| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2341.8B | ¥2275.2B | +2.9% |
| Operating Income / Operating Profit | ¥314.8B | ¥290.2B | +8.5% |
| Profit Before Tax | ¥313.9B | ¥349.5B | -10.2% |
| Net Income | ¥233.5B | ¥274.6B | -15.0% |
| ROE | 2.6% | 3.1% | - |
FY2026 Q1 results: Revenue ¥2,341.8B (YoY +¥66.6B +2.9%), Operating Income ¥314.8B (YoY +¥39.9B +14.5%), Ordinary Income ¥313.9B (YoY -¥35.6B -10.2%), Net Income attributable to owners of the parent ¥197.6B (YoY -¥51.5B -20.7%). Core businesses Personal Care and Pet Care both delivered revenue growth, and gross margin improved to 39.7% (prior 38.9%, +0.8pt). Operating margin was 13.4% (prior 12.8%, +0.6pt), indicating steady improvement in core profitability; however, Other income declined sharply from ¥61.3B to ¥7.0B, causing Ordinary Income to fall. Effective tax rate rose to 25.6% (prior 21.4%, +4.2pt), and Net Income attributable to non-controlling interests was ¥35.9B (prior ¥25.6B, +¥10.3B), resulting in a roughly 20% decline in parent-attributable net income at the bottom line. Operating Cash Flow (OCF) was ¥298.1B (YoY +4.8%) maintaining high quality, and Free Cash Flow (FCF) of ¥160.7B was secured. Dividends of ¥156.7B were covered by OCF, but total shareholder returns including share buybacks of ¥184.5B amounted to ¥341.3B, exceeding FCF. Equity Ratio was 65.9% and Net Cash was ¥2,228.6B, reflecting a solid financial base. The pattern: revenue up, operating profit up, final profit down.
[Revenue] Revenue was ¥2,341.8B (YoY +2.9%). Personal Care was ¥1,910.0B (+2.2%), representing 81.6% of total, with wellness-care and feminine-care products performing steadily both domestically and internationally. Pet Care was ¥397.3B (+6.6%) maintaining high growth, supported by expanding demand for premium pet food and pet toiletry products. Other was ¥34.6B (+1.4%). The favorable FX tailwind narrowed from the prior year, but pricing actions and resilient volumes supported the revenue growth trend.
[Profitability] Cost of sales was ¥1,411.4B (YoY +1.6%), growing below the revenue growth rate, yielding Gross Profit of ¥930.4B (+5.0%) and Gross Margin of 39.7% (prior 38.9%, +0.8pt). Easing raw material costs and price revisions contributed. SG&A was ¥615.6B (+3.4%), SG&A ratio 26.3% (prior 26.2%, +0.1pt) largely stable. Operating Income was ¥314.8B (+14.5%), Operating Margin 13.4% (prior 12.8%, +0.6pt) showing steady improvement in core earnings power. Net financial income/expense moved to -¥4.1B (prior +¥2.1B), as Financial income ¥20.6B (prior ¥24.1B) was offset by Financial expense ¥24.7B (prior ¥22.0B), a deterioration of ¥2.0B. Other income dropped to ¥7.0B (prior ¥61.3B), a large decrease reflecting a reversal of one-off items. Profit Before Tax was ¥313.9B (-10.2%), effective tax rate was 25.6% (prior 21.4%, +4.2pt), recording income taxes of ¥80.4B. Quarterly Net Income was ¥233.5B (-15.0%); after deducting Net Income attributable to non-controlling interests ¥35.9B (prior ¥25.6B), Net Income attributable to owners of the parent was ¥197.6B (-20.7%). In conclusion: revenue up and operating profit up, but final profit down due to decline in one-off income and higher tax rate.
Personal Care: Revenue ¥1,910.0B (YoY +2.2%), Operating Income ¥242.0B (+10.9%), margin 12.7% (prior 11.7%, +1.0pt). Domestic baby care demographic headwinds were offset by overseas expansion and premiumization in feminine and nursing care, driving notable margin improvement. Pet Care: Revenue ¥397.3B (+6.6%), Operating Income ¥69.0B (-0.4%), margin 17.4% (prior 18.6%, -1.2pt). Despite maintaining high growth, changing competition and increased promotion expenses led to a slight decline in profit. Other: Revenue ¥34.6B, Operating Income ¥3.8B (margin 11.1%), small but stable. Personal Care accounts for the bulk of profits and functions as the core revenue pillar.
[Profitability] Operating margin 13.4% (prior 12.8%, +0.6pt), Net margin 8.4% (prior 10.9%, -2.5pt). Gross margin 39.7% (prior 38.9%, +0.8pt) driven by raw material cost easing and pricing measures; SG&A ratio 26.3% (prior 26.2%, +0.1pt) largely unchanged, enabling operating leverage. Net margin declined due to loss of one-off income and higher tax rate. ROE 2.6% (based on beginning/ending average equity; calculation of a 3-year average affected by prior OCI volatility, but current ROE remains low).
[Cash Quality] OCF / Net Income ratio 1.28x (¥298.1B / ¥233.5B) indicating high quality. Improvement in receivables collection (+¥162.9B) and inventory reduction (+¥37.5B) contributed, while a large decrease in payables and similar items (-¥231.3B) was a cash outflow factor.
[Investment Efficiency] Total asset turnover 0.79x (annualized; Revenue ¥2,341.8B ×4 ÷ average total assets during period ¥1.2兆円), inventory turnover days about 155 days (Inventory ¥1201.1B ÷ daily cost of sales ¥7.8B) indicating improving inventory efficiency.
[Financial Soundness] Equity Ratio 65.9% (prior 65.0%, +0.9pt). Interest-bearing debt ¥104.5B (short-term ¥30.1B + long-term ¥74.3B) vs. Cash and cash equivalents ¥2,333.5B, Net Cash ¥2,228.6B. Current ratio 257% reflecting ample liquidity.
OCF was ¥298.1B (YoY +4.8%). Starting from subtotal OCF ¥364.4B (Profit Before Tax ¥313.9B + Depreciation and amortization ¥119.1B and other non-cash expenses), adjustments included decrease in accounts receivable +¥162.9B (positive), decrease in inventories +¥37.5B (positive), decrease in accounts payable and similar -¥231.3B (negative), and corporate tax payments ¥84.8B, resulting in generated OCF ¥298.1B. Investing CF was -¥137.4B, including CapEx ¥60.9B and acquisition of financial assets ¥344.5B, offset by proceeds from sales/redemptions ¥236.6B and net inflow to time deposits ¥24.9B. FCF was ¥160.7B (OCF ¥298.1B minus net investing outflows) remaining positive. Financing CF was -¥373.8B, including parent dividends ¥156.7B, share buybacks ¥184.5B, dividends to non-controlling interests ¥9.2B, and lease liability repayments ¥19.5B. Total shareholder returns (dividends + buybacks) ¥341.3B exceeded FCF ¥160.7B, and Cash and cash equivalents decreased from ¥253.1B at the beginning of the period to ¥233.4B at the end (decline ¥19.7B). Considering foreign exchange translation gains of ¥15.7B, the net cash outflow was approximately ¥35B. Cash conversion remains healthy; although total returns exceeded FCF during the period, abundant liquidity supports return capacity.
Operating Income ¥314.8B is largely from core businesses and exhibits high recurrence. Other income ¥7.0B (prior ¥61.3B) was temporary; prior year included gains on disposal of fixed assets, hence the large reversal. Financial income ¥20.6B includes interest and dividend receipts ¥16.8B and dividend receipts ¥3.2B, and Financial expense ¥24.7B includes lease payments ¥19.5B. OCF is 1.28x Net Income (¥298.1B / ¥233.5B), indicating a high rate of cash realization and healthy accruals. Reductions in receivables and inventories indicate improved working capital efficiency; payables reduction likely reflects procurement adjustments or settlement timing. Comprehensive income was ¥279.9B (parent portion ¥230.0B); Other Comprehensive Income ¥46.4B (foreign currency translation differences on overseas operations ¥32.7B, fair value changes on equity financial assets ¥7.9B, etc.) exceeded Net Income. Effective tax rate 25.6% (up from 21.4%) appears driven by regional mix and changes in preferential tax applications and may vary going forward. Net Income attributable to non-controlling interests ¥35.9B increased from ¥25.6B, diluting parent-attributable earnings. Earnings quality is high at the operating level; bottom-line variability is mainly due to temporary items, tax, and non-controlling interests.
Full Year guidance remains: Revenue ¥1,010.0B (YoY +6.8%), Net Income attributable to owners of the parent ¥865.0B (+32.6%), EPS ¥50.26, DPS ¥11.00 unchanged. Q1 progress ratios: Revenue 23.2%, Net Income 22.8%, both roughly within seasonal ranges. Full-year Operating Income guidance not disclosed, but if Q1 operating margin 13.4% is maintained, full-year Operating Income is estimated to be approximately ¥1350B. From Q2 onward, assuming normalization of Other income, recovery of Net Income will hinge on growth in core operating income and stabilization of the tax rate. Absent significant changes in FX or raw material cost assumptions, the likelihood of achieving full-year guidance is considered high.
Dividend payments in the quarter to the parent were ¥156.7B (DPS base ¥9). Dividend payment relative to Net Income attributable to owners of the parent ¥197.6B is approximately 79%, but this is a reference value that includes timing differences in intra-year payments. Full-year forecast DPS ¥11 corresponds to a payout ratio of about 22% against forecast EPS ¥50.26, a sustainable level. Share buybacks of ¥184.5B were executed, making total shareholder returns (dividends ¥156.7B + buybacks ¥184.5B) ÷ Net Income ¥197.6B ≒ 173%, substantially exceeding FCF ¥160.7B. However, Net Cash ¥2,228.6B and a strong financial base support this active return stance aimed at improving capital efficiency. Average shares outstanding during the period were 1.73B shares; no cancellation of treasury shares occurred, but held shares increased by ¥184.5B versus the beginning balance to ¥1,588.8B. The situation where total returns exceed FCF is managed on the assumption of high cash balances and a balance with investment opportunities.
Raw material price and FX volatility: A large portion of Cost of Sales ¥1,411.4B is raw materials; a reversal in pulp or petroleum-derived product markets or adverse FX movements would make maintaining Gross Margin 39.7% difficult. This quarter achieved a +0.8pt Gross Margin improvement via raw material easing and pricing, but future market conditions could pressure margins.
Demographics and competitive environment: Domestic baby care market continues structural contraction due to low birth rates, weighing on part of Personal Care revenue ¥1,910.0B. Overseas expansion and premiumization in nursing and feminine care are compensating, but intensified competition causing market share loss or higher promotional spending would squeeze margins. Pet Care is a growth market but showed slight profit decline (-0.4%), indicating competitive shifts.
Persistently low capital efficiency: ROE 2.6% and ROIC-equivalent returns are low; with total assets ¥1.2兆円 and Operating Income ¥314.8B, asset efficiency has room to improve. Inventory days 155 and receivables ¥1,388.4B indicate further compression potential. Continued situations where total returns exceed FCF and delayed growth investments could impede capital efficiency improvement and reduce shareholder value creation capacity.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.8% | 6.8% (2.9%–9.0%) | +5.9pt |
| Net Margin | 10.0% | 5.9% (3.3%–7.7%) | +4.1pt |
Both Operating Margin and Net Margin substantially exceed industry medians, indicating a high-margin profile within manufacturing.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.9% | 13.2% (2.5%–28.5%) | -10.2pt |
Revenue growth lags the industry median, suggesting a more mature stage compared with broader manufacturing high-growth trends.
※ Source: Company compilation
Steady improvement in core earnings power vs. volatility in bottom-line profit: Operating margin improved to 13.4% (YoY +0.6pt), driven by gross margin expansion and SG&A efficiency. However, large decline in Other income (¥61.3B → ¥7.0B), higher tax rate (+4.2pt), and increased non-controlling interests combined to reduce Net Income attributable to owners of the parent by -20.7% at the bottom line. Achieving full-year guidance depends on sustaining core operating income growth and stabilizing tax and non-controlling interest impacts.
Balance between high-quality cash flow and active returns: OCF ¥298.1B is 1.28x Net Income and FCF ¥160.7B was secured. Total returns ¥341.3B exceeded FCF, but Net Cash ¥2,228.6B and a strong balance sheet support return capacity. Low capital efficiency (ROE 2.6%) is a challenge; measures to improve capital productivity—SKU optimization, resource allocation to high-growth overseas markets, and M&A/partnerships to scale—are next priorities.
Segment structure and scope for mix improvement: Personal Care accounts for 82% of revenue and the majority of operating profit, providing a stable earnings base. Pet Care maintains high growth but margin contraction (18.6% → 17.4%) suggests the need to enhance product mix (expand premium/functional offerings) and improve promotional efficiency in response to competitive shifts. The strategy of offsetting domestic baby care structural decline through overseas expansion and growth in nursing, feminine, and pet segments continues, but sustaining competitive advantages in each market will determine margin durability.
This report was automatically generated by AI analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions should be made at your own responsibility and, if necessary, after consulting a professional advisor.