Kyodo Printing (7914) FY2026 Q3 Earnings Report

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Executive Summary

The Company recorded a decline in revenue and operating income from its core business due to lower revenue in the Information Communications Business and a decline in order-unit prices in the Information Security Business. However, net income increased as a result of gains on the sale of cross-held shares. Revenue was ¥73.52B (down 2.1% YoY), operating income was ¥1.44B (down 16.2%), and ordinary income was ¥1.95B (down 9.5%), while quarterly net income attributable to owners of the parent increased to ¥2.84B (up 19.2%). The primary factor behind the increase in net income was extraordinary income of ¥2.38B, including ¥2.36B in gains on sales of investment securities. Operating income, which indicates the earnings power of the core business, declined from the prior year.

Factors Affecting Business Performance

【Revenue】Revenue was ¥73.52B, down 2.1% from the same period of the prior year. The Living and Industrial Materials Business recorded higher revenue due to expanded orders for flexible packaging, tubes, and other products. However, the Information Communications Business declined 7.0% due to shrinking demand for paper media and an order-taking policy focused on profitability. The Information Security Business also declined 1.2% due to the backlash from large projects and lower orders related to cards. The revenue declines in these two businesses weighed on overall performance.

【Profit and Loss】Although the gross margin improved to 21.1% from 20.1% in the same period of the prior year due to the containment of the cost of sales, SG&A expenses increased 4.8% YoY, resulting in an increase in expenses that exceeded the increase in revenue. Consequently, operating income declined to ¥1.44B (down 16.2%), and the operating margin fell to 2.0% from 2.3% in the prior year. Ordinary income was ¥1.95B (down 9.5%), with the decline narrowing due to ¥0.75B in non-operating income, including ¥0.36B in dividend income. Extraordinary income of ¥2.38B, of which ¥2.36B was gains on sales of investment securities, boosted profit before tax, resulting in net income of ¥2.84B (up 19.2%). The gap between ordinary income and net income was substantial at approximately 46%, attributable to the one-time gains on sales of investment securities. In conclusion, the core business experienced lower revenue and profit, while overall revenue declined and net income increased.

Segment Analysis

The core business is the Living and Industrial Materials Business, which generated revenue of ¥25.11B (34.2% of total revenue) and operating income of ¥1.10B, making the largest contribution to profit. This business achieved higher revenue and profit, with operating income increasing 24.4%, due to expanded orders for flexible packaging, tubes, and other products, as well as progress in price revisions, thereby supporting consolidated earnings. The Information Security Business generated revenue of ¥23.25B and operating income of ¥0.86B (down 45.2%), representing a significant decline in profit due to delays in passing on increases in logistics and other costs to prices and lower order-unit prices. The Information Communications Business generated revenue of ¥24.90B and recorded an operating loss of ¥0.23B, widening from the ¥0.16B loss in the prior year and weighing on consolidated operating income of ¥1.44B. There is a substantial disparity in profit margins among the segments: 4.4% for Living and Industrial Materials, 3.7% for Information Security, and negative 0.9% for Information Communications.

Key Financial Indicators

Profitability: ROE of 5.8% (annualized) and operating margin of 2.0% (2.3% in the prior year).
Cash flow quality: Operating CF/net income of 1.11x and FCF of ¥2.05B.
Investment efficiency: Capital expenditures/depreciation of approximately 0.79x (capital expenditures of ¥3.41B and depreciation of ¥4.30B), indicating a phase centered on replacement investment.
Financial soundness: Equity Ratio of 51.8% (49.8% in the prior year) and current ratio of 152.1%.

Cash Flow Analysis

Operating CF was ¥3.15B, up 14.1% YoY, and was 1.11x net income of ¥2.84B, indicating adequate cash backing for reported earnings. Investing CF was negative ¥1.11B, as capital expenditures of ¥3.41B were partially offset by proceeds from the sale of investment securities of ¥2.59B and other items. Financing CF was negative ¥4.13B, with the primary cash outflows consisting of ¥1.87B in repayments of long-term borrowings, ¥1.73B in dividend payments, and ¥0.39B in share repurchases. FCF was secured at ¥2.05B (operating CF of ¥3.15B less capital expenditures equivalent to ¥1.11B). An ¥0.87B increase in inventories and a ¥0.37B decrease in trade payables were factors weighing on working capital. The assessment of cash generation is at a level ranging from standard to requiring somewhat closer monitoring.

Earnings Quality

Net income of ¥2.84B was substantially higher than ordinary income of ¥1.95B, with the primary reason for the difference being extraordinary income of ¥2.38B, mainly consisting of ¥2.36B in gains on sales of investment securities. Excluding this one-time factor, core-business earnings declined 9.5% YoY on an ordinary-income basis, and the increase in net income does not indicate an improvement in recurring earnings power. Non-operating income of ¥0.75B, including ¥0.36B in dividend income and ¥0.17B in insurance dividends, represented approximately 1.0% of revenue and was not substantial in scale. Operating CF exceeded net income, and from an accruals perspective, there are no significant concerns regarding the quality of accounting earnings.

Earnings Forecast and Guidance

The Q3 cumulative progress rates against the full-year forecast (revenue of ¥103.50B, operating income of ¥2.80B, and ordinary income of ¥3.25B) were 71.0% for revenue, 51.6% for operating income, and 60.1% for ordinary income. Compared with the standard progress rate of 75%, operating income was 23.4pt below, ordinary income was 14.9pt below, and revenue was also 4.0pt below. Operating income of approximately ¥1.36B will need to be recorded in Q4 alone, a level nearly equivalent to cumulative operating income of ¥1.44B through Q3. Accordingly, progress in recovering the core business will be the key to achieving the full-year forecast.

Shareholder Returns

The annual dividend forecast is ¥76 (interim dividend of ¥38 and year-end dividend of ¥38), with a target DOE of 3.5%. The Payout Ratio calculated based on the full-year net income forecast of ¥3.85B and estimated total dividends of approximately ¥2.14B based on the average number of shares outstanding during the period is approximately 55.6%. In addition, the Company resolved to repurchase up to ¥1.0B or 600,000 shares. As of the end of January 2026, it had repurchased 429,000 shares (¥0.67B), and in November 2025 it canceled 3.48 million shares (10.4% of total shares issued). The Total Return Ratio, including share repurchases in addition to dividends, is therefore above the dividend-only Payout Ratio of 55.6%.

Catalysts

【Short term】Expansion of orders in the Living and Industrial Materials Business in Q4, new BPO orders from local governments in the Information Security Business, and progress in price revisions in the Information Communications Business will determine whether the full-year operating income forecast can be achieved. 【Long term】The Company is expected to continue improving capital efficiency through the ongoing sale of cross-held shares, as well as reviewing shareholder returns and its capital structure through share repurchases and cancellations.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the operating margin and net margin are below the industry median, indicating that profitability is relatively low within the industry.

Growth and Capital Efficiency

The revenue growth rate is below the industry median and is near the lower bound of the IQR.

※Source: Compiled by the Company

Risk Factors

1. Continued losses in the Information Communications Business: Revenue was ¥24.19B, down 7.0% from the same period of the prior year, while the operating loss was ¥0.23B, widening from the ¥0.16B loss in the prior year. If the structural decline in demand for paper media continues, it could constrain the recovery of consolidated operating income.

2. Delays in passing on costs and declining order-unit prices: Operating income in the Information Security Business declined 45.2% YoY. If the inability to pass on cost increases to prices continues, the segment’s 3.7% profit margin could come under further pressure.

3. Prolonged collection of accounts receivable: Trade receivables were ¥26.97B, accounting for 21.4% of total assets, and a lengthening of the collection period has been noted. During a period of declining revenue, this could tie up working capital and weigh on operating CF.

Key Points from the Earnings Results

1. The increase in net income was attributable to the one-time gain of ¥2.36B on the sale of investment securities, while both operating income and ordinary income declined. In assessing the quality of the earnings results, the core-business earnings trend—reflected in the operating income progress rate of 51.6%—is an indicator of recurring earnings strength.

2. While the Living and Industrial Materials Business continues to achieve higher revenue and profit as the core business with the largest share of both revenue and profit, continued losses in the Information Communications Business and declining profit in the Information Security Business are weighing on consolidated performance, and the profitability gap among segments is widening.

3. Financial soundness is improving, as reflected by an Equity Ratio of 51.8% (49.8% in the prior year) and a 70% reduction in long-term borrowings. Share repurchases and cancellations are also continuing. The stability of the financial base is a contrasting feature to the challenge of delayed progress toward the operating income forecast.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,047–¥2,163 at ±1% for the cost of equity, and ¥2,097–¥2,109 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(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; it 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 through an integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. It does not recommend investment in any specific security. The 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 a professional as necessary.

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