| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥7384.3B | ¥7668.6B | -3.7% |
| Operating Income | ¥329.9B | ¥372.6B | -11.5% |
| Ordinary Income | ¥498.4B | ¥480.6B | +3.7% |
| Net Income | ¥509.9B | ¥351.6B | +45.0% |
| ROE | 7.6% | 5.6% | - |
For the fiscal year ended March 2026, Revenue was 7,384B (YoY -284B, -3.7%), Operating Income was 330B (YoY -43B, -11.5%), Ordinary Income was 498B (YoY +18B, +3.7%), and Net Income was 510B (YoY +158B, +45.0%). Although top-line and operating-profit declined, Net Income rose substantially due to recording Special Gains of 372B, principally a gain on sale of investment securities of 362B. The Seals Business drove operating profit growth while weakness in the Electronic Components Business reduced the operating margin to 4.5% (-0.4pt). Ordinary Income benefited from non-operating income of 226B including equity-method investment income of 95B and foreign exchange gains of 41B, resulting in higher Ordinary Income. The increase in Net Income is largely driven by one-off items, and on an underlying-performance basis results are assessed as roughly flat.
Revenue of 7,384B was down 284B YoY (-3.7%). By segment, the Seals Business remained firm at 3,693B (+1.4%), while the Electronic Components Business declined significantly to 3,451B (-7.0%). Other businesses totaled 259B and were affected by the sale of the roll business. The Seals Business achieved revenue growth through price pass-through and improved mix to automotive, construction machinery, and industrial machinery customers. The Electronic Components Business experienced revenue declines due to demand adjustments in the electronics industry and intensified price competition. Cost of sales ratio was 82.2%, yielding a gross margin of 17.8%, nearly unchanged YoY. SG&A was 984B, or 13.3% of sales, rising slightly and reflecting the stickiness of fixed costs that pressured profitability.
Operating Income was 330B (YoY -43B, -11.5%), with the operating margin down to 4.5% (-0.4pt). The Seals Business delivered 279B (+6.3%) maintaining a margin of 7.5%, absorbing depreciation of 234B and achieving higher profits. The Electronic Components Business posted 40B (-55.6%), a steep decline with margin falling to 1.1%. Non-operating income of 226B comprised interest income 11B, dividend income 36B, equity-method investment income 95B, and foreign exchange gains 41B, comfortably exceeding non-operating expenses of 58B. As a result, Ordinary Income rose to 498B (+3.7%). Special Gains totaled 372B centered on a gain on sale of investment securities of 362B, while Special Losses totaled 143B including a loss on sale of affiliate shares of 94B and impairment losses of 15B, producing a net positive impact of +229B on profit. After deducting corporate taxes and others of 218B (effective tax rate 29.9%), Net Income was 510B (+45.0%). In conclusion, operating-level results show revenue and profit declines, but gains in non-operating and special items delivered higher net profits.
The Seals Business reported Revenue of 3,693B (+1.4%) and Operating Income of 279B (+6.3%), a margin of 7.5%. Price pass-through and mix improvement to automotive, construction machinery, and industrial machinery customers supported growth, enabling the business to absorb depreciation of 234B and increase profits. It accounted for 84.5% of consolidated Operating Income and remains the core earnings pillar. The Electronic Components Business posted Revenue of 3,451B (-7.0%) and Operating Income of 40B (-55.6%), with margin plunging to 1.1%. Demand adjustments in the electronics industry and price competition weighed on performance, and profitability deteriorated relative to depreciation of 244B. Operating Income fell from 89B in the prior year, halving the prior profit level, making structural profit improvement an urgent task. Other businesses delivered Revenue of 259B and Operating Income of 11B, margin 4.4%. Scale shrank following the roll business sale, but certain margins were maintained via specialty lubricants and other products.
Profitability: Operating margin of 4.5% fell 0.4pt from 4.9% a year earlier, driven down by margin deterioration in the Electronic Components Business (1.1%). Gross margin was 17.8%, roughly unchanged, but stickiness of SG&A at 13.3% compressed operating margin. ROE of 7.6% exceeds last year’s 5.2%, but the Net Income increase was led by special gains, so underlying performance is effectively flat. Ordinary Income margin was 6.7%, aided by equity-method investment income and foreign exchange gains.
Cash Quality: Operating Cash Flow (OCF) was 681B, 1.34x Net Income of 510B, indicating healthy cash generation. OCF/EBITDA (EBITDA = Operating Income 330B + Depreciation 491B = 821B) was 0.83x, slightly low, as changes in working capital (inventory increase -70B, accounts payable decrease -106B) slowed cash conversion. Free Cash Flow (FCF) was 579B and covers dividends of 199B by 2.91x, leaving ample capacity for returns.
Investment Efficiency: Estimated ROIC (NOPAT / Invested Capital) is calculated as Operating Income 330B × (1 - 0.299) = 231B NOPAT, with invested capital (interest-bearing debt 206B + net assets 6,703B - cash & deposits 1,568B = 5,341B), yielding about 4.3%, which is low. Capital turnover (Revenue / Total Assets) is 0.78x, stable, and low profitability in the Electronic Components Business drags down overall investment efficiency. CapEx/Revenue is 6.6% and CapEx/Depreciation is 0.99x, indicating maintenance-level investment and limited growth investment.
Financial Soundness: Equity Ratio is 70.4%, Debt/Equity is 12.1%, indicating a conservative capital structure. Current ratio is 225% and quick ratio 202%, showing ample short-term liquidity. Cash & deposits of 1,568B are 3.25x short-term borrowings of 482B. Total interest-bearing debt is 206B and net interest-bearing debt is -1,362B, a net cash position. Interest coverage (Operating Income 330B / Interest expense 26B) is 12.7x, showing light interest burden.
OCF was 681B, down 25.6% from 916B a year earlier, but remained at a healthy level at 1.34x Net Income of 510B. Working capital changes included collection from receivables +129B, inventory increase -70B, and accounts payable decrease -106B, resulting in a net drag of -47B. Non-cash expenses included depreciation 491B and impairment losses 15B. Equity-method investment income of 95B has not been fully cash-realized and thus represented a cash outflow adjustment; corporate taxes paid were 79B, a cash outflow. Investing Cash Flow was -103B: capital expenditures -485B were largely offset by proceeds from sale of investment securities +393B, leaving a small net outflow. Financing Cash Flow was -471B, driven by dividend payments -199B, share repurchases -151B, and repayment of long-term borrowings -89B. Free Cash Flow was 579B (OCF 681B - Investing CF 103B), ample and covering the sum of dividends and share buybacks (350B) by 1.65x. Cash and cash equivalents increased by 206B from opening 1,361B to closing 1,567B, further strengthening the financial base.
Operating Income of 330B contrasted with Ordinary Income of 498B, a divergence of 168B attributable to non-operating income of 226B including equity-method investment income 95B (28.8%), dividend income 36B (10.9%), and foreign exchange gains 41B (12.4%). Equity-method investment income reflects associates’ performance and is expected to have some continuity, but foreign exchange gains depend on market movements and are largely one-off. On special items, the gain on sale of investment securities 362B net of a loss on sale of affiliate shares 94B produced a net +268B that materially boosted Net Income; excluding these effects, estimated underlying Net Income is about 242B, below prior year Net Income of 352B. Comprehensive income was 882B, a +372B divergence relative to Net Income 510B, mainly due to foreign currency translation adjustments +218B and actuarial gains/losses related to retirement benefits +188B. Available-for-sale securities valuation differences were -82B, and OCI from equity-method affiliates contributed +47B. The quality of Net Income is heavily dependent on one-off items, and earnings power from operating activities is showing deceleration.
Full-year guidance is Revenue 7,566B (YoY +2.5%), Operating Income 350B (+6.1%), Ordinary Income 483B (-3.1%), and Net Income 464B (flat YoY). Revenue guidance assumes recovery in demand for the Electronic Components Business and a revision of exchange-rate assumptions, leading to modest top-line growth. Operating Income is projected to increase assuming margin recovery in Electronic Components via price, yield, and utilization improvements; however, Ordinary Income is expected to decline due to a reversal in foreign exchange gains and slower growth in equity-method investment income. Net Income is forecast to be roughly flat, on the assumption that last year’s special gains will not recur. The company assumes second-half weighted revenue in its guidance, implying some downside risk to year-to-date progress on Operating Income. Recovery of Electronic Components margins is the key to meeting plans; demand volatility and delays in price pass-through represent downside risks.
Annual dividend is interim 65 yen and year-end 65 yen for a total of 130 yen, a substantial increase from prior-year dividend of 50 yen (+80 yen, +160%). Total dividends amount to approximately 199B, with a Payout Ratio of 56.8%. FCF of 579B covers dividends by 2.91x, providing a comfortable buffer. Total returns including share buybacks of 151B amount to approximately 350B. Total Return Ratio is (dividends 199B + share buybacks 151B) / Net Income 510B = 68.6%, a sustainable level. Treasury stock balance decreased from 177B in the prior year to 26B, an 85.6% reduction, reflecting share repurchases of 151B and subsequent disposal/cancellation during the period. These actions contributed to per-share value enhancement and improved DOE. Note that in October 2026 NOK plans to integrate management with Eagle Industry and establish a joint holding company; dividend policy after the integration will be announced separately. While the company’s stance to strengthen shareholder returns ahead of integration is evident, future dividend levels will depend on integration progress and the new governance policy.
Structural weakness in profitability of the Electronic Components segment: Operating margin fell to 1.1% (prior year 2.4%), with Operating Income of 40B (-55.6%), halving from 89B a year earlier. Demand adjustments in the electronics industry, price competition, and declines in utilization and yields are primary causes. The segment accounts for 46.7% of Revenue; if profitability improvement is delayed, achieving the full-year Operating Income target (+6.1%) will be difficult. If Electronic Components Operating Income does not recover to prior-year levels, consolidated Operating margin of 4.5% will deteriorate further and divergence from the manufacturing benchmark median of 7.8% will widen.
Dependence on one-off gains and stagnation of underlying earnings power: Of Net Income 510B, gain on sale of investment securities 362B (post-tax approx. 254B) constitutes a large portion. Excluding the net special items +229B, underlying Net Income is about 281B, below prior-year 352B. Operating Income declined to 330B (-11.5%), and the company’s structure depends on non-operating income (equity-method investment income 95B, foreign exchange gains 41B). Exchange rates are volatile and lack persistence; absent recovery of operating performance, next year’s guidance of Ordinary Income -3.1% suggests profit growth will slow.
Working capital efficiency and sluggish cash conversion: OCF of 681B decreased by 235B YoY (-25.6%), and OCF/EBITDA is 0.83x, below 1.0x. Inventory increase -70B and accounts payable decrease -106B were main factors, with work-in-process ratio of 37% and relatively high inventory composition posing risk of stock build-up during production bottlenecks. Estimated DSO (Accounts receivable 1,437B ÷ daily sales 20.2B) is about 71 days, exceeding 60 days and indicating longer collection periods. DPO (Accounts payable 650B ÷ daily cost of sales 16.6B) is about 39 days and relatively short, suggesting substantial room to improve the cash conversion cycle (CCC). Without improvements in working capital management, the OCF/Net Income multiple may decline and constrain return capacity.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.5% | 7.8% (4.6%–12.3%) | -3.3pt |
| Net Margin | 6.9% | 5.2% (2.3%–8.2%) | +1.7pt |
Operating margin trails the industry median by 3.3pt, reflecting margin weakness in the Electronic Components Business and stickiness of SG&A. Net margin exceeds the median by 1.7pt due to a one-off gain on sale of investment securities but lacks sustainability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -3.7% | 3.7% (-0.4%–9.3%) | -7.4pt |
Revenue growth rate lags the industry median by 7.4pt, primarily due to declines in the Electronic Components Business.
※ Source: Company aggregation
Progress on profit recovery in the Electronic Components Business: The segment’s Operating margin of 1.1% fell sharply from 2.4% last year, making its turnaround the top priority for group-wide profit recovery. Full-year guidance (Operating Income +6.1%) assumes price pass-through, yield improvements, and higher utilization in Electronic Components. Quarterly margin trends and CapEx deployment (changes in Electronic Components CapEx/Revenue ratio) will serve as progress indicators. Segment disclosures showing Electronic Components margin moving back into the 2% range will be a key monitoring metric.
Balance between underlying earnings and one-off gains: Net Income of 510B depends heavily on gain on sale of investment securities 362B, implying underlying Net Income of roughly 280B, below the prior year. The divergence between Operating Income 330B (-11.5%) and Ordinary Income 498B (+3.7%) is driven by equity-method investment income 95B and foreign exchange gains 41B, which are of limited persistence. With guidance indicating Ordinary Income -3.1% and flat Net Income, recovery of operating profitability (restoring operating margins and improving SG&A efficiency) is critical for sustainable medium-term profit growth.
Capital efficiency and return capacity: Estimated ROIC 4.3% and ROE 7.6% indicate low capital efficiency, but net cash 1,362B and FCF 579B point to a strong financial base. Total Return Ratio 68.6% reflects a shareholder-return strengthening stance, with the sizable dividend increase (+80 yen) and share buybacks of 151B. Attention should be paid to capital policy changes ahead of the management integration (holding company formation), as post-integration dividend policy and capital efficiency targets will be important inputs to valuation. Improvements in working capital efficiency (shortening CCC, compressing inventories) would further enhance ROIC and FCF generation.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. 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 statements. Investment decisions should be made at your own responsibility and, where appropriate, after consulting a professional advisor.