| Metric | This Period | Prior-Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | - | - | - |
| Operating Income | ¥108.5B | ¥150.7B | -28.0% |
| Equity-method Investment Income (Loss) | ¥2.5B | ¥3.5B | -28.0% |
| Ordinary Income | ¥108.9B | ¥158.2B | -31.2% |
| Net Income | ¥11.6B | ¥67.1B | -82.7% |
| ROE | 0.8% | 4.6% | - |
For the fiscal year ended March 2026 (Full Year), Revenue was ¥6,067.8B (YoY +¥522.7B +9.4%), Operating Income was ¥108.5B (YoY ▲¥42.2B ▲28.0%), Ordinary Income was ¥108.9B (YoY ▲¥49.3B ▲31.2%), and Net Income attributable to owners of the parent was ¥47.2B (YoY ▲¥28.5B ▲37.6%). Overseas Wholesale drove the revenue increase with Revenue of ¥3,380.8B (+22.7%), accounting for group-wide top-line growth, but the segment swung to an operating loss (▲¥5.5B) and SG&A ratio rose (15.6% of Revenue, from 13.8% prior year, +1.8pt), causing Operating Margin to decline to 1.8% (from 2.7% prior year, ▲0.9pt). In non-recurring items, gain on sale of investment securities of ¥47.0B was recorded, while impairment losses of ¥17.8B and restructuring costs of ¥24.6B were incurred; a persistently high effective tax rate of 47.3% also pressured the bottom line, resulting in a substantial decline in final profit.
Revenue of ¥6,067.8B (+9.4%) was driven by significant growth in Overseas Wholesale. By segment, Overseas Wholesale was ¥3,380.8B (+22.7%), accounting for 55.7% of total; Domestic Wholesale ¥1,931.2B (▲3.7%), Paper Processing ¥514.1B (▲0.4%), Environmental Raw Materials ¥200.4B (▲11.5%), and Real Estate Leasing ¥41.3B (▲0.7%). Gross Profit was ¥1,054.4B (prior ¥914.7B) with Gross Margin improving to 17.4% (from 16.5% prior year, +0.9pt), but a sharp rise in SG&A to ¥945.9B (+23.8%) pushed the SG&A ratio to 15.6% of Revenue (from 13.8% prior year, +1.8pt), offsetting gross margin improvements. Expansion of SG&A, which includes goodwill amortization of ¥12.5B, was mainly driven by fixed-cost inflation in personnel and logistics and cost increases associated with Overseas Business expansion.
On the P&L, Operating Income was ¥108.5B (▲28.0%) with Operating Margin 1.8% (from 2.7% prior year, ▲0.9pt). Non-operating income comprised financial income of ¥37.3B including dividend income ¥13.6B and interest income ¥9.5B, versus financial expenses of ¥36.9B including interest expense ¥30.2B, resulting in a roughly neutral net effect and Ordinary Income ¥108.9B (▲31.2%). In extraordinary items, the Company recorded special gains of ¥54.6B including gain on sale of investment securities ¥47.0B and gain on business transfers ¥2.8B, while recognizing special losses totaling ¥50.0B including impairment losses ¥17.8B (including goodwill impairment in Overseas Wholesale of ¥14.4B), restructuring costs ¥24.6B, and litigation settlement ¥5.1B. Pre-tax income was ¥113.4B, income taxes ¥53.6B (effective tax rate 47.3%), and non-controlling interests ¥12.6B, resulting in Net Income attributable to owners of the parent ¥47.2B (▲37.6%). The company delivered higher Revenue but lower profits. Temporary factors—net special items of ¥4.5B and high tax rate—pressed down the final profit.
Overall, the swing of Overseas Wholesale into a loss significantly depressed consolidated profitability, and Paper Processing’s strong performance could not fully offset the decline, resulting in consolidated lower profits.
Profitability: Operating Margin 1.8% (from 2.7% prior year, ▲0.9pt), Ordinary Margin 1.8% (from 2.9% prior year, ▲1.1pt), Net Income Margin attributable to owners of the parent 0.8% (from 1.4% prior year, ▲0.6pt), all deteriorated. ROE was 0.8% (prior 5.8%), a significant decline, calculated as Net Income attributable to owners of the parent ¥47.2B ÷ average equity approximately ¥1,207B. ROA on an ordinary income basis fell to 2.8% (from 4.1% prior year). Gross Margin improved to 17.4% (+0.9pt) but SG&A ratio expansion worsened operating profitability.
Cash Quality: Operating Cash Flow (OCF) was ¥245.5B, 21.2x Net Income of ¥11.6B. EBITDA (Operating Income ¥108.5B + Depreciation ¥101.9B) was approximately ¥210B, and OCF/EBITDA was 1.17x, indicating strong cash conversion. The subtotal of operating cash flow before working capital changes was ¥302.9B; working capital changes contributed +¥39.8B (receivables decrease +¥60.2B, inventory increase ▲¥17.5B, payables decrease ▲¥2.9B). Free Cash Flow (FCF = OCF ¥245.5B + Investing CF ▲¥11.8B) was ¥233.8B, comfortably covering capital expenditures of ¥56.6B. Investment Efficiency: Total Asset Turnover 1.54x (Revenue ¥6,067.8B ÷ Total Assets ¥3,947.0B), Fixed Asset Turnover 6.20x (Revenue ÷ Fixed Assets ¥1,541.5B). Depreciation ¥101.9B against Tangible Fixed Assets ¥979.6B gives a depreciation-to-capital ratio of 10.4%; CapEx ¥56.6B yields an investment-to-depreciation ratio of 0.56x, indicating restrained investment.
Financial Soundness: Equity Ratio 35.7% (from 37.1% prior year, ▲1.4pt), Current Ratio 118.8% (Current Assets ¥2,404.9B ÷ Current Liabilities ¥2,023.6B), Quick Ratio 84.9%. Interest-bearing debt total ¥989.5B (short-term borrowings ¥449.9B + CP ¥250.0B + bonds ¥200.0B + long-term borrowings ¥89.6B) versus cash ¥258.2B yields Net Interest-bearing Debt ¥731.3B and Net D/E ratio 0.52x. Debt/EBITDA approx. 4.7x, and interest coverage (EBITDA approx. ¥210B ÷ interest expense ¥30.2B) 6.96x.
Operating Cash Flow ¥245.5B (prior ¥210.1B, +16.9%) reflects OCF subtotal ¥302.9B less corporate tax payments ¥52.0B. Working capital contributed +¥39.8B (receivables recovery +¥60.2B, inventory increase ▲¥17.5B, payables decrease ▲¥2.9B). OCF is 21.2x Net Income of ¥11.6B, indicating strong conversion supported by non-cash adjustments such as impairment ¥17.8B and restructuring expenses plus working capital improvements. Investing Cash Flow was ▲¥11.8B (prior ▲¥112.2B), a large improvement: capital expenditures of ▲¥56.6B were more than offset by proceeds from sale of investment securities +¥83.4B and business transfers +¥32.3B. FCF ¥233.8B comfortably exceeds shareholder returns of ¥122.5B (dividends ¥33.3B + buybacks ¥89.2B). Financing Cash Flow was ▲¥167.9B: net decrease in short-term borrowings ▲¥57.6B, long-term borrowings repayment ▲¥44.6B, bond redemptions ▲¥200.0B were partially offset by bond issuances +¥100.0B and CP increase +¥95.0B, enabling shareholder returns of ▲¥122.5B. Cash increased from ¥190.3B at the beginning of the period to ¥258.2B at the end (+¥67.9B), with abundant FCF building liquidity buffers.
Recurring earnings are centered on Operating Income ¥108.5B and Ordinary Income ¥108.9B, which includes non-operating income ¥37.3B (dividend income ¥13.6B, interest income ¥9.5B, etc.) and non-operating expenses ¥36.9B (interest expense ¥30.2B, etc.). One-off items consisted of Special Gains ¥54.6B (gain on sale of investment securities ¥47.0B, gain on business transfers ¥2.8B, etc.) and Special Losses ¥50.0B (impairment losses ¥17.8B, restructuring costs ¥24.6B, litigation settlement ¥5.1B, etc.), netting to +¥4.5B. Of Net Income attributable to owners of the parent ¥47.2B, approximately ¥25B was attributable to the net special items and the high tax rate (effective tax rate 47.3%, including tax effect adjustments for prior periods), so temporary factors account for roughly half of the final profit. Non-operating income represented only 0.6% of Revenue, indicating low dependency on financial income. OCF ¥245.5B substantially exceeds Net Income ¥11.6B, demonstrating good accrual quality; however, gain on sale of investment securities boosted Net Income and its reproducibility is limited. Non-cash expenses such as depreciation ¥101.9B and working capital improvements were main drivers of cash generation, indicating strong recurring cash-generating ability.
For FY ending March 2027 (Full Year), Revenue is undisclosed, Operating Income is forecast at ¥155.0B (YoY +42.9%), Ordinary Income ¥150.0B (YoY +37.8%), Net Income attributable to owners of the parent ¥80.0B (YoY +69.5%), EPS ¥72.70, DPS ¥18.00. Against year-to-date Operating Income ¥108.5B and Ordinary Income ¥108.9B, the Full Year forecast implies progress rates of Operating Income 70.0% and Ordinary Income 72.6%. Achievement assumes Overseas Wholesale returning to profitability (recovering from this period’s ▲¥5.5B), normalization of SG&A ratio (decline from 15.6% this period), and normalization of the effective tax rate (decline from 47.3% this period). Realization of benefits from restructuring costs ¥24.6B and execution of profitability improvement measures are key. Forecast DPS ¥18.00 is a reduction from this period’s ¥34.00, but considering the 1:10 stock split in October 2024, on a pre-split basis this equates to ¥180 and represents an effective dividend increase. Payout Ratio on forecast basis is about 24.8% (DPS ¥18 ÷ EPS ¥72.7), down from 40.7% this period, reflecting a policy prioritizing profit growth.
Annual dividend is ¥34.00 per share (interim ¥14.00 + year-end ¥20.00), a decline from prior-year ¥125.00 but, accounting for the 1:10 stock split in October 2024, this is equivalent to ¥340 pre-split and thus an effective increase. Payout Ratio is 40.7% (total dividends ¥33.3B ÷ Net Income attributable to owners of the parent ¥47.2B, approximate, calculated using shares outstanding adjusted for the split). Share buybacks of ¥89.2B were executed, and combined with dividends ¥33.3B total shareholder returns were ¥122.5B; Total Return Ratio relative to FCF is 52.4%. Share repurchases (7.68 million shares) were undertaken to prevent dilution and strengthen shareholder returns, representing approximately 6.4% of shares outstanding. FCF coverage of shareholder returns is ¥122.5B ÷ OCF ¥245.5B = 0.50x, indicating sufficient dividend capacity. The forecast DPS ¥18.00 for FY2027 on a post-split basis is lower than this period’s ¥34.00, but on a pre-split basis (¥180) it represents an effective YoY +44% increase. The high Total Return Ratio this period is influenced by special factors, but sustained OCF and FCF generation supports its sustainability.
Deterioration of profitability and revenue volatility in Overseas Wholesale: The Overseas Wholesale segment accounts for 55.7% of Revenue but swung to a loss of ▲¥5.5B this period (prior ¥32.0B profit). Impairment losses including goodwill impairment of ¥14.4B and market deterioration rapidly worsened profitability, and restructuring costs of ¥24.6B were recorded. Market volatility overseas and integration costs materially influence consolidated profits. Achieving the FY2027 forecast depends on this segment returning to profitability, which is uncertain.
SG&A ratio increase and structurally lower profitability: SG&A rose to ¥945.9B (15.6% of Revenue) from prior ¥763.9B (13.8%), an increase of ¥182.0B (+23.8%), and the SG&A ratio increased by 1.8pt. SG&A growth outpaced revenue growth (+9.4%), demonstrating negative operating leverage driven by fixed-cost inflation in personnel and logistics which offset gross margin improvement (+0.9pt). Operating Margin 1.8% (from 2.7% prior year) indicates structural profitability decline and an urgent need to restore cost discipline.
Tightness in short-term funding structure and refinancing risk: Of Current Liabilities ¥2,023.6B, short-term borrowings ¥449.9B, CP ¥250.0B, and bonds maturing within one year ¥31.5B contribute to a high short-term interest-bearing debt ratio; coverage of short-term liabilities by cash ¥258.2B is limited at 1.27x. Long-term borrowings have reduced to ¥89.6B, shortening average debt maturity; bond redemptions ¥200.0B were complemented by CP increase ¥95.0B and bond issuance ¥100.0B. The company is sensitive to refinancing in a rising interest-rate environment; rising funding costs and securing liquidity are risk factors.
No industry benchmark data available
Profit recovery in Overseas Wholesale and restoration of cost discipline are prerequisites for the FY2027 profit plan. Overseas Wholesale has high business concentration with Revenue ¥3,380.8B (55.7% composition) and turned to a loss of ▲¥5.5B this period while SG&A ratio rose to 15.6% (from 13.8% prior year, +1.8pt). Achieving FY2027 Operating Income ¥155.0B (+42.9%) requires this segment to return to profitability and restraint in SG&A; realization of benefits from restructuring costs ¥24.6B and market recovery are critical. Monitor quarterly trends in Overseas Wholesale segment profit, SG&A ratio, and Operating Margin.
Cash generation is solid and shareholder return capacity is ample, but improving short-term funding structure is a task. OCF ¥245.5B (21.2x Net Income), OCF/EBITDA 1.17x, and FCF ¥233.8B demonstrate strong cash generation and fully cover total shareholder returns ¥122.5B (dividends ¥33.3B + buybacks ¥89.2B). However, Current Ratio 118.8% and Quick Ratio 84.9%, and short-term interest-bearing debt roughly ¥731B against cash ¥258.2B indicate tight short-term liquidity and high refinancing sensitivity. Extending maturities of interest-bearing debt and maintaining cash buffers are keys to stable funding.
Significant room to improve capital efficiency; recovery of ROIC and ROE is the inflection point for valuation. ROE 0.8% (prior 5.8%), estimated ROIC 3.4% below cost of capital, Total Asset Turnover 1.54x, and Net Margin 0.8% highlight weak profitability. Although Gross Margin improved to 17.4%, SG&A expansion kept Operating Margin at 1.8%, necessitating structural cost optimization. If Operating Income reaches ¥155.0B in FY2027, Operating Margin should turn positive and capital efficiency could recover. Monitor Operating Margin, ROE, and working capital turnover days.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by our firm based on publicly disclosed financial data. Investment decisions are your own responsibility; please consult a professional advisor as needed before making any investment decisions.