MATSUDA SANGYO Co.,Ltd. FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, Revenue was 6878.4B (YoY +2190.0B +46.7%), Operating Income was 224.4B (YoY +97.6B +77.0%), Ordinary Income was 235.5B (YoY +100.3B +74.1%), and Net Income attributable to owners of the parent was 131.6B (YoY +51.7B +64.7%), delivering significant top-line and bottom-line growth. The rapid expansion of the precious metals-related business (Revenue +57.7%) was the primary driver, and Operating Margin improved by +0.6pt to 3.3% (prior year 2.7%). ROE rose to 11.1% (prior year 9.9%), reflecting simultaneous high revenue growth and profitability improvement.

Drivers of Performance

[Revenue] The precious metals-related business expanded rapidly to 5704.2B (+57.7%), accounting for 82.9% of total Revenue. Growth was driven by expanded precious metals recovery and smelting, increased sales of bullion and chemical products, and higher metal prices. The food-related business posted 1174.7B (+9.6%), a steady increase supported by expanded sales of processed raw materials such as seafood and agricultural products. Overall Revenue rose sharply by +46.7%, reflecting both volume expansion and price effects.

[Profitability] Cost of sales was 6397.8B, yielding a gross margin of 7.0% (prior year 7.5%), down -0.5pt, but SG&A of 256.3B (SG&A ratio 3.7%, prior year 4.8%) was streamlined, resulting in an Operating Margin improvement to 3.3% (prior year 2.7%) (+0.6pt). Operating Income of 224.4B was up +77.0%, demonstrating positive operating leverage well above the SG&A increase rate of +13.8%. Non-operating items included Equity Method Investment Income of 13.7B and Interest & Dividend Income of 0.7B, offset by Interest Expense of 6.0B, leading to Ordinary Income of 235.5B (+74.1%). Extraordinary losses were minimal, consisting only of loss on retirement of fixed assets of 0.9B. After income taxes of 65.5B (effective tax rate 27.9%), Net Income attributable to owners of the parent was 131.6B (+64.7%), achieving revenue and profit growth.

Segment Analysis

The precious metals-related business is the core segment, with Operating Income of 193.4B (+90.0%) and a margin of 3.4%, representing approximately 86% of total Operating Income. Expansion of precious metals recovery and smelting and higher metal prices drove sales and profits. The food-related business delivered Operating Income of 30.9B (+23.9%) with an improved margin of 2.6% (prior year 2.3%), supported by steady expansion in processed raw material sales. Both segments achieved revenue and profit growth, but the high concentration in precious metals—82.9% of Revenue—remains a structural characteristic.

Key Financial Metrics

[Profitability] ROE of 11.1% improved +1.2pt from 9.9% in the prior year, with the structure: Net Income Margin 1.9% × Total Asset Turnover 3.0x × Financial Leverage 1.9x. Operating Margin 3.3% (+0.6pt) improved due to SG&A efficiency, while Gross Margin 7.0% (-0.5pt) was affected by higher procurement costs and mix changes. [Cash Quality] Operating Cash Flow/Net Income -0.7x is a cautionary signal on cash quality. Accounts receivable increased by 143.6B and inventory increased by 309.0B, which are the primary drivers; accounts payable increased by 95.0B partially offsetting this, but Operating Cash Flow was -89.6B. [Investment Efficiency] Total Asset Turnover improved to 3.0x (prior year 2.8x) due to revenue growth. Capital expenditures were 55.8B versus depreciation of 37.9B, yielding an investment/depreciation ratio of 1.5x, indicating continued growth investment. [Financial Soundness] Equity Ratio 52.3% (prior year 59.2%), D/E 0.4x, Debt/EBITDA 1.8x remain at healthy levels, though the increase in short-term borrowings of 257.97B raises the short-term liability ratio and warrants attention.

Cash Flow Analysis

Operating Cash Flow was -89.6B versus +25.4B in the prior year, a marked deterioration. The main cause was working capital buildup: Accounts Receivable +143.6B and Inventory +309.0B were significant increases, partially offset by Accounts Payable +95.0B; however, cash conversion of Operating Income lagged. Investing Cash Flow was -44.5B, primarily due to Capital Expenditures of 55.8B. Free Cash Flow was -134.1B. Financing Cash Flow included short-term borrowings +142.9B, long-term borrowings raised 100.0B, long-term borrowings repayments -51.8B, dividends -23.3B, and share buybacks -2.9B, resulting in cash on hand increasing by +30.7B to 145.6B. The rapid buildup of inventory and receivables is mainly driven by revenue growth and higher metal prices and appears temporary; normalizing cash conversion efficiency will be a focus next period.

Quality of Earnings

Of Ordinary Income 235.5B, Operating Income accounted for 224.4B, indicating core earnings dominance and an earnings structure centered on recurring operations. Major components of non-operating income of 19.6B were Equity Method Investment Income 13.7B, Foreign Exchange Gains 0.7B, and Dividend Income 0.5B; relative to Revenue this is 0.3% and thus limited in impact. Non-operating expenses of 8.4B were mainly Interest Expense of 6.0B. Extraordinary losses were minimal at 0.9B for loss on retirement of fixed assets. Comprehensive Income of 215.3B differs from Net Income 131.6B mainly due to Other Comprehensive Income items: Deferred hedge gains/losses 30.0B, Foreign Currency Translation Adjustments 5.1B, Net Unrealized Gains on Available-for-Sale Securities 5.2B, and Remeasurements of Defined Benefit Plans 5.0B, reflecting substantial unrealized gains from derivative hedges. Operating Cash Flow/Net Income -0.7x indicates relatively high accruals, but since inventory and receivable buildups are the primary cause, this is assessed as a working capital management issue rather than a fundamental revenue recognition quality problem.

Outlook & Guidance

Full Year guidance is Revenue 7000.0B (vs. this period +1.8%), Operating Income 240.0B (vs. this period +7.0%), Ordinary Income 246.0B (vs. this period +4.5%), and Net Income attributable to owners of the parent 171.0B (vs. this period +30.0%). Progress toward the annual Operating Income target is 93.5% and Ordinary Income 95.7%, indicating a high probability of achieving full-year targets. The +1.8% Revenue growth rate reflects a slowdown from this period's high growth, while Operating Income +7.0% assumes maintained profitability. The higher Net Income growth rate likely incorporates normalization of tax rates and one-off items. EPS forecast is 661.71 yen, DPS forecast is 55 yen, with a payout ratio of 8.3%, which remains low.

Shareholder Returns

Annual dividend is ¥100 per share (interim ¥50 + year-end ¥50), unchanged from the prior year. Payout ratio is 20.6% (based on current year) and 8.3% on the full-year forecast, remaining low and indicating ample capacity to return capital relative to profit levels. However, FCF was -134.1B and the current dividends were effectively financed by borrowings, so cash-based sustainability depends on normalization of working capital. Share buybacks were small at 2.9B, and Total Return Ratio is approximately 22.8% (dividends + buybacks / Net Income). Next period DPS guidance is 55 yen, suggesting normalization from the current period's ¥100, and the low payout ratio of 8.3% indicates significant remaining room for returns.

Risk Factors

1. High concentration in the precious metals-related business (Revenue mix 82.9%): The business is highly sensitive to metal prices and spreads, and in a downturn there is risk of inventory valuation losses and margin compression. Gross Margin is thin at 7.0%, making the company sensitive to price fluctuations.

2. Negative Operating Cash Flow and high accruals: Operating Cash Flow/Net Income -0.7x indicates delayed cash realization, driven by Inventory +309.0B and Accounts Receivable +143.6B. If working capital turnover deteriorates further due to market or transactional changes, additional borrowing needs may arise.

3. Increased reliance on short-term liabilities: Short-term borrowings of 257.97B versus cash of 145.6B yield Cash/Short-term Liabilities 0.6x. Short-term borrowings increased by +123.5% YoY, raising rollover dependence and refinancing risk. Interest rate hikes could increase funding costs.

Industry Benchmark (Reference · Company Estimate)

Profitability & Return

Growth & Capital Efficiency

※ Source: Company compilation

Key Points from the Results

1. Rapid expansion of the precious metals-related business drove Revenue +46.7% and Operating Income +77.0%, and SG&A efficiency improved Operating Margin by +0.6pt. Scale merits and tailwinds from price increases coincided, lifting ROE to 11.1%.

2. Conversely, Operating Cash Flow -89.6B and buildups of Inventory +309.0B and Accounts Receivable +143.6B are bottlenecks in cash conversion. The company financed dividends and investments with short-term borrowings +142.9B, so normalization of working capital and returning Operating Cash Flow to positive will be catalysts for re-rating.

3. Debt/EBITDA 1.8x and Interest Coverage approximately 44x indicate a healthy financial position, but the increased reliance on short-term liabilities (Short-term Borrowings 257.97B, Cash/Short-term Liabilities 0.6x) is a point of caution. Next period guidance is conservative—Revenue +1.8%, Operating Income +7.0%—but stable gross margin, working capital, and borrowing structure are prerequisites for sustainable growth.

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This report is an earnings analysis document automatically generated by AI from XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial disclosures. Investment decisions are your responsibility; consult a professional advisor as needed.