| Metric | Current Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue | ¥19.5B | ¥20.1B | -2.7% |
| Operating Income | ¥0.5B | ¥1.2B | -53.7% |
| Ordinary Income | ¥0.6B | ¥1.3B | -52.9% |
| Net Income | ¥0.5B | ¥0.9B | -47.1% |
| ROE | 0.8% | 1.5% | - |
This quarter resulted in lower revenue and lower earnings, as a decline in sales was compounded by deteriorating profitability. Lower sales and profitability in the core Filter Business weighed on overall performance. Revenue was ¥19.5B (¥20.1B in the same period last year, YoY-2.7%), Operating Income was ¥0.5B (¥1.2B in the same period last year, YoY-53.7%), Ordinary Income was ¥0.6B (¥1.3B in the same period last year, YoY-52.9%), and Net Income was ¥0.5B (¥0.9B in the same period last year, YoY-47.1%). The Operating Margin was 2.7%, down 3.1pt from 5.8% in the same period last year (116/2,005), primarily due to the simultaneous deterioration in the gross margin and increase in the SG&A ratio.
【Revenue】Revenue was ¥19.5B, representing YoY-2.7%. By segment, the core Filter Business, which accounts for 95.8% of revenue, was the main contributor to the decline, with revenue of ¥18.7B (YoY-3.4%), while the BurningAppliances Business increased revenue to ¥0.8B (YoY+17.9%). However, given its small scale, its impact on the overall results was limited. Other Businesses contracted significantly to ¥0.0B, representing YoY-78.8%.
【Profit and Loss】Gross profit was ¥2.6B (gross margin of 13.2%), down 2.5pt from ¥3.1B (gross margin of 15.7%) in the same period last year. SG&A expenses increased 3.2% YoY to ¥2.0B, rising despite the decline in revenue; consequently, the SG&A ratio increased from 9.9% to 10.5%. As the gross margin declined while the SG&A ratio increased, Operating Income decreased to ¥0.5B (YoY-53.7%). Ordinary Income similarly amounted to ¥0.6B (YoY-52.9%); however, the effective corporate income tax burden declined to 20.8% from 29.9% in the same period last year against Pretax Income of ¥0.6B, causing the decline in Net Income (-47.1%) to be less pronounced than the decline in Pretax Income (-53.2%). Extraordinary gains and losses were both ¥0.0B and immaterial, representing only a minor temporary impact on performance. In conclusion, the company recorded lower revenue and lower earnings, with limited revenue growth drivers and simultaneous declines in sales and profitability in the core business.
The Filter Business reported revenue of ¥18.7B (95.8% of total revenue) and Operating Income of ¥1.4B (margin of 7.3%), with both revenue and profit declining YoY (revenue YoY-3.4%, profit YoY-31.9%). Given that the profit margin in the same period last year was approximately 10.4%, the segment’s profit margin declined by approximately 3.1pt in Q1, making the deterioration in profitability in the core business the primary factor pushing down the company-wide profit margin. The BurningAppliances Business reported revenue of ¥0.8B (4.1% of total revenue), while Operating Income improved significantly by YoY+321.9%, albeit remaining immaterial, resulting in a profit margin of 2.7%. Other Businesses continued to incur operating losses and, although their impact on company-wide profit was limited, constituted structurally low-profitability segments.
【Profitability】The Operating Margin of 2.7% and Net Profit Margin of 2.5% (Net Income of ¥0.48B / Revenue of ¥19.5B) both declined from 5.8% and 4.5%, respectively, in the same period last year. Profit pressure is evident from both the gross margin of 13.2% and the SG&A ratio of 10.5%.【Cash Quality】Cash and deposits were ¥17.9B, slightly down from ¥18.7B in the same period last year. Inventories were ¥8.1B, up 2.0% YoY, while notes and accounts receivable were ¥10.7B, down 11.4% YoY; no significant improvement was observed in asset turnover efficiency.【Investment Efficiency】ROE was 0.8%. Decomposed into Net Profit Margin of 2.5% × Total Asset Turnover of 0.25 × Financial Leverage of 1.29x, the low Total Asset Turnover was the primary factor restraining ROE, indicating room for improvement in asset efficiency.【Financial Soundness】The Equity Ratio was 77.6%, remaining broadly in line with 77.8% in the same period last year. Liquidity was sound, with a Current Ratio of 335.2% and a Quick Ratio of 278.6%. Short-term borrowings of ¥4.6B were unchanged from the same period last year, and interest-bearing debt was limited to short-term borrowings.
Cash and deposits were ¥17.9B, down 4.7% from ¥18.7B in the same period last year, indicating that the decline in profit levels was also reflected in the cash position. While inventories increased slightly to ¥8.1B, up 2.0% YoY, notes and accounts receivable declined 11.4% YoY to ¥10.7B, while electronically recorded monetary claims increased 11.9% YoY to ¥6.7B, suggesting that part of the collection process may have shifted to electronically recorded monetary claims. Accounts payable increased 6.4% YoY to ¥4.5B, indicating more active use of working capital on the procurement and payment side than in the same period last year. Short-term borrowings were ¥4.6B, unchanged from the same period last year, and there was no significant change in the financing structure. Overall, although there were some changes in the composition of working capital, the decline in cash and deposits was limited, and no sudden change in cash management was observed.
Extraordinary gains and losses this quarter were immaterial, with extraordinary gains of ¥0.0B and extraordinary losses of ¥0.0B; recurring operating profit and loss therefore remained the primary driver of performance, indicating that earnings quality was maintained. Non-operating income was ¥0.1B, primarily consisting of dividend income of ¥0.05B and interest income of ¥0.01B, down from ¥0.15B in the same period last year. The effective corporate income tax burden against Pretax Income of ¥0.6B was 20.8%, down from 29.9% in the same period last year. This lower tax burden caused the decline in Net Income (-47.1%) to be less pronounced than the decline in Pretax Income (-53.2%); however, this was more attributable to a temporary reduction in the tax burden than to a structural improvement in recurring earnings power. Accordingly, a certain divergence arose between Net Income and operating performance, as reflected in the degree of deterioration in Operating Income. From a working capital perspective, a slight increase in inventories coexisted with a decline in notes and accounts receivable, and no significant abnormalities were observed from an accrual perspective.
The full-year earnings forecast calls for Revenue of ¥83.5B (YoY+3.1%), Operating Income of ¥4.1B (YoY-0.7%), Ordinary Income of ¥4.3B (YoY-4.7%), and Net Income of ¥3.0B (YoY-7.7%). No revision was made to the dividend forecast during the quarter. Q1 progress rates were 23.4% for Revenue, 13.0% for Operating Income, 14.2% for Ordinary Income, and 15.9% for Net Income, with all profit items below the simple one-quarter pace of 25%. Operating Income had the lowest progress rate, and improvement in profitability from Q2 onward is necessary to achieve the full-year plan.
The dividend per share was ¥0.00 for both the same period last year and the current quarter, and the full-year dividend forecast also remains ¥0.00 with no revision. The Payout Ratio is not subject to evaluation because no dividend payment was identified for calculation purposes.
Business Segment Concentration Risk: The Filter Business accounts for 95.8% of revenue and the majority of segment profit, creating a structure in which company-wide performance is highly susceptible to order trends and price competition in this business.
Asset Efficiency and Working Capital Risk: Total Asset Turnover is low at 0.25x (Net Profit Margin of 2.5% × Leverage of 1.29x resulting in ROE of 0.8%). Inventories of ¥8.1B and notes and accounts receivable of ¥10.7B account for approximately 24% of total assets, indicating limited progress in improving asset efficiency.
Short-Term Funding Structure Risk: Interest-bearing debt of ¥4.6B consists entirely of short-term borrowings, with no diversification into long-term funding. Cash and deposits of ¥17.9B exceed short-term liabilities, and there is no immediate issue with payment capacity; however, the degree of reliance on short-term borrowings requires ongoing monitoring.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.7% | 6.8% (2.9%–9.0%) | -4.1pt |
| Net Profit Margin | 2.5% | 5.9% (3.3%–7.7%) | -3.5pt |
The company’s Operating Margin and Net Profit Margin are approximately 4pt below the manufacturing industry median, placing it in the lower tier of the industry in terms of profitability.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -2.7% | 13.2% (2.5%–28.5%) | -15.8pt |
The company’s Revenue Growth Rate is substantially below the manufacturing industry median, and the company is experiencing a decline in revenue while its peers are generally growing.
※Source: Compiled by the Company
The Operating Margin declined 3.1pt from 5.8% in the same period last year to 2.7%, while the gross margin deteriorated (15.7%→13.2%) and the SG&A ratio increased (9.9%→10.5%) simultaneously, indicating the need to review the cost structure.
Q1 progress toward the full-year earnings forecast was 13.0% for Operating Income, substantially below the simple progress benchmark of 25%. Accordingly, recovery in profitability in the second half is a prerequisite for achieving the full-year plan.
The business composition, which relies on the core Filter Business for 95.8% of revenue, should be noted as a structural characteristic that makes company-wide performance highly susceptible to demand and pricing trends in that business.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.
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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.