| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥6779.2B | ¥7071.0B | -4.1% |
| Operating Income | ¥187.2B | ¥151.8B | +23.3% |
| Ordinary Income | ¥208.4B | ¥132.8B | +56.9% |
| Net Income | ¥110.1B | ¥129.3B | -14.9% |
| ROE | 7.5% | 10.5% | - |
The full year results for the fiscal year ended March 2026 showed Revenue of ¥6779.2B (YoY -¥291.8B -4.1%), Operating Income of ¥187.2B (YoY +¥35.4B +23.3%), Ordinary Income of ¥208.4B (YoY +¥75.6B +56.9%), and Net Income attributable to owners of the parent of ¥110.1B (YoY -¥19.2B -14.9%). At the operating level, gross margin improved from 6.5% to 7.3% (+0.8pt), and SG&A was contained at ¥305.7B, resulting in Operating Margin improving from 2.1% to 2.8% (+0.7pt). Ordinary Income rose significantly aided by foreign exchange gains of ¥18.7B, but Net Income declined because one-off losses recorded in the prior year of ¥52.1B (including impairment losses of ¥25.9B) narrowed to ¥1.1B this fiscal year while the effective tax rate increased. Operating Cash Flow (OCF) was ¥382.9B (YoY +54.5%), approximately 3.5x Net Income, funding capital expenditures of ¥271.8B and securing Free Cash Flow (FCF) of ¥118.6B. Equity Ratio improved to 43.6% (from 37.5% prior year, +6.1pt) and ROE improved to 7.5% (from 5.1% prior year, +2.4pt), strengthening the balance sheet.
[Revenue] Revenue decreased to ¥6779.2B (YoY -4.1%). By region, North America declined to ¥1778.0B (-13.8%), a drop of ¥283.5B, and China fell to ¥626.4B (-11.2%), down ¥79.1B, which were the primary drivers. Conversely, Europe grew to ¥680.6B (+10.5%) and Asia to ¥609.7B (+18.9%), while the core Japan market modestly declined to ¥3201.3B (-2.7%). The companywide revenue decline reflects production adjustments in North America and softening demand in China; increases in Europe and Asia were insufficient to fully offset those decreases.
[Profitability] Gross Profit was ¥492.8B (prior year ¥457.9B, +¥34.9B +7.6%), and Gross Margin improved to 7.3% (prior 6.5%, +0.8pt). Improvement in cost of sales ratio was driven by stabilization of raw material prices, production efficiency gains, and progress in passing through price increases. SG&A was ¥305.7B, essentially flat from prior year ¥306.1B, and by containing fixed costs despite lower revenue, Operating Income rose to ¥187.2B (+23.3%), lifting Operating Margin to 2.8% (prior 2.1%, +0.7pt). By segment, Japan posted ¥83.4B (+41.2%), China ¥30.3B (+33.5%), and North America ¥37.8B (+38.6%), with significant margin improvements offsetting revenue declines. Non-operating items included dividend income ¥5.7B, interest income ¥4.5B, and FX gains ¥18.7B, while FX losses ¥18.5B and interest expense ¥9.3B were recorded, resulting in net non-operating income of ¥21.2B (prior year net non-operating loss ¥18.9B, +¥40.1B). Ordinary Income therefore rose sharply to ¥208.4B (+56.9%). Extraordinary items were net +¥4.6B (extraordinary gains ¥5.7B including ¥15.8B gain on sale of investment securities; extraordinary losses ¥1.1B including impairment losses ¥0.4B and business structure reform costs ¥0.7B), improving from prior year net -¥32.0B. Profit before tax was ¥213.0B (prior ¥100.8B, +111.3%), but after corporate tax expense of ¥40.9B and non-controlling interests of ¥11.8B, Net Income attributable to owners of the parent was ¥110.1B (-14.9%). Although the effective tax rate declined from 42.7% to 19.2%, Net Income decreased due to the reversal of prior-year tax base compression caused by one-off losses. In conclusion, despite revenue decline, improved gross margin and fixed cost control produced higher operating profit but lower net income.
The Japan segment reported Revenue ¥3201.3B (-2.7%), Operating Income ¥83.4B (+41.2%), and margin 2.6%. Margin improvement was notable despite revenue decline, driven by production efficiency and fixed cost control. North America Revenue was ¥1778.0B (-13.8%) with a significant drop, yet Operating Income improved to ¥37.8B (+38.6%) and margin to 2.1% due to cost reductions mitigating revenue impact. Europe achieved Revenue of ¥680.6B (+10.5%) but Operating Income fell to ¥21.8B (-11.6%) and margin to 3.2%, indicating margin pressure despite growth. China recorded Revenue of ¥626.4B (-11.2%) but Operating Income improved to ¥30.3B (+33.5%) and margin was highest among segments at 4.8%, supported by a profitable product mix. Asia grew Revenue to ¥609.7B (+18.9%) but Operating Income declined sharply to ¥12.7B (-32.7%) and margin to 2.1%, as growth-related investment costs and start-up expenses pressured profitability.
[Profitability] Operating Margin improved to 2.8% (prior 2.1%, +0.7pt), achieved through Gross Margin of 7.3% (prior 6.5%, +0.8pt) and only a slight increase in SG&A ratio to 4.5% (prior 4.3%, +0.2pt). ROE increased to 7.5% (prior 5.1%, +2.4pt), driven mainly by improvement in Net Income margin. ROA rose to 6.2% (prior 4.2%, +2.0pt). [Cash Quality] OCF / Net Income was 3.48x (prior 1.92x), indicating strong cash backing of profits. OCF/EBITDA ratio was 0.90x, with depreciation of ¥236.6B and OCF of ¥382.9B. The accrual ratio was -19.8% (OCF - Net Income)/Total Assets, showing cash generation significantly exceeded accounting profit. [Investment Efficiency] Capital expenditures were ¥271.8B (4.0% of Revenue), up +9.9% from prior year ¥247.3B. Construction-in-progress was ¥176.2B (prior ¥229.6B, -23.3%), indicating some investments moved to operation. Work-in-process was ¥156.6B (53.7% of inventories total ¥291.5B), remaining high; inventory reduction is a future challenge. [Financial Soundness] Equity Ratio improved to 43.6% (prior 39.2%, +4.4pt), aided by Net Assets of ¥1458.5B (prior ¥1231.7B, +18.4%). Interest-bearing debt (short-term borrowings ¥96.0B + long-term borrowings ¥259.5B + bonds ¥60.0B + lease liabilities equivalent) totaled ¥415.5B, with Debt/Equity ratio of 28.5%. Current Ratio was 110.9% (Current Assets ¥1533.0B / Current Liabilities ¥1382.5B), indicating acceptable short-term liquidity.
OCF rose to ¥382.9B (prior ¥247.9B, +54.5%). From profit before tax ¥213.0B adding back depreciation ¥236.6B, subtotaled ¥442.4B, adjustments for working capital included inventory increase -¥23.7B, decrease in trade receivables +¥53.5B, decrease in trade payables -¥84.5B, and corporate tax paid -¥56.2B, among others. Investing Cash Flow was -¥264.3B (prior -¥231.9B, -14.0%), mainly capital expenditures -¥271.8B (prior -¥247.3B) and intangible asset investments -¥7.2B, partially offset by proceeds from sale of fixed assets ¥22.8B and sale of securities ¥18.6B. Financing Cash Flow was -¥63.8B (prior -¥103.6B, +38.4%), including long-term debt repayments -¥136.1B, short-term borrowings increase +¥22.6B, long-term borrowings raised +¥100.0B, dividend payments -¥36.7B, and share repurchases -¥4.2B. FCF of ¥118.6B (OCF ¥382.9B - Investing CF ¥264.3B) covered dividend payments and share repurchases totaling ¥40.9B. Cash and cash equivalents rose from ¥132.8B at the beginning of the period to ¥202.3B at year-end (+¥69.4B), strengthening liquidity.
Of Ordinary Income ¥208.4B, ¥187.2B was generated from core operations, and non-operating income of ¥21.2B comprised dividend income ¥5.7B, interest income ¥4.5B, and FX gains ¥18.7B (after offsetting FX losses ¥18.5B). Net FX result was +¥0.2B, essentially neutral, so substantive non-operating income centered on dividends and interest of ¥10.2B. Extraordinary items were net +¥4.6B, driven mainly by gain on sale of investment securities ¥15.8B (extraordinary gains ¥5.7B) less impairment losses ¥0.4B and restructuring costs ¥0.7B; this represents 2.2% of Ordinary Income and indicates low reliance on one-time items. Prior year included extraordinary losses of ¥52.1B (impairment losses ¥25.9B and restructuring costs ¥26.2B); the absence of these this year contributed to the +111.3% increase in profit before tax, but normalization of tax burden resulted in Net Income decreasing -14.9%. OCF ¥382.9B is 3.5x Net Income ¥110.1B, with accrual (Net Income - OCF) of -¥272.8B, indicating very strong cash backing of profits. Working capital movements were supported by receivables collection +¥53.5B and moves to reduce inventory, while decrease in trade payables -¥84.5B reflects normalization of payment terms.
For FY2027 (year ending March 2027), management forecasts Revenue ¥6690.0B (YoY -1.3%), Operating Income ¥190.0B (YoY +1.5%), Ordinary Income ¥190.0B (YoY -8.8%), Net Income attributable to owners of the parent ¥140.0B (YoY +27.2%), and EPS ¥156.65. Versus the current period results, the achievement ratios are Revenue 101.3%, Operating Income 98.5%, Ordinary Income 109.7%, and Net Income 78.6% — Revenue and Ordinary Income are above plan, Operating Income slightly below, and Net Income below plan as the benefit from one-off reductions in extraordinary losses diminishes. The plan assumes continued revenue decline but operating profit growth driven by ongoing gross margin improvement and fixed cost control; the projected decrease in Ordinary Income assumes a normalization (reversal) of FX gains. The projected increase in Net Income reflects that the prior-year one-off losses have run through and the next fiscal year expects improved earnings under a normal tax burden. Dividend guidance is ¥22.00 per share, a reduction from current fiscal year payout of ¥43.00 (ordinary dividend ¥18.00 + commemorative dividend ¥3.00 + year-end ¥23.00), but excluding the commemorative dividend the ordinary dividend plan implies continued upward trend.
Annual dividend is ¥43.00 (interim ¥20.00, year-end ¥23.00, with year-end comprising ordinary dividend ¥18.00 + commemorative dividend ¥3.00). Net Income attributable to owners of the parent ¥110.1B and shares outstanding 89,581 thousand shares (after deducting treasury stock 278 thousand shares = 89,303 thousand shares) result in total dividends of ¥38.4B and a Payout Ratio of 34.9%. Prior year dividend was ¥17.00 with total dividends ¥30.3B and Payout Ratio 26.0%; this year implemented an increased dividend and higher payout ratio. Share repurchases amounted to ¥4.2B (in Financing CF) and total shareholder returns were ¥42.6B, giving a Total Return Ratio of 38.7%. Dividend coverage relative to FCF (¥118.6B) is 3.1x, indicating high sustainability. Next year’s dividend forecast of ¥22.00 (Payout Ratio 14.0%) reflects the absence of the commemorative dividend; on an ordinary dividend basis the company indicates continuation of an increase from prior ordinary dividend ¥18.00. Retained earnings stand at ¥742.4B (prior ¥617.9B, +20.2%), providing ability to balance growth investment and shareholder returns.
Risk of persistently high work-in-process ratio 53.7%: Of inventories ¥291.5B, work-in-process ¥156.6B accounts for a majority. Although down from prior ¥172.6B, it remains high. Prolonged stagnation in production stages or reduced efficiency in changeovers could cause yield deterioration or inventory valuation loss. Work-in-process alone is estimated to represent approximately 84 days of inventory; compressing in-process inventory is the next priority to improve margins and cash flow.
Demand variability risk in North America and China segments: North America Revenue ¥1778.0B (-13.8%) and China Revenue ¥626.4B (-11.2%) show continued declines in key markets. Prolonged production adjustments and structural shrinkage in demand for exhaust-related parts due to electrification shifts are concerns. These two regions account for 35.5% of consolidated revenue outside Japan, and delayed demand recovery could downside companywide performance.
Volatility in non-operating income/loss from foreign exchange: This year FX gains ¥18.7B and FX losses ¥18.5B nearly offset, whereas prior year only FX losses ¥18.5B were recorded, increasing non-operating expense. With overseas revenue ratio of 54.5% (total excluding Japan), appreciation of the yen could increase valuation losses and translation losses, raising non-operating expense and posing downside risk at the Ordinary Income level. The next fiscal year’s plan projects Ordinary Income -8.8% reflecting conservative FX assumptions.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.8% | 7.8% (4.6%–12.3%) | -5.0pt |
| Net Margin | 1.6% | 5.2% (2.3%–8.2%) | -3.5pt |
The company’s Operating Margin of 2.8% is -5.0pt below the industry median 7.8%, placing it in the lower tier within manufacturing. Despite Gross Margin improvement to 7.3%, SG&A burden and capital-intensive business structure are depressing margins.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -4.1% | 3.7% (-0.4%–9.3%) | -7.8pt |
Company Revenue growth -4.1% is -7.8pt below the industry median 3.7%, with demand adjustments in North America and China being primary drivers of underperformance.
※Source: Company aggregation
Sustainability of operating profit growth through gross margin improvement and fixed cost control: Despite Revenue decline of -4.1%, Operating Income rose +23.3% and Gross Margin improved from 6.5% to 7.3% (+0.8pt). Stabilization of raw material costs and progress in price pass-through were primary drivers, and SG&A containment at ¥305.7B lifted Operating Margin from 2.1% to 2.8%. Segment-level profitability improvements were broad-based (Japan +41.2%, China +33.5%, North America +38.6%), suggesting structural improvement in earnings power. The next fiscal year plan is conservative with Operating Income +1.5%, but continued gross margin improvements and rigorous SG&A control could produce upside.
Strengthening of OCF generation and expanded investment capacity: OCF ¥382.9B is 3.5x Net Income ¥110.1B, and FCF ¥118.6B comfortably covers dividends and buybacks totaling ¥40.9B, with cash on hand increasing to ¥202.3B (+¥69.4B). Equity Ratio improved to 43.6% (+4.4pt) and Interest-bearing Debt/Equity 28.5% indicates restrained financial leverage. The ability to sustain capital expenditures of ¥271.8B while securing FCF supports balancing growth investment and shareholder returns, and the transition of construction-in-progress ¥176.2B to operating assets could drive earnings growth next year.
This report is an AI-generated earnings analysis created by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the company based on public financial disclosures. Investment decisions are your responsibility; consult a professional advisor as necessary before making investment decisions.
These are mechanically computed values based on a residual income model. They are not a forecast of market prices or a recommendation of any investment action, and do not predict or guarantee future share prices. Historical values are computed retrospectively using current guidance-achievement statistics.