier equipment commissioning, and fundamental improvements in working capital management are prerequisites for restoring capital efficiency.
Financial leverage and short-term debt concentration increase refinancing risk. Short-term borrowings account for 51.5% of interest-bearing debt ¥291.4B; Debt/EBITDA 5.42x is high and interest coverage 2.97x is limited. With negative Operating CF persisting, reliance on debt rollovers poses risk of rising interest payments and worsening borrowing conditions. Although next year plans for higher revenue and operating profit are in place, net income is forecast to decline sharply as one-off gains fall away and dividends are planned to halve to ¥14.0, making financial normalization and cash flow improvement top priorities.
This report is an AI-generated earnings analysis document produced by analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as appropriate.