| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥10106.8B | ¥9973.3B | +1.3% |
| Operating Income | ¥971.2B | ¥1624.6B | -40.2% |
| Profit Before Tax | ¥939.9B | ¥1590.7B | -40.9% |
| Net Income | ¥681.7B | ¥1178.5B | -42.2% |
| ROE | 8.4% | 15.7% | - |
For the consolidated fiscal year ended March 2026, Revenue was ¥10,106.8B (vs prior year +¥133.4B, +1.3%), Operating Income was ¥971.2B (vs prior year -¥653.4B, -40.2%), Ordinary Income was ¥772.0B (vs prior year +¥76.9B, +11.1%), and Net Income was ¥681.7B (vs prior year -¥496.9B, -42.2%). Although Revenue increased slightly, the Operating margin fell to 9.6% (prior year 16.3%), a decline of 6.7ppt, resulting in a large drop in profits. Gross margin narrowed to 64.7% (prior year 68.6%), down 4.1ppt, while SG&A ratio rose to 50.2% (prior year 49.7%), up 0.5ppt, indicating deterioration in the profit structure. By segment, the core Gastrointestinal Endoscopy Solutions Business posted Revenue of ¥6,973.6B (+3.5%) and Operating Income of ¥1,363.6B (-20.5%)—higher sales but lower profit—while the Surgical & Intervention Business recorded Revenue of ¥3,131.1B (-3.0%) and an Operating loss of ¥149.9B (previously an Operating profit of ¥151.5B), moving into loss. Other expenses increased to ¥575.4B (prior year ¥312.9B), +84.0%, including impairment losses of ¥120.9B and equity-method losses of ¥37.0B (prior year equity-method profit ¥4.7B), which pressured profits. Meanwhile, higher financial income of ¥61.7B contributed to Ordinary Income, and Profit Before Tax was ¥940.0B (prior year ¥1,590.7B, -40.9%). Operating Cash Flow (OCF) was ¥1,005.9B (-47.2%), and Free Cash Flow (FCF) was limited to ¥131.8B, insufficient to cover total shareholder returns of ¥725.6B (dividends ¥225.6B + buybacks ¥500.0B). Cash balance declined to ¥1,880.4B (-25.5%).
[Revenue] Revenue was ¥10,106.8B (+1.3%), a slight increase. By segment, the Gastrointestinal Endoscopy Solutions Business grew to ¥6,973.6B (+3.5%) and accounted for 69.0% of consolidated sales, driving the increase. The Surgical & Intervention Business declined to ¥3,131.1B (-3.0%), representing 31.0% of sales and acting as a headwind. Other businesses contracted to ¥2.1B (-60.8%). The endoscopy growth likely reflected expanded sales of endoscope equipment and therapeutic accessories, while the surgical decline appears driven by adverse product mix, price competition, and worsening market conditions in urology and surgical endoscopy. Overall growth was modest and insufficient to accelerate top-line expansion.
[Profitability] Operating Income was ¥971.2B (-40.2%), a substantial decline. Cost of sales rose to ¥3,565.9B (prior year ¥3,136.4B, +13.7%), increasing more than Revenue, so Gross Profit fell to ¥6,540.9B (prior year ¥6,836.9B, -4.3%) and Gross Margin fell to 64.7% (prior year 68.6%), down 4.1ppt. Drivers of higher cost ratios likely include adverse product mix, higher raw material and logistics costs, FX effects, and a higher proportion of low-margin products in the Surgical business. SG&A rose to ¥5,070.8B (prior year ¥4,956.5B, +2.3%), up ¥114.3B, and SG&A-to-sales rose to 50.2% (prior year 49.7%), up 0.5ppt. With Revenue up only +1.3% but SG&A up +2.3%, operating leverage did not materialize and fixed-cost burden pressured profits. By segment, Gastrointestinal Endoscopy Operating Income fell to ¥1,363.6B (-20.5%), with margin declining to 19.6%, while Surgical moved to an Operating loss of ¥149.9B (margin -4.8%), diluting consolidated margins. Other expenses surged to ¥575.4B (prior year ¥312.9B, +84.0%), with an impairment charge of ¥120.9B depressing Operating Income. Equity-method results turned into a loss of ¥37.0B (prior year profit of ¥4.7B), reflecting deterioration at equity-method affiliates. Financial income rose to ¥61.7B (prior year ¥34.5B), financial expenses rose to ¥93.0B (prior year ¥68.4B), and net financial cost modestly improved to ¥31.3B (prior year ¥33.9B). Profit Before Tax was ¥940.0B (-40.9%); corporate income tax expense was ¥258.2B (prior year ¥412.7B, -37.4%), resulting in Net Income of ¥681.7B (-42.2%). The effective tax rate rose 1.6ppt to 27.5% (prior year 25.9%). Comprehensive income was ¥1,304.5B (prior year ¥1,134.6B, +15.0%), exceeding Net Income, as other comprehensive income of ¥628.0B (including ¥564.4B foreign exchange gains and ¥52.9B remeasurements of defined benefit plans) supplemented Net Income. In conclusion, despite slight revenue growth, the company reported a substantial decline in profit.
The Gastrointestinal Endoscopy Solutions Business recorded Revenue of ¥6,973.6B (+3.5%), Operating Income of ¥1,363.6B (-20.5%), and an Operating margin of 19.6% (prior year 25.4%, -5.8ppt). Segment assets increased to ¥7,350.7B (prior year ¥6,042.9B). This core business, comprised of endoscope equipment, gastrointestinal procedural devices, and medical services, maintained revenue growth but saw a marked margin decline due to pricing initiatives, adverse product mix, and rising costs. The Surgical & Intervention Business recorded Revenue of ¥3,131.1B (-3.0%) and an Operating loss of ¥149.9B (turning from prior year Operating profit ¥152.6B to loss, margin -4.8%). Segment assets rose to ¥5,552.4B (prior year ¥5,000.9B). Composed of urology products, pulmonology products, surgical endoscopy, and energy devices, this segment fell into loss due to declining sales and severe margin deterioration, substantially pressuring consolidated Operating Income. Urgent measures required include product portfolio review, fixed-cost reduction, and pricing adjustments. The Other Businesses (new business R&D and exploration) recorded Revenue of ¥2.1B (-60.8%) and an Operating loss of ¥5.0B (prior year Operating loss ¥4.7B), remaining limited in scale. Allocation method changes for corporate shared expenses have been reapplied to the prior period, preserving comparability.
[Profitability] Operating margin decreased to 9.6% (prior year 16.3%), down 6.7ppt, and Net margin narrowed to 6.7% (prior year 11.8%), down 5.1ppt. A 4.1ppt decline in Gross Margin to 64.7% (prior year 68.6%) and a 0.5ppt rise in SG&A ratio to 50.2% (prior year 49.7%) pressured profitability. ROE declined to 8.7% (prior year 15.6%), down 6.9ppt, well below the company’s historical levels. The ROE decline was driven by the significant deterioration in Net margin; Total Asset Turnover slightly declined to 0.66x (prior year 0.70x). Financial leverage decreased marginally to 1.89x (prior year 1.91x). [Cash Quality] OCF/Net Income was 1.48x, indicating solid cash backing for profits, but OCF/EBITDA (EBITDA = Operating Income + D&A ¥672.2B = ¥1,643.4B) was only 0.61x, as working capital buildup hindered cash conversion. Trade receivables rose to ¥2,368.3B (prior year ¥2,041.8B, +¥326.5B) and inventories to ¥2,070.9B (prior year ¥1,871.5B, +¥199.4B); payables increased to ¥806.5B (prior year ¥614.2B, +¥192.3B). DSO 86 days, DIO 212 days, DPO 83 days, and CCC 215 days indicate prolonged working capital retention. FCF of ¥131.8B was only 0.19x Net Income, insufficient to cover dividends and buybacks totaling ¥725.6B, prompting drawdown of cash on hand and additional borrowing. [Investment Efficiency] Total Asset Turnover fell to 0.66x (prior year 0.70x), and Fixed Asset Turnover declined to 1.78x (prior year 1.91x). Segment asset increases (Endoscopy +¥1,307.8B, Surgical +¥551.5B) outpaced modest sales growth, worsening asset efficiency. [Financial Soundness] Equity Ratio remained high at 52.8% (prior year 52.4%), and Current Ratio was healthy at 161.7% (Current Assets ¥7,063.1B / Current Liabilities ¥4,368.7B). Interest-bearing debt slightly increased to Short-term ¥798.8B + Long-term ¥1,597.0B = ¥2,395.8B (prior year Short-term ¥949.9B + Long-term ¥1,341.2B = ¥2,291.1B), and Debt/EBITDA was 1.46x, within investment-grade range. Interest burden (financial expense) was ¥93.0B, and Interest Coverage (Operating Income / Financial Expense) was 10.4x, providing ample room. Goodwill was ¥1,942.4B (23.9% of equity, 1.18x EBITDA) and intangible assets ¥1,010.3B (12.4%), significant in scale; however, an impairment loss of ¥120.9B was recorded and impairment risk should be monitored.
OCF was ¥1,005.9B (prior year ¥1,904.6B, -47.2%), a large decline. Profit Before Tax of ¥940.0B plus non-cash expenses including Depreciation & Amortization ¥672.2B and impairment losses ¥120.9B, and adding equity-method losses of ¥37.0B, resulted in a subtotal of ¥1,644.8B (prior year ¥1,883.4B). In working capital, trade receivables increased by ¥304.6B and inventories by ¥106.7B (cash outflows), while payables increased by ¥185.2B (cash inflow), but net working capital deteriorated. An increase in provisions of ¥60.7B (prior year decrease ¥152.3B) contributed to cash inflow. Interest received ¥25.1B and dividends received ¥0.1B were inflows; interest paid ¥40.5B and corporate tax payments ¥623.7B (prior year refund ¥30.1B) were outflows, resulting in final OCF of ¥1,005.9B. OCF/Net Income 1.48x indicates good cash backing for profits, but OCF/EBITDA 0.61x shows weak cash conversion, primarily due to working capital buildup. Investing Cash Flow was an outflow of ¥-874.1B (prior year -¥654.7B). The company invested ¥555.6B in tangible fixed assets and ¥268.7B in intangible assets for capital expenditure and R&D, and acquired investment securities for ¥51.4B and conditional consideration settlement ¥1.7B, among other items. Prior year included proceeds from sale of orthopedic business ¥37.3B and recovery from cancellation of equity acquisition ¥76.0B, which did not recur this period; other investing cash outflows totaled ¥27.0B, increasing investment CF outflow. FCF was OCF ¥1,005.9B + Investing CF -¥874.1B = ¥131.8B (prior year ¥1,249.9B, -89.5%). Financing Cash Flow was an outflow of ¥-876.3B (prior year -¥2,115.4B). The company raised long-term borrowings of ¥700.0B and issued bonds ¥298.7B, while repaying long-term borrowings ¥700.0B, redeeming bonds ¥250.0B, lease repayments ¥199.1B, dividend payments ¥225.6B, and share buybacks ¥500.0B. With FCF of ¥131.8B, total shareholder returns of ¥725.6B (dividends + buybacks) far exceeded cash generation, and the company covered the difference by drawing down cash and issuing borrowings/bonds. Including FX effects +¥99.6B, cash and cash equivalents decreased by ¥-644.9B, ending the period at ¥1,880.4B (prior year ¥2,525.3B, -25.5%). Compressing working capital and restoring FCF generation are key to sustaining shareholder returns and financial flexibility.
Recurring revenue is centered on Revenue of ¥10,106.8B from sales of gastrointestinal endoscopes and treatment devices, and Operating Income of ¥971.2B indicates core operating profitability. One-off items include impairment losses of ¥120.9B included in Other Expenses ¥575.4B, reflecting non-cash charges from decreased profitability of fixed assets and goodwill. The increase in Other Expenses (vs prior year +¥262.5B) likely includes restructuring costs and temporary cost increases. The equity-method loss of ¥37.0B may reflect temporary underperformance at non-consolidated affiliates and should be considered separate from recurring operating performance. Financial income ¥61.7B primarily comprises FX gains and interest income, and is non-operating in nature. Financial expense ¥93.0B consists of interest expense and FX losses. Although OCF was 1.48x Net Income, indicating good cash backing, OCF/EBITDA was 0.61x and low due to working capital increases (trade receivables +¥326.5B, inventories +¥199.4B) delaying cash conversion. This indicates widening accruals (the gap between accrual accounting and cash accounting) and warrants attention regarding future cash generation. Comprehensive income of ¥1,304.5B (Net Income ¥681.7B + Other Comprehensive Income ¥628.0B) exceeded Net Income substantially, driven by valuation gains such as foreign currency translation gains of ¥564.4B, providing a temporary capital enhancement effect from FX movements. Ordinary Income being below Operating Income (Ordinary ¥772.0B vs Operating ¥971.2B) reflects that non-operating expenses exceeded non-operating income; net financial cost ¥31.3B and equity-method loss ¥37.0B were deducted from Operating Income. Overall, recurring earnings are supported by the Gastrointestinal Endoscopy business, but the Surgical segment’s move into loss, higher impairment and other expenses, and working capital retention have reduced earnings quality. Improvement initiatives and normalization of cash conversion will be key to restoring earnings quality.
The year-end dividend was ¥30 per share (interim dividend ¥0), making the annual dividend ¥30 and total dividends ¥225.6B (prior year ¥209.8B). With EPS ¥61.32, the payout ratio was 48.9%, a moderate level. Share buybacks of ¥500.0B (number of shares acquired not disclosed) were executed, making total shareholder returns (dividends + buybacks) ¥725.6B. Total return ratio relative to Net Income was 106.4%, exceeding Net Income. With FCF of ¥131.8B, total returns of ¥725.6B were not covered, and the company addressed the shortfall by drawing down cash (-¥644.9B) and issuing borrowings/bonds (net +¥104.6B). In the prior year, total returns were ¥1,210.0B (dividends ¥210B + buybacks ¥1,000B) with FCF ¥1,249.9B; this period the company slightly restrained returns, but the sharp decline in FCF generation caused total returns to exceed FCF. The dividend increase (prior year dividend not stated; presumed new setting of year-end ¥30) can be seen as maintaining shareholder return stance. With Equity Ratio 52.8% and cash balance ¥1,880.4B, short-term ability to continue returns exists, but sustainable expansion of returns requires recovery in FCF generation (higher OCF, working capital compression). The payout ratio of 48.9% is within a sustainable range, but a total return ratio of 106.4% might be tolerable as a one-off; continued excess would require normalized cash generation.
Continued loss risk in the Surgical & Intervention Business: The segment posted an Operating loss of ¥149.9B (margin -4.8%) and turned into a loss, significantly diluting consolidated Operating Income. With concurrent sales decline and margin deterioration, urgent actions are needed—product portfolio review, fixed-cost reduction, and price optimization. If losses persist, consolidated Operating margin will remain depressed, and additional impairment risk or exit costs may arise. With segment assets of ¥5,552.4B and insufficient cash generation, delayed improvement in asset efficiency raises the risk of recurring impairment losses.
Cash conversion deterioration risk from working capital retention: With DSO 86 days, DIO 212 days, and CCC 215 days, the working capital cycle has lengthened and OCF/EBITDA 0.61x shows weak cash conversion. Trade receivables ¥2,368.3B (+¥326.5B) and inventories ¥2,070.9B (+¥199.4B) have accumulated; further collection delays or inventory buildup could deplete FCF and exhaust funds for dividends and buybacks. The effectiveness of CCC-shortening measures (tightening credit management, inventory optimization, improving purchasing terms) will be a focal point.
Goodwill and intangible asset impairment risk: Goodwill of ¥1,942.4B (23.9% of equity, 1.18x EBITDA) and intangible assets ¥1,010.3B were recorded, and an impairment loss of ¥120.9B was recognized this period. Continued underperformance in the Surgical business or adverse market changes that cause actual cash flows to fall below M&A assumptions could trigger further impairment. The majority of goodwill is presumed to originate from M&A in the Gastrointestinal Endoscopy and Surgical domains; delayed recovery in segment Operating Income could necessitate reassessment of asset values.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 8.7% | 6.3% (3.2%–9.9%) | +2.4pt |
| Operating Margin | 9.6% | 7.8% (4.6%–12.3%) | +1.9pt |
| Net Margin | 6.7% | 5.2% (2.3%–8.2%) | +1.6pt |
On profitability and returns, ROE, Operating Margin, and Net Margin all exceed industry medians, placing the company favorably within the manufacturing sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 1.3% | 3.7% (-0.4%–9.3%) | -2.4pt |
On growth, Revenue growth lags the industry median by 2.4ppt, indicating weaker top-line momentum versus peers.
※ Source: Company compilation
Recovery of core business profitability and improvement of segment mix: The Gastrointestinal Endoscopy Solutions Business is the core, accounting for 69.0% of sales, but its Operating margin fell to 19.6% (prior year 25.4%), down 5.8ppt. The Surgical & Intervention Business turned to a loss, diluting consolidated margins. A 4.1ppt decline in Gross Margin and a 0.5ppt rise in SG&A ratio were primary drivers of profit deterioration; urgent measures include pricing policy, product mix rebalancing, cost improvements, and fixed-cost reductions. The timing of Surgical returning to profitability and the pace of margin recovery in Gastrointestinal Endoscopy will determine improvements in consolidated Operating margin. Although the company’s Operating margin of 9.6% is 1.9ppt above the industry median of 7.8%, it represents a significant deterioration relative to the company’s prior-year 16.3%, and normalizing the profit structure is a top priority.
Working capital management and restoration of cash generation: With OCF/EBITDA 0.61x and CCC 215 days, cash conversion is weak and FCF ¥131.8B is far below total returns ¥725.6B. The buildup of receivables and inventories is the main cause; strengthening credit management, optimizing inventory, and supply-chain efficiency are needed. The payout ratio of 48.9% is sustainable, but the total return ratio of 106.4% has been funded by cash drawdown and borrowing; without normalization of FCF, continued return expansion is difficult. Monitoring progress on DSO/DIO/CCC reductions and a reversal in OCF/EBITDA will be key. Financial soundness — Equity Ratio 52.8% and Debt/EBITDA 1.46x — is adequate, so short-term liquidity risk is limited, but medium- to long-term freedom in capital allocation will depend on Operating Cash Flow recovery.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; consult professional advisors as necessary.