| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1949.0B | ¥1956.0B | -0.4% |
| Operating Income | ¥40.4B | ¥54.6B | -26.0% |
| Profit Before Tax | ¥35.5B | ¥62.0B | -42.7% |
| Net Income | ¥13.8B | ¥40.1B | -65.5% |
| ROE | 1.2% | 3.5% | - |
For the fiscal year ending December 2025, Revenue was ¥1,949.0B (YoY -¥7.0B, -0.4%), Operating Income was ¥40.4B (YoY -¥14.2B, -26.0%), Ordinary Income was -¥25.1B (YoY -¥34.8B, -358.9%), and Net Income attributable to owners of parent was ¥10.0B (YoY -¥28.5B, -74.0%). While revenue remained flat, increases in SG&A and expanded corporate-level costs led to double-digit decline in Operating Income. At the ordinary income stage, declines in financial income (¥25.5B → ¥14.4B), increases in financial expenses (¥18.0B → ¥19.3B), and expanded equity-method losses (-¥3.3B → -¥3.6B) combined to produce a substantial swing to a large loss. Despite Profit Before Tax of ¥35.5B, an abnormally high effective tax rate of 61.1% compressed Net Income to ¥10.0B, a 74.0% YoY decline.
Revenue from external customers was ¥1,949.0B (YoY -0.4%), a slight decline. By segment, Industrial Materials was ¥763.2B (+3.0%) and Medical Technology was ¥471.3B (+3.3%) achieving revenue growth, while Devices was ¥584.5B (-13.5%) with a significant decline that offset company-wide growth. Other (Information & Communication, Pharmaceutical Manufacturing, etc.) was ¥130.0B (+55.8%) and performed strongly. Gross profit was ¥436.9B with a gross margin of 22.4% (prior year 22.4%), unchanged. SG&A was ¥384.1B (prior year ¥371.6B), up ¥12.5B, and the SG&A ratio rose to 19.7% (prior year 19.0%). Operating Income was ¥40.4B (-26.0%) with an operating margin of 2.1% (prior year 2.8%), a deterioration of 72bp. Corporate-level adjustments and foreign exchange losses caused reconciliation items to be -¥42.6B (prior year -¥28.7B), worsening by ¥13.9B. Non-operating items included financial income of ¥14.4B (prior year ¥25.5B), down ¥11.1B; financial expenses of ¥19.3B (prior year ¥18.0B), up ¥1.3B; and equity-method losses of -¥3.6B (prior year -¥3.3B), a larger negative contribution. Other expenses of ¥15.2B include one-off costs that exceed other income of ¥6.3B. Profit Before Tax was ¥35.5B but corporate taxes and related amounted to ¥21.7B (effective tax rate 61.1%), an anomalously high tax burden that depressed Net Income. Comprehensive income was ¥48.3B, exceeding Net Income of ¥13.8B due mainly to non-cash items such as foreign currency translation differences of ¥16.2B and valuation differences on financial assets of ¥13.3B. In conclusion, insufficient revenue growth, higher SG&A, deterioration in non-operating items, and high tax burden — a quadruple hit — resulted in lower revenue and profit.
Total segment profit was ¥79.1B; after deducting corporate-level adjustments of -¥42.6B, consolidated Operating Income was ¥40.4B. Industrial Materials was the largest profit contributor, but its margin deterioration and higher corporate expenses dragged overall profitability down.
Profitability: Operating margin 2.1% (prior year 2.8%) worsened by 72bp, mainly due to SG&A ratio rising to 19.7% (prior year 19.0%). SG&A grew by 3.4% against revenue growth of -0.4%, indicating negative operating leverage. ROE was 0.9% (prior year 3.4%), well below the three-year average, driven primarily by a sharp decline in Net Profit Margin to 0.5% (prior year 2.0%). ROA (on an ordinary income basis) fell to -1.0% (prior year 0.4%). EBITDA was ¥144.0B (Operating Income ¥40.4B + Depreciation & Amortization ¥103.6B), giving an EBITDA margin of 7.4%.
Cash quality: Operating Cash Flow was ¥92.0B, 6.7x Net Income of ¥13.8B, materially exceeding accounting profit, but OCF/EBITDA was 0.64x indicating low cash conversion efficiency and dependence on working capital release (inventory reduction ¥50.6B; trade receivables improvement ¥10.5B). Working capital turnover days: DSO 74 days (trade receivables ¥394.3B ÷ daily sales 2,668百万円 × 365 ÷ 2), DIO 77 days (inventories ¥318.9B ÷ daily COGS 2,070百万円 × 365 ÷ 2), suggesting room for efficiency improvements. Capital expenditures were ¥63.1B vs Depreciation ¥103.6B, CAPEX/Depreciation 0.61x, indicating a restrained investment stance.
Investment efficiency: Total asset turnover 0.78x (prior year 0.78x) unchanged. Estimated ROIC 2.5% (EBIT equivalent ¥54.0B ÷ Invested Capital ¥2,160B), below cost of capital. Treasury shares of ¥49.2B were cancelled during the period as part of capital efficiency measures.
Financial soundness: Equity Ratio 46.1% (prior year 45.4%) remains stable. Interest-bearing debt (bonds and borrowings) totaled ¥624.9B (current ¥387.8B + non-current ¥237.1B), giving Debt/EBITDA of 4.3x, a high level. Short-term borrowings increased from ¥169.6B to ¥387.8B, up 128.7%, shortening debt maturities and raising refinancing and interest-rate sensitivity. EBIT/interest coverage is approximately 2.4x (EBIT -¥54.5B + interest paid ¥16.8B ≒ -¥37.7B ÷ ¥16.8B; using financial expenses including non-operating items of ¥19.3B yields approximately 2.8x), indicating limited headroom. Cash and deposits were ¥378.5B (prior year ¥509.7B), down 25.7%, and net interest-bearing debt was ¥246.4B. Goodwill was ¥332.8B, 28.2% of equity attributable to owners of parent (¥1,178.7B) and 2.3x relative to EBITDA — manageable but warrants ongoing impairment monitoring.
Operating Cash Flow was ¥92.0B (prior year ¥123.1B, -25.2%). Starting from Profit Before Tax of ¥35.5B, adding back non-cash charges including Depreciation & Amortization ¥103.6B and impairment losses ¥7.0B, working capital changes contributed inventory reduction +¥50.6B and trade receivables reduction +¥10.5B, partially offset by decrease in trade payables -¥21.5B. From subtotal ¥148.9B, cash taxes paid ¥46.4B, interest paid ¥16.8B, and lease payments ¥22.2B were deducted to arrive at Operating CF. OCF/EBITDA 0.64x shows weak cash conversion and reliance on working capital release. Investing CF was -¥138.5B, driven by CAPEX -¥63.1B, intangible asset acquisitions -¥14.9B, and subsidiary acquisitions -¥56.6B; proceeds included sales of tangible fixed assets ¥8.6B, resulting in net FCF of -¥46.4B. Financing CF was -¥83.7B: borrowings raised included short-term borrowings ¥28.7B and long-term borrowings ¥10.2B, while repayments included long-term borrowings -¥27.0B, short-term borrowings -¥13.2B, dividends -¥23.8B (to owners of parent -¥23.8B), share buybacks -¥6.6B, lease repayments -¥22.2B, and acquisition of non-controlling interests -¥28.9B. Including foreign exchange effects +¥12.5B, cash and cash equivalents decreased by ¥117.6B to ¥392.1B. It is estimated that without working capital improvements (inventory + receivables net +¥61.1B), OCF would have fallen to roughly ¥31B, highlighting weak core cash generation. With negative FCF, dividends and buybacks were funded from cash on hand and debt, indicating shareholder returns reliant on liquidity and debt financing.
Operating Income of ¥40.4B derives from recurring operations but includes non-recurring impairment losses of ¥7.0B. Non-operating income of ¥14.4B (0.7% of sales) is limited; financial income fell by ¥11.1B from ¥25.5B to ¥14.4B, reducing its sustainability. Financial expenses ¥19.3B (prior year ¥18.0B) are primarily interest expense and are on an increasing trend. Equity-method losses of -¥3.6B were negative for a third consecutive period, indicating structural issues. Other income was ¥6.3B versus other expenses of ¥15.2B, a net negative that may include one-off items. The effective tax rate of 61.1% on Profit Before Tax ¥35.5B is abnormally high, likely due to nondeductible expenses, regional mix, and partial non-recognition of deferred tax assets — a mix of temporary and structural factors. Comprehensive Income ¥48.3B exceeded Net Income ¥13.8B by ¥34.5B, driven mainly by non-cash OCI items such as foreign exchange translation differences ¥16.2B, financial asset valuation differences ¥13.3B, and remeasurement of defined benefit plans ¥3.0B. Operating CF ¥92.0B is 6.7x Net Income, providing support, but OCF/EBITDA 0.64x shows dependence on working capital release and raises questions about sustainable cash generation. The majority of accruals are explained by working capital movements, indicating fragile cash conversion of core business. Overall, recurring earnings are mostly business-driven but the quality of non-operating results and tax burden is low, and cash quality depends on working capital release, raising sustainability concerns.
The FY2026 plan calls for Revenue ¥1,915.0B (YoY -1.7%), Operating Income ¥66.0B (+63.4%), Net Income attributable to owners of parent ¥23.0B (+129.6%), and EPS ¥48.54. Revenue is expected to decline slightly, but an Operating margin of 3.4% (current 2.1%) implies about 130bp improvement, assuming cost optimization and business mix improvements. Progress vs current period: Revenue is ahead of initial plan by +1.8% (¥1,949.0B ÷ ¥1,915.0B), while Operating Income is significantly behind initial plan at -38.8% (¥40.4B ÷ ¥66.0B). The current year faced a triple headwind of one-off cost increases, high tax burden, and deterioration in financial results; next year assumes tax normalization, improved financial results, and corporate cost reduction to restore margins. Dividend forecast ¥25.0 (half of current period ¥50.0) represents rationalization based on expected profit levels. OCF and FCF plans are undisclosed, but assumptions include improved working capital efficiency (shorter DSO/DIO) and optimized capital expenditures. To achieve next year’s plan, Device demand recovery, margin improvement in Industrial Materials, corporate cost cuts equivalent to about 130bp, and normalization of the tax rate to the 40% range are required.
Annual dividend is ¥50.0 per share (interim ¥25.0, year-end ¥25.0), with total dividends of ¥2,550M (to owners of parent ¥2,380M + non-controlling interests ¥170M). The payout ratio relative to Net Income attributable to owners of parent of ¥10.0B is 237.6%, an abnormally high level, meaning dividends could not be covered by current period earnings and relied on retained earnings and borrowings. Share buybacks of ¥660M were executed; combined with dividends, the total shareholder return ratio is approximately 300%. Dividends + buybacks of ¥3,040M were funded against FCF of -¥4,640M, covered by Operating CF (¥9,200M) and asset sales/borrowings. Cash and deposits ¥378.5B (prior year ¥509.7B) fell by ¥131.2B due to dividends, buybacks, and investments, reducing financial flexibility. Next year’s dividend forecast ¥25.0 (payout ratio 51.5%) is a rationalization tied to profit level, but sustainable returns require FCF to turn positive and improved working capital efficiency. Cancellation of treasury shares ¥4,920M during the period signaled intent to improve capital efficiency, but with ROE at 0.9%, returns are below cost of capital and improving profitability remains the priority.
The company is a diversified operator across Industrial Materials, Devices, and Medical Technology, occupying an intermediate position across chemicals, electronic components, and precision instruments. Compared to peer group (chemical & electronic components sectors) compiled by the company from public filings, Operating margin 2.1% is well below sector median 5–7%, placing it in the bottom quartile. ROE 0.9% is far below sector median 8–10%, indicating inferior profitability. Equity Ratio 46.1% is in line with sector median 40–50% and financial soundness is standard. Payout ratio 237.6% is extremely high within the sector and disproportionate to profit levels. Operating CF / Sales 4.7% (¥92.0B ÷ ¥1,949.0B) is below sector median 7–9%, indicating relatively weak cash generation. DSO 74 days and DIO 77 days exceed sector averages (DSO ~60 days, DIO ~50 days), indicating significant scope for improvement. EBITDA margin 7.4% is below sector median 10–12% and indicates weaker pre-depreciation profitability. Goodwill / Equity ratio 28.2% is in line with sector median 20–30%, but goodwill of 2.3x EBITDA implies impairment risk. Overall, the company underperforms on profitability, capital efficiency, and working capital efficiency, though financial stability is average; shareholder return policy exceeds earnings reality. If next year’s Operating margin target of 3.4% is achieved, ranking could improve from lower to mid-tier, but simultaneous improvements in working capital, tax rate, and interest costs are essential.
Three key points:
This report was generated automatically by AI analyzing XBRL earnings release data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.