| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥15533.6B | ¥15185.0B | +2.3% |
| Operating Income / Operating Profit | ¥166.0B | ¥189.4B | -12.3% |
| Equity-Method Investment Income (Loss) | ¥-19.4B | ¥-1.9B | -924.3% |
| Ordinary Income | ¥166.3B | ¥207.2B | -19.7% |
| Net Income | ¥145.0B | ¥138.6B | +4.6% |
| ROE | 5.3% | 5.4% | - |
For the fiscal year ended March 2026, Toho Holdings reported Revenue of ¥15,533.6B (YoY +¥348.6B, +2.3%), Operating Income of ¥166.0B (YoY -¥23.4B, -12.3%), Ordinary Income of ¥166.3B (YoY -¥40.9B, -19.7%), and Net income attributable to owners of the parent of ¥173.3B (YoY -¥24.2B, -12.7%), representing higher revenue but lower profit. Revenue was driven by expansion in the Dispensing Pharmacy Business (+5.2%), but the core Pharmaceutical Wholesale Business saw a decline in gross margin (Gross Profit Margin 7.9%, down -0.1pt from 8.0% a year earlier), and SG&A increased to ¥1,058.2B (YoY +¥31.0B, +3.0%), leading Operating Margin to fall to 1.1% (down -0.1pt). At the Ordinary Income stage, an equity-method investment loss of ¥19.4B (prior year ¥1.9B) was a drag, further reducing profitability. However, recognition of Special Gains of ¥116.2B, including ¥94.9B gain on sale of investment securities, lifted Pre-Tax Income to ¥261.4B, and after ¥88.0B of income taxes, Net income was limited to a YoY decline of -12.7%.
[Revenue] Revenue increased to ¥15,533.6B (YoY +2.3%). By segment, the Pharmaceutical Wholesale Business—core—recorded ¥14,948.7B (+2.1%) and accounted for 96.2% of revenue, while the Dispensing Pharmacy Business achieved ¥1,005.4B (+5.2%) maintaining high growth. Pharmaceutical Manufacturing & Sales Business was ¥115.6B (+0.9%), and Other Peripheral Businesses were ¥70.5B (+2.9%), both slight increases. Gross Profit was ¥1,224.2B (Gross Profit Margin 7.9%), up ¥5.8B (+0.5%) YoY, but lagged revenue growth (+2.3%), resulting in a 0.1pt decline from 8.0% the prior year. Drivers include drug price revision impacts in wholesale, tougher pricing negotiations, and persistently high logistics costs.
[Profitability] Operating Income decreased to ¥166.0B (YoY -12.3%). SG&A totaled ¥1,058.2B (as a % of sales 6.8%), up ¥31.0B (+3.0%) YoY, outpacing revenue growth (+2.3%). Key increases included executive compensation and labor-related costs ¥456.5B (43.1% of SG&A), and rent ¥81.7B; depreciation also rose to ¥55.6B (YoY +¥0.6B). By segment, Operating Income in the Pharmaceutical Wholesale Business was ¥168.2B (-11.6%), where margin decline in the core business weighed on results; Pharmaceutical Manufacturing & Sales Business fell to ¥2.8B (-61.3%). Conversely, the Dispensing Pharmacy Business recorded ¥14.0B (+64.0%) operating income, significantly improving profitability within the portfolio. Ordinary Income was ¥166.3B (YoY -19.7%), a larger decline than at the operating level, driven by a worsening equity-method investment loss of ¥19.4B (prior year ¥1.9B). Special Gains of ¥116.2B (gain on sale of investment securities ¥94.9B, gain on sale of fixed assets ¥14.5B) boosted Pre-Tax Income to ¥261.4B, and after income taxes of ¥88.0B, Net income attributable to owners of the parent was ¥173.3B (YoY -12.7%). In conclusion, despite revenue growth, higher SG&A and lower gross margin led to declines at the Operating and Ordinary stages, while special gains narrowed the decline at the bottom line, resulting in a revenue-up profit-down outcome.
The Pharmaceutical Wholesale Business posted Revenue of ¥14,948.7B (YoY +2.1%) and Operating Income of ¥168.2B (YoY -11.6%), implying a margin of 1.1%. As the core business representing 96.2% of sales, drug price revisions and tougher pricing negotiations reduced gross margins, and increases in logistics and labor costs pressured operating income. The Dispensing Pharmacy Business reported Revenue of ¥1,005.4B (+5.2%) and Operating Income of ¥14.0B (+64.0%), with an improved margin of 1.4%. Improved same-store profitability and the effect of dispensing fee revisions contributed, making this the most improved segment. The Pharmaceutical Manufacturing & Sales Business recorded Revenue of ¥115.6B (+0.9%) and Operating Income of ¥2.8B (-61.3%), with a margin of 2.4%, suffering from intensified competition in the generic drug market and supply constraints. Other Peripheral Businesses achieved Revenue of ¥70.5B (+2.9%) and Operating Income of ¥8.3B (+27.0%), maintaining a high margin of 11.8% supported by stable revenues from medical-related services.
[Profitability] Operating Margin was 1.1% (down -0.1pt from 1.2% prior year), and Net Margin was 1.1% (down -0.2pt from 1.3%). ROE was 5.3%, down -2.5pt from 7.8% prior year, as the contraction in Gross Profit Margin to 7.9% (down -0.1pt from 8.0%) combined with an SG&A ratio of 6.8% (unchanged from prior year) prevented operating leverage from working. [Cash Quality] Operating Cash Flow (OCF) was ¥192.4B, 1.11x Net income attributable to owners of the parent ¥173.3B, indicating good linkage, while OCF/EBITDA (Operating Income + Depreciation ¥226.6B) was 0.85x, somewhat weak. Days Sales Outstanding (DSO) was 81 days, indicating persistent working capital weight. [Investment Efficiency] Total Asset Turnover was 2.10x (unchanged from 2.10x prior year), maintaining efficiency of the wholesale model, and Free Cash Flow (FCF) was ¥200.7B (turning from -¥41.8B prior year to positive) due to improved OCF and restrained investing CF. [Financial Soundness] Equity Ratio was 36.7% (improved +1.2pt from 35.5%), D/E ratio was 1.73x (down from 1.81x), indicating soundness, and interest-bearing debt was minimal at ¥53.6B (short-term borrowings ¥0.8B, long-term borrowings ¥52.8B), close to a net cash position. Current Ratio was 129.2% and Quick Ratio was 108.9%, indicating sufficient short-term liquidity.
OCF improved significantly to ¥192.4B (prior year -¥266.8B, improvement +¥459.2B). Of the OCF subtotal ¥263.4B, changes in working capital contributed: increase in trade receivables -¥140.1B, decrease in inventories +¥13.8B, increase in accounts payable +¥157.6B, and after paying corporate taxes -¥75.3B, OCF of ¥192.4B was generated. In the prior year, a large decrease in accounts payable -¥407.6B had pressured OCF, but normalization of accounts payable management this period led to improvement. Investing CF recorded an inflow of ¥8.2B (prior year -¥41.8B, improvement +¥50.0B), with capital expenditures -¥62.2B and purchases of short-term investment securities -¥100.0B offset by proceeds from sale/redemption of short-term investment securities +¥148.3B and sales of investment securities +¥31.7B. Financing CF was -¥163.5B (narrowed from -¥203.6B), with principal outflows including share repurchases -¥100.0B, dividend payments -¥54.5B, and repayment of long-term borrowings -¥4.0B. FCF (OCF + Investing CF) was ¥200.7B, covering dividend payments of ¥54.5B 3.68 times, and total shareholder returns including share buybacks of ¥100.0B amounted to ¥154.5B, which is fully fundable.
Net income attributable to owners of the parent of ¥173.3B exceeded Ordinary Income of ¥166.3B due to Special Gains of ¥116.2B (gain on sale of investment securities ¥94.9B, gain on sale of fixed assets ¥14.5B). One-off gains accounted for 44.5% of Pre-Tax Income ¥261.4B, indicating a large divergence from recurring earnings power. In non-operating items, an equity-method investment loss of ¥19.4B (prior year ¥1.9B) pressured Ordinary Income, causing the YoY decline in Ordinary Income (-19.7%) to exceed the decline in Operating Income (-12.3%). Non-operating income of ¥27.9B included stable dividend income received of ¥9.8B, but the deterioration in equity-method results offset this. OCF ¥192.4B is 1.11x Net income attributable to owners of the parent ¥173.3B, showing solid cash backing. Accrual (Net income - OCF) was -¥19.1B (as % of Revenue -0.1%), negative and indicative of profit being below cash generation in a healthy way. However, OCF/EBITDA of 0.85x is below 1.0x, and working capital intensity—especially trade receivables—suppresses cash conversion efficiency. The repeatability of Special Gains is low; improving recurring earnings at the Ordinary level is key to enhancing earnings quality going forward.
Full-year guidance projects Revenue ¥16,010.0B (YoY +3.1%), Operating Income ¥148.0B (YoY -10.9%), Ordinary Income ¥166.0B (YoY -0.2%), and Net income attributable to owners of the parent ¥129.0B. Compared with actuals, Revenue achieved 97.0% of forecast, Operating Income 112.2%, Ordinary Income 100.2%, and Net income 134.3%, indicating progress ahead of plan at the operating and bottom-line stages. The upside in Operating Income likely reflects SG&A control and higher profits in the Dispensing Pharmacy Business, suggesting the full-year forecast is conservative. Conversely, Revenue slightly trailed guidance, implying a focus on profitability over top-line expansion. Forecasted dividend is ¥90 per annum (interim ¥45, year-end ¥45), which is substantially below actual dividend of ¥165 (interim ¥45, year-end ¥120), reflecting the conservative profit outlook embedded in the company’s guidance.
Dividends for the period were interim ¥45 and year-end ¥120, totaling ¥165 per share (prior year ¥25; prior-year policy differed), resulting in a Payout Ratio of 20.8%. Against Net income ¥145.0B (including amounts not attributable to owners of the parent), total dividends were approximately ¥54.5B, implying a calculated Payout Ratio of about 37.6%. Against FCF ¥200.7B, dividend payments ¥54.5B represent 27.2% of FCF, and FCF coverage is 3.68x, indicating ample capacity. The company executed share repurchases of ¥100.0B, and combined with dividends total shareholder returns were ¥154.5B, yielding a Total Return Ratio of approximately 106.5% (equivalent to 89.2% relative to Net income attributable to owners of the parent ¥173.3B). Total returns correspond to 77.0% of FCF ¥200.7B, which is a sustainable level. The full-year dividend forecast of ¥90 per share is below the realized dividend of ¥165, reflecting the company’s conservative earnings assumptions in its forecast.
Drug Price Revisions and Pricing Negotiation Risk: Gross Profit Margin of 7.9% declined -0.1pt from 8.0% a year earlier, and drug price revisions and tougher pricing negotiations in the Pharmaceutical Wholesale Business are compressing gross margins. Continued biennial drug price revisions and healthcare cost containment measures pose ongoing downward pressure on margins, and further declines from the already low Operating Margin of 1.1% could weaken the revenue base.
Working Capital Risk: Trade receivables of ¥3,454.9B (prior year ¥3,306.6B) represent 22.2% of Revenue, with DSO of 81 days indicating elongation. OCF/EBITDA of 0.85x and somewhat weak cash conversion efficiency mean delays in receivable collections could impact liquidity. The gap with accounts payable ¥4,142.4B (prior year ¥3,977.2B) locks up funds as working capital and suppresses cash generation.
Equity-Method Investment Loss Risk: Equity-method investment loss of ¥19.4B (prior year ¥1.9B) pressured Ordinary Income, causing the YoY decline in Ordinary Income (-19.7%) to exceed the decline in Operating Income (-12.3%). Poor performance of equity-method investees is outside the company’s direct control; continued losses would destabilize recurring income at the Ordinary stage.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 1.1% | 3.4% (1.4%–5.0%) | -2.3pt |
| Net Margin | 0.9% | 2.3% (1.0%–4.6%) | -1.4pt |
Operating Margin is 2.3pt below the industry median of 3.4%, with the low-margin structure of pharmaceutical wholesale suppressing profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.3% | 5.9% (0.4%–10.7%) | -3.6pt |
Revenue growth lags the industry median of 5.9% by 3.6pt, indicating top-line expansion below market growth.
※ Source: Company compilation based on public financial statements
Move away from reliance on Special Gains and improvement in recurring earnings: This period Special Gains of ¥116.2B including gain on sale of investment securities ¥94.9B accounted for 44.5% of Pre-Tax Income, offsetting the Ordinary Income decline (-19.7%). With Operating Margin 1.1% and Net Margin 1.1% materially below industry medians (3.4%, 2.3%), attention will focus on whether the company can curb SG&A growth (this period +3.0% outpaced revenue growth +2.3%) and improve gross margins (through logistics efficiency and strengthened pricing negotiation power) to lift recurring earnings.
Improvement in working capital efficiency and strengthening cash conversion: DSO of 81 days and OCF/EBITDA 0.85x show working capital intensity constrains cash generation. Although OCF improved to ¥192.4B (prior year -¥266.8B) due to normalization of accounts payable management, sustainable cash generation requires shortening DSO and optimizing inventory turnover. FCF ¥200.7B covers dividends and buybacks, but enhancing working capital efficiency is key to expanding capacity for growth investments.
Growth of the Dispensing Pharmacy Business and portfolio diversification: The Dispensing Pharmacy Business achieved Operating Income ¥14.0B (+64.0%), with a margin of 1.4% exceeding the Pharmaceutical Wholesale margin of 1.1%. Although its revenue share remains 6.5%, further expansion could reduce the 96.2% concentration in wholesale revenue and enhance portfolio stability. The Pharmaceutical Manufacturing & Sales Business is underperforming with Operating Income ¥2.8B (-61.3%), so progress on structural reforms in that business is also a focus.
This report was automatically generated by AI analyzing XBRL earnings disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.