| Metrics | Current Period | Prior-year period | YoY |
|---|---|---|---|
| Revenue | ¥79.1B | ¥80.0B | -1.0% |
| Operating Income | ¥2.8B | ¥3.0B | -6.4% |
| Ordinary Income | ¥2.9B | ¥3.0B | -2.5% |
| Net Income | ¥1.6B | ¥1.7B | -5.2% |
| ROE | 2.3% | 2.4% | - |
FY2026 Q3 consolidated results were: Revenue ¥79.1B (YoY -¥0.9B -1.0%), Operating Income ¥2.8B (YoY -¥0.2B -6.4%), Ordinary Income ¥2.9B (YoY -¥0.1B -2.5%), and Net Income ¥1.6B (YoY -¥0.1B -5.2%). While revenue slightly declined, the gross margin remained at 44.7%, indicating a solid earnings base; however, SG&A of ¥32.6B (41.1% of revenue) stayed elevated, limiting the operating margin to 3.5%. The effective tax rate was 43.7%, and the heavy tax burden weighed on net income. The full-year outlook calls for Revenue of ¥104.2B (YoY +1.0%), Operating Income of ¥3.7B (YoY +4.3%), and Net Income of ¥2.6B, expecting profit growth; based on Q3 results, achieving this will hinge on SG&A control and improving the tax burden.
[Profitability] ROE 2.2% (our Q3 figure) significantly trails the industry median of 4.0%, highlighting profitability challenges. By DuPont’s three factors, Net margin is 2.1%, Total asset turnover 0.65x, and Financial leverage 1.66x; the weak net margin is the primary drag. The operating margin of 3.5% exceeds the industry median of 2.8%, but the heavy SG&A ratio of 41.1% and an effective tax rate of 43.7% pressured net income, leaving the net margin at roughly the industry median of 1.8%. ROA of 1.3% is below the industry median of 2.2%. Interest coverage of 8.46x indicates adequate debt-servicing capacity. [Cash Quality] Cash and deposits were ¥39.99B, ensuring ample liquidity. Accounts payable declined sharply YoY by -35.6% (¥9.89B → ¥6.37B), suggesting earlier cash outflows for working capital. As Operating Cash Flow is not disclosed, verification is needed for the cash backing of earnings. [Investment Efficiency] Total asset turnover of 0.65x is standard within the industry but has room for improvement. [Financial Soundness] Equity Ratio 60.1% (above the industry median of 47.3%), Current ratio 243.0%, and Quick ratio 197.7% together indicate strong safety metrics. Interest-bearing debt is ¥23.3B, with a Debt/Capital ratio of 24.1% and a debt-to-equity ratio of 0.66x, reflecting restrained financial leverage. However, with a short-term liabilities ratio of 72.3% and short-term borrowings of ¥16.9B, dependence on short-term debt is high, warranting attention to refinancing risk. Cash-to-short-term liabilities coverage is 2.37x, indicating sufficient short-term liquidity.
As detailed disclosures for Operating CF, Investing CF, and Financing CF are not provided, we infer funding movements from balance sheet trends. Cash and deposits stood at ¥39.99B, maintaining ample liquidity during the period. Within working capital, accounts payable fell markedly YoY by -¥3.52B (-35.6%), suggesting increased cash outflows due to earlier payments to suppliers or changes in purchasing terms. Meanwhile, accounts receivable of ¥21.37B and inventories of ¥14.52B remained relatively stable, concentrating working capital changes in the compression of accounts payable. Short-term liabilities were ¥34.57B, including short-term borrowings of ¥16.85B; cash and deposits covered this by 1.16x, limiting short-term liquidity risk. Based on Operating Income of ¥2.8B and Net Income of ¥1.6B, operating-level profit generation continues, but the quality of conversion to cash requires confirmation once Operating CF is available. The sustainability of the dividend burden (a planned year-end dividend of ¥85.0) also depends on the actual Operating CF.
With Ordinary Income at ¥2.9B and Operating Income at ¥2.8B, net non-operating income was limited at roughly ¥0.1B. Non-operating income of ¥0.54B mainly comprised dividend income of ¥0.17B and interest income of ¥0.06B, while non-operating expenses included interest expense of ¥0.33B, resulting in a slightly positive financial balance. Non-operating income is small at about 0.7% of revenue, indicating reliance on the core business for profits. Gross profit of ¥35.33B (gross margin 44.7%) demonstrates a stable earnings base, but heavy operating expenses, including SG&A of ¥32.56B, compressed the operating margin to 3.5%. The effective tax rate of 43.7% is high, with corporate taxes of ¥1.3B reducing current-period profit, suggesting room to optimize the tax structure. While Operating CF disclosure is absent and cash backing of earnings remains unverified, ongoing recording of Operating Income indicates continued recurring profit generation.
Risk of SG&A rigidification: SG&A of ¥32.6B is high at 41.1% of revenue; if structurally fixed, limited revenue growth will mute operating leverage and hinder margin improvement. Short-term debt dependence risk: With a short-term liabilities ratio of 72.3% and short-term borrowings of ¥16.9B, reliance on short-term debt is high, posing risks of higher refinancing costs or funding difficulties if financial market conditions deteriorate. Risk of persistently high tax burden: If the high effective tax rate of 43.7% continues, improvements at the operating profit level may not fully translate into net income, constraining shareholder return capacity.
[Position within Industry] (Reference Information; Our Estimates) Compared with the industry median for Wholesale Trade in 2025 Q3, the Equity Ratio of 60.1% exceeds the industry median of 47.3% by +12.8pt, indicating strong financial safety. The Current ratio of 243.0% also significantly surpasses the industry median of 184%, reflecting solid short-term liquidity. The operating margin of 3.5% is +0.7pt above the industry median of 2.8%, placing it around to slightly above average within the industry. Conversely, ROE of 2.2% is -1.8pt below the industry median of 4.0%, highlighting issues with return efficiency. Net margin of 2.1% is comparable to the industry median of 1.8%, but ROA of 1.3% is below the industry median of 2.2%, indicating inferior total asset efficiency. Revenue growth of -1.0% lags the industry median of +1.1%, showing delays in expanding earnings. The Net Debt/EBITDA multiple versus the industry median of -2.14 suggests the company holds substantial cash and is estimated to be near a net-cash position, indicating high soundness. Overall, financial soundness and safety are superior within the industry, but there is room for improvement in earnings growth and capital efficiency. (Industry: Wholesale Trade, Comparison: 2025 Q3, Source: our aggregation, N=14 companies)
Despite a high gross margin of 44.7%, the operating margin remains at 3.5% due to a high SG&A ratio of 41.1%; progress in SG&A control is key to improving profitability going forward. The effective tax rate of 43.7% places a heavy burden and weighs on net income, indicating scope for tax optimization as a potential earnings tailwind. With a Payout Ratio of 103.7%, dividends exceed net income; note that dividend sustainability assumes confirmation of Operating CF performance and achievement of the full-year guidance.
This report is an automatically generated earnings analysis based on XBRL earnings release data processed by AI. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm from publicly available financial results. Investment decisions are your own responsibility. Consult a professional as needed before making any investment decisions.