| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥281.4B | ¥265.0B | +6.2% |
| Operating Income / Operating Profit | ¥-12.2B | ¥11.1B | -51.0% |
| Ordinary Income | ¥-21.7B | ¥3.9B | -77.4% |
| Net Income / Net Profit | ¥-16.6B | ¥-9.2B | -79.0% |
| ROE | -23.8% | -10.7% | - |
For FY2026, Revenue reached ¥281.4B (¥+16.4B YoY +6.2%), achieving top-line growth. However, Operating Income deteriorated to ¥-12.2B (¥-23.3B YoY), Ordinary Income to ¥-21.7B (¥-25.6B YoY), and Net Income to ¥-16.6B (¥-7.4B YoY), with all profit measures widening their losses and resulting in a significant decline in profitability. Gross profit margin fell to 9.8% (prior year 18.6%), down 8.8ppt, and SG&A of ¥39.9B substantially exceeded gross profit of ¥27.6B. Operating margin declined to -4.3% (prior year +4.2%), worsening by 8.5ppt. Increased interest expense of ¥12.0B (prior year ¥8.1B) also contributed to an expanded loss at the ordinary income level. A recorded non-recurring gain of ¥10.0B narrowed pre-tax loss to ¥-11.8B, but after taxes the company reported a net loss for the second consecutive year.
[Revenue] Revenue was ¥281.4B, up +6.2% YoY. Trade receivables were ¥49.2B (prior year ¥40.7B), up +21.0%, indicating lengthening collection days at a pace exceeding revenue growth. Tangible fixed assets were ¥350.9B (prior year ¥277.1B), up +26.7%; of this, leased assets were ¥216.7B (prior year ¥143.6B), up +50.9%, suggesting expanded supply capacity which likely contributed to revenue growth.
[Profitability] Cost of sales was ¥253.7B, up ¥32.2B YoY (+14.5%), significantly outpacing revenue growth (+6.2%). As a result, gross profit margin fell from 18.6% to 9.8% (down 8.8ppt), and gross profit declined to ¥27.6B (prior year ¥49.1B), a decrease of ¥21.6B. SG&A was ¥39.9B (prior year ¥38.0B), a slight increase, but the large drop in gross profit resulted in an operating loss of ¥-12.2B (prior year +¥11.1B). Non-operating interest expense increased to ¥12.0B (prior year ¥8.1B), +47.5%, and total non-operating expenses amounted to ¥12.3B. Consequently, ordinary loss expanded to ¥-21.7B (prior year +¥3.9B). The recognition of non-recurring gains of ¥10.0B reduced the pre-tax loss to ¥-11.8B; after recording income taxes of ¥4.8B (cash payment ¥1.5B, deferred tax ¥3.3B), the net loss for the period was ¥-16.6B (prior year ¥-9.2B). In conclusion, the company reported revenue growth but declining profits and an enlarged net loss.
[Profitability] Operating margin was -4.3% (prior year +4.2%), gross profit margin 9.8% (prior year 18.6%), and net margin -5.9% (prior year -3.5%), all deteriorating. ROE was -23.8% (prior year -13.4%) due to widening losses; ROA on an ordinary income basis was -5.1% (prior year +1.1%). EBITDA was ¥6.4B (Operating Income ¥-12.2B + Depreciation & Amortization ¥18.6B), with a margin of 2.3%, and EBITDA/interest expense was 0.53x, indicating weak earnings power relative to interest burden. [Cash Quality] Operating Cash Flow / Net Income was 0.20x, indicating weak cash conversion; Days Sales Outstanding (DSO) was 64 days, extended from 56 days a year earlier. Accrual ratio was -2.9%, but this reflects a calculation effect under loss conditions and does not resolve the underlying weak cash generation. [Investment Efficiency] Capital expenditure was ¥11.7B, 0.63x of depreciation ¥18.6B, reflecting a restrained capex stance. Total asset turnover fell to 0.62x (prior year 0.68x). [Financial Soundness] Equity ratio declined to 15.3% (prior year 22.0%), and D/E ratio rose to 5.55x (prior year 3.53x). Debt/EBITDA was 8.0x, at a high level. Interest-bearing liabilities (short-term borrowings ¥572百万円 + long-term borrowings ¥4,541百万円 + corporate bonds ¥45百万円 + lease liabilities ¥22,913百万円) total ¥279.1B. Current ratio was 133.4%, and cash / short-term debt ratio was 5.8x, indicating a certain level of short-term liquidity, but interest coverage on an EBIT basis was -1.02x, showing extremely weak capacity to cover interest.
Operating Cash Flow was ¥-3.3B (prior year +¥18.8B), a significant deterioration. Operating cash flow subtotal (before working capital changes) was ¥-1.6B (prior year +¥45.1B), driven mainly by operating losses and high interest payments (cash interest paid ¥11.8B). In working capital, an increase in trade receivables of ¥-8.6B was a cash outflow, trade payables increased ¥+0.4B (cash inflow), and inventory changes were roughly neutral. Increases in bonus provisions ¥1.4B and retirement benefit obligations ¥0.7B partially contributed cash inflows, but corporate tax payments of ¥-2.3B were a burden. Investing Cash Flow was ¥-12.8B, primarily capex of ¥-11.7B. This is a large reduction from the prior year’s large investment of ¥-42.1B and indicates a cash-focused stance. Financing Cash Flow was a limited ¥+0.6B; while long-term borrowings provided ¥+45.0B, cash outflows included long-term borrowings repayments ¥-10.4B, lease liabilities repayments ¥-2.9B, reduction in short-term borrowings ¥-0.9B, and corporate bond redemptions ¥-0.2B, so net financing was modest. As a result, free cash flow was ¥-16.1B and cash declined by ¥-15.5B to ¥40.9B (prior year ¥56.4B). Under current operating capabilities, the company cannot self-fund both maintenance capex and interest payments, and reliance on financing remains high.
Recurring earning power is extremely weak, with losses at both operating and ordinary income stages. Non-operating income of ¥2.8B includes subsidy income of ¥1.6B (prior year ¥1.2B), which is limited at 1.0% of Revenue. Conversely, non-operating expenses reached ¥12.3B, largely composed of interest expense ¥12.0B, equating to 4.3% of Revenue, a heavy burden. The non-recurring gain of ¥10.0B is a temporary factor, likely including gains on fixed asset disposals, but only partially offsets the recurrent losses. Non-recurring losses were minor at ¥0.1B. The divergence between ordinary income and net income reflects the ¥10.0B non-recurring gain and income taxes of ¥4.8B (including deferred tax ¥3.3B). Operating CF was ¥-3.3B, 0.20x of Net Income ¥-16.6B, meaning cash outflows persist despite losses; working capital expansion and high interest payments impede cash generation. Accrual (Net Income - Operating CF) was ¥-1.3B and accrual ratio was -2.9%, which may superficially appear favorable but stems from loss-period accounting effects and does not indicate genuine high-quality earnings.
Full Year guidance expects Revenue of ¥288.7B (YoY +2.6%), Operating Income ¥4.2B, Ordinary Income ¥-8.5B, and Net Income ¥-10.6B. Compared with actuals, Revenue of ¥281.4B corresponds to 97% progress, a slight shortfall. Operating Income fell far short at ¥-12.2B versus guidance ¥+4.2B; Ordinary Income ¥-21.7B (guidance ¥-8.5B) and Net Income ¥-16.6B (guidance ¥-10.6B) also missed. The gap at the operating income stage is particularly pronounced, likely due to higher-than-expected cost of sales and deterioration of gross margin. The ¥10.0B non-recurring gain is likely a one-off and was probably not included in guidance assumptions; the fundamental earnings gap remains unresolved. Achieving full-year guidance requires gross margin recovery and cost control in H2, but given the current deviation, the outlook appears challenging.
No dividend was paid this period (prior year: no dividend), with payout ratio at 0%. Given the net loss ¥-16.6B, Operating CF ¥-3.3B, and Free CF ¥-16.1B, there is no financial capacity to pay dividends, so continuation of no dividend is a reasonable decision. Retained earnings are in deficit at ¥-17.3B; priority should be restoring profitability and stabilizing the financial base. Conditions for reinstating dividends in the future include strengthening EBITDA and improving interest coverage (to at least >2x), returning Free Cash Flow to positive territory, and rebuilding equity. No share buybacks were conducted; the company continues to prioritize internal reserves and debt reduction over shareholder returns.
Rapid deterioration of profitability risk: Gross profit margin fell from 18.6% to 9.8% (down 8.8ppt), and operating margin worsened to -4.3% (prior year +4.2%), an 8.5ppt decline. Cost inflation in labor and utilities and deterioration in utilization and price/mix are likely primary causes and may persist as structural issues in the short term. Rebounding gross margin requires price revisions, utilization improvements, and procurement cost optimization, which will take time to implement.
High leverage and rising interest burden risk: D/E ratio 5.55x and Debt/EBITDA 8.0x indicate high leverage, and interest expense ¥12.0B (prior year ¥8.1B) represents 4.3% of Revenue. EBITDA/interest coverage is 0.53x and EBIT-based coverage is -1.02x, indicating extremely weak capacity to meet interest. In a rising interest rate environment, interest burden could increase further, pressuring cash flows and reducing financial flexibility. The heavy fixed-cost structure including lease liabilities of ¥229.1B also weakens resilience to economic and demand swings.
Working capital expansion and insufficient cash generation risk: Trade receivables rose to ¥49.2B (prior year ¥40.7B), +21.0%, and DSO extended to 64 days (prior year 56 days). Operating CF ¥-3.3B and Free CF ¥-16.1B show weak cash generation, and cash balance declined 27.4% to ¥40.9B (prior year ¥56.4B). Current operating capabilities cannot self-fund maintenance capex and interest, increasing dependence on external financing. Continued delays in receivables collection and prolonged operating losses heighten liquidity risk.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | -4.3% | 8.1% (3.6%–16.0%) | -12.4pt |
| Net Margin | -5.9% | 5.8% (1.2%–11.6%) | -11.7pt |
Profitability is well below the industry median, with both operating and net margins in negative territory, placing the company near the bottom of the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 6.2% | 10.1% (1.7%–20.2%) | -3.9pt |
Revenue growth rate trails the industry median by 3.9ppt, indicating relatively weaker growth.
※ Source: Company aggregation
The most critical issue in the financials is the sharp decline in gross margin (18.6% → 9.8%), with cost inflation and deterioration in utilization and price/mix identified as the primary drivers of the shift into operating loss. Going forward, price revisions, improved utilization, and procurement cost optimization are key to recovering gross margin. Investors should closely monitor gross margin trends (especially signs of a bottoming and reversal) as the most important indicator.
The high-leverage structure (D/E 5.55x, Debt/EBITDA 8.0x) and heavy interest burden (interest expense ¥12.0B, EBITDA/interest 0.53x) severely constrain financial flexibility. Improving interest coverage (to at least >2x) and returning Free Cash Flow to positive territory are prerequisites for financial stabilization. It is positive that capex has been restrained to 0.63x of depreciation, signaling a shift to cash conservation, but achieving operating CF positivity and shortening collection days (improving DSO of 64 days) are urgent tasks.
The large gap versus full-year guidance (Operating Income guidance ¥+4.2B vs actual ¥-12.2B) suggests assumptions on cost structure and gross margin were off, and fundamental earnings recovery is required for guidance achievement. The ¥10.0B non-recurring gain is temporary and does not address the core issue of recovering recurring earnings. In the short term, defensive operations and debt management are necessary; in the medium term, improvements in utilization/pricing and progress on restructuring cost structure will be the crucible for performance turnaround.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; please consult advisors as needed before making any investment decision.