| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1601.1B | ¥1616.7B | -1.0% |
| Operating Income | ¥55.7B | ¥31.2B | +78.2% |
| Ordinary Income (JGAAP) | ¥47.9B | ¥-22.7B | +72.7% |
| Net Income | ¥32.5B | ¥-75.5B | +143.0% |
| ROE | 5.6% | -13.5% | - |
For the fiscal year ended March 2026, Revenue was ¥1,601.1B (YoY -¥15.6B, -1.0%), a slight decline, while Operating Income improved to ¥55.7B (YoY +¥24.5B, +78.2%), Ordinary Income (JGAAP) to ¥47.9B (YoY +¥70.6B, turned positive), and Net Income attributable to owners of the parent to ¥32.5B (YoY +¥108.0B, turned positive), representing a substantial earnings recovery. Operating margin improved to 3.5% from 1.9% a year earlier (+1.6pt), gross margin expanded to 11.4% from 10.0% (+1.4pt), and SG&A ratio was controlled at 7.9% (prior year 8.1%). By segment, Japan led the company with Operating Income of ¥45.1B (+68.3%), China ¥11.2B (+77.4%), Thailand ¥9.7B (+56.1%), and Indonesia ¥19.4B (+5.1%) all delivering higher profits; meanwhile North America continued to post a loss of ¥-31.8B, remaining the largest bottleneck to profitability. Non-operating items included foreign exchange gains of ¥15.7B, but interest expense of ¥18.1B weighed heavily. Extraordinary items included special losses of ¥21.0B, including business structure reform costs of ¥16.9B. Operating Cash Flow was ¥48.1B (YoY +232.5%), a marked improvement, and Free Cash Flow secured a positive ¥23.9B.
Revenue: Revenue was ¥1,601.1B, down 1.0% YoY. By region, China 12,679百万円 (+6.3%), Thailand 7,690百万円 (+5.0%), and Indonesia 24,843百万円 (+1.4%) achieved revenue increases supported by resilient demand in Asia. Japan was ¥64,842百万円 (-0.3%) roughly flat, North America ¥49,266百万円 (-1.1%) slightly down, and Europe ¥9,163百万円 (-28.0%) posted a significant decline, reflecting weakness in developed markets. Total shipments including inter-segment transactions were ¥1,684.8B (-1.6% YoY) as external customer sales fell and internal transactions were streamlined. As a brake-product-focused company, regional differences in auto production volumes and OEM production adjustments are primary drivers of revenue variation.
Profitability: Operating Income improved significantly to ¥55.7B (YoY +78.2%). Cost of sales ratio improved to 88.6% from 90.0% a year earlier (-1.4pt), expanding Gross Profit to ¥182.5B (Gross Margin 11.4%). Stabilization of raw material and energy costs, pass-through price revisions, and production efficiency improvements contributed. SG&A amounted to ¥126.9B (SG&A ratio 7.9%), reduced by ¥3.2B YoY, demonstrating effective cost control. By segment, Japan recorded Operating Income of ¥45.1B (margin 7.0%) up 68.3%, China ¥11.2B (margin 8.8%) up 77.4%, and Thailand ¥9.7B (margin 12.6%) up 56.1%, with Japan and Asia driving profit growth. Conversely, North America continued to record an operating loss of ¥-31.8B (margin -6.5%), and Europe posted ¥0.5B (margin 0.6%) with large declines. In non-operating items, interest income was ¥1.6B versus interest expense of ¥18.1B, and foreign exchange gains of ¥15.7B contributed net, but non-operating result was a deficit of ¥-7.8B. Ordinary Income turned positive to ¥47.9B from ¥-22.7B the prior year. Extraordinary items comprised special losses of ¥21.0B, including business structure reform costs of ¥16.9B, disaster losses ¥3.1B, and impairment losses ¥1.8B; special gains totaled ¥7.0B including gains on disposal of fixed assets of ¥6.1B, resulting in net extraordinary loss of ¥-14.0B. Profit before tax was ¥33.9B, income taxes ¥6.4B, and net income attributable to non-controlling interests ¥9.1B, leaving Net Income attributable to owners of the parent of ¥32.5B (turned positive from ¥-75.5B). Comprehensive income was ¥20.9B, with translation adjustments of ¥-8.5B depressing net income. In conclusion, despite slightly lower Revenue, improved gross profit and controlled SG&A drove a large operating profit increase; while interest burden and one-off costs remain, the company achieved a structural shift from increasing revenue with falling profits to declining revenue with rising profits, with Ordinary and Net Income both reverting to positive.
Japan segment: Revenue ¥648.4B (-0.3%) essentially flat, while Operating Income improved to ¥45.1B (+68.3%) and margin to 7.0%, primarily driven by cost reductions and fixed-cost absorption. North America segment: Revenue ¥492.7B (-1.1%), Operating loss ¥31.8B (loss margin -6.5%) remained in deficit, impacted by structural reform costs and lower utilization. Europe segment: Revenue ¥91.6B (-28.0%) and Operating Income ¥0.5B (-83.8%) saw steep declines due to market contraction and deteriorated fixed-cost absorption. China segment: Revenue ¥126.8B (+6.3%), Operating Income ¥11.2B (+77.4%), margin 8.8%, benefiting from local demand recovery and price revisions. Thailand segment: Revenue ¥76.9B (+5.0%), Operating Income ¥9.7B (+56.1%), margin 12.6%, maintaining high profitability supported by rising demand within ASEAN. Indonesia segment: Revenue ¥248.4B (+1.4%), Operating Income ¥19.4B (+5.1%), margin 7.8%, continuing steady growth. Consolidated Operating Income after corporate adjustments was ¥55.7B, with Japan and Asia producing the majority of profits while North American losses clearly drag on consolidated performance.
Profitability: Operating margin 3.5% (prior year 1.9%, +1.6pt), Gross Margin 11.4% (prior year 10.0%, +1.4pt), Net margin 2.0% (prior year -4.7%, +6.7pt) — profitability improved across the board. ROE 5.6% rose markedly from 0.3% a year earlier but remains at a low level. ROA (based on Ordinary Income) 3.7% turned positive from -1.6% previously. Cash Quality: Operating Cash Flow ¥48.1B equals 1.48x Net Income ¥32.5B, indicating good cash backing of profits, and Free Cash Flow was a positive ¥23.9B. However, OCF/EBITDA (Operating CF ÷ [Operating Income + Depreciation]) was 0.41x, low, suggesting working capital constraints and the presence of non-cash gains/losses that suppress cash conversion. Investment Efficiency: Capital expenditures ¥45.5B were below depreciation of ¥61.8B, with CapEx/Revenue ratio 2.8% and CapEx/Depreciation ratio 0.74x, indicating an upgrade investment mode. Total asset turnover 1.24x (prior year 1.26x) was roughly flat, leaving room to improve asset efficiency. Financial Soundness: Current ratio 208.3%, Quick ratio 196.4% indicate sufficient short-term liquidity. Equity Ratio 44.7% (prior year 43.6%, +1.1pt) is stable, but interest-bearing debt of ¥330.5B yields Debt/EBITDA 2.81x and Debt/Equity Ratio 57.4% reflecting moderate leverage. Interest coverage (Operating Income ÷ Interest Expense) is 3.07x, showing heavy interest burden; interest expense ¥18.1B represents 32.5% of Operating Income ¥55.7B. Working capital stood at ¥349.2B, 21.8% of Revenue, high, and DSO (Accounts Receivable ÷ Daily Revenue) was 67 days, indicating prolonged collection that reduces capital efficiency.
Operating CF improved to ¥48.1B (prior year ¥14.5B, +232.5%). The subtotal was ¥90.0B, reflecting Operating Income ¥55.7B plus Depreciation ¥61.8B less non-cash items adjustments, showing direct contribution from profit improvements. Changes in working capital were a cash outflow of ¥-36.7B, driven by increase in trade receivables -¥14.7B (slower collections) and decrease in trade payables -¥22.0B (shortened payment terms). Inventory change was -¥0.2B, nearly neutral. Payments for income taxes amounted to ¥18.4B, interest and dividends received ¥1.6B, and interest paid ¥18.0B, resulting in final Operating CF of ¥48.1B. Investing CF was ¥-24.1B, with purchases of tangible and intangible fixed assets of -¥45.5B offset by proceeds from sale of fixed assets of ¥20.1B, limiting net investment. Financing CF was ¥-9.2B: proceeds from long-term borrowings ¥26.9B were offset by repayments of long-term borrowings -¥19.2B, net decrease in short-term borrowings -¥10.2B, dividends to non-controlling interests -¥3.5B, and other outflows, resulting in net deleveraging. Free Cash Flow was a positive ¥23.9B (Operating CF ¥48.1B − Investing CF ¥24.2B), providing capacity for financing activities. Cash and cash equivalents at period-end were ¥180.9B (prior year ¥183.0B, -¥2.1B), with foreign exchange effects of -¥16.8B also impacting balances.
Against Net Income of ¥32.5B, the step-down from Operating Income ¥55.7B to Ordinary Income ¥47.9B was mainly due to non-operating expenses (interest expense ¥18.1B and net foreign exchange loss ¥3.0B [¥18.7B loss − ¥15.7B gain]), indicating interest burden pressures on the ordinary earnings level. Extraordinary items netted to ¥-14.0B, with one-off costs including business structure reform costs ¥16.9B, disaster losses ¥3.1B, and impairment losses ¥1.8B reducing Net Income; gains on disposal of fixed assets ¥6.1B were also one-off. The gap between Comprehensive Income ¥20.9B and Net Income ¥32.5B was mainly due to translation adjustments of ¥-8.5B, reflecting currency translation effects of overseas subsidiaries. That Operating CF exceeded Net Income by 1.48x is aided by depreciation of ¥61.8B as a non-cash expense, but increases in working capital are absorbing cash, so the quality of recurring earnings is still improving. Excluding one-offs, estimated recurring ordinary earnings are approximately ¥37.6B (Operating Income ¥55.7B less interest expense ¥18.1B), or alternatively Ordinary Income ¥47.9B less net FX gains ¥10.4B, and cash backing for Net Income is improving; nonetheless, interest burden and working capital remain constraints on earnings quality.
Full year guidance: Revenue ¥1,409.0B (YoY -12.0%), Operating Income ¥70.0B (+25.7%), Ordinary Income ¥52.0B (+8.6%), Net Income ¥25.0B, EPS ¥9.21. Progress vs. Q2 cumulative results: Revenue 113.6% (ahead of plan), Operating Income 79.6% (behind plan), Ordinary Income 92.1% (near plan), Net Income 130.0% (ahead of plan). Revenue outperformance reflects slower-than-expected declines in North America and Europe and resilience in Japan and Asia; shortfall in Operating Income progress implies North American restructuring costs and worsening fixed-cost absorption in Europe impacted results more than anticipated. Net Income outperformance may be due to differences in expected extraordinary items and lower-than-expected income taxes. Versus full-year guidance, the second half is structured as Revenue -¥192.1B (accelerating decline), Operating Income +¥14.3B (maintaining profit growth pace), Ordinary Income +¥4.1B (flat), and Net Income -¥7.5B (compressing Net Income), indicating that second-half profitability improvement and progress on North America restructuring are key.
Dividends for the period: interim ¥0, year-end ¥0, continuing no dividend. The prior year was also no dividend, marking the second consecutive year without distribution. Payout Ratio is 0%. Despite securing positive Free Cash Flow of ¥23.9B, the company prioritizes internal reserves to strengthen the balance sheet and fund business restructuring. Retained Earnings increased to ¥197.2B (prior year ¥178.7B, +10.3%), building capacity for potential future dividend resumption. No share buybacks were confirmed; shareholder returns are being deferred for the time being. Resolution of North American losses, reduction of interest burden, and stabilization of cash generation are likely prerequisites for dividend resumption.
Continued losses in North American operations: Operating loss of ¥31.8B (loss margin -6.5%) continued for the second consecutive year, offsetting 57.1% of consolidated Operating Income ¥55.7B. Despite投入 of business structure reform costs ¥16.9B, improvement has been slow; if customer base rebuilding and fixed-cost reductions are delayed, further impairments or business withdrawal risks may materialize. Continued losses under Debt/EBITDA of 2.81x entail a risk of rising leverage.
Persistent interest burden: Interest expense ¥18.1B accounts for 32.5% of Operating Income ¥55.7B and interest coverage is only 3.07x. Outstanding long-term borrowings of ¥313.6B remain high, and in a rising interest rate environment, financial costs could rise and hit Ordinary and Net Income. Low OCF/EBITDA of 0.41x suggests weak cash generation and constrained debt-servicing capacity.
Enlarged working capital: Working capital ¥349.2B (21.8% of Revenue) and DSO 67 days indicate prolonged receivables collection that reduces capital efficiency. The decrease in trade payables -¥22.0B also contributed, resulting in Operating CF generation lagging profit improvements. Delays in adjusting working capital during revenue decline could trigger liquidity risk and higher interest expense.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.5% | 7.8% (4.6%–12.3%) | -4.3pt |
| Net Margin | 2.0% | 5.2% (2.3%–8.2%) | -3.2pt |
Profitability metrics are well below industry medians; both Operating Margin and Net Margin are in the lower percentile. North American losses and interest burden are primary causes.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -1.0% | 3.7% (-0.4%–9.3%) | -4.7pt |
Revenue growth lags the industry median, with declines in Europe and North America suppressing company-wide growth.
※ Source: Company compilation
It is commendable that core operating profitability improved steadily, achieving Gross Margin +1.4pt and Operating Margin +1.6pt. Japan and Asia are generating the bulk of profits, and regional diversification is functioning as a risk hedge. However, the structure whereby North America’s Operating loss of ¥31.8B offsets 57.1% of consolidated profit remains unresolved; completing the structural reforms is critical to stabilizing next-period earnings.
Interest burden of ¥18.1B (32.5% of Operating Income) and Interest Coverage of 3.07x reduce financial resilience in a rising-rate environment. Weak cash conversion efficiency with OCF/EBITDA at 0.41x further underlines the urgency to improve debt-servicing capacity. Maintaining positive Free Cash Flow of ¥23.9B, compressing interest-bearing debt of ¥330.5B, and pursuing refinancing would expand financial flexibility and shareholder return capacity.
The pattern of Revenue progress exceeding forecasts while Operating Income falls short indicates persistent issues in North America and Europe alongside resilience in Japan and Asia. Achieving the second-half Operating Income target of +¥14.3B depends on narrowing the North America loss and progressing price pass-through, so monitoring progress is important. Although dividends remain suspended for two consecutive years, Retained Earnings have steadily increased, and if profitability and cash generation stabilize, dividend resumption becomes more likely.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial data. Investment decisions are your responsibility; consult professionals as needed before making investment decisions.
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