| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥18050.3B | ¥17195.1B | +5.0% |
| Operating Income / Operating Profit | ¥671.1B | ¥850.7B | -21.1% |
| Ordinary Income | ¥757.2B | ¥895.8B | -15.5% |
| Net Income | ¥341.0B | ¥678.9B | -49.8% |
| ROE | 2.4% | 4.8% | - |
For the fiscal year ended March 2026, Revenue was ¥18050B (YoY +¥855B +5.0%), Operating Income was ¥671B (YoY -¥180B -21.1%), Ordinary Income was ¥757B (YoY -¥139B -15.5%), and Net Income attributable to owners of the parent was ¥648B (YoY -¥253B -28.1%). Although revenue increased across the three business domains in aggregate, a decline in gross margin (23.5%, YoY -0.5pt) and an increase in SG&A ratio (19.8%, YoY +0.7pt) led to an Operating Margin deterioration to 3.7% (worsened by 1.2pt). Non-operating items contributed a net benefit of ¥86B, and extraordinary items provided a net benefit of ¥296B mainly due to gain on sale of investment securities of ¥542B, with these one-off factors supporting final profit. With the Q1 acquisition of TOPPAN Packaging USA Inc. and 27 other companies, goodwill rose to ¥1,038B (YoY +¥815B) and intangible fixed assets to ¥2,815B (YoY +¥1,942B), resulting in a significant increase in long-term borrowings to ¥2,180B (YoY +¥1,404B) while short-term borrowings were reduced to ¥1,251B (YoY -¥1,877B), thereby lengthening and stabilizing the liability profile.
[Revenue] Revenue reached ¥18050B (YoY +5.0%). By segment, Information & Communication was ¥9,039B (-0.2% YoY) roughly flat, Lifestyle & Industry was ¥7,152B (+31.4% YoY) with substantial growth driven by Q1 M&A scale expansion, and Electronics was ¥1,859B (-34.2% YoY) with a large decline due to market adjustments in semiconductor and display-related areas. By region, Japan was ¥10,747B (prior ¥10,899B) and Asia ¥2,922B (prior ¥3,385B) both down; North America was ¥2,474B (prior ¥1,426B) and Other regions ¥1,908B (prior ¥1,485B) increased driven by overseas M&A, reflecting diversification of regional and business portfolios amid external uncertainty. Cost of sales ratio worsened to 76.5% (prior 76.0%) (+0.5pt), and gross margin declined to 23.5% (prior 24.0%).
[Profitability] Gross profit was ¥4,243B (YoY +¥29B) while SG&A increased to ¥3,571B (YoY +¥243B), resulting in Operating Income of ¥671B (YoY -¥180B -21.1%). Goodwill amortization rose to ¥85B (prior ¥37B), and other SG&A also increased significantly (higher freight, personnel, and infrastructure costs), so cost control did not keep pace with revenue expansion. Non-operating items produced a net benefit of ¥86B, driven by interest income ¥70B, equity-method investment gains ¥79B, and foreign exchange gains ¥75B, securing Ordinary Income of ¥757B (-15.5%). Extraordinary items comprised extraordinary gains ¥616B including gain on sale of investment securities ¥542B, and extraordinary losses ¥320B including impairment losses ¥140B, producing a net benefit of ¥296B. As a result, Profit before tax was ¥1,054B, income taxes ¥342B (effective tax rate 32.4%), and non-controlling interests ¥64B were deducted, leaving Net Income attributable to owners of the parent of ¥648B (YoY -28.1%). In conclusion, despite revenue growth, operating-stage cost increases outpaced gross profit gains, and one-off factors supplemented the final results, producing a growth-in-revenue but decline-in-profit profile.
The Information & Communication business posted Revenue ¥9,039B (YoY -0.2%), Operating Income ¥450B (YoY -1.1%), and margin 4.9%. Core businesses such as securities passbooks, cards, and BPOs remained at prior-year levels but with limited upside. The Lifestyle & Industry business reported Revenue ¥7,152B (+31.4%), Operating Income ¥331B (YoY -1.1%), and margin 4.6%. The Q1 acquisition of TOPPAN Packaging USA drove large expansion of the North American packaging business and rapid revenue growth, but integration costs and increased amortization limited Operating Income to near prior levels and reduced margin from 6.2% in the prior year. The Electronics business had Revenue ¥1,859B (YoY -34.2%), Operating Income ¥337B (YoY -36.5%), and margin 18.1%. Demand declines for LCD color filters and semiconductor packaging products led to significant revenue and profit decreases, but a high mix of higher-value products maintained a high margin. Consolidated Operating Income after corporate costs was ¥671B (YoY -21.1%). While scale expansion in Lifestyle & Industry contributed to top-line growth, none of the domains achieved margin improvement, making profitability enhancement across the portfolio a key issue.
[Profitability] Operating Margin of 3.7% worsened by 1.2pt from 4.9% in the prior year, driven mainly by a decline in Gross Margin to 23.5% (prior 24.0%) and a rise in SG&A ratio to 19.8% (prior 19.1%). ROE 2.4% (prior 4.9%) fell sharply due to lower net profit margins and is low compared with the company’s historical performance and industry medians. [Cash Quality] Operating Cash Flow (OCF) was ¥861B, 1.33x of Net Income ¥648B, indicating cash realization of profits was maintained, but net movement in working capital was a negative ¥953B from OCF subtotal ¥1,814B to cash generated, mainly due to trade receivables increase -¥322B and trade payables decrease -¥368B. OCF/EBITDA ratio at 0.59x is low, and working capital management needs improvement. [Investment Efficiency] Return on Assets (ROA) 3.0% and fixed asset turnover 2.76x remained at average levels given asset expansion from M&A. Depreciation was ¥792B versus capital expenditures ¥1,288B, with CapEx/Depreciation ratio at 1.63x, indicating continued aggressive investment. [Financial Soundness] Equity Ratio 55.1% (prior 56.4%) remains high; Current Ratio 186.5%; Cash and deposits ¥4,389B cover approximately 70% of current liabilities ¥6,293B, indicating low short-term liquidity risk. Total interest-bearing debt ¥3,431B and approximate EBITDA ¥1,463B imply Debt/EBITDA of 2.3x and Interest Coverage 16.5x, both consistent with investment-grade financial safety.
Operating Cash Flow was ¥861B (prior ¥663B), generated from OCF subtotal ¥1,814B less corporate tax payments -¥989B and working capital movements -¥953B. Major outflows were trade receivables increase -¥322B and trade payables decrease -¥368B; inventory increase -¥13B was limited. Investing Cash Flow was a large outflow of -¥3,822B (prior +¥459B), comprised of acquisition of subsidiary shares -¥2,940B (acquisition of TOPPAN Packaging USA and others), capital expenditures -¥1,288B, proceeds from sale of securities +¥799B, and proceeds from sale of subsidiaries +¥236B, among others. Consequently, Free Cash Flow was -¥2,960B (prior +¥1,122B). Financing Cash Flow was -¥289B, reflecting long-term borrowings +¥1,578B, net decrease in short-term borrowings -¥1,823B, share repurchases -¥300B, and dividend payments -¥174B. Beginning cash ¥7,531B plus Operating +¥861B, Investing -¥3,822B, Financing -¥289B, FX +¥137B, and change in consolidation scope -¥307B resulted in ending cash ¥4,112B, compressing liquidity but keeping it at a manageable level.
Operating Income ¥671B indicates recurring earning capacity but decreased by 21.1% YoY, signaling a deterioration in operating-quality of earnings. Non-operating items contributed net +¥86B, with interest income ¥70B, equity-method investment income ¥79B, and FX gains ¥75B as main items; non-operating income ¥316B is 1.8% of Revenue, within a recurrent range. Extraordinary items provided net +¥296B, a temporary factor driven by extraordinary gains ¥616B mainly from gain on sale of investment securities ¥542B, offset by extraordinary losses ¥320B including impairments ¥140B. Of Net Income attributable to owners of the parent ¥648B, net extraordinary items ¥296B account for approximately 45.7%, indicating high dependence on one-off items. Comprehensive income ¥1,052B versus Net Income ¥341B (including non-controlling interests) shows a difference of ¥711B arising from other comprehensive income items such as currency translation adjustments +¥297B, retirement benefit adjustments +¥109B, equity-method investee OCI +¥78B, and valuation differences on securities -¥173B; valuation gains/losses do not directly affect profit sustainability. OCF ¥861B exceeded Net Income ¥648B, yielding an accrual ratio of -0.8% in a healthy range, but deterioration in working capital and a low OCF/EBITDA ratio of 0.59x remain quality concerns.
Full-year guidance for the fiscal year ending March 2026 is Revenue ¥19,250B (YoY +6.6%), Operating Income ¥800B (YoY +19.2%), Ordinary Income ¥835B (YoY +10.3%), Net Income attributable to owners of the parent ¥550B, EPS ¥198.57, and annual dividend ¥29. Against actual Revenue of ¥18,050B, the full-year target ¥19,250B implies a progress rate of 93.8%, broadly on track. Operating Income progress is 83.9% (actual ¥671B vs guidance ¥800B), assuming an additional ¥129B of Operating Income in H2, reflecting expectations of realization of M&A synergies and cost containment to recover operating margins. Ordinary Income progress is 90.7%. Net Income progress shows actual ¥648B versus guidance ¥550B, indicating the target has already been met and the company likely assumes a reversal of extraordinary gains in the full year. Dividend guidance ¥29 (including year-end ¥30?) implies an annual payout ratio of approximately 24.0% and maintains a stable dividend policy.
Annual dividend paid was ¥58 (interim ¥28, year-end ¥30), with payout ratio 26.4% (based on Net Income attributable to owners of the parent ¥648B). Despite profit decline, the company increased dividends from prior ¥24, demonstrating stability in shareholder returns. Total dividends were approximately ¥167B, which are sufficiently covered by OCF ¥861B. The company executed share repurchases of ¥300B in financing activities, making combined total shareholder returns approximately ¥467B; total return ratio relative to Net Income is about 72.0%, indicating an aggressive return stance. However, Free Cash Flow was a large negative -¥2,960B, meaning the funding for total returns came from cash reserves and increased interest-bearing debt. Next-year dividend forecast ¥29 appears half of this year’s actual ¥58, but with a payout ratio around 24.0% it reflects a conservative stance prioritizing post-M&A financial flexibility and reinvestment.
M&A Integration Risk: In Q1, the company acquired TOPPAN Packaging USA and 27 other companies, materially increasing goodwill to ¥1,038B and intangible fixed assets to ¥2,815B. Goodwill/EBITDA of 0.71x and goodwill/Net Assets of 7.4% are currently within healthy ranges, but delays in integration or unmet synergies could materialize impairment risk. The Lifestyle & Industry operating margin at 4.6% is low, and improving the earnings power of acquired assets is a challenge.
Working Capital Management Risk: Trade receivables increased ¥322B and trade payables decreased ¥368B, causing a working capital outflow of about ¥950B from OCF subtotal ¥1,814B and leaving OCF at ¥861B. With OCF/EBITDA at 0.59x, prolonged receivable collection periods or changes in payment terms could worsen capital efficiency and reduce free cash generation.
Profitability Decline Risk: Operating Margin 3.7% worsened by 1.2pt from 4.9%, with concurrent declines in gross margin and increases in SG&A ratio. Continued weak market conditions in Electronics, integration costs in Lifestyle & Industry, and stagnation in Information & Communication demand could prevent portfolio-wide margin improvement, prolonging low ROE/ROIC and depressing valuation.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.7% | 7.8% (4.6%–12.3%) | -4.0pt |
| Net Profit Margin | 1.9% | 5.2% (2.3%–8.2%) | -3.3pt |
The company’s Operating Margin and Net Profit Margin are significantly below industry medians, placing it in the lower group within manufacturing.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.0% | 3.7% (-0.4%–9.3%) | +1.3pt |
Revenue growth exceeds the industry median, reflecting active growth investments including M&A.
※Source: Company compilation
Scale expansion from M&A and integration challenges: Q1 TOPPAN Packaging USA acquisition expanded Lifestyle & Industry revenue by +31.4% and nearly doubled North America revenue to ¥2,474B. Goodwill ¥1,038B and intangible assets ¥2,815B increased while long-term borrowings rose to ¥2,180B and short-term borrowings were compressed to ¥1,251B, elongating the debt profile and maintaining financial stability. However, Lifestyle & Industry operating margin remains low at 4.6%, making realization of integration synergies a focus area.
Potential trough and recovery in Operating Margin: Operating Margin declined to 3.7% from 4.9% last year, but next-year guidance targets Operating Income ¥800B (+19.2%), suggesting a turn toward recovery. This assumes gross margin improvement, SG&A containment, and realization of M&A synergies; quarterly progress monitoring will be important.
Working capital management and cash generation: OCF ¥861B improved YoY by +29.8% but deterioration in working capital left OCF/EBITDA at a low 0.59x. Strengthening receivables collection and optimizing payables are key to raising OCF-to-EBITDA conversion above 0.8x, which is critical for financial soundness and sustainability of shareholder returns.
This report is an AI-generated financial analysis document created by analyzing XBRL financial statement data. It is not intended as a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm based on public financial statements. Investment decisions are your responsibility; consult professionals as necessary before making investment choices.