| Metric | Current Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue | ¥872.7B | ¥824.1B | +5.9% |
| Operating Income | ¥47.5B | ¥49.3B | -3.6% |
| Ordinary Income | ¥47.8B | ¥50.7B | -5.7% |
| Net Income | ¥33.0B | ¥34.9B | -5.3% |
| ROE | 1.4% | 1.4% | - |
The first quarter resulted in higher revenue but lower profit, with increased SG&A expenses and rising funding costs putting pressure on margins. Revenue expanded to ¥872.7B (+5.9% YoY), while Operating Income declined to ¥47.5B (-3.6%), Ordinary Income to ¥47.8B (-5.7%), and Net Income to ¥33.0B (-5.3%). The Operating Margin was 5.4%, down 0.5pt from 6.0% in the same period last year, primarily due to the SG&A ratio rising 0.4pt to 9.2%. Progress against the full-year company forecast (Revenue of ¥3700.0B and Operating Income of ¥176.0B) is proceeding above the standard 25% progress level at the profit stages.
【Revenue】All three business segments recorded higher revenue, contributing broadly to overall growth. The core Leasing & Finance Business generated revenue of ¥812.0B (+5.3%), accounting for 93% of the total. The Services Business and Investment Business recorded double-digit revenue growth, at ¥28.4B (+14.4%) and ¥32.3B (+14.6%), respectively.
【Profit and Loss】Gross Profit increased in line with revenue growth to ¥128.0B (+5.1%), although the gross margin declined 0.1pt to 14.7% from 14.8% in the previous year. SG&A expenses increased 11.0% to ¥80.5B, outpacing revenue growth (+5.9%), and the SG&A ratio rose 0.4pt to 9.2%. By segment, the Leasing & Finance Business posted lower profit of ¥48.5B (-1.2%), as did the Investment Business at ¥4.9B (-12.6%). Corporate expenses (head-office administrative expenses) also increased from ¥7.9B to ¥8.3B, weighing on consolidated Operating Income. At the Ordinary Income stage, the increase in non-operating expenses, including ¥1.3B in interest expenses and ¥1.4B in bond issuance costs, resulted in Ordinary Income of ¥47.8B (-5.7%). No extraordinary gains or losses were recorded, and the gap between Ordinary Income and Net Income was attributable to the tax burden at an effective tax rate of 30.9%, resulting in higher revenue but lower profit.
The Leasing & Finance Business generated revenue of ¥812.0B (+5.3%) and Operating Income of ¥48.5B (-1.2%), with a profit margin of 6.0%, slightly below 6.4% in the previous year. It is the core business, accounting for 93% of total revenue and 87% of total profit, and has the greatest impact on consolidated performance.
The Services Business generated revenue of ¥28.4B (+14.4%) and Operating Income of ¥2.5B (-0.8%), with a profit margin of 8.7%, down 1.3pt from 10.0% in the previous year.
The Investment Business recorded double-digit revenue growth of ¥32.3B (+14.6%), but Operating Income declined by the largest amount among the segments to ¥4.9B (-12.6%). Its profit margin was 15.0%, down 4.7pt from 19.7% in the previous year, making it the most volatile segment.
Corporate expenses increased to ¥8.3B (¥7.9B in the previous year), which was deducted from total segment profit of ¥55.8B, resulting in consolidated Operating Income of ¥47.5B. No impairment losses, goodwill, or similar items were recorded by any segment.
【Profitability】The Operating Margin was 5.4%, down 0.5pt from 6.0% in the same period last year. The Ordinary Income Margin also declined 0.6pt to 5.5% from 6.1%, while the Net Profit Margin declined 0.4pt to 3.8% from 4.2%. ROE was 1.4% (quarterly actual), with the decline in the Net Profit Margin being the primary factor behind the ROE level. 【Cash Flow Quality】Non-operating income was ¥2.9B, equivalent to only 0.3% of revenue, and no extraordinary gains or losses were recorded; therefore, profit was generated from recurring business activities. The gap between Ordinary Income and Net Income (¥47.8B→¥33.0B) was attributable to the tax burden at an effective tax rate of 30.9%, rather than a deterioration in earnings quality caused by accounting estimate factors. 【Investment Efficiency】Total Asset Turnover was 0.059x (Revenue of ¥872.7B/Total Assets of ¥14807.5B), showing a slight improvement from 0.056x in the previous year and confirming that revenue growth outpaced asset growth. 【Financial Soundness】The Equity Ratio was 16.3%, broadly unchanged from 16.5% in the previous year. The Current Ratio was a robust 333.7% (Current Assets of ¥12117.5B/Current Liabilities of ¥3631.0B), indicating high short-term payment capacity. Meanwhile, the debt-to-equity ratio (Total Liabilities/Net Assets) was high at 5.1x, while Interest Coverage (EBIT/Interest Expenses) was 37.4x, indicating that interest payments were sufficiently covered.
As no cash flow statement was disclosed, funding trends are analyzed based on changes in the balance sheet. Cash and deposits declined by ¥29.6B (-41.1%) to ¥42.5B from ¥72.1B in the same period last year. Meanwhile, short-term borrowings increased to ¥225.0B (+¥70.0B, +45.2%), and commercial paper increased to ¥640.0B (+¥70.0B, +12.3%), indicating greater reliance on short-term funding. Accounts payable declined by ¥106.7B (-46.7%) to ¥121.9B from ¥228.6B in the previous year, suggesting that payments for working capital progressed. Lease receivables and investment assets, major components of current assets, increased moderately to ¥6045.7B (+¥74.2B, +1.2%). The change in the funding structure, whereby asset growth is financed with short-term funds, warrants attention from a liquidity management perspective.
The current-period profit and loss included no extraordinary gains or losses and was generated from recurring business activities. Non-operating income of ¥2.9B consisted mainly of ¥2.2B in dividend income and ¥0.7B in interest income, representing only 0.3% of revenue, and its contribution to profit was limited. Non-operating expenses of ¥2.7B consisted of ¥1.3B in interest expenses and ¥1.4B in bond issuance costs, among other items, suggesting rising funding costs. Net Income of ¥33.0B versus Ordinary Income of ¥47.8B (a gap of approximately -31%) was attributable to the tax burden at an effective tax rate of 30.9%, with no distortion caused by accrual factors identified. Comprehensive Income was ¥24.5B, below Net Income of ¥33.0B, with valuation differences on available-for-sale securities of -¥0.7B and deferred hedge gains or losses of -¥0.1B making negative contributions. Valuation losses reflecting market fluctuations weighed on Comprehensive Income.
Progress against the full-year company forecast was 23.6% for Revenue (¥872.7B/¥3700.0B), 27.0% for Operating Income (¥47.5B/¥176.0B), 27.5% for Ordinary Income (¥47.8B/¥174.0B), and 27.7% for Net Income (¥33.0B/¥119.0B). Compared with the 25% benchmark for quarterly progress, Revenue was slightly below, while each profit level was above the benchmark. The full-year forecast anticipates declines of 14.7% in Operating Income and 17.3% in Ordinary Income from the previous year. Accordingly, the downward trend in the first quarter (Operating Income -3.6%, Ordinary Income -5.7%) can be considered to be within the range assumed in the full-year plan. No revision to the earnings forecast was made during the quarter.
The company’s full-year dividend forecast is ¥256 (interim dividend of ¥128 = regular ¥93 + special ¥35; year-end dividend of ¥128 = regular ¥93 + special ¥35). The Payout Ratio against the full-year EPS forecast of ¥386.06 is approximately 66.3% (¥256/¥386.06), a somewhat high level because it includes special dividends. The company has indicated a policy of continuing special dividends from the fiscal year ending March 2027 through the fiscal year ending March 2032, and no revision to the dividend forecast had been made as of the current quarter.
Business concentration risk: The Leasing & Finance Business accounts for 93% of revenue (¥812.0B/¥872.7B), creating a structure in which a decline in the business’s profit margin (6.0%, versus 6.4% in the previous year) directly affects consolidated earnings.
Shorter-term funding structure and interest rate risk: Short-term borrowings increased to ¥225.0B (+45.2%) and commercial paper to ¥640.0B (+12.3%), while cash and deposits declined to ¥42.5B (-41.1%). The debt-to-equity ratio was high at 5.1x, and interest expenses also increased to ¥1.3B (¥0.7B in the previous year), resulting in a financial structure susceptible to the impact of rising funding costs.
Margin pressure from rising SG&A expenses: SG&A expenses increased to ¥80.5B (+11.0%), outpacing revenue growth (+5.9%), and the SG&A ratio rose 0.4pt to 9.2% from 8.8% in the previous year. Corporate expenses also increased to ¥8.3B, putting downward pressure on the Operating Margin.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.4% | 5.0% (-0.8%–23.5%) | +0.4pt |
| Net Profit Margin | 3.8% | 3.4% (-1.2%–24.6%) | +0.4pt |
The Company’s Operating Margin and Net Profit Margin are both slightly above the industry median.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.9% | 9.3% (2.0%–17.3%) | -3.4pt |
The Revenue Growth Rate was below the industry median, indicating a relatively moderate pace of top-line expansion.
※Source: Compiled by the Company
Despite higher revenue, increased SG&A expenses and rising funding costs pressured margins, resulting in YoY declines in Operating Income, Ordinary Income, and Net Income. The key focus going forward will be whether the Company can maintain revenue growth while controlling the pace of cost increases.
Full-year progress was 23.6% for Revenue, compared with 27.0% for Operating Income, 27.5% for Ordinary Income, and 27.7% for Net Income. The profit stages were therefore above the standard 25% progress level and are tracking relatively ahead of the company’s full-year profit decline plan (Operating Income -14.7%, etc.).
The simultaneous increase in short-term borrowings and commercial paper and decline in cash and deposits indicates that the funding structure is becoming more short-term oriented, which should be monitored.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional adviser as necessary.
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