| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥4423.2B | ¥4605.1B | -4.0% |
| Operating Income | ¥103.2B | ¥164.3B | -37.2% |
| Profit Before Tax | ¥154.6B | ¥200.6B | -22.9% |
| Net Income | ¥96.6B | ¥113.0B | -14.6% |
| ROE | 2.9% | 3.5% | - |
For the fiscal year ended March 2026, Revenue was ¥4423.2B (YoY -¥181.8B, -4.0%), Operating Income was ¥103.2B (YoY -¥61.1B, -37.2%), Ordinary Income was ¥193.0B (YoY +¥76.6B, +65.9%), and Net Income was ¥96.6B (YoY -¥16.4B, -14.6%). At the operating level, both revenue and profit declined; gross margin fell to 12.3% (prior year 13.7%), a decrease of 1.4pt, partially offset by an SG&A ratio improvement to 10.0% (prior year 10.2%), but Operating Margin deteriorated by 1.3pt to 2.3% (prior year 3.6%). Ordinary Income increased YoY by 65.9% supported by financial income of ¥48.4B and equity-method gains of ¥5.8B, but core business earning power excluding non-operating items weakened. Net Income attributable to the parent was ¥71.3B (YoY -¥8.6B, -17.3%), EPS ¥60.37 (YoY -¥10.32, -14.6%), and the full-year Payout Ratio was 156%, materially exceeding profit levels.
[Revenue] Revenue declined to ¥4423.2B (YoY -4.0%). By segment, Americas ¥2608.2B (-0.6%) was essentially flat, while China ¥535.4B (-21.3%) and Asia and Europe ¥391.5B (-7.1%) saw significant declines. Japan ¥888.1B (+0.9%) remained resilient. By region, sales were: U.S. ¥1767.0B, Canada ¥649.0B, China ¥539.7B, Japan ¥882.5B, with high customer concentration—Honda-related sales ¥3821.2B representing 86% of total. Weakening demand in China and adverse product mix were the main drivers of the revenue decline.
[Profitability] Cost of goods sold was ¥3878.7B (YoY -2.5%), resulting in a gross margin of 12.3% (prior year 13.7%), down 1.4pt. Increases in raw material, logistics, and labor costs outpaced price pass-through, and margin deterioration in the Americas segment (Operating Margin 0.6%) pushed down consolidated gross margin. SG&A was contained at ¥442.0B (YoY -6.1%), but Operating Income fell sharply to ¥103.2B (YoY -37.2%). Operating Margin fell 1.3pt to 2.3% (prior year 3.6%), indicating lower operating-level profitability. Non-operating items—financial income ¥48.4B (prior year ¥40.8B), financial expenses ¥2.9B (prior year ¥7.3B), and equity-method gains ¥5.8B (prior year ¥2.8B)—contributed to Ordinary Income of ¥193.0B (YoY +65.9%). From Profit Before Tax ¥154.6B, income taxes of ¥58.0B (effective tax rate 37.5%) were deducted, yielding Net Income ¥96.6B (YoY -14.6%). Net Income attributable to the parent was ¥71.3B (YoY -17.3%), with non-controlling interests of ¥25.2B reducing consolidated net income. Impairment losses of ¥15.8B (prior year ¥14.9B) were recognized in Americas and China, pressuring profit as one-off expenses. In conclusion, the company experienced revenue and operating profit declines with weakened operating earning power; Ordinary Income rose due to non-operating gains, but core business strength softened.
Americas (Revenue ¥2608.2B, Operating Income ¥14.7B, Margin 0.6%) was essentially flat in Revenue (-0.6%) but Operating Income plunged -76.0% YoY. An impairment of ¥15.4B was recorded, and cost increases plus lagged price pass-through pressured profitability. Japan (Revenue ¥888.1B, Operating Income ¥96.3B, Margin 10.8%) saw Revenue +0.9% with Operating Income -7.1%, remaining the high-margin contributor and accounting for 93% of consolidated Operating Income. China (Revenue ¥535.4B, Operating Income ¥67.7B, Margin 12.6%) experienced a large Revenue decline (-21.3%) but Operating Income only declined -9.1%, maintaining a high margin of 12.6%. Asia and Europe (Revenue ¥391.5B, Operating Loss -¥4.7B, Margin -1.2%) had Revenue -7.1%; although the loss narrowed YoY (+49.6%), the segment remained negative. Restoring profitability in Americas and Asia & Europe is key to consolidated improvement.
[Profitability] ROE 2.3% (prior year 2.7%), ROA 2.3% (prior year 2.6%) declined; Operating Margin 2.3% (prior year 3.6%) and Net Margin 2.2% (prior year 2.5%) deteriorated across metrics. Gross Margin 12.3% (prior year 13.7%) fell 1.4pt due to cost increases and adverse product mix. SG&A ratio improved to 10.0% (prior year 10.2%) by 0.2pt but could not offset the gross margin drop. EBITDA was ¥247.7B (Operating Income ¥103.2B + Depreciation & Amortization ¥144.5B), yielding an EBITDA margin of 5.6% (prior year 6.8%), and Depreciation coverage of Operating Income was 1.40x.
[Cash Quality] Operating Cash Flow was ¥226.1B, 2.34x Net Income ¥96.6B; OCF/EBITDA was 0.91x, at the lower bound. Accrual ratio -3.7% ((Operating CF - Net Income)/Total Assets) is within a healthy range.
[Investment Efficiency] Total asset turnover was 1.05x (Revenue ¥4423.2B / average total assets ¥4275B). Capital expenditures ¥192.5B were 1.33x Depreciation ¥144.5B, indicating capex investment ahead of depreciation.
[Financial Soundness] Equity Ratio 73.3% (prior year 70.8%), D/E 0.29x (interest-bearing-equivalent other financial liabilities ¥64.3B / net assets ¥3276B), current ratio 270% (current assets ¥2296B / current liabilities ¥850B) — all very healthy. Interest coverage was 36x (Operating Income ¥103.2B / interest expense ¥2.9B), indicating minimal interest burden.
Operating CF was ¥226.1B (prior year ¥287.1B, -21.3%). Starting from Profit Before Tax ¥154.6B, add Depreciation & Amortization ¥144.5B and impairment ¥15.8B; working capital impacts included accounts receivable decrease of ¥102.1B and inventory flat at ¥0.7B supporting cash, offset by accounts payable decrease of -¥93.4B. From a subtotal of ¥326.4B, cash taxes paid -¥135.6B were deducted to arrive at Operating CF. Operating CF is 2.34x Net Income, indicating high quality. Investing CF was -¥237.2B, driven by net increase in time deposits -¥1.0B, capital expenditures -¥192.5B, intangible asset acquisitions -¥29.6B, and purchase of capital-like financial instruments -¥39.0B. Free Cash Flow was -¥11.1B (Operating CF ¥226.1B + Investing CF -¥237.2B), a slight negative. Financing CF was -¥227.2B, comprised of dividend payments -¥103.5B, share buybacks -¥50.0B, dividends to non-controlling interests -¥58.6B, and lease repayments -¥15.0B. Cash and cash equivalents decreased from ¥1115.4B at the beginning of the period to ¥926.0B, a decline of -¥190.3B, including foreign exchange translation +¥48.0B. Working capital management saw simultaneous AR compression and AP reduction, resulting in neutral end-period cash management. Operating CF/EBITDA at 0.91x is at the lower bound; despite negative FCF, total returns of ¥153.5B were implemented by drawing down cash balances.
Ordinary recurring earnings center on Operating Income ¥103.2B as the core indicator of business earning power. One-off items—impairment loss ¥15.8B and gain on sale of fixed assets ¥11.2B—partly offset each other. Non-operating income ¥48.4B (1.1% of Revenue) is below a 5% threshold but materially boosted Ordinary Income to ¥193.0B, warranting attention to the divergence from Operating Income. Financial income composition includes interest/dividends ¥20.6B and foreign exchange gains, and equity-method gains ¥5.8B were added at the ordinary level. The effective tax rate of 37.5% is standard, but non-controlling interests of ¥25.2B reduce final Net Income, leaving Net Income attributable to parent at ¥71.3B, only 37% of Ordinary Income. Accrual ratio -3.7% and Operating CF/Net Income 2.34x indicate good cash backing of profits. The large gap between Ordinary Income and Net Income reflects the impact of non-operating gains, taxes, and non-controlling interests on final earnings volatility.
Against the full-year guidance (Revenue ¥4400B, Operating Income ¥130B, Net Income ¥85B, Net Income attributable to parent ¥80B), actuals were Revenue ¥4423.2B (+0.5% beat), Operating Income ¥103.2B (-20.6% miss), Net Income ¥96.6B (+13.6% beat), and Net Income attributable to parent ¥71.3B (-10.8% miss). Revenue landed slightly higher, but Operating Income missed due to margin deterioration in the Americas and impairment recognition. Ordinary Income ¥193.0B exceeded guidance (not disclosed) due to non-operating gains, but Net Income attributable to parent missed due to non-controlling interest impact. EPS actual ¥60.37 vs. guidance ¥68.47, a shortfall of -¥8.10. Dividend guidance of interim ¥44 and year-end ¥46 totaling ¥90 matched actuals. Miss factors include steep margin decline in the Americas (0.6%), China Revenue decline (-21.3%), impairment ¥15.8B, and increased non-controlling interest burden.
Annual dividend ¥90 (interim ¥44, year-end ¥46; up ¥50 from prior year ¥40). Dividend payments totaled ¥103.5B against Net Income attributable to parent ¥71.3B (on an issued share basis), yielding a Payout Ratio of 156%, materially exceeding profit. Including share buybacks ¥50.0B, the Total Return Ratio was 216% (dividends ¥103.5B + share buybacks ¥50.0B ÷ Net Income attributable to parent ¥71.3B), an extremely high level. With Free Cash Flow at -¥11.1B and dividends ¥103.5B, FCF coverage is negative and dividends were funded by drawing down cash balances. Treasury stock balance decreased from -¥270.0B prior year to -¥124.3B this year (cancellation ¥193.5B, acquisition ¥50.2B, disposal ¥0.4B). Cash and cash equivalents ¥926.0B provide ample near-term liquidity and capacity for returns, but sustainability of Total Return Ratio above 200% is questionable given current profit and FCF levels. A flexible return policy aligned with profit recovery and FCF improvement is desirable.
Americas profitability deterioration risk: Americas accounts for Revenue ¥2608.2B (59% of total) and Operating Margin sharply fell to 0.6% (-76.0%). Rising raw material, logistics, and labor costs have outpaced price pass-through, and an impairment of ¥15.4B was recorded. Absent further price adjustments or cost reductions, Japan (high margin 10.8%) alone may not offset Americas’ weakness, posing a risk of prolonged depressed Operating Margin.
Customer concentration risk: High concentration with Honda-related sales ¥3821.2B representing 86% of total. The company is therefore highly susceptible to Honda’s model cycle and demand fluctuations; production cuts or specification changes for particular models can materially swing revenue and profit. Demand weakness in China and Asia/Europe (-21.3%, -7.1%) is largely attributable to customer dynamics.
Sustainability risk of high returns: With Total Return Ratio 216% and Payout Ratio 156%, the company returned dividends ¥103.5B + buybacks ¥50.0B despite Free Cash Flow -¥11.1B. While cash balance ¥926.0B and financial soundness are strong, if current profit and FCF levels persist, insufficient return resources could lead to dividend cuts, reduced buybacks, or constraints on growth investment.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 2.3% | 6.3% (3.2%–9.9%) | -4.0pt |
| Operating Margin | 2.3% | 7.8% (4.6%–12.3%) | -5.4pt |
| Net Margin | 2.2% | 5.2% (2.3%–8.2%) | -3.0pt |
All of ROE, Operating Margin, and Net Margin are below industry medians, placing the company in the lower range for profitability within the manufacturing sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -4.0% | 3.7% (-0.4%–9.3%) | -7.7pt |
Revenue growth at -4.0% significantly lags industry median growth of 3.7%, indicating weaker growth performance.
※ Source: Company compilation
Restoring Americas profitability is the highest priority. Raising the Americas Operating Margin from 0.6% through price adjustments, cost reductions, and product-mix improvements is key to improving consolidated Operating Margin and ROE. Monitor progress on portfolio reforms to leverage high margins in Japan and China (10.8%, 12.6%) while correcting loss/low-margin structures in Americas and Asia & Europe.
High Total Return Ratio of 216% substantially exceeds earnings and is currently supported by cash balance ¥926.0B and strong financial position, but with FCF at -¥11.1B sustainability is difficult. The timing of profit recovery and FCF turnaround, and potential adjustments to the return policy (e.g., dividend cuts or reduced buybacks), will be focal points of cash allocation.
This report was automatically generated by AI analyzing XBRL financial statement data to produce an earnings analysis document. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed financial statements. Investment decisions should be made at your own responsibility; consult professionals as necessary.