| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥585.6B | ¥601.1B | -2.6% |
| Operating Income | ¥71.0B | ¥56.7B | +25.3% |
| Ordinary Income | ¥70.1B | ¥60.0B | +16.9% |
| Net Income | ¥68.4B | ¥51.6B | +32.7% |
| ROE | 12.8% | 10.2% | - |
For the fiscal year ended March 2026, Revenue totaled ¥585.6B (YoY -¥15.6B -2.6%), Operating Income was ¥71.0B (YoY +¥14.3B +25.3%), Ordinary Income was ¥70.1B (YoY +¥10.1B +16.9%), and Net Income attributable to owners of the parent was ¥68.4B (YoY +¥16.8B +32.7%), resulting in lower revenue but higher profit. Operating margin improved to 12.1% (from 9.4% a year earlier, +2.7pt), and net margin improved to 11.7% (from 8.6% a year earlier, +3.1pt), indicating a significant increase in profitability. The core Seal Products business performed well with Revenue +8.0% and Operating Income +25.2%, driven by maintained gross margin of 42.7% and suppression of SG&A ratio to 30.5%, leading company-wide margin improvement. Conversely, the Functional Resin Products business recorded Revenue -10.0% and Operating Income -12.7%, remaining at a low operating margin of 3.4%. Special items were a net loss as Special Losses of ¥3.9B (impairment losses ¥1.4B, business structure reform expenses ¥3.5B, etc.) exceeded Special Gains of ¥1.3B, but this does not undermine the improving trend in recurring profitability.
[Revenue] Revenue was ¥585.6B (YoY -2.6%), a slight decline. By segment, the Seal Products business increased to ¥438.6B (+8.0%), accounting for 74.9% of consolidated Revenue. Strong sales of plant and equipment-related products, elastomer products, and automotive parts, along with overseas expansion centered in Asia, contributed. The Functional Resin Products business declined to ¥147.0B (-10.0%), affected by softer market conditions and selling price pressure, mainly for fluoropolymer products. By region, Japan was ¥395.5B (-3.6%), Asia was ¥159.7B (+14.0%), and the U.S. was ¥29.1B (-41.3%), reflecting changes in regional mix. Divestitures including the silicon wafer recycling business also impacted, resulting in consolidated Revenue below the prior year.
[Profitability] Operating Income rose substantially to ¥71.0B (YoY +25.3%). Gross profit was ¥249.8B (gross margin 42.7%, up from 39.7% +3.0pt), aided by expansion of high-margin product mix in the Seal Products business and easing of raw material cost pressures. SG&A was ¥178.8B (SG&A ratio 30.5%, from 30.2% +0.3pt), with cost control proving effective despite investment for revenue growth, converting gross margin improvements into Operating Income. Ordinary Income was ¥70.1B (YoY +16.9%); non-operating income of ¥5.8B (dividends received ¥0.6B, foreign exchange gains ¥0.3B, etc.) partially offset non-operating expenses of ¥6.7B (interest expense ¥2.6B, etc.), resulting in a slightly smaller increase than operating income. Profit before tax was ¥67.5B, and after deducting income taxes of ¥16.2B (effective tax rate 24.0%), Net Income attributable to owners of the parent was ¥68.4B (YoY +32.7%), outpacing the growth rate of Operating Income. In summary, the results show a structure of declining revenue but rising profit, where margin improvements and cost efficiency produced operating leverage.
The Seal Products business recorded Revenue ¥438.6B (YoY +8.0%), Operating Income ¥66.0B (YoY +25.2%), and an operating margin of 15.1%, maintaining high profitability. Strong demand for plant and equipment-related products, elastomer products, and automotive parts, together with price revisions and mix improvement, boosted gross margins and reinforced its position as the core segment contributing 93.0% of consolidated Operating Income. The Functional Resin Products business recorded Revenue ¥147.0B (YoY -10.0%), Operating Income ¥5.0B (YoY -12.7%), and an operating margin of 3.4%. It was adversely affected by softer market conditions and downward pressure on selling prices centered on fluoropolymer products, and by reduced operating rates, leading to a significant decline in profitability. The inter-segment gap in operating margins is large at 11.7pt, underscoring a corporate structure driven by the high-margin Seal Products model.
[Profitability] Operating margin 12.1% (prior year 9.4%), net margin 11.7% (prior year 8.6%) improved significantly, led by the core Seal Products business margin of 15.1%. ROE 12.8% (prior year 9.5%) indicates improved profitability and trending improvement in capital efficiency. ROA 9.6% (prior year 8.6%) also rose.
[Cash Quality] Operating Cash Flow (OCF) ¥50.3B / Net Income ¥68.4B = 0.74x, with inventory increases (-¥15.2B) and decrease in accounts payable (-¥10.5B) pressuring working capital and leaving cash conversion efficiency as an issue. Days sales outstanding (DSO) 77 days (¥123.5B ÷ ¥585.6B × 365 days), inventory turnover days 43 days (¥69.1B ÷ ¥585.6B × 365 days), indicating room to improve inventory efficiency.
[Investment Efficiency] Capital expenditure ¥44.6B / Depreciation ¥27.4B = 1.63x, continuing active growth investment; goodwill ¥7.8B recorded and intangible assets increased to ¥38.7B (from ¥18.8B prior year, +106%), expanding the basis for future earnings.
[Financial Soundness] Equity Ratio 64.2% (prior year 64.9%) remains high; current ratio 303% (current assets ¥479.7B / current liabilities ¥158.2B), quick ratio 260%, indicating strong short-term liquidity. Interest-bearing debt total is short-term borrowings ¥36.5B + long-term borrowings ¥114.8B = ¥151.3B; net interest-bearing debt after deducting cash ¥79.2B is ¥72.1B, with Debt/Equity ratio 0.28x, reflecting conservative financial leverage. Interest coverage is Operating Income ¥71.0B / interest paid ¥2.6B = 27.3x, indicating a very light interest burden.
OCF was ¥50.3B (YoY +3.2%), derived from profit before tax ¥67.5B plus non-cash expenses such as depreciation ¥27.4B, adjusted for working capital movements and income taxes paid ¥21.7B. Inventory increases of ¥15.2B (finished goods ¥6.9B, raw materials ¥12.7B, work in process ¥1.3B, etc.) and decrease in accounts payable of ¥10.5B were the main cash outflows, with a slight increase in accounts receivable ¥0.5B also limiting cash conversion efficiency. Investing cash flow was -¥43.6B, driven by capital expenditures of ¥44.6B and intangible asset acquisitions of ¥4.9B as growth investments, partially offset by inflows such as subsidies ¥15.0B and proceeds from sale of investment securities ¥6.7B. Free Cash Flow was ¥6.7B (OCF ¥50.3B - investing CF ¥43.6B), a small but positive amount. Financing cash flow was -¥9.0B, reflecting dividend payments ¥26.4B and net increase in long-term borrowings ¥34.4B (proceeds ¥55.0B - repayments ¥21.5B) together with net decrease in short-term borrowings ¥19.1B. Cash and cash equivalents at period-end were ¥79.2B (from ¥79.7B at the beginning of the period, -¥0.5B), essentially flat and stable including foreign exchange effects of ¥1.8B. Improving working capital efficiency and OCF/EBITDA are key to strengthening future cash generation.
Earnings quality is high, with Operating Income ¥71.0B comprising the bulk of Ordinary Income ¥70.1B, and net non-operating items totaling -¥0.9B are limited. Of non-operating income ¥5.8B, dividends received ¥0.6B, interest received ¥0.3B, and foreign exchange gains ¥0.3B are the main items, indicating recurring financial income. Non-operating expenses ¥6.7B include interest expense ¥2.6B, so interest burden is minor at 3.7% of Operating Income. Special items were net -¥2.6B (Special Gains ¥1.3B - Special Losses ¥3.9B), mixing one-off gains such as gains on sale of investment securities ¥4.1B and one-off costs including impairment losses ¥1.4B and business structure reform expenses ¥3.5B. Accrual (Net Income - OCF) is ¥68.4B - ¥50.3B = +¥18.1B, representing +26.5% of Net Income and relatively high, but this is attributable to working capital increases (inventory +¥15.2B, accounts receivable +¥0.5B, accounts payable -¥10.5B) and does not necessarily call into question the quality of profit recognition. The difference between other comprehensive income ¥55.6B and Net Income ¥68.4B of -¥12.8B is not fully explained by other comprehensive income items of ¥4.3B (foreign currency translation adjustments ¥0.9B, actuarial adjustments related to retirement benefits ¥1.7B, etc.), and data consistency should be carefully verified. Overall, operating profitability is sound, but improving cash generation efficiency would further enhance earnings quality.
For the fiscal year ending March 2027, management forecasts Revenue ¥650.0B (YoY +11.0%), Operating Income ¥90.0B (YoY +26.7%), Ordinary Income ¥87.0B (YoY +24.1%), Net Income attributable to owners of the parent ¥71.0B, EPS ¥403.11, and dividend ¥85.00. The plan assumes further improvement in Operating margin to 13.8% (from 12.1% this period, +1.7pt), driven by price maintenance and expanded sales of high-value-added products in the Seal Products business and profitability improvements in the Functional Resin Products business. Against current results, Revenue progress is 585.6B / 650.0B = 90.1%, and Operating Income is 71.0B / 90.0B = 78.9%, implying a planned ramp-up in the second half. The forecast dividend of ¥85 appears to be a reduction from the current period’s ¥150 (interim ¥75 + year-end ¥75), but the year-end dividend is expected to include a commemorative dividend of ¥30, so practical alignment with the baseline dividend level should be confirmed. Achieving the forecast depends on improved cash generation through normalization of inventory and receivable efficiency and on correcting the imbalance in segment profitability.
Annual dividend is ¥150 (interim ¥75 + year-end ¥75), giving a payout ratio of 51.5% based on EPS ¥291.16. The prior year also had an annual dividend of ¥150 (interim ¥75 + year-end ¥75), so the dividend level was maintained. Total dividend payments amounted to ¥26.4B (same as prior year). Dividend coverage relative to FCF ¥6.7B is 0.25x and relative to OCF ¥50.3B is 0.52x, meaning payouts are funded within operating cash flow. There were no share buybacks (treasury stock acquisition -¥0.0B), so the Total Return Ratio is approximately equal to the payout ratio. The forecast dividend for FY2027 of ¥85 implies a payout ratio of 21.1% against forecast EPS ¥403.11, a substantial decline, but the possibility of including a commemorative year-end dividend of ¥30 suggests the need to confirm the practical continuity of the dividend policy. In the medium term, expanding FCF through working capital efficiency improvements and optimizing the balance between investment and returns will be key to sustainable shareholder returns.
Risk of deterioration in working capital efficiency: Inventory increase ¥15.2B and decrease in accounts payable ¥10.5B resulted in OCF/Net Income of 0.74x, leaving cash generation efficiency as a challenge. Inventory turnover days 43 days and DSO 77 days lengthen the working capital cycle and can strain liquidity during market fluctuations or sales slowdowns. Urgent measures are required to reduce inventory and strengthen credit management heading into FY2027.
Concentration and profitability disparity risk across segments: The Seal Products business accounts for 74.9% of Revenue and 93.0% of Operating Income, making the company highly exposed to demand fluctuations and competitive pressures in that market. The Functional Resin Products business remains low-margin at 3.4% and is sensitive to raw material and selling price spreads and operating rate fluctuations. If improvement in Functional Resin profitability lags, overall corporate growth potential may be constrained, as indicated by the 11.7pt gap in segment operating margins.
Aggressive investment and tight dividend coverage: With capital expenditure ¥44.6B (1.63x depreciation) and continued growth investment, FCF is limited to ¥6.7B and dividend payments ¥26.4B result in a coverage ratio of 0.25x, which is fragile. While dividend continuation relying on OCF is possible, prolonged investment or worsening working capital could increase reliance on external funding and reduce financial flexibility.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating margin | 12.1% | 7.8% (4.6%–12.3%) | +4.4pt |
| Net margin | 11.7% | 5.2% (2.3%–8.2%) | +6.5pt |
The company’s profitability significantly exceeds the industry median, placing it in the upper quartile for both operating and net margins.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth (YoY) | -2.6% | 3.7% (-0.4%–9.3%) | -6.3pt |
Revenue growth lags the industry median, reflecting a near-term revenue contraction, but profitability advantages from margin and earnings growth support the company’s competitive position.
※ Source: Company compilation
Achieving Operating Income +25.3% and ROE 12.8% despite revenue decline reflects successful shift to high-value-added products, price maintenance, and cost control in the core Seal Products business. Operating margin 12.1% and net margin 11.7% substantially exceed industry medians, confirming a competitive advantage in profitability. The FY2027 forecast targets further improvement to Operating margin 13.8% and monitoring feasibility of the planned growth in revenue and profit is essential.
At the same time, deterioration in working capital efficiency is notable, with OCF/Net Income 0.74x, inventory increase ¥15.2B, and decrease in accounts payable ¥10.5B constraining cash generation. With FCF ¥6.7B against dividend payments ¥26.4B (coverage 0.25x), compressing inventory, strengthening receivables collection, and normalizing OCF are key to restoring cash generation. Continued active investment (capex ¥44.6B, 1.63x depreciation) requires early realization of investment benefits and improved working capital management to underpin medium-term financial stability.
By segment, the Seal Products business accounts for 93.0% of Operating Income with a high operating margin of 15.1%, while the Functional Resin Products business remains low at 3.4%. Narrowing the 11.7pt segment margin gap and sustaining Asia sales growth of +14.0% will be important indicators of execution capability for the growth strategy.
This report was auto-generated by AI analyzing 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 publicly disclosed financial data. Investment decisions are your own responsibility; please consult a professional advisor as needed before making investment decisions.