| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥38173.5B | ¥36713.3B | +4.0% |
| Operating Income / Operating Profit | ¥531.8B | ¥556.1B | -4.4% |
| Equity-Method Investment Gain / (Loss) | ¥39.1B | ¥-37.7B | +203.7% |
| Ordinary Income | ¥757.2B | ¥652.5B | +16.0% |
| Net Income / Net Profit | ¥160.0B | ¥207.6B | -22.9% |
| ROE | 2.0% | 2.7% | - |
For the fiscal year ended March 2026, Revenue / Net Sales were ¥3兆8,173B (YoY +1,460B +4.0%), Operating Income was ¥532B (YoY -24B -4.4%), Ordinary Income was ¥757B (YoY +105B +16.0%), and Net Income attributable to owners of the parent was ¥425B (YoY +23B +5.6%). Both the Pharmaceutical Wholesale Business (prescription drugs, etc.) and the Cosmetics & Daily Goods Wholesale Business secured revenue increases, maintaining a third consecutive year of revenue growth. However, operating profit declined due to a roughly 13bp decline in gross margin to 6.8% (prior year 7.0%) and an increase in selling, general and administrative expenses. At the ordinary income level, non-operating income of ¥254B—principally equity-method investment gains of ¥39B, dividend income of ¥31B, and private equity fund gains of ¥43B—contributed to a significant increase. Net special gains of ¥218B (mainly gains on sale of investment securities ¥214B) less special losses of ¥157B (including restructuring costs ¥46B) produced a net uplift of ¥61B, helping final profit increase. EPS was ¥206.67 (prior year ¥193.20 +7.0%).
[Revenue] By segment, the Pharmaceutical Wholesale Business (prescription drugs, etc.) accounted for ¥2,4661B (+4.0%) or 64.6% of the total, the Cosmetics & Daily Goods and OTC Pharmaceutical Wholesale Business accounted for ¥1,2378B (+4.2%) or 32.4%, and the Animal Pharmaceuticals & Food Processing Raw Materials and related businesses accounted for ¥1,173B (+0.4%) or 3.1%. The core pharmaceutical wholesale business saw steady demand from hospitals, clinics and dispensing pharmacies, maintaining a similar growth rate to the prior year. Cosmetics & daily goods performed well to drugstores and convenience stores, achieving the highest growth among segments at +4.2%. Animal-related businesses posted only marginal increases. Overall, the company achieved three consecutive years of revenue growth, sustaining top-line momentum.
[Profitability] Gross profit was ¥2,610B, with a gross margin of 6.8%, down about 13bp from 7.0% a year earlier. A challenging price negotiation environment in pharmaceutical wholesale and rising logistics and labor costs compressed gross margin. SG&A was ¥2,078B (+3.8%), roughly in line with revenue growth, leaving the SG&A ratio at 5.4%, unchanged from the prior year. Major SG&A items were salaries and allowances ¥830B (+1.7%), depreciation ¥136B (+0.5%), and rent ¥58B (+12.6%). As a result, Operating Income was ¥532B (-4.4%), and the operating margin contracted to 1.4% (prior year 1.5%), shrinking about 13bp. At the ordinary income level, non-operating income of ¥254B far exceeded non-operating expenses of ¥29B, resulting in Ordinary Income of ¥757B (+16.0%). Major components of non-operating income were dividend income ¥31B, equity-method investment gains ¥39B, and private equity fund gains ¥43B; non-operating expenses were negligible (interest expense ¥0.1B). Net special gains of ¥218B (mostly gains on sale of investment securities ¥214B) less special losses of ¥157B (restructuring costs ¥46B; impairment losses ¥7B; valuation losses on investment securities ¥5B, etc.) produced a net +¥61B, lifting profit before taxes to ¥818B. After income taxes ¥287B (effective tax rate 35.1%) and non-controlling interests ¥106B, Net Income attributable to owners of the parent was ¥425B (+5.6%). In conclusion, despite revenue growth, operating profit declined due to lower gross margin; ordinary profit rose due to improved non-operating items; and final profit increased due to net positive special items, resulting in a revenue-and-profit expansion profile.
The Pharmaceutical Wholesale Business (prescription drugs, etc.) reported Operating Income of ¥242B (-3.6%) with a margin of 1.0%, a decrease of ¥91B year-on-year. The Cosmetics & Daily Goods and OTC Pharmaceutical Wholesale Business reported Operating Income of ¥264B (-5.6%) with a margin of 2.1%, a decrease of ¥16B year-on-year. The Animal Pharmaceuticals & Food Processing Raw Materials and related businesses reported Operating Income of ¥23B (-4.9%) with a margin of 2.0%, a decrease of ¥1B year-on-year. Operating income decreased across all segments, but Cosmetics & Daily Goods was the largest contributor to consolidated operating income, and its 2.1% margin substantially outperformed the 1.0% margin in the Pharmaceutical Wholesale Business, maintaining higher profitability. The Pharmaceutical Wholesale Business accounts for 64.6% of revenue composition and thus has a concentrated structure sensitive to drug price revisions and pricing negotiation environment.
[Profitability] Operating margin was 1.4% (prior year 1.5%), down approximately 13bp. Gross margin was 6.8% (prior year 7.0%), also down about 13bp, confirming pressure from rising logistics and labor costs and continued price competition. ROE was 2.0% (prior-year comparison unavailable but very low), indicating low capital efficiency reflecting industry characteristics. ROA (on ordinary income basis) improved to 4.0% (prior year 3.6%), aided by improved non-operating results. [Cash Quality] Operating Cash Flow (OCF) was ¥466B, about 1.10x the Net Income attributable to owners of the parent of ¥425B, which is broadly healthy. The OCF subtotal (before working capital changes) was ¥686B, yielding a cash conversion rate of 68%, a neutral level. OCF/EBITDA (Operating Income + Depreciation = ¥532B + ¥174B = ¥706B) was 0.66x, below 1.0x, as working capital burdens (trade receivables -¥427B; inventories -¥117B; trade payables +¥513B; net -¥31B) suppressed cash generation. Free Cash Flow was ¥559B (OCF + Investing CF ¥93B), ample; capital expenditures of ¥66B were only 38% of depreciation ¥174B, indicating restrained capex. [Investment Efficiency] Total asset turnover was 1.99x (Revenue ¥3兆8,173B / Total assets ¥1兆9,220B), a standard efficiency for wholesale, with capex maintained at renewal levels. [Financial Soundness] Equity Ratio was 41.4% (prior year 41.5%), stable; current ratio 128% and quick ratio 110%, indicating sound liquidity. Interest-bearing debt is minimal, with interest expense ¥0.1B; interest coverage is extremely strong at 5,318x on operating income basis and 7,060x on EBITDA basis. Goodwill / Equity ratio is 1.6%, and intangible assets / total assets ratio is 1.9%, indicating a light intangible asset load and high balance sheet flexibility.
OCF was ¥466B (prior year ¥605B -23.1%), 2.91x consolidated Net Income ¥160B, and 1.10x Net Income attributable to owners of the parent ¥425B, broadly healthy. The structure shows the OCF subtotal ¥686B less working capital changes (trade receivables -¥427B; inventories -¥117B; trade payables +¥513B; net -¥31B) and income taxes paid ¥258B. The increase in trade receivables of ¥427B reflects higher sales and lengthening DSO, inventories up ¥117B reflect stock buildup for demand response and logistics stabilization, and trade payables up ¥513B reflect expanded purchases and payment timing. Investing CF was +¥93B (prior year -¥34B), as proceeds from sale of investment securities ¥279B exceeded capital expenditures ¥66B, intangible asset purchases ¥31B, and acquisition of subsidiary shares ¥111B, resulting in net cash inflow. Financing CF was -¥294B, with major items dividend payments ¥132B, share buybacks ¥81B, dividends to non-controlling interests ¥33B, and lease liability repayments ¥6B. Free Cash Flow ¥559B (OCF + Investing CF) comfortably covers dividends ¥132B and share buybacks ¥81B totaling ¥213B, yielding an FCF coverage of 2.62x and ample return capacity. Cash and deposits increased to ¥2,891B (prior year ¥2,614B +¥277B), indicating robust liquidity.
Operating Income of ¥532B (margin 1.4%) versus Ordinary Income ¥757B (margin 2.0%) shows that net non-operating income of +¥225B (non-operating income ¥254B - non-operating expenses ¥29B) substantially boosted ordinary income. Major components of non-operating income were dividend income ¥31B, equity-method investment gains ¥39B, and private equity fund gains ¥43B. These investment-related revenues represent 0.7% of sales and are not an excessive dependence, but they carry inherent volatility. Regarding special items, net special gains of +¥61B (special gains ¥218B, mostly gains on sale of investment securities ¥214B; special losses ¥157B including restructuring costs ¥46B; impairment losses ¥7B; valuation losses on investment securities ¥5B, etc.) lifted profit before tax but are one-off in nature. Comprehensive income was ¥668B (owners of the parent ¥544B; non-controlling interests ¥124B), well above Net Income ¥160B, with other comprehensive income ¥136B (valuation differences on securities ¥98B; actuarial differences on retirement benefits ¥25B; OCI share of associates ¥12B, etc.) contributing. Accrual quality is solid with OCF ¥466B / Net Income ¥160B = 2.91x, while OCF/EBITDA (¥706B) at 0.66x is depressed by working capital burden. Core operating profitability is weakening due to gross margin decline, with non-operating and special items compensating for final profit.
Full Year (FY) guidance is Revenue ¥3兆9,440B (YoY +3.3%), Operating Income ¥550B (YoY +3.4%), Ordinary Income ¥715B (YoY -5.6%), Net Income attributable to owners of the parent ¥390B (YoY -8.2%), EPS ¥190.52, Dividend ¥34. Compared with the actuals: Revenue ¥3兆8,173B / ¥3兆9,440B = 96.8%, Operating Income ¥532B / ¥550B = 96.7%, Ordinary Income ¥757B / ¥715B = 105.9%, Net Income attributable to owners of the parent ¥425B / ¥390B = 109.1%. Relative to a standard Q2 progress (about 50% of full year), Revenue and Operating Income are roughly on plan, while Ordinary Income and Net Income have already exceeded the plan. The upside was driven by improved non-operating and special items. Note that the impact of the tender offer to make PALTAC a wholly owned subsidiary is not yet incorporated, and guidance post-wholly-owned conversion will be disclosed at an appropriate time; attention should be paid to both potential scale expansion and integration costs from the next fiscal year onward.
Annual dividend is ¥66 (Q2-end ¥32; year-end ¥34), a substantial increase of ¥36 year-on-year. The payout ratio to Net Income attributable to owners of the parent ¥425B is 31.1% (dividend payments ¥132B / Net Income attributable to owners of the parent ¥425B), a sustainable level. Share buybacks of ¥81B were executed during the period (recorded in Financing CF as -¥81B). Free Cash Flow ¥559B covers the total of dividends and share buybacks of ¥213B by 2.62x, indicating ample capacity for returns. Total return ratio (dividends + share buybacks ¥213B / Net Income attributable to owners of the parent ¥425B) is approximately 50%. Next fiscal year’s forecast dividend of ¥34 (year-end) is a reduction, likely part of dividend smoothing, and the policy of a payout ratio around 30% is expected to be maintained. Share buybacks retain room for tactical deployment while balancing PALTAC integration and working capital needs.
Deterioration in working capital efficiency: Increases in trade receivables -¥427B and inventories -¥117B have pressured OCF, reducing OCF/EBITDA to 0.66x and lowering cash conversion. DSO (trade receivables / daily sales) is estimated at approximately 76 days, suggesting looser collection terms. Inventory days are also lengthening; credit control, SKU optimization and logistics efficiency to compress working capital are challenges.
Gross margin decline and lack of operating leverage: Gross margin declined to 6.8% (prior year 7.0%) by about 13bp; SG&A ratio remained flat at 5.4%, leading operating margin to shrink to 1.4% (prior year 1.5%). Price negotiation pressure in pharmaceutical wholesale and rising logistics costs are compressing gross margin, and SG&A growth (+3.8%) roughly matches revenue growth (+4.0%), limiting operating leverage. If price correction, SKU/channel mix improvement and distribution optimization do not progress, there is a risk of a secular decline in profitability.
Execution risk for PALTAC integration: The tender offer to make PALTAC a wholly owned subsidiary is underway, but delays in PMI, persistent duplicate costs, or difficulty in renegotiating customer terms could postpone realization of expected synergies (collaborative purchasing, logistics integration). Integration costs and increased working capital may temporarily pressure cash flow and margins.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 1.4% | 3.4% (1.4%–5.0%) | -2.0pt |
| Net Profit Margin | 0.4% | 2.3% (1.0%–4.6%) | Delta |
Operating margin is 2.0pt below the industry median of 3.4%, and net profit margin is 1.9pt below the median of 2.3%, placing the company in the lower half of industry profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 4.0% | 5.9% (0.4%–10.7%) | -1.9pt |
Revenue growth rate is 1.9pt below the median 5.9%, indicating top-line expansion is around standard to slightly below peers.
※ Source: Company compilation
Final profit supplemented by non-operating and special items: Operating profit declined due to a roughly 13bp drop in gross margin, but net non-operating income of ¥225B (non-operating income ¥254B) including equity-method investment gains, dividend income and private equity fund gains, plus net special gains centered on gains on sale of investment securities ¥214B (net special gains ¥61B), boosted ordinary and final profit. Non-operating income is 0.7% of sales and not an excessive dependence, but volatility of investment-related income is inherent; strengthening core operating earnings (improving gross margin and SG&A efficiency) is key for sustainable growth.
Working capital burden and declining cash conversion: OCF ¥466B is healthy relative to Net Income, but OCF/EBITDA at 0.66x and working capital increases (trade receivables -¥427B; inventories -¥117B) are suppressing cash generation. DSO is estimated at about 76 days, indicating looser collection terms. Free Cash Flow ¥559B sufficiently covers dividends and share buybacks, but with the risk of working capital increases from the PALTAC integration, improving cash conversion through credit control, SKU optimization and inventory turn improvements is a priority.
High profitability in non-prescription segments and optional value of PALTAC integration: The Cosmetics & Daily Goods wholesale business is highly profitable with Operating Income ¥264B and a 2.1% margin, substantially higher than the 1.0% margin in prescription pharmaceuticals, and is a pillar of consolidated profit. PALTAC’s full acquisition could generate significant scale, purchasing and logistics synergy potential; however, successful PMI execution is critical to medium-term profitability improvement. Integration costs and temporary increases in working capital and the time lag to realize synergies should be incorporated into assessments.
This report was auto-generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are compiled by the Company from public financial statements as reference information. Investment decisions are your own responsibility; consult a professional advisor as necessary.