| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥6503.7B | ¥6700.4B | -2.9% |
| Operating Income / Operating Profit | ¥100.8B | ¥135.4B | -25.6% |
| Equity-method Investment Income (Loss) | ¥0.4B | ¥0.7B | -45.1% |
| Ordinary Income | ¥61.8B | ¥97.1B | -36.4% |
| Net Income | ¥54.6B | ¥69.5B | -21.4% |
| ROE | 6.1% | 8.1% | - |
The fiscal year ended March 2026 closed with Revenue ¥6503.7B (YoY -¥196.7B -2.9%), Operating Income ¥100.8B (YoY -¥34.6B -25.6%), Ordinary Income ¥61.8B (YoY -¥35.3B -36.4%), and Net Income ¥54.6B (YoY -¥14.9B -21.4%), representing declines in both top and bottom lines. Softening demand in Northeast Asia (-6.0%) weighed on Revenue, while higher SG&A (¥1155.7B → ¥1199.7B YoY +3.8%) and increased finance costs (interest paid ¥31.3B) compressed margins at the operating and ordinary stages. Gross margin improved to 20.0% (from 19.3% YoY +0.7pt), reflecting product mix improvement, but Operating Margin deteriorated to 1.5% (from 2.0% YoY -0.5pt), with a heavy fixed-cost structure as SG&A ratio rose to 18.4%. Extraordinary gains ¥29.4B (gain on sale of investment securities ¥16.3B, etc.) provided some support to the bottom line, but non-operating expenses ¥53.9B reduced Ordinary Income. Cash flow remained robust with Operating Cash Flow (OCF) ¥198.1B (YoY +77.4%), aided by inventory reduction ¥26.9B and accounts receivable collection ¥98.7B, generating Free Cash Flow ¥87.0B. Total assets were ¥3747.1B, Net Assets ¥894.5B, and D/E 3.19x indicating a high-leverage structure; short-term borrowings ¥564.4B (YoY +40.8%) and a short-term liability bias elevate liquidity risk. The company guides for next year Revenue ¥7100B (+9.2%) and Operating Income ¥110B (+9.2%) but signals a conservative stance by forecasting dividends cut from ¥36 to ¥20.
[Revenue] Revenue was ¥6503.7B (YoY -2.9%), a decline. By segment, Northeast Asia was the largest drag at ¥2876.1B (-6.0%), impacted by weakening demand for paper and cardboard and volume declines. Europe/Americas was ¥2990.4B (+0.2%), a slight increase supported by price revisions and mix improvement. Asia Pacific was ¥647.9B (-2.7%), a slight decrease. Real estate leasing was stable at ¥19.9B (+0.5%). Regional composition was Europe/Americas 46.0%, Northeast Asia 44.2%, Asia Pacific 10.0%, highlighting concentration in the two core regions. Gross margin improved to 20.0% (from 19.3% YoY +0.7pt) as shifts to higher value-added products and price pass-through had some effect. Cost of sales ratio narrowed to 80.0% (from 80.7%), but the SG&A ratio rose to 18.4% (from 17.3% YoY +1.1pt), offsetting operating-level margin benefits.
[Profitability] Operating Income was ¥100.8B (-25.6%), with Operating Margin at 1.5% (from 2.0% YoY -0.5pt), a significant deterioration. SG&A rose to ¥1199.7B (from ¥1155.7B YoY +3.8%) despite lower Revenue, pressured by elevated logistics and personnel costs and head office expenses (adjustment -¥10.5B, corporate expenses -¥15.1B). Goodwill amortization ¥15.1B also reduced profit. By segment, Northeast Asia posted Operating Income ¥18.7B (-35.3%) with margin down to 0.7%, Europe/Americas ¥58.2B (-25.0%) margin 1.9%, Asia Pacific ¥28.1B (-6.4%) margin 4.3% relatively resilient, and Real Estate Leasing ¥6.2B (+3.8%) margin 31.5% outstanding. Ordinary Income was ¥61.8B (-36.4%); non-operating income was ¥14.9B (including dividends received ¥5.3B) against non-operating expenses ¥53.9B (interest paid ¥31.3B, foreign exchange loss ¥3.2B), highlighting the burden of interest. Profit before tax was ¥83.9B; extraordinary gains ¥29.4B (gain on sale of investment securities ¥16.3B, gain on sale of fixed assets ¥3.5B, gain on negative goodwill ¥1.1B) lifted results, partly offset by extraordinary losses ¥7.3B (impairment losses ¥7.1B). After corporate taxes ¥27.7B (effective tax rate 33.0%), Net Income was ¥54.6B (-21.4%). In summary, despite gross margin improvement accompanying Revenue decline, higher SG&A and finance costs resulted in lower Revenue and lower profitability.
Europe/Americas: Revenue ¥2990.4B (+0.2%), Operating Income ¥58.2B (-25.0%), margin 1.9%. Slight Revenue growth but larger profit decline driven by higher SG&A, indicating deteriorating operating efficiency. Northeast Asia: Revenue ¥2876.1B (-6.0%), Operating Income ¥18.7B (-35.3%), margin 0.7%, the weakest level. Demand softness and higher fixed-cost burden hit profitability, making improvements urgent. Asia Pacific: Revenue ¥647.9B (-2.7%), Operating Income ¥28.1B (-6.4%), margin 4.3%, the strongest and relatively resilient. Real Estate Leasing: Revenue ¥19.9B (+0.5%), Operating Income ¥6.2B (+3.8%), margin 31.5%, serving as a stable income source. Corporate adjustments -¥10.5B comprise head office costs -¥15.1B and inter-segment eliminations +¥4.6B, with management costs reducing consolidated operating margin by approximately 1.6pt.
[Profitability] Operating Margin 1.5% (from 2.0% YoY -0.5pt), Net Margin 0.8% (from 1.2% YoY -0.4pt) indicate deteriorated profitability. Gross Margin 20.0% (from 19.3% YoY +0.7pt) improved, but SG&A ratio 18.4% (from 17.3% YoY +1.1pt) pressured operating performance. ROE 6.1% reflects an Equity Ratio 23.9% and financial leverage 4.19x, but Net Margin decline drove ROE down markedly from 9.5% in the prior year. [Cash Quality] OCF ¥198.1B is 3.6x Net Income ¥54.6B, indicating high cash-generating ability. OCF/EBITDA 0.87x (EBITDA ¥226.9B) is slightly below the benchmark 0.9x, though inventory reduction ¥26.9B and receivables collection ¥98.7B contributed. Accrual ratio -263% is exceptionally strong, signifying high earnings quality. [Investment Efficiency] Total asset turnover 1.74x (from 1.90x) shows some asset efficiency slowdown. ROIC 4.8% falls below estimated capital cost (7-8%), indicating room to improve invested capital efficiency. CapEx ¥35.4B is only 28.1% of Depreciation ¥126.1B, suggesting underinvestment risk for medium-to-long-term competitiveness. [Financial Soundness] Equity Ratio 23.9% (from 24.5% YoY -0.6pt) slightly declined. D/E 3.19x and Debt/EBITDA 2.81x indicate high leverage. Interest-bearing debt ¥637.4B (including short-term borrowings ¥564.4B, long-term borrowings ¥73.0B, corporate bonds ¥200B, CP ¥130B, lease liabilities ¥407.2B) shows a short-term liability ratio of 88.6%, highlighting short-term concentration. Cash ¥126.3B / short-term liabilities ¥637.4B yields liquidity coverage 0.20x, weak. Interest coverage (Operating Income / interest paid) 3.22x indicates limited tolerance to rising rates. Current ratio 112.3%, Quick ratio 75.6% convey limited short-term liquidity cushion.
Operating Cash Flow (OCF) was ¥198.1B (YoY +77.4%), a substantial improvement. Profit before tax ¥83.9B plus non-cash charges depreciation ¥126.1B, goodwill amortization ¥15.1B, etc., produced a pre-working-capital subtotal of ¥251.8B. In working capital, decrease in trade receivables ¥98.7B (accelerated collections) and decrease in inventories ¥26.9B (inventory compression) contributed to cash generation, while decrease in trade payables -¥56.6B partially offset. After corporate tax payments -¥30.1B and interest payments -¥32.2B, OCF was secured. Investing Cash Flow was -¥111.1B with tangible/intangible asset acquisitions -¥35.4B, acquisitions of subsidiary shares -¥81.8B (15 new consolidated entities), business transfers -¥23.1B reflecting continued active investment, while proceeds from sale of securities ¥26.7B and asset disposals ¥7.8B provided cash recovery. Free Cash Flow was ¥87.0B, covering dividends ¥23.2B 3.8x and share buybacks ¥24.0B, with total shareholder returns ¥47.2B adequately funded. Financing Cash Flow was -¥81.2B; net increase in short-term borrowings ¥157.6B, long-term borrowings repayment -¥95.9B implying term shortening, lease repayments -¥83.4B, dividends -¥23.2B, share buybacks -¥24.0B, and net CP reduction -¥10B. Cash and equivalents rose ¥13.1B from opening ¥113.2B to closing ¥126.3B, aided by FX effect +¥7.3B, but liquidity coverage 0.20x under short-term liability bias remains weak, making term extension urgent.
Ordinary Income ¥61.8B is derived from Operating Income ¥100.8B less net non-operating loss -¥39.0B, where non-operating income ¥14.9B (dividends received ¥5.3B, interest received ¥2.9B, other ¥4.2B) is far outweighed by non-operating expenses ¥53.9B (interest paid ¥31.3B, foreign exchange loss ¥3.2B, other ¥5.2B), showing finance costs depressing ordinary-stage results. Net extraordinary items were +¥22.2B (extraordinary gains ¥29.4B, extraordinary losses ¥7.3B) with gain on sale of investment securities ¥16.3B, gain on sale of fixed assets ¥3.5B, and gain on negative goodwill ¥1.1B temporarily supporting the bottom line; impairment losses ¥7.1B and valuation losses on investment securities ¥1.2B partially offset. The divergence between Ordinary Income and Net Income is driven by tax expense ¥27.7B (effective tax rate 33.0%) and extraordinary items; Net Income was underpinned by extraordinary gains. Accrual quality is high: OCF/Net Income 3.6x and accrual ratio -263%, indicating earnings are well-backed by cash. Goodwill amortization ¥15.1B (JGAAP) persistently depresses Net Income, so IFRS-comparable valuation on an EBITDA ¥226.9B basis is appropriate. Comprehensive Income ¥87.2B (Net Income ¥54.6B + Other Comprehensive Income ¥32.6B) was mainly driven by foreign currency translation adjustments ¥52.7B, with available-for-sale securities valuation difference ¥3.8B and retirement benefit adjustments -¥25.5B as offsets.
Full Year guidance: Revenue ¥7100B (YoY +9.2%), Operating Income ¥110B (YoY +9.2%), Ordinary Income ¥65B (YoY +5.3%), Parent Net Income ¥50B (down from current period ¥56.2B). The company expects operating improvement from Revenue recovery and SG&A restraint, but projects declines at the ordinary and net stages due to higher interest burden, tax, and FX impacts baked into a conservative outlook. EPS forecast ¥77.82 (current period ¥87.44), dividend guidance ¥20 (from ¥36 this period, a significant cut) reflecting cautious shareholder return stance. Progress rates are Revenue 91.6%, Operating Income 91.6%, Ordinary Income 95.1%, suggesting operating-stage targets are nearly achieved but conservative assumptions below ordinary stage explain the final net decline projection. Guidance prioritizes liquidity preservation under short-term liability concentration and term extension, and cash allocation will be biased toward strengthening internal reserves.
Current period dividends were interim ¥18 and year-end ¥18, annual ¥36 (same as prior year). Payout Ratio 28.8% (Dividends ¥23.2B / Parent Net Income ¥80.5B) is at an appropriate level; payout ratio measured against parent earnings is within benchmark ranges. Share buybacks ¥24.0B combined with dividends ¥23.2B produced total shareholder returns ¥47.2B. Total Return Ratio 58.6% (Total Returns ¥47.2B / Parent Net Income ¥80.5B) is at a sustainable level. Free Cash Flow ¥87.0B is 3.8x dividends and 1.8x total returns, indicating sufficient funding for returns. Next fiscal year dividend guidance ¥20 represents a 44.4% cut, with payout ratio 25.7% on EPS forecast ¥77.82, a modest reduction. Prioritizing financial flexibility under short-term liability bias (short-term liability ratio 88.6%, Cash/short-term liabilities 0.20x) and rising rate environment, the company shifts to a conservative dividend policy. Treasury stock declined by -¥35.8B (5.3% of issued shares), contributing to per-share value but reducing liquidity buffer. In the medium term, as term extension and cash generation stabilize, gradual dividend increases may be feasible.
High leverage and short-term liability concentration: With D/E 3.19x and Debt/EBITDA 2.81x, the company has a highly leveraged profile and short-term liability ratio 88.6% and Cash/short-term liabilities 0.20x indicate a clear maturity mismatch. With interest rates rising, limited interest coverage 3.22x raises refinancing cost and liquidity squeeze risk. Short-term borrowings ¥564.4B (YoY +40.8%) and CP ¥130B refinancing are near-term concerns.
Low profitability and rising fixed-cost burden: Operating Margin 1.5% and Net Margin 0.8% indicate low-return operations; ROIC 4.8% is below estimated capital cost (7-8%). SG&A ratio 18.4% (YoY +1.1pt) and heavy fixed costs mean Northeast Asia margin 0.7% is near breakeven. Persistently high logistics and personnel costs and head office cost -¥15.1B press operating performance, potentially offsetting gross margin improvement (+0.7pt). In downturns, fixed-costs may suppress results.
Inventory, receivables, and goodwill risk: Inventories ¥772.3B (20.6% of total assets) and trade receivables ¥1068.3B (28.5%) indicate large working capital, exposing the company to counterparty credit risk and inventory obsolescence risk. New consolidations of 15 entities increased goodwill to ¥149.2B (16.7% of net assets), raising potential integration delays and impairment risk. Prior-year impairment charge ¥7.1B was recorded; additional impairments in a recession could pressure Net Income.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 1.5% | 3.4% (1.4%–5.0%) | -1.8pt |
| Net Margin | 0.8% | 2.3% (1.0%–4.6%) | -1.5pt |
Both Operating Margin and Net Margin are below industry medians, placing the company in the lower tier within the sector. With an SG&A ratio of 18.4% and heavy fixed-costs, shifting toward higher value-added products and improving cost efficiency are urgent.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -2.9% | 5.9% (0.4%–10.7%) | -8.8pt |
Revenue growth underperforms the industry median by 8.8pt, primarily due to Northeast Asia demand softness. If next year’s forecast +9.2% is achieved, the company could recover to the upper ranks of the sector.
※ Source: Company compilation
Liquidity resilience and progress on term extension under short-term liability concentration: With short-term liability ratio 88.6%, Cash/short-term liabilities 0.20x, and D/E 3.19x, the company faces high leverage and short-term concentration that could crystallize refinancing cost increases and liquidity stress in a rising-rate environment. Monitoring the refinancing of short-term borrowings ¥564.4B (YoY +40.8%) and progress in term diversification via long-term borrowings and corporate bonds is critical. Given OCF ¥198.1B and Free Cash Flow ¥87.0B, the company has cash-generation capacity to pursue staged term extension and interest burden reduction, which is pivotal for sustaining shareholder returns.
Reversal of Operating Margin via gross margin improvement and SG&A restraint: Gross Margin 20.0% (YoY +0.7pt) reflects successful product mix shift and price pass-through, but SG&A ratio 18.4% (YoY +1.1pt) caused Operating Margin to deteriorate to 1.5% (YoY -0.5pt). Next fiscal year the company plans Operating Income ¥110B (+9.2%) through Revenue recovery (+9.2%) and SG&A control, but persistent elevated logistics and personnel costs and head office cost -¥15.1B may continue. Curbing SG&A growth and reducing fixed costs are keys to leveraging operating leverage; recovery to 2%-level Operating Margin is a precondition to improve ROIC (current 4.8% → target 7-8%).
Balancing underinvestment in CapEx with improvements in capital efficiency: CapEx ¥35.4B equals only 28.1% of Depreciation ¥126.1B, suggesting underinvestment risk to medium/long-term competitiveness. Given ROIC 4.8% below capital cost (7-8%), prioritizing asset efficiency improvements (improving total asset turnover 1.74x) and selective investments in high-return businesses should take precedence over indiscriminate spending. The increase in goodwill via M&A (¥149.2B, 16.7% of net assets) and consolidation of 15 entities requires smooth integration to validate a path to ROIC above 7%.
This report is an earnings analysis document automatically generated by AI analyzing XBRL earnings disclosure 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; consult professionals as necessary before making investment decisions.