| Indicator | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥14423.0B | ¥15292.2B | -5.7% |
| Operating Income / Operating Profit | ¥902.2B | ¥1291.5B | -30.1% |
| Ordinary Income | ¥802.2B | ¥1285.4B | -37.6% |
| Net Income / Net Profit | ¥598.3B | ¥829.4B | -27.9% |
| ROE | 7.7% | 11.8% | - |
For the fiscal year ended March 2026, Revenue was ¥14,423B (YoY -¥869B, -5.7%), Operating Income was ¥902B (YoY -¥389B, -30.1%), Ordinary Income was ¥802B (YoY -¥483B, -37.6%), and Net Income attributable to owners of parent was ¥598B (YoY -¥231B, -27.9%). Revenue declined due to lower unit selling prices following normalization of fuel prices and wholesale electricity prices, but Operating Cash Flow (OCF) remained robust at ¥2,373B (YoY +27.6%), or 3.97x Net Income, indicating strong cash generation. Investing Cash Flow was -¥2,362B as major investments continued, producing Free Cash Flow of ¥10B, a slight positive turn. Operating margin fell to 6.3% from 8.4% a year earlier, a decline of 2.2pt. The core Integrated Energy Business (83.3% of revenue) recorded Operating Income of ¥703B (-26.2%), and the Transmission & Distribution Business also halved to ¥121B (-52.0%). Interest expense rose to ¥258B, weighing on ordinary-stage profitability; extraordinary items were a net -¥35B and modest. Performance materially exceeded the full-year forecast (Operating Income ¥520B), achieving 173.5% of the plan, driven by cost discipline and a more favorable fuel/market environment than assumed.
[Revenue] Revenue was ¥14,423B (YoY -5.7%), a decline. The primary cause was lower selling prices following stabilization of fuel costs and wholesale electricity prices. By segment, Integrated Energy Business revenue was ¥12,019B (-4.7%), Transmission & Distribution Business was ¥1,769B (-13.2%), and Information & Communications Business was ¥340B (+1.9%). Revenue composition: Integrated Energy 83.3%, Transmission & Distribution 12.3%, Information & Communications 2.4%, Other 2.0%, indicating very high dependence on the Integrated Energy business. The tranquility in fuel prices and normalization of the wholesale market directly reduced unit prices, while volume expansion was limited.
[Profitability] Operating Income was ¥902B (-30.1%), with an operating margin of 6.3%, down 2.2pt from 8.4% the prior year. Operating Income in Integrated Energy was ¥703B (-26.2%), margin 5.8%; Transmission & Distribution was ¥121B (-52.0%), margin 6.8%, both showing significant profit decline. Lower fixed-cost absorption and higher depreciation (¥1,391B, YoY +¥24.3B) pressured margins. Equity-method investment income contributed steadily at ¥79B. Non-operating profit/loss was a net -¥100B, primarily due to increased interest expense of ¥258B (prior year ¥145B). Ordinary Income was ¥802B (-37.6%), with higher interest burden amplifying operating-stage declines. Extraordinary items were a net -¥35B (extraordinary gains ¥105B, extraordinary losses ¥140B); impairment losses ¥70B and loss on disposal of fixed assets ¥70B were noted but overall impact was limited. Profit before income taxes was ¥908B (-28.4%), income taxes ¥224B, non-controlling interests -¥2B, resulting in Net Income attributable to owners of parent of ¥598B (-27.9%). Conclusion: revenue and profit decreased.
Integrated Energy Business: Revenue ¥12,019B (-4.7%), Operating Income ¥703B (-26.2%), margin 5.8%. Decline in fuel prices and market unit prices led to revenue and profit decreases, but the segment retained its leading position with 83.3% of revenue. Transmission & Distribution Business: Revenue ¥1,769B (-13.2%), Operating Income ¥121B (-52.0%), margin 6.8%. Declines were notable due to allowed returns under regulation and timing lags in rate adjustments. Information & Communications Business: Revenue ¥340B (+1.9%), Operating Income ¥49B (+3.8%), margin 14.4%, delivering modest profit growth; high margin supports corporate profitability but the business scale is small and contribution to overall profit is limited. Other segments: Revenue ¥295B (-2.6%), Operating Income ¥68B (-9.7%), margin 23.0%, maintaining high margin. 78% of consolidated Operating Income was generated by Integrated Energy and 13% by Transmission & Distribution, so profitability of these two businesses strongly determines corporate results.
[Profitability] Operating margin of 6.3% declined 2.2pt from 8.4% the prior year; Net Profit Margin 4.1% down 1.3pt from 5.4%. ROE was 7.7% (reference: prior year approximately 15.0%), affected by lower net margin and improvement in Equity Ratio (prior year 16.2% → current period 16.8%). EBITDA was ¥2,294B (Operating Income ¥902B + Depreciation ¥1,391B), with an EBITDA margin of 15.9%, reflecting the heavy depreciation burden typical of utility businesses. [Cash Quality] OCF/Net Income was a high 3.97x, and OCF/EBITDA was 1.03x, indicating good cash conversion. Accrual ratio was -283%, negative, signifying very strong cash backing of profits. [Investment Efficiency] Capital expenditures/Depreciation was about 1.92x, indicating continued investment phase. ROIC was approximately 3.1% (NOPAT 902 × 0.776 / (Net interest-bearing debt ¥2.05T + Net assets ¥775.3B)) and at a low level. [Financial Soundness] Equity Ratio improved to 16.8% (prior year 16.2%), Current Ratio 127.2%, Quick Ratio 113.3% indicating healthy short-term liquidity. Long-term borrowings ¥1.82T, bonds ¥1.22T, total interest-bearing debt ¥3.04T, Debt/Equity 4.96x reflecting high leverage. Interest coverage was 3.50x on an EBIT basis and 8.89x on an EBITDA basis, so ability to cover interest from operating earnings is currently maintained, but Debt/EBITDA was 8.02x indicating a high debt burden.
OCF was ¥2,373B, up 27.6% YoY, 3.97x Net Income of ¥598B, reflecting high quality. OCF subtotal (before working capital changes) was ¥2,603B; depreciation ¥1,391B was the major non-cash item. Working capital changes: decrease in trade receivables provided cash of +¥205B, increase in inventories was -¥32B, decrease in trade payables was -¥108B, with a net positive contribution of +¥65B. Payments of corporate tax etc. were -¥46B, interest & dividend receipts +¥69B, interest payments -¥254B, resulting in OCF of ¥2,373B. Investing CF was -¥2,362B, mainly acquisition of tangible/intangible fixed assets -¥2,671B; proceeds from disposals were limited at ¥235B. Free Cash Flow was ¥10B, a slight positive turn, but coverage of dividend payments of ¥115B is thin. Financing CF was +¥1,354B, including proceeds from long-term borrowings ¥3,988B, repayments of long-term borrowings -¥1,347B, net change in short-term borrowings -¥684B (short-term borrowings were reduced materially from ¥763B to ¥70B), bond issuance ¥399B, bond redemption -¥846B, dividend payments -¥115B. The company reduced short-term funding reliance, raised funds via long-term debt and bonds, and cash on hand increased from ¥2,867B to ¥4,234B, up ¥1,367B. OCF/EBITDA was 1.03x, and FCF coverage (FCF/Dividends) was 0.10x, indicating dividends are primarily supported by financing CF.
Recurring earnings core consists of Operating Income ¥902B and equity-method investment income ¥79B, totaling ¥981B from core operations. One-off items were a net -¥35B (extraordinary gains ¥105B, extraordinary losses ¥140B), including impairment losses ¥70B, loss on disposal of fixed assets ¥70B, and derivative valuation gains ¥73B; overall impact on the company was limited. Non-operating profit/loss was net -¥100B, with non-operating income ¥364B versus non-operating expenses ¥464B; the main driver was an increase in interest expense to ¥258B (prior year ¥145B), indicating interest burden has risen in a high-leverage environment and is pressuring ordinary-stage results. Interest & dividend income received was ¥37B, small. Accrual quality is strong: OCF ¥2,373B / Net Income ¥598B = 3.97x, accrual ratio -283%, with depreciation ¥1,391B as a major non-cash contributor. Comprehensive income was ¥810B, exceeding Net Income ¥598B; the ¥212B difference mainly comprised deferred hedge gains/losses ¥36B, adjustments related to retirement benefits ¥31B, and share of other comprehensive income of equity-method investees ¥59B—valuation and adjustment items mainly. Divergence between Ordinary Income and Net Income is within tax burden and extraordinary items, indicating high normality.
Full-year forecast: Revenue ¥14,900B, Operating Income ¥520B, Ordinary Income ¥400B, Net Income attributable to owners of parent ¥280B, EPS ¥86.2, Dividend ¥15. Actual progress vs. forecast: Revenue 96.8% (slightly short), Operating Income 173.5%, Ordinary Income 200.6%, Net Income 213.7% — significantly above plan. Better-than-expected cost discipline and improvement in fuel/wholesale electricity market conditions boosted profits. The dividend plan of ¥15 is a cut from the current period dividend of ¥27 (interim ¥10 + year-end ¥17), reflecting a conservative stance prioritizing investment burden and financial soundness. Full-year revenue forecast implies YoY +3.3% growth, but Operating Income -42.4%, Ordinary Income -50.1%, Net Income -53.2% in the plan, indicating a sharp planned profit decline. The current period’s profit outperformance may reflect front-loaded improvements, while the next fiscal year’s conservative outlook likely incorporates expected increases in costs and investment.
Annual dividend was ¥27 (interim ¥10 + year-end ¥17); payout ratio was 9.9%, low, indicating ample distributable profit capacity. Total dividends amounted to approximately ¥115B (based on shares outstanding net of treasury stock). However, Free Cash Flow was ¥10B, well below dividend outflow, with FCF coverage 0.10x. Dividend funding is mainly reliant on financing CF (long-term borrowings and bond issuance), and sustainability of dividends during the investment phase depends on financing conditions and smoothing of investments. Cash and deposits of ¥4,234B provide a large liquidity buffer and there is no short-term concern over dividend payment ability, but medium-to-long-term maintenance of dividends requires either reduction in capital expenditures or improvement in cash flows. The company plans a dividend of ¥15 next fiscal year, indicating a reduction to align with investment and financial leverage. There were no share buybacks, and the concept of Total Return Ratio is not applied.
Concentration risk: Integrated Energy Business accounts for 83.3% of revenue and 78% of Operating Income; its profitability strongly determines corporate results. Volatility in fuel prices and wholesale electricity prices, timing lags in fuel cost adjustment mechanisms, and demand shifts directly impact results, with limited diversification buffer. Transmission & Distribution also showed large variability (Operating Income -52.0%) due to regulatory and institutional factors, exposing portfolio vulnerability.
High leverage and interest rate risk: Debt/Equity 4.96x, interest-bearing debt ¥3.04T, Debt/EBITDA 8.02x, indicating a high debt burden. Interest expense of ¥258B, up 78.2% YoY, could further compress Ordinary Income in a rising interest rate environment. Although interest coverage on an EBIT basis is 3.50x, deterioration of the interest environment or decline in EBIT would reduce resilience. Room to maintain credit ratings and covenant compliance is limited; funding costs and terms could worsen.
Investment burden and low ROIC risk: Capital expenditures/Depreciation 1.92x indicates continued high investment phase and Free Cash Flow fragile at ¥10B. Expansion of investment totals, project execution risk, or cost overruns could further impair capital efficiency. ROIC at 3.1% is low; if investment returns fall below cost of capital, shareholder value may be eroded. Capacity to concurrently sustain dividends, debt repayment and investment is limited, raising concerns about reduced financial flexibility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.3% | 19.9% (6.5%–38.3%) | -13.7pt |
| Net Profit Margin | 4.1% | 5.6% (3.8%–22.2%) | -1.5pt |
Operating margin is 13.7pt below the industry median and low even for utilities. Normalization of fuel costs/market unit prices and reduced fixed-cost absorption are the main drivers, indicating significant room for margin improvement within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -5.7% | -0.5% (-0.9%–13.1%) | -5.2pt |
Revenue growth is 5.2pt below the median, with a larger decline relative to peers. Impact from fuel price and unit price declines is greater than peers, and top-line recovery is a key challenge.
※ Source: Company aggregation
Gap between cash generation and profitability: OCF is 3.97x Net Income and OCF/EBITDA is 1.03x indicating high cash quality, while Operating Margin 6.3% is 13.7pt below industry median. Depreciation of ¥1,391B boosts cash but lower fixed-cost absorption and higher interest burden pressure profitability. Shortening the timing lag in the fuel cost adjustment mechanism and improving cost efficiency are keys to margin recovery.
Financial balance during continued investment phase: Capital expenditures/Depreciation 1.92x and Free Cash Flow ¥10B indicate heavy investment burden. The cut to dividend ¥15 and increased cash on hand (¥4,234B) secure liquidity. Debt/EBITDA 8.02x and interest expense ¥258B keep interest burden elevated, but reduction in short-term borrowings (¥763B→¥70B) lowers short-term liquidity risk. Smoothing investments and improvements in system efficiency are prerequisites for capital efficiency improvement.
Material outperformance vs. full-year forecast and cautious outlook for next fiscal year: Operating Income reached 173.5% of forecast, yet next fiscal year’s plan shows -42.4% decline. It is important to discern whether current period profit improvement was front-loaded or whether next period’s conservative outlook embeds higher costs and investment. Integrated Energy and Transmission & Distribution together account for 91% of Operating Income; profitability trends in these two segments will continue to exert major influence on consolidated results.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmark figures are reference information compiled by our firm based on publicly available financial statements. Investment decisions are your responsibility; please consult professionals as necessary before making investment decisions.