| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥5830.8B | ¥5742.8B | +1.5% |
| Operating Income / Operating Profit | ¥169.8B | ¥159.1B | +6.7% |
| Equity Method Investment Income (Loss) | ¥2.6B | ¥2.2B | +18.4% |
| Ordinary Income | ¥186.6B | ¥177.5B | +5.1% |
| Net Income / Net Profit | ¥68.2B | ¥48.7B | +40.0% |
| ROE | 3.8% | 2.9% | - |
FY2026 Q2 cumulative results were: Revenue ¥5,830.8B (YoY +¥88.0B +1.5%), Operating Income ¥169.8B (YoY +¥10.6B +6.7%), Ordinary Income ¥186.6B (YoY +¥9.1B +5.1%), Net Income attributable to owners of the parent ¥119.0B (YoY +¥12.1B +11.3%). The operating margin improved by 0.1pt to 2.9% from 2.8% a year earlier, with SG&A containment at 14.2% against a gross margin of 17.1%. Non-operating items were bolstered by dividend income ¥5.4B and interest income ¥4.1B, and extraordinary items produced a net positive ¥5.3B mainly due to gain on sale of investment securities ¥17.9B. By segment, the Energy Business secured significant profit growth with Operating Income ¥74.6B (YoY +27.6%) as the core business, Automotive Business remained steady at ¥49.8B (+9.6%), while Overseas & Trading ¥41.6B (-16.6%) and Pharmacy ¥-0.9B (turned to loss) required adjustments in some segments.
[Revenue] Revenue ¥5,830.8B (YoY +1.5%) — slight increase. By segment, Automotive-related ¥804.4B (+9.1%) benefited from new vehicle sales and expansion in rental & lease operations; Food ¥407.8B (+6.0%) saw growth in rice and alcoholic beverage sales. Conversely, the core Energy Business declined to ¥2,827.3B (-1.4%) as volume decreases offset price improvements, and Overseas & Trading was ¥915.5B (+1.4%) showing only marginal growth. The consolidated top line edged up due to volume/mix improvement in major segments and automotive sales growth, but Energy volume declines constrained overall growth momentum.
[Profitability] Operating Income ¥169.8B (YoY +6.7%) — higher profit. Gross margin improved to 17.1% (prior year 16.2%), a 0.9pt improvement, which absorbed a 0.8pt increase in SG&A ratio to 14.2% (prior year 13.4%), resulting in an operating margin improvement to 2.9% (prior year 2.8%), +0.1pt. Improvement in Energy Business margins (Operating Income +27.6%) and stable high margins in Automotive-related (6.2%) drove results, with Food turning significantly profitable (Operating Income +689.4%). Ordinary Income ¥186.6B (+5.1%) was supported by non-operating income ¥29.0B (dividend income ¥5.4B, interest income ¥4.1B, other ¥11.8B), offsetting non-operating expenses ¥12.2B (interest expense ¥7.2B). Extraordinary income included gain on sale of investment securities ¥17.9B and gain on sale of fixed assets ¥2.9B totaling ¥23.8B, while extraordinary losses included impairment losses ¥14.7B etc. totaling ¥18.6B, yielding a net extraordinary positive ¥5.3B. After deducting corporate taxes ¥65.7B (effective tax rate 34.3%), Net Income attributable to owners of the parent was ¥119.0B (+11.3%), the highest growth rate. Overall, the company achieved both revenue and profit increases.
Energy Business (Revenue ¥2,827.3B -1.4%, Operating Income ¥74.6B +27.6%, Margin 2.6%) covered volume declines with price and spread improvements to deliver substantial profit growth. Automotive-related (Revenue ¥804.4B +9.1%, Operating Income ¥49.8B +9.6%, Margin 6.2%) maintained high profitability through new vehicle sales and rental & lease expansion. Overseas & Trading (Revenue ¥915.5B +1.4%, Operating Income ¥41.6B -16.6%, Margin 4.5%) saw volume gains but margin compression led to lower profits. Construction-related (Revenue ¥488.0B +1.1%, Operating Income ¥12.5B -11.7%, Margin 2.6%) had marginal revenue growth but deteriorating profitability. Food (Revenue ¥407.8B +6.0%, Operating Income ¥6.7B +689.4%, Margin 1.6%) returned to large profitability due to expanded rice and alcoholic beverage sales and margin improvement. Pharmacy (Revenue ¥205.2B +2.3%, Operating Income -¥0.9B turned to loss, Margin -0.4%) suffered profitability deterioration from fee revisions and higher personnel costs. Pet (Revenue ¥144.8B +1.1%, Operating Income ¥1.2B -39.2%, Margin 0.9%) had marginal revenue growth but lower margins. Others (Revenue ¥163.7B +4.9%, Operating Income ¥14.9B +25.5%, Margin 9.1%) maintained high profitability through information equipment and real estate leasing.
[Profitability] Operating margin 2.9% (prior year 2.8%) improved by 0.1pt but remains below the industry median 3.4%, reflecting structurally low margins due to a high SG&A burden of 14.2% against a gross margin of 17.1%. ROE 3.8% (prior year 6.9%) declined with higher equity and is below the company’s three-year historical average. Net profit margin 2.0% (prior year 1.9%) improved 0.1pt due to non-operating and extraordinary income contribution but remains below the industry median 2.3%. [Cash Quality] Operating Cash Flow (OCF) ¥296.9B is 4.4x Net Income ¥68.2B, reflecting high cash generation from working capital efficiency and accumulation of non-cash items such as depreciation. Accrual ratio -5.4% is healthy, indicating high cash realization of profits. [Investment Efficiency] Total asset turnover 1.76x (prior year 1.79x) slightly declined with asset growth but remains high. EBIT margin 2.9% is low, but non-operating income including dividend and interest income supports Ordinary Income. [Financial Soundness] Equity Ratio 53.9% (prior year 51.9%) improved with capital accumulation; current ratio 161.8%, quick ratio 133.2% indicate healthy liquidity. Interest-bearing debt ¥369.9B, Debt/Equity 0.21x, Interest Coverage 23.6x indicate ample financial capacity. Short-term borrowings ¥326.1B and short-term liabilities ratio 88.1% imply high reliance on short-term funding and potential refinancing risk in a rising-rate environment.
OCF ¥296.9B (YoY -22.6%) was secured from operating cash subtotal ¥354.6B after working capital movements (collection of trade receivables ¥53.4B, inventory increase -¥12.3B, decrease in trade payables -¥19.6B) and corporate tax payments -¥63.5B, delivering cash generation 4.4x Net Income ¥68.2B and high-quality cash flow creation. Investing CF -¥131.0B was mainly due to capital expenditures -¥116.7B, continuing growth investments at 2.0% of sales, below depreciation ¥138.7B. Proceeds from sale of investment securities ¥22.2B contributed to cash inflows. Free Cash Flow ¥165.9B (OCF less capex) is 5.7x dividend payments ¥29.0B, indicating ample distributable capacity. Financing CF -¥143.9B was driven by repayment of short-term borrowings -¥50.3B, repayment of long-term borrowings -¥29.3B, dividend payments -¥29.1B, and lease liability repayments -¥40.5B. Cash and cash equivalents increased by ¥27.2B to ¥589.0B (opening balance ¥561.8B), maintaining strong liquidity on hand.
Recurring earnings were composed primarily of Operating Income ¥169.8B and non-operating income ¥29.0B (dividend income ¥5.4B, interest income ¥4.1B, equity-method investment income ¥2.6B, other ¥11.8B), with non-operating income ratio to sales at 5.0% — not an excessive dependency. Extraordinary items included extraordinary income ¥23.8B (gain on sale of investment securities ¥17.9B, gain on sale of fixed assets ¥2.9B, government subsidies ¥3.0B) and extraordinary losses ¥18.6B (impairment losses ¥14.7B, loss on disposal of fixed assets ¥0.6B, other ¥3.3B), netting +¥5.3B and contributing about 2.7% of pre-tax income ¥191.8B. Accrual ratio -5.4% and OCF/Net Income 4.4x indicate high cash realization and good earnings sustainability. Comprehensive income ¥151.8B exceeded Net Income ¥68.2B, with other comprehensive income contributing via valuation differences on available-for-sale securities ¥21.6B and foreign currency translation adjustments ¥2.9B. The gap between Ordinary Income ¥186.6B and Net Income ¥119.0B is attributable to net extraordinary items +¥5.3B, corporate taxes ¥65.7B, and non-controlling interests ¥7.1B — within an acceptable range.
Against the full-year forecast (Revenue ¥6,150.0B, Operating Income ¥157.0B, Ordinary Income ¥175.0B, Net Income attributable to owners of the parent ¥110.0B), Q2 cumulative progress rates are: Revenue 94.8%, Operating Income 108.1%, Ordinary Income 106.6%, Net Income 108.2%. While Revenue is short of the full-year forecast by -5.2%, profits have exceeded expectations at all stages. Improvement in Energy spreads, steady Automotive-related performance, and Food margin improvements appear to be the main drivers of profit outperformance, suggesting that the full-year forecast is conservative for Operating Income and below. Regarding dividends, with an annual dividend forecast of ¥65, the company paid an interim dividend of ¥50 at Q2-end and plans a year-end ¥65 for a total annual payout of ¥115 — materially above the forecast and indicating a strong shareholder return posture.
An interim dividend of ¥50 was paid at Q2-end, and the year-end dividend of ¥65 would result in an annual dividend of ¥115 (prior year comparable ¥28). Payout Ratio 22.4% (based on basic EPS ¥388.91) indicates a conservative stance; Free Cash Flow ¥165.9B versus dividend payments ¥29.1B yields FCF coverage of 5.7x, showing ample dividend capacity. Total Return Ratio is 22.4% as returns are dividend-only. Net assets ¥1,783.5B and Equity Ratio 53.9% indicate a solid capital base, and low Debt/Equity 0.21x supports scope for dividend increases. Goodwill amortization ¥4.8B reduces Net Income but is non-cash, so FCF-based distribution capacity remains sufficient.
Short-term funding dependence risk: Short-term borrowings ¥326.1B and short-term liabilities ratio 88.1% indicate high dependence on short-term funding, exposing the company to refinancing condition deterioration and higher funding costs in a rising-rate environment. Cash and deposits ¥685.7B cover short-term liabilities by 2.1x and liquidity is secured, but sensitivity to interest and credit market shifts is elevated.
Polarization of segment profitability: Pharmacy business loss ¥-0.9B and Overseas & Trading ¥41.6B (-16.6%) show profit deterioration in some segments diluting consolidated margins. Heavy profit dependence on Energy and Automotive segments creates risk that market and demand fluctuations in those areas will directly affect consolidated results.
SG&A inflation: SG&A ¥829.0B (YoY +7.5%) outpaced sales growth +1.5%, increasing the SG&A ratio to 14.2% (+0.8pt). Ongoing upward pressure on personnel and logistics costs limits operating leverage, and if gross margin improvements cannot absorb rising SG&A, there is a risk of a structural downward trend in profit margins.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.9% | 3.4% (1.4%–5.0%) | -0.4pt |
| Net Profit Margin | 1.2% | 2.3% (1.0%–4.6%) | -1.1pt |
The company’s operating and net profit margins are below the industry medians, indicating relatively low profitability within the sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 1.5% | 5.9% (0.4%–10.7%) | -4.4pt |
Revenue growth lags the industry median by 4.4pt, indicating a relatively slower growth pace within the sector.
※ Source: Company compilation
Spread improvements in the Energy Business drove consolidated profits, delivering Operating Income +27.6%. Given the linkage of performance to crude oil, refining margins, and LP gas procurement prices, sustainability of market conditions and pricing policy will be key points to watch next fiscal year. High Automotive-related margin 6.2% and steady sales provide downside protection, and segment diversification supports stable earnings.
OCF ¥296.9B, OCF/Net Income 4.4x, and accrual ratio -5.4% indicate continued high-quality cash generation; Free Cash Flow ¥165.9B yields dividend coverage 5.7x and ample return capacity. However, short-term borrowings ¥326.1B and short-term liabilities ratio 88.1% mean dependence on short-term funding is high, warranting attention to refinancing cost increases in a rising-rate environment.
SG&A ¥829.0B (YoY +7.5%) outpaced sales growth +1.5%, raising SG&A ratio to 14.2% (+0.8pt). Personnel and logistics inflationary pressures constrain operating leverage; Pharmacy loss and Overseas & Trading profit decline dilute consolidated margins. Achieving both gross margin improvement and cost control remains a structural challenge.
This report was auto-generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the firm based on publicly available financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.