| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥8559.8B | ¥9020.5B | -5.1% |
| Operating Income | ¥732.4B | ¥758.4B | -3.4% |
| Ordinary Income | ¥613.5B | ¥640.5B | -4.2% |
| Net Income (attributable to owners of the parent) | ¥337.2B | ¥587.2B | -42.6% |
| ROE | 7.1% | 14.4% | - |
The fiscal year ended March 2025 results were Revenue ¥8,559.8B (YoY -¥460.7B -5.1%), Operating Income ¥732.4B (YoY -¥26.0B -3.4%), Ordinary Income ¥613.5B (YoY -¥27.0B -4.2%), and Net Income attributable to owners of the parent ¥337.2B (YoY -¥250.0B -42.6%). The primary driver of lower sales was a reduction in government electricity bill subsidy (prior year ¥261B → this period ¥191B) and price fluctuations due to fuel cost adjustments. The main causes of the profit decline were the reversal of prior-year special gains of ¥195B and an increase in interest expense (¥109.9B → ¥147.9B, +34.5%). Although the operating margin improved by 0.2pt from 8.4% to 8.6%, the net margin declined by 1.2pt from 5.1% to 3.9%, with higher financial expenses weighing on profits.
[Revenue] Revenue was ¥8,559.8B, down -5.1% YoY. Electricity business operating revenue was ¥7,854.5B, down -4.6% from ¥8,231.4B, primarily due to a reduction in the national electricity bill relief subsidy from ¥261B to ¥191B (≈¥70B decrease). By segment, Hokkaido Electric Power (Generation & Retail) accounted for ¥6,775.9B (-7.5%), representing 79.2% of consolidated sales and directly impacted by the subsidy reduction. Conversely, Hokkaido Electric Power Network (Transmission & Distribution) secured revenue of ¥1,405.2B (+7.2%), demonstrating stability in transmission revenues. Other businesses declined slightly to ¥408.2B (-10.5%).
[Profitability] Operating Income was ¥732.4B, down -3.4% YoY, a smaller decline than sales. The operating margin improved to 8.6% from 8.4% (+0.2pt), reflecting fuel cost containment and cost management. Ordinary Income was ¥613.5B (-4.2%), impacted by an increase in non-operating expenses to ¥193.1B (prior year ¥153.6B). The main non-operating expense was interest expense of ¥147.9B (prior year ¥109.9B, +34.5%), driven by higher interest-bearing debt and rising rates. Profit before tax was ¥618.8B, down -26.7% from ¥843.6B, with a large reversal of prior-year special gains (prior year ¥195.5B → this period ¥12.1B). After deducting corporate taxes and others of ¥165.0B, Net Income attributable to owners of the parent was ¥337.2B (-42.6%), with an effective tax rate of 26.7%. Segment profit (ordinary basis) showed divergence: Hokkaido Electric Power ¥446.2B (-16.9%) and Hokkaido Electric Power Network ¥25.2B (+126.0%), highlighting the stability of transmission & distribution. In conclusion, reduced subsidies and the disappearance of prior-year special gains led to lower revenue and profit.
Hokkaido Electric Power (Generation & Retail) reported Revenue ¥6,775.9B (-7.5%) and Segment Profit ¥446.2B (-16.9%), yielding a margin of 6.6%. Although subsidy declines and lagged fuel cost adjustments pressured profitability, this remains the core business, generating approximately 73% of consolidated profit. Hokkaido Electric Power Network (Transmission & Distribution) posted Revenue ¥1,405.2B (+7.2%) and Segment Profit ¥25.2B (+126.0%) with a margin of 1.8%, turning from a significant loss the prior year to profit, supported by tariff revisions and increased transmission volume. Other businesses recorded Revenue ¥408.2B (-10.5%) and Segment Profit ¥190.6B with a high margin of 46.7% but limited scale. Concentration toward Hokkaido Electric Power is high at 79.2% of sales, making the company sensitive to regulation and market fluctuations.
[Profitability] Operating margin was 8.6%, up +0.2pt from 8.4%, reflecting cost restraint. Net margin was 3.9%, down -2.6pt from 6.5%, affected by higher interest burden and the disappearance of special gains. ROE was 7.1%, a substantial decline from 18.1% in the prior year, primarily due to lower net income. ROA was 1.4% (ordinary income basis 2.6%), showing asset efficiency typical for a power utility. [Cash Quality] Operating CF / Net Income ratio was 2.60x, indicating solid cash generation. OCF / EBITDA ratio was 0.79x, with cash conversion somewhat constrained by working capital movements and tax/interest payments. [Investment Efficiency] Capital expenditure (tangible & intangible acquisitions) was ¥2,175.6B versus depreciation of ¥720.0B, implying an investment multiple of ~3.0x and continued robust growth/renewal investment. [Financial Soundness] Equity Ratio was 19.2%, up +0.9pt from 18.3% but still low. D/E ratio was 4.22x, indicating high leverage, with interest-bearing debt reaching ¥1,483.9B (bonds ¥859.2B, long-term borrowings ¥540.3B). Current ratio was 0.92, below 1.0, signaling short-term liquidity caution. Interest coverage was 4.95x (EBIT / interest expense) and 9.82x (EBITDA / interest expense), indicating near-term ability to service interest.
Operating CF was ¥1,145.5B, down -8.8% from ¥1,255.9B, but equivalent to 3.4x Net Income ¥337.2B, showing solid cash generation. Operating CF subtotal (before working capital changes) was ¥1,526.6B, including depreciation of ¥720.0B, roughly consistent with EBITDA (Operating Income + Depreciation = ¥1,452.4B). In working capital, inventories decreased by ¥88.4B and accounts receivable decreased by ¥123.9B, indicating improved receivables and inventory management, but a decrease in accrued taxes of -¥49.9B pressured funds. Corporate tax payments were -¥263.0B and interest payments -¥138.5B, constraining operating CF. Investing CF was -¥2,130.7B, with fixed asset acquisitions of -¥2,175.6B indicating continued large-scale capital investment, partially offset by construction contribution receipts of +¥114.5B. Free Cash Flow was a large negative -¥985.2B, with investment cash far exceeding operating cash. Financing CF was +¥1,268.1B, funded by bond issuance ¥1,950.0B and long-term borrowings drawn ¥1,020.0B, while covering bond redemptions -¥1,000.0B, long-term borrowings repayments -¥625.6B, and dividend payments -¥65.4B. Net change in short-term borrowings was ±¥890.0B, securing funding flexibility. Cash and cash equivalents increased by ¥282.8B from ¥1,563.2B at the beginning of the period to ¥1,846.1B at period-end, maintaining liquidity on hand.
Ordinary Income of ¥613.5B is the core of earnings, while net non-operating income of ¥74.2B (0.9% of sales) and non-operating expenses of ¥193.1B (2.3% of sales) result in financial costs depressing profits. Non-operating income is limited (dividend income ¥13.6B, interest income ¥6.7B, equity-method investment gains ¥7.9B), while non-operating expenses are dominated by interest expense ¥147.9B. Special gains were ¥12.1B, a large decline from ¥195.5B in the prior year, indicating limited non-recurring support. The accrual ratio (Net Income - Operating CF) / Total Assets is -2.9%, showing Operating CF exceeded Net Income and that cash backing of profits is solid. The gap between Ordinary Income ¥613.5B and Net Income ¥337.2B is -45.0%, mainly due to corporate taxes and others ¥165.0B (effective tax rate 26.7%) and non-controlling interests ¥13.8B. Of the ¥250.0B YoY decline in Net Income, roughly ¥183B is attributable to the reduction in special gains and about ¥38B to higher interest expense, indicating non-recurring factors and interest burden affected earnings quality.
Full-year guidance is Revenue ¥9,700.0B (YoY +13.3%), Operating Income ¥480.0B (YoY -34.5%), Ordinary Income ¥300.0B (YoY -51.1%), and Net Income attributable to owners of the parent ¥220.0B (EPS ¥100.27). The projected revenue increase assumes the end of subsidy reductions and normalization of electricity tariffs, while the large projected profit decline appears conservative, incorporating higher depreciation, interest burden, and normalization of fuel cost adjustments. Progress rates (actual / full-year forecast) are: Revenue 88.2%, Operating Income 152.6%, Ordinary Income 204.5%, Net Income 153.3%, indicating first-half results materially exceeded the forecast and the guidance assumes profit deterioration in the second half. Dividend guidance is annual ¥16.5 (reflecting adjustments from interim ¥15.0 and year-end ¥17.0 in results), halving from the realized annual ¥32.0; with forecast EPS ¥100.27, the payout ratio is about 16%, keeping payouts at a low level.
Annual dividend was ¥32.0 (interim ¥15.0, year-end ¥17.0), up ¥2.0 from ¥30.0 in the prior year. Relative to Net Income attributable to owners of the parent ¥337.2B, total dividends amount to approximately ¥6.89B (shares outstanding excluding treasury shares: 205.32M shares × ¥32), yielding a payout ratio of 20.4%. With Operating CF ¥1,145.5B and dividend payments -¥65.4B, dividends are comfortably covered by operating cash, but Free Cash Flow is a deficit of -¥985.2B, so the coexistence of dividends and large capex effectively depends on external financing (Financing CF +¥1,268.1B). Full-year dividend guidance of ¥16.5 represents a halving from actual ¥32.0; with forecast EPS ¥100.27, the assumed payout ratio is ~16%, reflecting a conservative policy. Under continued large-scale investment, maintaining absolute dividend levels is prioritized, and scope for further increases depends on Free Cash Flow improvement and accumulation of regulated revenues. No share buyback is disclosed; shareholder return is by dividends only.
Short-term liquidity risk: Current ratio 0.92 with current assets ¥4,376.8B versus current liabilities ¥4,755.2B, leaving working capital slightly short at -¥378.4B. While cash and deposits of ¥1,846.1B provide 4.15x cover relative to short-term borrowings of ¥445.0B, attention to maturity mismatch is required and continued access to refinancing and the bond market is assumed.
High leverage and interest-rate sensitivity: D/E ratio 4.22x and Debt/EBITDA ratio 4.03x indicate high leverage, with interest-bearing debt at ¥1,483.9B (bonds ¥859.2B +18.8%, long-term borrowings ¥540.3B +9.3%). Interest expense rose sharply to ¥147.9B (+34.5% YoY); in a rising-rate environment financial expenses could increase further and compress net income. Interest coverage is 4.95x (EBIT / interest expense), indicating near-term serviceability, but high leverage constrains financial flexibility.
Dependence on subsidies & regulated revenues and concentration risk: The electricity bill relief subsidy declined from ¥261B to ¥191B, creating headwinds to revenue and profit. Sales concentration in Hokkaido Electric Power (Generation & Retail) is high at 79.2%, making the company vulnerable to regulatory changes (rate base treatment, allowed ROE, subsidy reductions) and fuel/market price volatility. Uncertainty around nuclear restarts (delays, additional safety costs) could also affect medium- to long-term profitability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.6% | 19.9% (6.5%–38.3%) | -11.4pt |
| Net Margin | 3.9% | 5.6% (3.8%–22.2%) | -1.7pt |
Both operating margin and net margin are below industry medians, indicating relatively lower profitability among power utilities.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -5.1% | -0.5% (-0.9%–13.1%) | -4.6pt |
Revenue growth of -5.1% is below the industry median of -0.5%, reflecting weak growth position within the sector due to subsidy reductions.
※ Source: Company compilation
Stability of transmission & distribution vs. subsidy-dependent generation & retail: Hokkaido Electric Power Network (Transmission & Distribution) achieved Revenue +7.2% and Segment Profit +126.0%, confirming stable tariff-driven earnings. Conversely, Hokkaido Electric Power (Generation & Retail) posted Revenue -7.5% and Segment Profit -16.9%, demonstrating susceptibility to subsidy reductions and regulatory/market volatility. The schedule for further subsidy reductions and progress on electricity tariff normalization will be key to earnings recovery.
Robust capital expenditure and expanding leverage: Capex is about 3.0x depreciation (acquisitions ¥2,175.6B / depreciation ¥720.0B), supporting future rate base expansion and higher regulated revenues, but Free Cash Flow remains a large negative -¥985.2B. Interest-bearing debt rose to ¥1,483.9B (bonds +¥135.8B, long-term borrowings +¥46.0B), with D/E 4.22x and Debt/EBITDA 4.03x, reflecting high leverage. In a rising-rate environment, interest expense increased sharply YoY (+34.5%), posing a risk of further pressure on net income. The current ratio of 0.92 also warrants attention to short-term liquidity and continued access to refinancing and the bond market.
Conservative full-year guidance and dividend policy: Full-year guidance anticipates large profit declines (Operating Income -34.5%, Ordinary Income -51.1%) under conservative assumptions incorporating higher depreciation and interest costs. Dividend guidance of ¥16.5 (halved from actual ¥32.0) implies an assumed payout ratio of about 16%, signaling prioritization of financial soundness. While dividends are covered by Operating CF, with persistent negative FCF external funding is required to reconcile dividends and capex, and medium-term dividend increases depend on FCF improvement and accumulation of regulated revenues.
This report was automatically generated by AI analyzing XBRL financial disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial data. Investment decisions are your responsibility; please consult a professional advisor as appropriate.