| Indicator | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥28965.4B | ¥27882.3B | +3.9% |
| Operating Income / Operating Profit | ¥755.2B | ¥1388.3B | -45.6% |
| Ordinary Income | ¥789.1B | ¥986.0B | -20.0% |
| Net Income / Net Profit | ¥455.1B | ¥176.6B | +157.7% |
| ROE | 4.7% | 1.8% | - |
For the fiscal year ended March 2026, Revenue was ¥28,965B (YoY +¥1,083B, +3.9%) while Operating Income was ¥755B (YoY -¥633B, -45.6%), Ordinary Income was ¥789B (YoY -¥197B, -20.0%), and Net Income attributable to owners of the parent was ¥455B (YoY +¥279B, +157.7%). Gross margin at the operating level deteriorated by 3.7pt from 19.2% to 15.5%, reducing profitability, and foreign exchange losses of ¥315B weighed on non-operating items. Although the reduction in special losses (prior year ¥124B → this period ¥268B) and changes in tax burden led to a large increase in Net Income, the results highlight a pronounced weakening of core operating profitability.
[Revenue] Revenue was ¥28,965B (+3.9%). By segment, the Automotive Business accounted for ¥28,622B (+3.8%) or 98.8% of total sales, and the Financial Services Business was ¥515B (+10.4%) with double-digit growth. By region: Japan ¥659B (+4.4%), North America ¥662B (-9.9%), Europe ¥212B (+66.8%), Asia ¥625B (+9.6%), Oceania ¥286B (-10.9%), Other ¥453B (+12.0%). North America declined while Europe posted substantial growth; Asia and Other regions drove overall expansion. Supplemental production-location data show Japanese sites increased revenue by +9.6% with strong exports, but Japanese-site operating profit turned to a loss of -¥451B, indicating deteriorating domestic profitability.
[Profitability] Operating Income was ¥755B (-45.6%), roughly halved. Cost of goods sold ratio worsened from 80.7% to 84.5% (+3.7pt), reducing Gross Profit to ¥4,491B (-16.3%) and lowering gross margin to 15.5%. Rising raw material and logistics costs and product mix shifts (PHEV / light commercial vehicle mix) appear to be the main drivers. SG&A was restrained at ¥3,736B (-6.1%), improving SG&A ratio by 1.4pt from 14.3% to 12.9%, but could not offset the gross margin decline. R&D was ¥649B (2.2% of sales), down 4.4% YoY. Operating margin compressed from 5.0% to 2.6% (-2.4pt). In non-operating items, interest and dividend income of ¥87B, equity-method income of ¥14B, and foreign exchange gains of ¥29B comprised non-operating income of ¥186B, while interest expense of ¥61B and foreign exchange losses of ¥315B were included in non-operating expenses of ¥152B, producing a net positive contribution of ¥34B. Foreign exchange losses equated to approximately 42% of Operating Income, pressuring profitability. Ordinary Income was ¥789B (-20.0%), with an Ordinary Income margin of 2.7% (prior year 3.5%). Special items comprised Special Income of ¥52B (gain on sale of investment securities ¥25B, gain on disposal of fixed assets ¥10B, etc.) and Special Losses of ¥268B (loss on disposal of fixed assets ¥29B, etc.), netting -¥216B. Income before income taxes was ¥573B (-34.3%), with income taxes of ¥362B (effective tax rate 63.1%), a heavy tax burden; Net Income was ¥455B, of which ¥111B was noncontrolling interests, leaving ¥344B attributable to owners of the parent. In conclusion, despite revenue growth, deteriorating gross margin and adverse FX reduced operating profitability substantially; Net Income rose due to movements in special items and tax burden, but the decline in core operating earnings is clear.
The Automotive Business had Revenue of ¥28,622B (+3.8%), Operating Income of ¥725B (-45.9%), and operating margin 2.5% (prior year 4.9%). The Financial Services Business had Revenue of ¥515B (+10.4%), Operating Income of ¥28B (-33.2%), and margin 5.5% (prior year 9.0%). The Automotive Business accounted for 96.0% of total Operating Income, with margin down 2.4pt YoY. Although the Financial Services Business also posted lower profits, it maintained a relatively high margin. Regional operating profit (supplemental) was Japan -¥451B (prior year +¥148B) turning to a loss, North America ¥217B (+¥334B), Europe ¥26B (+¥17B), Asia ¥781B (+¥695B), Oceania ¥60B (+¥110B) all in positive territory. The deterioration in profitability at Japanese sites is the primary driver of the companywide margin decline, requiring urgent review of structural costs.
[Profitability] Operating margin 2.6% (prior year 5.0%), Net margin 1.6% (prior year 0.6%), ROE 4.7% (prior year 1.8%), ROA (based on Ordinary Income) 3.4% (prior year 4.2%). Operating-level profitability worsened materially, but Net margin and ROE improved due to changes in tax burden and special items. EBITDA was ¥1,581B (Operating Income ¥755B + Depreciation ¥826B), with an EBITDA margin of 5.5% (prior year 7.6%). In a five-factor decomposition, EBIT margin 2.6%, interest burden coefficient 0.759 (Ordinary Income / Operating Income, reflecting non-operating expense burden including FX), tax burden coefficient 0.175 (Net Income / Income before income taxes, reflecting high tax burden), and financial leverage 2.51x compose ROE of 4.7%. The low tax burden coefficient (i.e., high effective tax rate 63.1%) depresses Net Income. [Cash Quality] Operating Cash Flow (OCF) ¥358B is 0.79x of Net Income ¥455B, with OCF/EBITDA 0.23x, indicating weak cash conversion. Of OCF subtotal ¥622B, changes in working capital contributed -¥265B (increase in trade receivables -¥809B, decrease in inventories +¥135B, increase in trade payables +¥763B). The accruals ratio is (Net Income ¥455B - OCF ¥358B) / Total Assets ¥2.4T = 0.004, small and suggesting limited signs of earnings manipulation. [Investment Efficiency] Total asset turnover 1.20x (prior year 1.24x), inventory turnover 10.2x (COGS / ending inventory), CCC (cash conversion cycle) is Days Sales Outstanding 31 + Days Inventory Held 36 - Days Payables 67 = -0 days, indicating efficiency. [Financial Soundness] Equity Ratio 39.8% (prior year 43.3%), Current Ratio 138% (prior year 139%), Debt/Equity 17.9% (prior year 15.0%), Interest-bearing debt (short-term borrowings ¥699B + CP ¥300B + long-term borrowings & current portion ¥1,583B) total ¥2,582B, Debt/EBITDA 1.6x, Interest Coverage 12.4x (OCF / interest paid), indicating good financial durability. Cash and deposits ¥4,389B are 4.1x short-term interest-bearing debt (approx. ¥1,058B), implying low liquidity risk.
Operating Cash Flow was ¥358B (prior year ¥1,747B, -79.5%). From OCF subtotal of ¥622B, changes in working capital generated -¥265B, primarily due to an increase in trade receivables of ¥809B (accounts receivable balance +61%), reflecting higher sales and changes in credit terms. Increases in trade payables of ¥763B (accounts payable balance +27%) and inventory reductions of ¥135B partially offset this, but the receivables increase was the main drag. Corporate taxes paid were ¥347B, and interest/dividends received were ¥137B, resulting in final cash generation of ¥358B. Investing Cash Flow was -¥1,224B (prior year -¥1,148B), led by capital expenditures of ¥1,126B (1.36x depreciation ¥826B), indicating continued proactive capex. Intangible asset investment ¥103B and proceeds from sale of securities/fixed assets provided partial inflows. Free Cash Flow was -¥867B (prior year +¥600B), a large negative reflecting investment lead. Financing Cash Flow was +¥469B (prior year -¥2,748B), with long-term borrowing proceeds ¥1,355B and short-term borrowing increases ¥470B resulting in net financing; long-term debt repayments ¥919B and dividend payments ¥167B were executed. Cash decreased by ¥180B to ¥4,389B, with FX effects +¥218B included in ending balance. Expansion of working capital pressured OCF; improving receivables collection efficiency and sustaining payable terms will be focal points. Recovery of capex returns is key to improving FCF.
Operating Income ¥755B versus Ordinary Income ¥789B shows non-operating items contributed +¥34B, with recurring non-operating income such as interest and dividend income ¥87B, equity-method income ¥14B, and FX gains ¥29B outweighing non-operating expenses (interest expense ¥61B, FX losses ¥315B, etc.). FX net was negative ¥286B on a gross basis. Special items netted -¥216B, as Special Income ¥52B (including gain on sale of investment securities ¥25B) was outweighed by Special Losses ¥268B (including loss on disposal of fixed assets ¥29B), constituting a temporary negative. Pre-tax income ¥573B faced income taxes of ¥362B (effective tax rate 63.1%), an unusually high tax burden suggesting write-downs of deferred tax assets or the effect of temporary differences. Comprehensive income was ¥640B (Net Income ¥455B + Other Comprehensive Income ¥185B), driven by foreign currency translation adjustments +¥334B and actuarial gains/(losses) on retirement benefits +¥116B. The gap between Net Income and OCF (Net Income ¥455B - OCF ¥358B = +¥97B) was mainly due to working capital changes; earnings quality is broadly sound but cash conversion efficiency needs improvement. The operating-level profit decline is structural—worsening cost ratios offsetting SG&A restraint—and volatility in special items and tax burden amplifies Net Income swings; restoring recurring earning power is the primary challenge.
Full Year guidance: Revenue ¥32,600B (YoY +12.5%), Operating Income ¥900B (+19.2%), Ordinary Income ¥800B (+1.4%), Net Income attributable to owners of the parent ¥250B, EPS ¥18.68, Annual Dividend ¥5. Revenue is expected to grow in double digits; Operating Income is planned to increase by ¥145B from ¥755B to ¥900B, bringing operating margin to about 2.8%. The limited growth in Ordinary Income (+1.4%) likely reflects normalization of non-operating income and conservative assumptions on FX. Progress to date (9 months / full year) is Revenue 88.9%, Operating Income 83.9%, Ordinary Income 98.6%—generally on track but Ordinary Income is already close to plan, leaving limited room for further improvement in non-operating items to meet the full-year target. Net Income guidance is conservative at ¥250B vs current period Net Income ¥455B, implying assumed second-half profit decline or higher tax rate given the elevated 9-month outperformance. Against EPS ¥18.68, Dividend ¥5 (payout ratio 26.8%) is sustainable on a full-year basis. Key to achievement will be gross margin recovery (cost reductions and product mix improvement), reduction of FX losses, and improving profitability at Japanese operations; higher utilization of capex and effectiveness of new model launches are assumed.
Annual dividend maintained at ¥10 (interim ¥5 + year-end ¥5), unchanged from prior year. Net Income attributable to owners of the parent was ¥344B (note: consolidated Net Income ¥455B less noncontrolling interests ¥111B); total dividends amount to approx. ¥134B, implying a payout ratio of ~39% (29% on a consolidated Net Income basis). Dividend yield versus BPS ¥687.01 is 1.5%. Against OCF ¥358B, dividend payments ¥167B give an OCF coverage ratio of 2.1x, indicating sound coverage, but with FCF -¥867B, dividends exceed FCF reflecting an investment-led phase while maintaining payouts. Full-year guidance assumes Dividend ¥5 (annualized) with a payout ratio of 26.8% against EPS ¥18.68, and the company appears to adjust dividends with performance. Share buybacks were limited at ¥72M this period (prior year ¥126M), so Total Return Ratio is essentially dividend-only. With cash ¥4,389B and interest-bearing debt ¥2,582B, net cash is ¥1,807B, indicating sufficient balance-sheet capacity for dividends, but maintaining dividends amid negative FCF depends on progress in investment recovery.
Structural deterioration of gross margin: This period’s gross margin 15.5% is down 3.7pt from 19.2% prior year. Rising raw material and logistics costs and product mix changes (PHEV / light commercial vehicle ratio) are main drivers, while delayed pass-through to selling prices and intensified competition are risks. A COGS ratio of 84.5% is high for manufacturing, requiring improvements in cost competitiveness and pricing strategy. The Japanese-site operating loss of ¥451B suggests structural cost issues; review of production efficiency and fixed cost allocation is urgent.
FX volatility and non-operating income volatility: Foreign exchange loss ¥315B represents ~42% of Operating Income and heavily depressed Ordinary Income. Net FX impact was -¥286B considering FX gains of ¥29B. Future FX movements could widen Ordinary Income volatility, and hedging execution will determine earnings stability. Large swings in non-operating items reduce predictability for investors.
Working capital expansion and weakening cash conversion: Trade receivables +¥944B (+61%), trade payables +¥962B (+27%) reflect rapid working capital expansion pressuring OCF. OCF/EBITDA 0.23x is well below industry averages, requiring better receivables management and supplier terms. Capex ¥1,126B (1.36x depreciation) remains elevated and the FCF deficit of -¥867B implies execution risk on investment recovery. Future cash generation will determine sustainability of dividends and growth investments.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.6% | 7.8% (4.6%–12.3%) | -5.1pt |
| Net Margin | 1.6% | 5.2% (2.3%–8.2%) | -3.6pt |
Profitability is well below industry medians, with an operating margin gap of 5.1pt and net margin gap of 3.6pt. The decline in gross margin and fixed-cost burden are the main causes, placing the company in a low-profit position within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 3.9% | 3.7% (-0.4%–9.3%) | +0.2pt |
Revenue growth is in line with the industry median and growth capability is average, but weak profitability erodes growth quality.
※ Source: Company compilation
Recoverability of Operating Margin and improvement of Japanese-site profitability: Operating margin 2.6% is far below the industry median of 7.8%, driven primarily by structural deterioration in gross margin (15.5% vs prior year 19.2%). The Japanese-site operating loss of ¥451B is the largest factor lowering company margins and necessitates domestic production efficiency and fixed-cost reductions. Full-year guidance expects operating margin to tick up to 2.8%, but execution of cost reductions and mix improvement is critical. Improving utilization of ¥1,126B in capex and the earnings effect of new model launches will be the litmus test for margin recovery.
Normalization of cash generation and progress in investment recovery: OCF/EBITDA 0.23x is abnormally low, with trade receivables up 61% pressuring working capital. FCF -¥867B reflects front-loaded investments, but weak OCF signals insufficient operating cash generation. Going forward, improvements in receivables collection and monetization of capex will determine sustainability of dividends and growth investments. Financial soundness is high (Debt/EBITDA 1.6x, Cash/short-term debt 4.1x), providing resilience, but early FCF turnaround is a precondition for better capital efficiency.
Volatility from FX and tax burden that reduces earnings predictability: FX loss ¥315B (≈42% of Operating Income) and an effective tax rate of 63.1% cause large earnings swings. Along with operating profit decline, variability in non-operating, special items, and tax burden reduces predictability of Net Income. The full-year guidance is conservative, but normalization of FX and tax adjustments (e.g., reassessment of deferred tax assets) would improve earnings stability. Progress on structural reforms and stabilization of external factors are conditions for medium-term re-rating.
This report is an AI-generated earnings analysis based on XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the firm from public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.