| Metric | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1437.4B | ¥1484.8B | -3.2% |
| Operating Income / Operating Profit | ¥93.5B | ¥69.5B | +34.6% |
| Ordinary Income | ¥102.5B | ¥72.5B | +41.3% |
| Net Income / Net Profit | ¥24.8B | ¥25.6B | -3.2% |
| ROE | 2.0% | 2.1% | - |
For the fiscal year ended March 2026, Revenue was ¥1437.4B (¥-47.4B YoY, -3.2%), Operating Income was ¥93.5B (¥+24.0B YoY, +34.6%), Ordinary Income was ¥102.5B (¥+30.0B YoY, +41.3%), and Net Income was ¥24.8B (¥-0.8B YoY, -3.2%). While operating profitability improved materially despite lower sales, the recognition of special losses totaling ¥60.6B, including impairment losses of ¥23.4B and inventory valuation losses of ¥16.97B, kept the bottom-line profit roughly flat with the prior year. The operating margin improved to 6.5% (up 1.8pp from 4.7%) as price measures took hold and cost optimization progressed. Operating Cash Flow was ¥82.1B, 3.30x Net Income, indicating good cash conversion of profits, but the compression of Net Income by special losses resulted in a low ROE of 2.0%.
[Revenue] Revenue was ¥1437.4B (YoY -3.2%), a decline. The core Exterior Materials Business recorded ¥1352.8B (YoY -3.3%), accounting for 92.1% of consolidated sales, impacted by weak housing starts and renovation demand. Other businesses recorded ¥116.0B (YoY +0.4%), a slight increase. By segment, Exterior Materials accounted for 92.1% of sales (Operating Income ¥119.6B, margin 8.8%), Others 7.9% (Operating Income ¥1.7B, margin 1.4%). The Exterior Materials Business operating margin improved by about 1.3pp from ~7.5% to 8.8%, helped by price pass-through and easing raw material costs. Consolidated cost of sales ratio improved to 64.1% (prior year 65.7%), expanding gross margin to 35.9% (prior year 34.3%).
[Profit & Loss] Cost of sales was ¥921.1B (64.1% of sales), yielding Gross Profit of ¥516.3B (gross margin 35.9%). SG&A was ¥422.7B (29.4% of sales; down from ¥43,900 million in the prior year), resulting in Operating Income of ¥93.5B (operating margin 6.5%, up 1.8pp from 4.7%). Non-operating income of ¥13.5B (dividend income ¥3.4B, interest income ¥1.7B, foreign exchange gains ¥3.8B, etc.) exceeded non-operating expenses of ¥4.5B (interest expense ¥3.4B, etc.), producing Ordinary Income of ¥102.5B (ordinary income margin 7.1%, up 2.2pp from 4.9%). Pre-tax income was compressed to ¥42.0B due to special losses of ¥60.6B (impairment ¥23.4B, inventory valuation loss ¥16.97B, loss on retirement of fixed assets ¥4.6B, etc.). After income taxes of ¥17.2B (effective tax rate ~41%), Net Income was ¥24.8B (net margin 1.7%, roughly unchanged from prior year 1.7%). The special losses were largely one-off in nature; operating improvements and non-operating income supported a solid Ordinary Income, but the bottom line was constrained by the special losses. In summary: lower revenue but higher operating and ordinary profits, with Net Income flat due to special losses.
The Exterior Materials Business recorded Revenue of ¥1352.8B (YoY -3.3%), Operating Income ¥119.6B (YoY +23.5%), margin 8.8% (approx. +1.3pp from prior ~7.5%). Revenue declined with slower housing starts, but price measures, easing raw material and logistics costs, and improved production efficiency drove a substantial margin improvement. Other businesses posted Revenue of ¥116.0B (YoY +0.4%) and Operating Income ¥1.7B (YoY +253.2%), margin 1.4%. Including fiberboard, construction, and FP businesses, small-scale profitability turned positive. The company’s profit structure is heavily driven by the Exterior Materials Business; margin trends in that segment determine consolidated profitability.
[Profitability] Operating margin of 6.5% improved 1.8pp from 4.7%, supported by gross margin expansion to 35.9% (up 1.6pp from 34.3%) and SG&A ratio improvement to 29.4% (down 0.2pp from 29.6%). Ordinary margin of 7.1% improved 2.2pp from 4.9%, with stable non-operating income contributing to solid ordinary-stage profitability. Net margin of 1.7% remained level with the prior year owing to special losses of ¥60.6B; excluding special items, underlying profitability is substantially higher. ROE stood at 2.0%, low (prior year 2.2%), with high Equity Ratio of 72.0% and compressed Net Income suppressing capital efficiency. ROA was 2.0% (prior year 2.2%). Segment margin for Exterior Materials at 8.8% indicates improved standalone business profitability from both pricing and cost measures.
[Cash Quality] Operating Cash Flow of ¥82.1B is 3.30x Net Income, indicating good cash realization, but OCF/EBITDA at 0.56x is low; reductions in accounts payable of ¥25.4B and tax payments of ¥35.8B constrained cash conversion. Accrual ratio was -3.4%, favorable, and depreciation ¥53.6B plus inventory decrease ¥25.1B and trade receivables decrease ¥25.5B boosted OCF. Free Cash Flow was ¥44.4B, covering dividends of ¥38.9B at 1.13x. [Investment Efficiency] Capital expenditures were ¥39.5B, 0.74x depreciation of ¥53.6B, indicating maintenance-oriented allocation and a gradual pace of asset renewal. Fixed asset turnover was 2.01x, and utilization of tangible fixed assets of ¥693.3B remained stable. [Financial Soundness] Equity Ratio was 72.0% (prior year 70.2%), very high safety. Current ratio 285%, quick ratio 221% show strong short-term liquidity. Interest-bearing debt was ¥141.3B, Debt/EBITDA 0.96x, interest coverage 27.4x, indicating low leverage and strong financial resilience. Cash and deposits of ¥247.0B are 9.3x short-term interest-bearing debt of ¥26.6B, limiting maturity mismatch risk.
Operating Cash Flow was ¥82.1B (YoY -21.1%), 3.30x Net Income, indicating high quality. Components: depreciation ¥53.6B and impairment losses ¥23.4B (non-cash) added back; inventory decrease ¥25.1B (inventory compression) and trade receivables decrease ¥25.5B (improved collections) contributed positively. Offsetting items included accounts payable decrease ¥25.4B (shortened payment terms or reduced purchases), tax payments ¥35.8B, and other working capital adjustments -¥18.9B. Investing Cash Flow was -¥37.8B, centered on capital expenditures of ¥39.5B and net acquisition/sale of investment securities (acquisitions ¥0.2B, disposals ¥4.99B). Free Cash Flow (Operating CF + Investing CF) was ¥44.4B, which covered dividend payments of ¥38.9B at 1.13x. Financing Cash Flow was -¥66.4B, including dividends ¥38.9B, share buybacks ¥25.0B, long-term debt repayments ¥30.3B, and borrowings of ¥29.0B (net repayment ¥1.3B). Ending cash balance was ¥247.0B (from opening ¥264.8B, change -¥17.8B). OCF/EBITDA at 0.56x remains low; payables reduction and tax payments suppressed cash conversion, but inventory and receivables compression can be seen as working capital efficiency improvements.
Recurring earnings consist of Operating Income ¥93.5B and stable non-operating income ¥13.5B (dividend income ¥3.4B, interest income ¥1.7B, foreign exchange gains ¥3.8B, etc.). Non-operating income is 0.9% of sales, well below 5%, a healthy level. One-off items were special losses of ¥60.6B (impairment ¥23.4B, inventory valuation loss ¥16.97B, loss on retirement of fixed assets ¥4.6B, etc.), which compressed pre-tax income to ¥42.0B and Net Income to ¥24.8B. Most special losses were structural/one-off items; operating-stage earning power remains solid. Comprehensive income was ¥32.9B; the ¥8.1B difference versus Net Income (¥24.8B) consisted of currency translation adjustments -¥7.6B, valuation gains on securities +¥11.9B, and retirement benefit adjustments +¥3.7B, indicating an accumulation of unrealized gains in securities. Operating CF of ¥82.1B is 3.30x Net Income, accrual ratio -3.4%, showing good cash conversion and high quality of earnings. However, OCF/EBITDA 0.56x signals weak cash conversion efficiency due to accounts payable decreases and tax payments. The divergence between Ordinary Income and Net Income is mainly due to special losses; absent recurrence of these special losses, underlying profitability is robust.
Full-year guidance: Revenue ¥1410.0B (vs current period -1.9%), Operating Income ¥96.0B (vs current period +2.6%), Ordinary Income ¥98.0B (vs current period -4.4%), Net Income ¥80.0B (significant increase). Progress rates are: Revenue 101.9%, Operating Income 97.4%, Ordinary Income 104.6%, Net Income 31.0% — Revenue, Operating and Ordinary are near achievement lines. The low Net Income progress rate reflects the current period’s special losses of ¥60.6B; the full-year plan assumes a rebound from special losses and tax burden normalization, projecting a large recovery in Net Income. Revenue guidance is conservative to factor external environment uncertainty; Operating Income is expected to rise slightly as price and cost measures solidify; Net Income is assumed to recover substantially to ¥80.0B once special losses dissipate. Key to achieving targets are stabilization of Exterior Materials demand, continued improvement in inventory quality, and prevention of special loss recurrence.
Dividends: interim ¥57 and year-end ¥57, annual ¥114 (same as prior year). Payout Ratio based on Net Income is approximately 158%, high and a heavy burden relative to earnings. However, dividend coverage by FCF was 1.13x this period, so cash generation covered dividends. Share buybacks of ¥25.0B were implemented; total shareholder returns were Dividends ¥38.9B + Buybacks ¥25.0B = ¥63.9B, exceeding FCF ¥44.4B, resulting in Total Return Ratio of about 258% of Net Income. Treasury stock balance narrowed considerably from -¥97.33B to -¥37.95B (improvement +61%), with the buybacks and disposal/cancellation of treasury shares improving capital structure. If next period Net Income target of ¥80.0B is achieved, the payout ratio would decline to approximately 71% (calculated as 57 yen × 2 ÷ ¥80.0B EPS ≈ 71%), improving sustainability of dividends, which depends on profit recovery. Given cash deposits ¥247.0B and Operating CF ¥82.1B, dividend funding appears adequate, but continuation of generous total returns depends on profit rebound from special loss reversal and stabilization of OCF.
Inventory Valuation Loss / Quality Risk: Inventory valuation loss this period was ¥16.97B, about 9.5% of total inventories of ¥177.8B, highlighting inventory quality issues. Inventory turnover was 8.08x (prior 8.03x), a slight improvement, but DIO of 45.2 days is in a cautionary zone. Inventory composition is Finished Goods ¥177.8B, Raw Materials ¥64.4B, Work-in-Process ¥24.1B; unless finished goods inventory compression and quality normalization progress, recurrence risk remains.
Impairment Loss / Asset Profitability Risk: Impairment losses of ¥23.4B (Exterior Materials ¥21.6B, Others ¥1.8B) were recognized, indicating reduced asset profitability. Of tangible fixed assets ¥693.3B, major components are Machinery & Equipment ¥342.9B, Buildings ¥138.1B, Land ¥199.8B. If utilization or profitability of impaired assets does not improve, additional impairment risk persists. Fixed asset turnover at 2.01x indicates maintained efficiency, but with depreciation ¥53.6B versus capex ¥39.5B and continued restrained investment, asset aging may accelerate, raising future impairment and repair cost risks.
External Environment & Demand-Supply Risk: The core Exterior Materials Business depends on housing starts and renovation demand and declined -3.3% this period. Structural headwinds such as population decline and increase in vacant houses, combined with interest rate hikes and construction material inflation, may suppress demand. High segment concentration at 92.1% means weak exterior materials demand directly impacts consolidated earnings. Re-escalation of raw material and energy prices or adverse currency moves (foreign exchange gains ¥3.8B could reverse) may compress gross margins.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.5% | 7.8% (4.6%–12.3%) | -1.2pt |
| Net Margin | 1.7% | 5.2% (2.3%–8.2%) | -3.5pt |
Although the operating margin improved, it remains 1.2pp below the median, and Net Margin is 3.5pp below the median due to special losses.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -3.2% | 3.7% (-0.4%–9.3%) | -6.9pt |
Revenue growth rate is 6.9pp below the median, with weak exterior materials demand limiting growth.
※ Source: Company compilation
Operating-stage profitability improvement and expected rebound from special losses: Operating margin improved to 6.5% (up 1.8pp) as price measures and cost optimization took effect. Special losses of ¥60.6B were mainly one-off items such as impairments and inventory valuation losses; the company expects a rebound to Net Income ¥80.0B (over 3.2x the current period) next fiscal year. If operating improvements continue and special losses do not recur, there is significant upside for capital efficiency and ROE.
Balance between cash generation and return policy: Operating CF is 3.30x Net Income and of high quality, with improved working capital efficiency via inventory and receivables compression. However, payout ratio of 158% and Total Return Ratio of 258% represent a high distribution burden relative to earnings; total returns of ¥63.9B (including ¥25.0B buybacks) exceeded FCF ¥44.4B. Profit recovery and stabilization of OCF next year are prerequisites for sustaining the return policy. Reduction in treasury stock supports capital efficiency, but excessive returns risk constraining investment capacity and retained earnings.
Progress in inventory quality and asset profitability improvement: Recognition of inventory valuation losses ¥16.97B and impairment losses ¥23.4B highlights issues in inventory quality and asset profitability. Inventory turnover rose slightly but DIO of 45.2 days remains cautionary; further inventory compression and quality normalization are key to gross margin stability. Monitoring is required to see whether utilization improvement of impaired assets and increased capex will address asset aging issues.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as appropriate.