SEKI (7857) FY2026 Q3 Earnings Report

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Executive Summary

The key point for the nine months ended Q3 of the fiscal year ending March 2026 is that the Company’s operating results fell into the red as a decline in revenue coincided with an increase in SG&A expenses. Revenue was ¥87.2B (¥90.3B in the previous year, YoY -3.4%), Operating Income was ¥-2.0B (¥0.5B in the previous year), Ordinary Income was ¥-0.2B (¥2.5B in the previous year, disclosed-basis YoY +10.1%), and Net Income attributable to owners of the parent was ¥-0.2B (¥1.6B in the previous year). Declining revenue and deteriorating profitability in the core Printing-Related Business were the primary causes of the operating loss, while non-operating income, mainly dividends received, partially offset the loss.

Factors Affecting Earnings

【Revenue】Revenue was ¥87.2B, down 3.4% year on year. The two major segments, the core Printing-Related Business at ¥65.9B (down 2.3% year on year) and the Catalog Sales-Related Business at ¥10.6B (down 14.2%), both reported lower revenue, offsetting revenue growth in the Western and Paperboard Sales-Related Business (¥2.6B, +2.6%) and the Publishing and Advertising Agency-Related Business (¥8.6B, +1.7%).

【Profit and Loss】Gross profit was ¥18.7B, with a gross margin of 21.5%, down from 22.3% in the previous year. SG&A expenses increased 5.7% year on year to ¥20.8B, and the Company’s ability to absorb costs weakened amid declining revenue. As a result, Operating Income fell from a profit of ¥0.5B in the previous year to a loss of ¥-2.0B. Ordinary Income was limited to ¥-0.2B, supported by ¥2.0B in non-operating income, including ¥1.2B in dividends received, while Net Income deteriorated to ¥-0.2B after net special gains and losses, compared with ¥1.6B in the previous year. The earnings structure is characterized by declining revenue and lower profits, with the reduction in the loss at the Ordinary Income level dependent on income from investment holdings.

Segment Analysis

The Printing-Related Business posted revenue of ¥66.6B (76.4% composition ratio) and a segment loss of ¥1.9B, a significant deterioration from the ¥0.7B profit in the previous year, making it the primary driver of the Company-wide results. The Catalog Sales-Related Business recorded revenue of ¥10.6B (12.1% composition ratio) and profit of ¥0.4B, remaining profitable despite lower revenue year on year. The Publishing and Advertising Agency-Related Business generated revenue of ¥8.6B and a loss of ¥-0.3B, while the Western and Paperboard Sales-Related Business generated revenue of ¥10.0B and a small loss of ¥-0.1B, remaining broadly flat. The Museum-Related Business recorded a loss of ¥-0.1B despite its small revenue base. Recovery in the profitability of the Printing-Related Business is a necessary condition for an improvement in Company-wide performance.

Key Financial Indicators

【Profitability】The Operating Income margin was -2.3%, deteriorating from 0.5% in the previous year, while the Net Profit margin also declined to -0.3% from 1.7% in the previous year. The gross margin was 21.5%, approximately 85bp below the previous year’s 22.3%.【Cash Flow Quality】Dividends received accounted for ¥1.2B of the ¥2.0B in non-operating income, reducing the Ordinary Income loss. In addition, special gains of ¥0.3B, including a ¥0.2B gain on the sale of investment securities, contributed to earnings. Consequently, the earnings structure is relatively heavily affected by non-recurring items.【Investment Efficiency】Annualized ROE was -0.2%, reflecting a combination of low profitability and low leverage, with an asset turnover ratio of 0.612x and financial leverage of 1.16x.【Financial Soundness】The Equity Ratio was extremely high at 85.9%. Cash and deposits amounted to ¥32.6B, while interest-bearing debt remained limited to approximately ¥1.4B in long-term borrowings, indicating a solid financial foundation.

Cash Flow Analysis

As no statement of cash flows has been disclosed, the Company’s funding trends can be assessed from changes in the balance sheet. Cash and deposits were ¥32.6B, a decrease of ¥10.0B from ¥42.6B in the previous year. Meanwhile, investment securities increased to ¥57.7B from ¥48.0B in the previous year, an increase of ¥9.6B, suggesting that funds may have shifted from cash and deposits to investment securities and other assets even amid an operating loss. Intangible assets increased significantly due to the recognition of ¥5.3B in goodwill associated with the acquisition of Pure Flat. Net assets increased ¥5.4B year on year to ¥163.2B, supported by ¥6.5B in comprehensive income, mainly attributable to valuation differences on securities. Interest-bearing debt remained low, and financial funding constraints are considered limited.

Earnings Quality

Operating results were a ¥-2.0B loss on a core business basis, and the improvement to an Ordinary Income loss of ¥-0.2B was largely attributable to ¥2.0B in non-operating income, mainly ¥1.2B in dividends received; this differs in nature from recurring operating earnings. Special gains of ¥0.3B included a ¥0.2B gain on the sale of investment securities and a ¥0.1B gain on the sale of fixed assets, while special losses of ¥0.1B consisted of losses on the disposal of fixed assets. Given the small scale of earnings, these non-recurring items may determine whether final profit or loss is positive or negative. Accordingly, when evaluating Ordinary Income and Net Income, the contribution of temporary factors should be discounted. Comprehensive income was ¥6.5B, significantly diverging from Net Income of ¥-0.2B, primarily due to a ¥6.8B valuation difference on investment securities; this does not represent the underlying strength of business operations.

Earnings Forecast and Guidance

The full-year forecast is revenue of ¥127.7B (YoY +3.8%), Operating Income of ¥1.1B (YoY -49.2%), and Ordinary Income of ¥3.0B (YoY -33.2%). Revenue progress was 68.3%, below the simple prorated progress rate of 75%. Since Operating Income was a loss of ¥-2.0B for the nine months ended Q3, achieving the full-year forecast would require approximately ¥3.2B in Operating Income in Q4 alone, implying a significant turnaround from the cumulative loss. Similarly, the forecasts for Ordinary Income and Net Income presuppose a rapid improvement in earnings during Q4.

Shareholder Returns

The dividend was ¥13.00 per share in Q2, and the full-year forecast is ¥26.00. The Payout Ratio against forecast EPS of ¥54.50 is approximately 47.7%. On the other hand, the nine months ended Q3 resulted in a Net Loss attributable to owners of the parent of ¥-0.2B. Since the Payout Ratio would be negative if cumulative realized profit were used as the denominator, dividend sustainability cannot be evaluated in relation to realized earnings. Cash and deposits of ¥32.6B and low interest-bearing debt support the funding capacity for dividends, but sustainability depends on a recovery in core business earnings from Q4 onward. No share repurchases were confirmed, and no assessment has been made of the Total Return Ratio.

Risk Factors

1. Deterioration in the profitability of the core business: The Printing-Related Business recorded a segment loss of ¥1.9B against revenue of ¥66.6B, falling from a profit of ¥0.7B in the previous year. It has the largest impact on Company-wide operating results, and any delay in restoring profitability could determine overall performance.

2. Goodwill and acquisition integration risk: The acquisition of all shares of Pure Flat resulted in ¥5.3B in goodwill in the Printing-Related Business, and the purchase price allocation remains provisional. Although the amount is limited at 3.3% of net assets, amortization expenses and impairment risk may become a concern if the expected earnings contribution is not realized.

3. Rigid cost structure: While revenue declined 3.4% year on year, SG&A expenses increased 5.7%, causing operating leverage to work in reverse. The high work-in-process ratio also creates a risk that project backlogs and more difficult cost control could amplify earnings volatility.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s profitability is substantially below the industry median, with both Operating Income and Net Income at loss levels.

Growth and Capital Efficiency

Revenue growth also falls below the industry median, placing the Company’s declining-revenue trend in an underperforming position within the industry.

※Source: Company analysis

Key Points in the Earnings Results

1. The core business fell into an operating loss as declining revenue coincided with higher SG&A expenses, making recovery in the profitability of the core Printing-Related Business a condition for a turnaround in Company-wide performance.

2. The reduction in the Ordinary Income loss depends on non-operating income, mainly dividends received, and the holding and valuation of investment securities have a significant impact on changes in earnings and net assets.

3. Achieving the full-year Operating Income forecast requires a substantial earnings turnaround in Q4. Monitoring the amortization burden and integration benefits associated with the goodwill from the Pure Flat acquisition will be important going forward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,843–¥3,002 at cost of equity ±1%; ¥2,893–¥2,939 at ω ±0.1.

Notes:

• Normalized EPS calculated from Ordinary Income and other figures is used to exclude the impact of temporary gains and losses (the Company’s forecast EPS is ¥54.5).
• Since forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used, resulting in a timing difference from the full-year forecast.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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