| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥9085.2B | ¥8830.1B | +2.9% |
| Operating Income / Operating Profit | ¥383.2B | ¥462.2B | -17.1% |
| Equity-method Investment Income (Share of Profit of Associates) | ¥122.0B | ¥101.0B | +20.8% |
| Ordinary Income | ¥552.2B | ¥614.8B | -10.2% |
| Net Income / Net Profit | ¥344.0B | ¥245.2B | +40.3% |
| ROE | 7.7% | 6.2% | - |
For the fiscal year ended March 2026, Revenue was ¥9,085.2B (+¥255.1B, +2.9% YoY), Operating Income was ¥383.2B (-¥79.0B, -17.1% YoY), Ordinary Income was ¥552.2B (-¥62.6B, -10.2% YoY), and Net Income attributable to owners of the parent was ¥344.0B (+¥98.8B, +40.3% YoY). Although revenue increased, operating-stage profitability declined; however, recognition of special gains of ¥189.8B led to a substantial increase in Net Income. Operating margin fell to 4.2% (down -1.0pt from 5.2% prior year), mainly due to margin deterioration in the Energy Business and higher SG&A. Equity-method investment profit of ¥122.0B and non-operating income of ¥212.3B supported the ordinary-stage results, but the decline in operating profitability has emerged as a structural issue. Net special gains less losses of ¥155.1B boosted Net Income, creating a notable divergence from Ordinary Income that warrants attention.
[Revenue] Revenue totaled ¥9,085.2B (+2.9%), representing growth. By segment, the Material Business contributed the largest revenue increase at ¥2,205.1B (+8.2%), and the Industrial Gas & Machinery Business performed steadily at ¥2,914.4B (+6.1%). Conversely, the Energy Business declined to ¥3,723.9B (-3.0%) due to market conditions and reduced demand. Other businesses were ¥611.5B (+4.5%) with modest growth. Revenue mix was Energy 41.0%, Industrial Gas & Machinery 32.1%, Material 24.3%, and Other 6.7%, with a slight increase in the share of Industrial Gas & Machinery. Gross margin was 26.0%, down -0.5pt from 26.5% a year earlier; the cost ratio worsened to 74.0% (prior year 73.5%).
[Profitability] Operating Income was ¥383.2B (-17.1%). The Energy Business Operating Income fell sharply to ¥135.0B (-30.9%), with margin declining to 3.6% (down -1.5pt from 5.1%). Industrial Gas & Machinery recorded ¥154.1B (-12.3%) and Material ¥116.1B (-1.1%), both lower YoY. SG&A rose to ¥1,975.6B (+5.0%), outpacing revenue growth, with SG&A ratio rising to 21.7% (up +0.4pt from 21.3%). Major items included logistics costs ¥336.7B, fees ¥160.5B, and depreciation ¥214.8B. Non-operating income was ¥212.3B, led by equity-method investment income ¥122.0B (+20.9% YoY), resulting in Ordinary Income of ¥552.2B (-10.2%). Special gains were ¥189.8B (gain on sale of fixed assets ¥119.9B, gain on sale of investment securities ¥48.5B), offset by special losses ¥34.9B (impairment losses ¥15.5B, etc.), lifting Profit Before Tax to ¥707.1B (+12.5%). After deducting income taxes of ¥215.7B and excluding Net Income attributable to non-controlling interests of ¥14.8B, Net Income attributable to owners of the parent was ¥344.0B (+40.3%). In conclusion, while revenue rose, operating profit fell and the increase in Net Income was heavily dependent on one-time special gains.
The Energy Business reported revenue ¥3,723.9B (-3.0%), Operating Income ¥135.0B (-30.9%), and margin 3.6%. Narrowing market spreads and demand declines pressured profitability and were the main driver of the company-wide decline in operating margin. The Industrial Gas & Machinery Business recorded revenue ¥2,914.4B (+6.1%), Operating Income ¥154.1B (-12.3%), and margin 5.3%. Although top-line grew, increased SG&A and adverse mix led to lower profit. By composition of operating income, this segment accounted for 40.2% of company-wide Operating Income and remained the largest profit source. The Material Business had revenue ¥2,205.1B (+8.2%), Operating Income ¥116.1B (-1.1%), and margin 5.3%; revenue grew but profit was roughly flat. Other businesses generated revenue ¥611.5B (+4.5%) and Operating Income ¥35.2B (+6.4%), margin 5.8%, showing stable performance. After corporate adjustments of -¥57.3B, consolidated Operating Income was ¥383.2B. The business portfolio is shifting toward Industrial Gas & Machinery as the core earnings driver, while structural improvement in Energy remains a future challenge.
[Profitability] Operating margin was 4.2%, down -1.0pt from 5.2% last year; both Gross Margin 26.0% (-0.5pt) and SG&A ratio 21.7% (+0.4pt) deteriorated. Net margin improved to 3.8% (up +1.0pt from 2.8%) but this was largely driven by special gains and may not be sustainable. ROE was 7.7% (slightly changed YoY), and Equity Ratio was 49.9% (up +4.4pt from 45.5%), indicating conservative leverage. Return on Total Assets (based on Ordinary Income) was 6.2%, down from 7.2% prior year.
[Cash Quality] Operating Cash Flow (OCF) was ¥591.3B, 1.72x Net Income (¥344.0B), indicating good cash conversion. Working capital efficiency contributed, with accounts receivable collections +¥126.8B positive, while decrease in accounts payable -¥152.2B was a negative.
[Investment Efficiency] Capital expenditures were ¥383.8B, exceeding depreciation of ¥306.7B, with CapEx/Depreciation ratio of 1.25x. This indicates continued growth investment, but simplified ROIC (Operating Income / Invested Capital) remains low and improving capital efficiency is a challenge.
[Financial Soundness] Equity Ratio 49.9%, interest-bearing debt ¥1,582.9B (short-term borrowings ¥380.4B, long-term borrowings ¥1,202.5B), and cash & deposits ¥276.7B yield net interest-bearing debt ¥1,306.2B. D/E ratio 0.35x and interest coverage (OCF / interest paid) 18.9x show ample financial capacity. Current ratio 150.6% and quick ratio 119.6% indicate good short-term liquidity.
OCF was ¥591.3B (+12.8% YoY), starting from Profit Before Tax ¥707.1B, adding non-cash expenses such as depreciation ¥306.7B and goodwill amortization ¥31.8B. Working capital movements included accounts receivable collection +¥126.8B (positive), decrease in accounts payable -¥152.2B and slight decrease in inventories -¥2.0B (negatives), and tax payments -¥207.8B. OCF/Net Income ratio of 1.72x is high, indicating solid accrual quality. Investing Cash Flow was -¥237.8B, with CapEx -¥383.8B, proceeds from sale of tangible fixed assets +¥233.9B, and proceeds from sale of investment securities +¥58.5B as main items. Free Cash Flow was ¥353.5B (OCF ¥591.3B - Investing CF ¥237.8B), ample to cover dividends paid of -¥162.0B. Financing Cash Flow was -¥370.7B, with net increase in short-term borrowings +¥131.2B, long-term borrowings proceeds +¥188.5B and repayments -¥171.6B, net decrease in commercial paper -¥330.0B, and dividends paid -¥162.0B as main items. Cash and cash equivalents were essentially flat at ¥276.6B at year-end (from ¥275.9B at beginning of period). Stable OCF and cash inflows from asset disposals underpin growth investment and shareholder returns.
Of Net Income ¥344.0B, special gains of ¥189.8B (gain on sale of fixed assets ¥119.9B, gain on sale of investment securities ¥48.5B, etc.) less special losses ¥34.9B yield a net one-time amount estimated at ¥154.9B, representing roughly 45% of Net Income. Non-operating income ¥212.3B includes equity-method investment income ¥122.0B and dividend income ¥19.5B, indicating significant contribution from non-operating items. The net non-operating income amount of ¥169.0B (Ordinary Income ¥552.2B less Operating Income ¥383.2B) accounts for about 30.6% of Ordinary Income. With core operating profitability remaining low (Operating margin 4.2%), equity-method income and asset sales are propping up profitability, and there is room to improve the quality of core earnings. Conversely, OCF/Net Income ratio of 1.72x suggests solid cash backing. Comprehensive income was ¥682.3B, well above Net Income ¥344.0B, driven by Other Comprehensive Income increases such as valuation gains on other securities ¥114.2B and foreign currency translation adjustments ¥24.2B, which bolstered equity. OCI/Net Income ratio is about 33%, so accounting valuation gains are contributing materially to balance-sheet capital accumulation.
For FY ending March 2027, the company forecasts Revenue ¥9,600.0B (+5.7%), Operating Income ¥488.0B (+27.4%), Ordinary Income ¥590.0B (+6.8%), EPS ¥197.67 (Dividend forecast ¥23.50). Operating margin is expected to improve to 5.1% (+0.9pt), assuming normalization of Energy Business spreads and SG&A efficiency. Progress rate on Operating Income is 78.5% (current period ¥383.2B / full-year plan ¥488.0B), indicating a reasonable start but relying on a recovery in H2. The smaller growth in Ordinary Income (+6.8%) versus Operating Income (+27.4%) suggests an assumed decline in non-operating income. Achieving the full-year plan depends on margin improvement in the Energy Business (from 3.6% to targeted low-5% range) and continued revenue growth in Industrial Gas & Machinery. Special gains are expected to decline, so Net Income guidance is not explicitly stated; EPS forecast ¥197.67 is below prior year ¥207.10, implying a normalization after one-time gains.
Annual dividend is ¥47 per share (interim ¥23.5, year-end ¥23.5), unchanged from prior year. Total dividends are ¥108.3B, with payout ratio 26.7% (based on EPS ¥207.10), reflecting a conservative policy. With Free Cash Flow ¥353.5B and dividends ¥108.3B, FCF coverage is 3.26x, indicating ample room. For FY2027 the company forecasts a year-end dividend ¥23.50, assuming a flat annual dividend level; payout ratio relative to EPS forecast ¥197.67 would be approximately 23.8%, maintaining a conservative stance. No share buyback has been disclosed; shareholder returns are dividend-focused. With cash & deposits ¥276.7B, Equity Ratio 49.9%, and D/E ratio 0.35x, financial capacity is ample and leaves scope for medium-to-long-term increases in dividends. Retained earnings of ¥3,071.0B are substantial, and dividend sustainability is not a concern.
Margin volatility risk in the Energy Business: The Energy Business reported Operating Income ¥135.0B, a large decline of -30.9% YoY, and the lowest margin among segments at 3.6%. Compression of market spreads for LP gas and petroleum products and reduced demand have pressured earnings. If the assumed recovery scenario is not realized, achieving the company-wide Operating Income target ¥488.0B for the fiscal year could be difficult. Energy accounts for 41.0% of revenue and its market dependence is a source of earnings volatility.
Structural SG&A increase and deterioration of operating leverage: SG&A rose to ¥1,975.6B (+5.0%), outpacing revenue growth of +2.9%, raising SG&A ratio to 21.7%. Logistics ¥336.7B, depreciation ¥214.8B, and increased fixed personnel costs are primary drivers. Negative operating leverage in a revenue-expansion phase compresses profitability; if Operating margin remains low at 4.2%, improvements in ROE and ROIC could be delayed.
Dependence on one-time gains and Net Income volatility: Approximately 45% of Net Income ¥344.0B depends on special items (net ¥154.9B), and asset-sale gains are expected to decline going forward. EPS forecast ¥197.67 is below prior year ¥207.10, suggesting core earnings may decline. Equity-method investment income ¥122.0B is also subject to external factors. Sustaining profitability by covering operating-stage weakness with non-operating and one-time items has limits.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.2% | 3.4% (1.4%–5.0%) | +0.9pt |
| Net Margin | 3.8% | 2.3% (1.0%–4.6%) | +1.5pt |
Profitability is above the industry median for wholesale, but Operating Margin at 4.2% is below the quality threshold of 5.0% and has room for improvement.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.9% | 5.9% (0.4%–10.7%) | -3.0pt |
Growth is below the industry median, indicating relatively weaker growth momentum; the decline in the Energy Business revenues was a factor suppressing consolidated growth.
※ Source: Company aggregation
Improving operating-stage profitability is the top priority: Operating margin at 4.2% is above the industry median but low in absolute terms and deteriorated -1.0pt YoY. The full-year plan targets recovery to 5.1%, but this depends on margin normalization in the Energy Business and SG&A efficiencies; monitoring progress is necessary. Confirmed trend improvement in Operating margin would lead to improvements in ROE/ROIC and shareholder value.
Reduce dependence on one-time gains: Approximately 45% of this period’s Net Income is attributable to special items, and EPS forecast ¥197.67 is below prior year ¥207.10. The focus will be on core earnings (Operating and Ordinary stages) after one-time gains such as asset sales recede, and on stability of equity-method investment income ¥122.0B. Reducing reliance on non-operating items and growing Operating Income are conditions for establishing a sustainable earnings improvement trend.
Cash generation and financial capacity are positives: OCF ¥591.3B and Free Cash Flow ¥353.5B are ample, with payout ratio 26.7% and FCF coverage 3.26x, supporting shareholder returns. Equity Ratio 49.9% and D/E ratio 0.35x indicate strong financial health, allowing the coexistence of growth investment and dividend increases. CapEx/Depreciation ratio 1.25x shows continued growth investment; expansion centered on Industrial Gas & Machinery could be a medium-term earnings improvement driver.
This report is an earnings analysis document automatically generated by AI based on 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 statement data. Investment decisions should be made at your own responsibility, and, if necessary, after consulting a professional advisor.