| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2704.6B | ¥2502.3B | +8.1% |
| Operating Income / Operating Profit | ¥242.5B | ¥248.7B | -2.5% |
| Ordinary Income | ¥245.5B | ¥240.3B | +2.2% |
| Net Income / Net Profit | ¥116.8B | ¥163.5B | -28.6% |
| ROE | 10.5% | 15.4% | - |
For the fiscal year ended March 2026, Revenue was ¥2704.6B (YoY +¥202.2B +8.1%), Operating Income was ¥242.5B (YoY -¥6.2B -2.5%), Ordinary Income was ¥245.5B (YoY +¥5.2B +2.2%), and Net Income was ¥116.8B (YoY -¥46.7B -28.6%). Revenue expanded steadily led by domestic operations, but Operating Income slightly declined due to higher SG&A. Net Income fell substantially due to an impairment loss of ¥49.0B recorded in the Americas. Gross margin was largely flat at 40.3% (prior 40.5%), while SG&A ratio rose to 31.3% (prior 30.6%), pushing Operating margin down to 9.0% (prior 9.9%). Operating Cash Flow (OCF) was strong at ¥200.5B (YoY +18.0%), about 1.7x Net Income, but inventory increases and a decrease in accounts payable left room for improvement in cash conversion efficiency.
[Revenue] Revenue expanded to ¥2704.6B (+8.1% YoY) driven by a strong domestic market and new product launches. By segment, Japan led with ¥2262.3B (+7.2%, 83.7% of total), supported by robust domestic toy demand and a healthy aftermarket. Americas declined to ¥304.5B (-2.1%) amid a local market adjustment, Europe increased to ¥78.0B (+9.0%), Oceania rose to ¥28.6B (+3.9%), and Asia slightly decreased to ¥675.2B (-1.1%). By region, Japan was ¥1798.5B (prior ¥1630.1B), North America ¥454.0B (prior ¥452.6B) roughly flat, and Other ¥452.0B (prior ¥419.6B) increased. FX impacts were limited; the revenue increase was principally due to domestic product cycles and channel expansion.
[Profitability] Cost of Sales rose to ¥1615.4B (prior ¥1488.9B), +8.5%, producing Gross Profit of ¥1089.1B (prior ¥1013.5B), +7.5%. Gross margin edged down to 40.3% (prior 40.5%, -0.2pt). SG&A increased to ¥846.7B (prior ¥764.8B), +10.7%, outpacing revenue growth. SG&A ratio rose to 31.3% (prior 30.6%, +0.7pt) due to heightened promotion, logistics, and personnel costs. Operating Income was ¥242.5B (prior ¥248.7B), -2.5%, with Operating margin at 9.0% (prior 9.9%, -0.9pt). Non-operating income improved to ¥9.6B (prior ¥7.2B) and non-operating expense decreased to ¥6.5B (prior ¥15.6B), lifting Ordinary Income to ¥245.5B (prior ¥240.3B), +2.2%. Special losses totaled ¥54.5B (prior ¥2.5B), mainly impairment losses of ¥49.0B (primarily goodwill impairment in the Americas). Profit before tax fell to ¥191.0B (prior ¥238.1B), -19.8%; after corporate tax of ¥74.2B (effective tax rate 38.9%), Net Income was ¥116.8B (prior ¥163.5B), -28.6%. Net margin declined to 4.3% (prior 6.5%, -2.2pt). In summary, revenue grew while profit declined, with the one-off special loss materially reducing Net Income.
Japan segment maintained high profitability with Operating Income of ¥283.1B (prior ¥276.8B, +2.3%), a margin of 12.5%, driven by steady domestic toy demand and optimized product mix. Americas turned to profit with Operating Income of ¥5.8B (prior -¥1.6B). Although improved from last year’s loss, margin remains low at 1.9%, and the goodwill impairment of ¥48.6B highlights the need to rebuild the earnings base. Europe posted an Operating loss of ¥3.2B (prior -¥3.3B), slightly narrower loss, with a depressed margin of -4.1% despite revenue growth. Oceania improved to Operating Income ¥1.8B (prior ¥1.3B, +37.9%), margin 6.4%. Asia saw Operating Income decline to ¥21.3B (prior ¥26.7B, -20.1%), margin down to 3.2% (prior 3.9%). There is significant variance in profitability across regions; improving profitability outside Japan remains a key challenge.
[Profitability] ROE at 10.5% (prior 15.4%) decreased due to lower Net Income but remains favorable given a high Equity Ratio of 68.1% (prior 64.2%). Operating margin at 9.0% (prior 9.9%) fell -0.9pt due to higher SG&A. Net margin at 4.3% (prior 6.5%) compressed -2.2pt reflecting special losses. [Cash Quality] OCF/Net Income ratio is 1.7x, indicating solid cash generation exceeding Net Income. Accrual ratios slightly worsened due to working capital increases, but cash-based earnings quality remains high. [Investment Efficiency] Total asset turnover was 1.66x (Revenue ¥2704.6B ÷ Total Assets ¥1633.6B), Inventory turnover days approximately 52 days, Receivables days about 39 days — turnover efficiencies are generally sound. CapEx was ¥55.7B, below Depreciation of ¥77.6B (CapEx/Depreciation ratio 0.72x), indicating emphasis on leveraging existing assets. [Financial Soundness] Equity Ratio 68.1%, Current Ratio 257.6%, Quick Ratio 206.2% — extremely strong. Interest-bearing debt ¥7.0B vs. cash ¥510.9B yields a net cash position; Debt/EBITDA 0.02x, Interest Coverage 62.7x — financial risk is minimal. Goodwill decreased to ¥49.7B (4.5% of equity), lowering future impairment risk.
Operating Cash Flow was ¥200.5B (prior ¥170.0B, +18.0%), about 1.7x Net Income ¥116.8B. Operating cash inflow before working capital changes totaled ¥289.1B; after working capital movements — Inventory increase -¥21.1B, Receivables decrease +¥7.4B, Payables decrease -¥32.3B — and tax payments -¥81.7B, OCF amounted to ¥200.5B. Investing Cash Flow was -¥80.5B (prior -¥81.0B), with CapEx -¥55.7B and intangible asset acquisitions -¥20.7B as main outflows. Free Cash Flow (OCF + Investing CF) was ¥120.0B, a sizeable improvement from prior ¥89.0B. Financing Cash Flow was -¥182.5B, driven by dividend payments -¥60.8B, share buybacks -¥75.2B, and lease liability repayments -¥32.5B. Cash decreased from ¥560.7B at the beginning of the period to ¥509.9B at year-end, a decline of -¥50.8B; with FX impact +¥11.8B, the net decrease remained -¥50.8B. While inventory increases and lower payables weakened working capital, the robust balance sheet and stable OCF preserved financial flexibility.
The gap between Ordinary Income ¥245.5B and Net Income ¥116.8B is large, mainly due to Special Losses of ¥54.5B (including Impairment Losses ¥49.0B). The impairment relates to goodwill in the Americas and should be considered a non-recurring factor separate from recurring earning power. Non-operating income ¥9.6B includes FX gains ¥2.0B and interest/dividend income ¥3.1B; non-operating expense ¥6.5B includes interest expense ¥3.9B and FX losses ¥7.6B, with net non-operating profit roughly +¥3.0B, modest. Comprehensive Income ¥166.8B substantially exceeds Net Income ¥116.8B, aided by Other Comprehensive Income ¥50.0B (FX translation adjustment ¥37.8B, deferred hedge gains/losses ¥11.3B, etc.). FX translation gains reflect valuation increases of overseas subsidiary assets from yen depreciation and are unrealized, thus distinct from recurring earnings quality. OCF of ¥200.5B exceeding Net Income is largely driven by non-cash charges such as Depreciation ¥77.6B and Impairment ¥49.0B; from an accrual perspective, working capital deterioration (inventory increase, lower payables) partially offsets this.
Full Year guidance projects Revenue ¥2850.0B (YoY +5.4%), Operating Income ¥260.0B (YoY +7.2%), and Ordinary Income ¥260.0B (YoY +5.9%). Year-end dividend guidance of ¥35 leads to an annual dividend plan of ¥35. Operating Income is expected to increase ¥17.5B from this year’s ¥242.5B, assuming no repeat impairment and SG&A optimization. Progress ratios are 94.9% for Revenue, 93.3% for Operating Income, and 94.4% for Ordinary Income, indicating roughly on-track progress. Forecast EPS of ¥207.26 is projected to improve markedly from this year’s ¥131.38, primarily due to the absence of special losses. Forecast dividend ¥35 implies a Payout Ratio of approximately 17% (based on forecast Net Income ¥18.0B — note: the report states 180億円 assumption), reflecting a conservative stance prioritizing financial flexibility.
Actual dividends were annual ¥64 (interim ¥32, year-end ¥32), with a Payout Ratio of 51.3% (dividends approx. ¥60B vs. Net Income ¥116.8B). Cash holdings ¥510.9B cover dividend payments ¥60.8B about 8.4x. Share buybacks of ¥75.2B were executed, bringing total shareholder returns to ¥136.0B. Total returns exceeded FCF ¥120.0B by ¥16.0B, absorbed by ample opening cash. Total Return Ratio on an FCF basis was 113%, somewhat high, but sustainability is supported by stable OCF and a strong balance sheet. The forecast annual dividend of ¥35 would reduce the Payout Ratio to about 17% relative to forecast EPS ¥207.26, a markedly lower and conservative level reflecting the temporary impact of this year’s special losses. Upside for higher dividends depends on Operating Income recovery and improved cash conversion; medium- to long-term opportunities exist to raise payout and continue buybacks to strengthen total returns.
Regional concentration risk from domestic dependence: Japan accounts for 83.7% of Revenue and the bulk of Operating Income, so domestic market maturation or demand swings directly affect performance. The toy market is vulnerable to low birthrates and digitalization; a domestic demand downturn could expose a lack of substitute markets. Overseas operations show weak profitability, so diversifying away from domestic concentration is urgent.
Weak profitability in overseas segments and goodwill impairment risk: An impairment of ¥49.0B was recorded in the Americas; Europe remains loss-making and Asia saw profit declines. Remaining goodwill ¥49.7B (mainly Asia ¥49.7B) is 4.5% of equity — low, but additional impairment risk exists if overseas earnings do not recover. In particular, delayed margin improvements in Europe and Asia could necessitate future write-downs.
Deterioration in cash conversion efficiency: Inventory increase ¥21.1B and payables decrease ¥32.3B worsened working capital, leaving OCF/EBITDA at 0.63x, a low level. Risks include inventory obsolescence and higher working capital burdens if payable terms change. There is scope to leverage supplier credit (DPO ~27 days is short), but over-reliance increases supply chain risk.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.0% | 7.8% (4.6%–12.3%) | +1.2pt |
| Net Margin | 4.3% | 5.2% (2.3%–8.2%) | -0.9pt |
Operating margin exceeds the industry median by 1.2pt, placing the company in the upper tier within manufacturing. Net margin trails the median by 0.9pt due to special losses, but operating-stage profitability is solid.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 8.1% | 3.7% (-0.4%–9.3%) | +4.4pt |
Revenue growth outperformed the industry median by 4.4pt, reflecting a strong domestic market. In a low-growth manufacturing environment, toy market demand recovery and new product launches were effective.
※Source: Company compilation
Recovery potential from one-off impairment: The impairment loss of ¥49.0B is non-recurring; its absence next year should normalize Net Margin. The company’s forecasted Operating Income ¥260B assumes a +7.2% increase vs. this year, contingent on SG&A optimization and steady top-line. Operating-stage earning power is intact, so a recovery toward a ~10% Operating margin is plausible. Evaluations should separate the effect of special losses when assessing underlying profitability.
Room to improve cash conversion and optimize capital allocation: Despite a reasonable CCC of about 64 days, working capital management has room to improve due to inventory builds and lower payables. DPO ~27 days is short versus peers; extending supplier financing could improve cash conversion. CapEx is restrained (CapEx/Depreciation 0.72x), so balancing renewed growth investment with shareholder returns warrants monitoring. Given a strong balance sheet (Equity Ratio 68.1%, net cash), there is substantial scope to increase dividends and buybacks.
Progress in stabilizing overseas earnings and reducing domestic dependence: The dominance of the Japan segment provides stability but may cap growth. Progress is visible with the Americas returning to profit and Europe’s loss narrowing, but margins remain low. Asia’s profit decline is concerning; the pace of margin recovery overseas will determine long-term growth sustainability. Balancing risk reduction through geographic diversification while preserving a high-margin domestic base is critical.
This report is an AI-generated analysis of XBRL financial statement data and is provided for informational purposes only. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your responsibility; consult professional advisors as needed before making investment decisions.