| Metric | This Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥14576.7B | ¥13686.4B | +6.5% |
| Operating Income / Operating Profit | ¥1483.1B | ¥1170.6B | +26.7% |
| Ordinary Income | ¥1634.2B | ¥1322.7B | +23.5% |
| Net Income / Net Profit | ¥158.8B | ¥367.5B | -56.8% |
| ROE | 1.3% | 3.1% | - |
For the fiscal year ending March 2026, Revenue was ¥14576.7B (YoY +¥890.3B +6.5%), Operating Income was ¥1483.1B (YoY +¥312.5B +26.7%), Ordinary Income was ¥1634.2B (YoY +¥311.5B +23.5%), and Net Income attributable to owners of the parent was ¥1113.0B (YoY +¥260.5B +30.5%). Revenue marked the third consecutive year of growth, and Operating Margin improved materially to 10.2% (up 1.6pp from 8.6% a year earlier). International Business revenue (+21.7%) drove company-wide growth, and the Specialty Business recorded special income of ¥824.4B related to a Russia-related insurance settlement during the period, while the Environmental Infrastructure Business recorded special losses of ¥916.2B, including a large impairment loss of ¥701.2B. Net income benefited from equity-method investment gains of ¥236.2B (YoY +¥49.7B) and improved gross margin (22.5%, up 2.0pp from 20.5%), resulting in an overall profit increase despite the net effect of special items. Total assets expanded to 7.21兆円 (¥3,451.9B +5.0%), and ROE declined to 1.3% (from 3.1%) due to temporary factors, although the result reflects strengthening of the operating base.
Revenue: Consolidated Revenue of ¥14576.7B (+6.5%) was driven by rapid expansion in the International Business (¥2711.2B, +21.7%) and steady growth in the Domestic Lease Business (¥4628.0B, +2.9%). Automotive Business revenue was ¥3157.7B (+4.7%), Specialty Business ¥3430.8B (+2.5%), and Environmental Infrastructure Business ¥660.8B (+8.6%), with all segments achieving revenue growth. Regionally, the International Business—highly weighted to overseas—accounted for 18.6% of segment composition, expanding by approximately 4pp year-over-year. Revenue from customer contracts was ¥1566.9B, representing 10.8% of consolidated sales, preserving a business structure centered on lease and finance revenue. Cost of sales ratio improved to 77.5% (down 2.0pp from 79.5%) supported by improved asset portfolio quality and secured interest margins.
Profitability: Gross profit was ¥3282.5B (gross margin 22.5%). SG&A totaled ¥1799.5B (SG&A ratio 12.3%, up 0.4pp from 11.9%), producing Operating Income of ¥1483.1B (Operating Margin 10.2%, +1.6pp YoY). SG&A, which included ¥47.5B of goodwill amortization, increased by 16.8% YoY but was absorbed by the large gross profit expansion. Non-operating income included equity-method investment gains of ¥236.2B (¥186.5B prior year), lifting Ordinary Income, while interest expense of ¥111.8B (¥96.8B prior year) and higher financial costs increased. Ordinary Income totaled ¥1634.2B (Ordinary Income margin 11.2%), a double-digit YoY increase of 23.5%. In special items, the Specialty Business recorded special income of ¥841.1B including a Russia-related insurance settlement of ¥824.4B, but this was offset by special losses of ¥916.2B, including a large impairment of ¥701.2B in the Environmental Infrastructure Business and an intangible asset impairment of ¥126.7B in the Automotive Business. Pre-tax income was ¥1559.0B, from which income taxes of ¥376.4B (effective tax rate 24.1%) were deducted, and after non-controlling interests of ¥69.6B, Net Income attributable to owners of the parent was ¥1113.0B (YoY +30.5%). In summary, the company achieved revenue and operating profit growth, absorbed large swings in special items, and delivered final net income growth.
Domestic Lease Business recorded Revenue of ¥4628.0B (+2.9%) and Segment Profit of ¥228.1B (flat from ¥228.4B prior year), with a margin of 4.9%, securing stable income in a mature market. Automotive Business posted Revenue of ¥3157.7B (+4.7%) and Segment Profit of ¥121.3B (from ¥176.9B prior year, -31.4%), with a margin of 3.8%; an intangible asset impairment of ¥126.7B during the period deteriorated profitability. Specialty Business recorded Revenue of ¥3430.8B (+2.5%) and Segment Profit of ¥1121.8B (from ¥328.7B prior year, +241.3%), with a margin of 32.7%; the Russia-related insurance settlement of ¥824.4B materially boosted profit, although an impairment related to aircraft of ¥95.3B was also recorded. International Business Revenue was ¥2711.2B (+21.7%) and Segment Profit ¥235.4B (from ¥163.0B prior year, +44.4%), margin 8.7%; expansion in East Asia, ASEAN, and North America progressed smoothly. Environmental Infrastructure Business achieved Revenue of ¥660.8B (+8.6%) but recorded a Segment Loss of -¥444.5B (from profit ¥0.8B prior year), falling into deficit due to a fixed-asset impairment of ¥701.2B; profitability review of renewable energy operations is urgent.
Profitability: Operating Margin was 10.2% (up 1.6pp from 8.6%), driven by gross margin improvement and operating leverage. ROE was 1.3% (from 3.1%), temporarily depressed by special items despite improved operating earnings power. ROA (on an Ordinary Income basis) was 2.3% (up 0.3pp from 2.0%). Cash Quality: Operating Cash Flow / Net Income was weak at -0.69x, with Operating Cash Flow turning negative to -¥769.3B due to working capital movements and income tax payments of ¥374.4B. Accrual ratio was 2.6% ((Net Income - Operating CF) / Total Assets), statistically acceptable but indicative of cash-generation issues. Investment Efficiency: Total Asset Turnover was 0.202x (from 0.199x) slight increase; ROIC was 3.1% with room for improvement. Financial leverage remained high at 5.76x (from 5.83x), a source of capital efficiency. Financial Soundness: Equity Ratio was 17.4% (up 0.2pp from 17.2%), D/E ratio improved to 4.76x (from 4.90x) but leverage remains high. Interest-bearing debt was ¥3.97兆円 versus cash and deposits of ¥2214.8B, yielding Net D/E of 4.58x. Interest coverage (Operating Income before OCF basis) was 13.26x, strong, but cannot be computed on an Operating CF basis. Current ratio was 134.5%, securing short-term liquidity.
Operating Cash Flow was -¥769.3B (deterioration from +¥513.7B prior year), dragged down from an operating CF subtotal of ¥47.2B by working capital movements and other operating CF outflows. Corporate tax payments of ¥374.4B and interest payments of ¥1384.0B (adjusted before the subtotal as recorded in non-operating items) were heavy, and other operating CF net -¥363.8B also affected cash flow. Investing CF was -¥619.2B (from -¥314.7B prior year), driven by acquisition of investment securities ¥735.9B and acquisition of subsidiary shares ¥8.7B. Increases in tangible and intangible fixed assets of ¥8197.7B were mainly lease and finance assets and are classified effectively as operating investments. Free Cash Flow was a large negative at -¥1388.5B. Financing CF was +¥1879.6B, with financing including long-term borrowings procured of ¥11930.4B, bond issuance ¥2629.1B, and net increase in CP ¥1047.6B to cover funding needs. Repayments of long-term borrowings ¥1224.2B and bond redemptions ¥3619.1B were executed, and dividends of ¥338.2B were paid. Cash and cash equivalents increased by ¥508.7B to an ending balance of ¥2196.7B. The negative Operating CF is viewed as transitory due to expanded fund deployment and concentrated tax payments, and normalization of CF in the next period is a key verification point.
Ordinary Income of ¥1634.2B comprises Operating Income of ¥1483.1B and equity-method investment income of ¥236.2B, indicating a clear core earnings base. Non-operating income of ¥280.0B (1.9% of sales) included foreign exchange gains ¥23.7B, dividend income ¥15.8B, and interest income ¥16.9B, with limited contribution to total earnings. One-off factors included special income of ¥841.1B (mainly the Russia-related insurance settlement ¥824.4B) and special losses of ¥916.2B (impairments ¥869.2B), resulting in a net impact on Net Income of approximately -¥75.1B. The gap of about 32% between Ordinary Income ¥1634.2B and Net Income ¥1113.0B was mainly due to special items and tax burdens; excluding special items, profit quality is stable. Accrual quality: compared to Operating CF -¥769.3B, Net Income was ¥158.8B (pre-segment totals), giving an accrual ratio of 2.6% which is statistically acceptable, but Operating CF / Net Income of -0.69x signals weak cash conversion. Comprehensive Income was ¥1265.0B, well above Net Income ¥158.8B, contributed by Other Comprehensive Income ¥82.4B (currency translation adjustments -¥91.0B, valuation differences on available-for-sale securities +¥135.7B, etc.). While the recurring earnings base is solid, volatility from special items and need to improve CF quality are focal points going forward.
Full-year forecast plans Net Income attributable to owners of the parent of ¥1230.0B (EPS ¥251.66), a planned increase of +10.5% versus the current period result of ¥1113.0B. Dividend forecast is annual ¥45, a cut from ¥80 in the current period, reflecting a conservative stance anticipating the drop-off of special income. Progress against the plan stands at 90.5% based on current results, and achieving the full-year target assumes accumulation of profit in Q4. The company’s plan incorporates a rollback of one-off gains while building core earnings (expansion of International and Domestic Lease, efficiency in Automotive, and profit correction in Environmental Infrastructure). Focus areas include recovery in Environmental Infrastructure after the large impairment and maintaining baseline earnings after the fall-off of Specialty special income. Risks include rising funding costs in an increasing-rate environment and performance of equity-method investees.
Dividends were ¥80 per share (interim ¥36, year-end ¥44), maintaining a payout policy linked to earnings with a payout ratio of 35.5%. The large YoY increase from prior-year dividend of ¥29 reflected recorded special income; the forecasted ¥45 dividend for the next year reflects expected decline in one-off income. Total dividends amounted to ¥338.2B (from ¥274.2B prior year, +23.3%), and Total Return Ratio was 35.5%, aligned with the payout ratio (no share buybacks were executed). Free Cash Flow was -¥1388.5B and dividend coverage was -3.53x, negative, indicating reliance on external financing for dividend funding. Timing mismatches in cash flows are inherent in the business model, but sustained dividends in the medium term require normalization of Operating CF and selective capital outlays. Cash and deposits were ¥2214.8B (3.1% of total assets); given the 35.5% payout ratio, near-term dividend sustainability is maintained, but improving FCF is key to sustainably expanding shareholder returns.
Risk of delayed recovery in Environmental Infrastructure profitability: The Company recorded fixed-asset impairment of ¥701.2B this period, leading to a segment loss of -¥444.5B and a turn to red ink. Profitability, operational rates, and regulatory changes in renewable energy projects will determine future P&L, and additional impairments or business exits cannot be ruled out. Revenue contribution from Environmental Infrastructure assets of ¥2172.9B (3.0% of total assets) is uncertain.
Interest-rate and refinancing risk given high leverage: With a D/E ratio of 4.76x and interest-bearing debt of ¥3.97兆円 (bonds ¥9821.6B, long-term borrowings ¥2.21兆円, CP ¥3187.9B), the Company is highly dependent on debt. In a rising-rate environment, interest expense (¥111.8B, up 15.5% from ¥96.8B) may increase further and pressure earnings. Rollover risk for short-term funding (CP and short-term borrowings) and securing liquidity during market stress are challenges.
Earnings volatility from large swings in special items: This period’s special income of ¥841.1B (insurance settlement ¥824.4B) and special losses of ¥916.2B (impairments ¥869.2B) distorted the profit structure, raising the bar for YoY growth once one-off gains disappear next year. Specialty Business margin of 32.7% is heavily driven by one-off gains and sustainability is questionable. Rebuilding the Automotive Business after the ¥126.7B intangible asset impairment and residual value volatility for aircraft and real estate may impact future earnings.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.2% | 8.8% (4.0%–20.0%) | +1.3pp |
| Net Profit Margin | 1.1% | 4.3% (0.6%–11.3%) | -3.2pp |
Operating Margin is +1.3pp above the median, a favorable position within the industry, but Net Profit Margin is -3.2pp below the median, with large swings in special items compressing bottom-line profit.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 6.5% | 2.1% (-4.5%–6.9%) | +4.5pp |
Revenue growth rate exceeds the median by +4.5pp, with rapid International Business expansion contributing to above-average growth.
※ Source: Company compilation
Expansion of core earnings and normalization of one-off effects: Operating Margin 10.2% (+1.6pp) and equity-method investment income ¥236.2B (+¥49.7B) strengthened the core earnings base, but the period experienced large one-off items: Specialty insurance settlement ¥824.4B and Environmental Infrastructure impairment ¥701.2B. The company projects +10.5% profit growth next year assuming the drop-off of one-off gains is offset by continued International Business growth (+21.7%) and stable Domestic Lease earnings. Monitoring progress in Environmental Infrastructure profit correction and Automotive Business restructuring post-impairment is essential, as is segment-level quarterly trends.
Room to improve capital efficiency and cash flow quality: ROIC of 3.1% suggests significant room to exceed capital costs, and Operating CF / Net Income of -0.69x and FCF -¥1388.5B indicate weak CF quality. Under high leverage D/E 4.76x, negative Operating CF raises sensitivity to funding conditions, and rising rates could increase financing costs and compress earnings. Rapid pace of asset growth, with investment securities up +36.4%, calls for improved asset turnover and selective investing to raise ROIC. The payout ratio of 35.5% is within sustainable range, but FCF coverage of -3.53x shows reliance on external financing; normalization of Operating CF is a precondition for sustainably increasing shareholder returns.
This report is an AI-generated financial analysis document based on XBRL financial statement disclosure data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.