| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1078.9B | ¥1115.4B | -3.3% |
| Operating Income / Operating Profit | ¥105.7B | ¥114.2B | -7.5% |
| Ordinary Income | ¥105.3B | ¥111.9B | -5.9% |
| Net Income | ¥68.2B | ¥73.9B | -7.7% |
| ROE | 4.7% | 5.3% | - |
For the interim period of FY2026 ending March 2026, Revenue was ¥1078.9B (YoY -¥36.5B -3.3%), Operating Income was ¥105.7B (YoY -¥8.5B -7.5%), Ordinary Income was ¥105.3B (YoY -¥6.6B -5.9%), and Net Income attributable to owners of the parent was ¥68.2B (YoY -¥5.7B -7.7%), landing on lower revenue and profit. Cost of goods sold ratio improved to 57.2% from 59.8% a year earlier (improving 2.6pt), lifting gross margin to 42.8%. However, SG&A ratio rose to 33.0% (prior 30.0%), causing Operating Margin to decline to 9.8% (prior 10.2%), a 0.4pt decrease. Operating Cash Flow (OCF) was ¥131.1B (YoY -10.9%), 1.9x Net Income, maintaining strong cash generation; Free Cash Flow was positive at ¥85.2B. Debt/EBITDA was 1.85x and Interest Coverage was 10.4x, indicating sound financial health. Progress vs. full-year guidance (Revenue ¥2,200B, Operating Income ¥200B, Net Income ¥122B) was 49% for Revenue, 53% for Operating Income, and 56% for Net Income, exceeding typical pace and maintaining probability of achieving guidance.
Revenue: Revenue was ¥1078.9B, down 3.3% YoY. Core rental-related operations totaled ¥1067.5B (YoY -0.8%, composition 98.9%), with other businesses at ¥41.0B (YoY -3.6%, composition 3.8%). Rental-related revenue was affected by a pause in construction/infrastructure demand and price freezes, but gross margin improved to 42.8% (prior 40.2%) through utilization management and price maintenance. Gross profit increased to ¥461.8B (prior ¥448.8B), indicating resilient core profitability.
Profitability: Operating Income was ¥105.7B (YoY -7.5%). Despite gross margin improvement, SG&A increased to ¥356.1B (YoY +6.4%), lifting SG&A ratio to 33.0% (prior 30.0%) and eroding operating leverage. Retirement benefit expenses ¥4.8B (prior ¥4.0B) and provisions increased costs, reversing operating leverage. Non-operating items comprised non-operating income ¥10.1B (including dividend income ¥0.1B, foreign exchange gains ¥1.7B) and non-operating expenses ¥10.4B (including interest expense ¥10.1B, foreign exchange losses ¥0.7B), netting -¥0.4B — immaterial. Ordinary Income was ¥105.3B (YoY -5.9%). Extraordinary income was ¥0.7B (gain on sale of fixed assets) and extraordinary losses were ¥1.1B (loss on disposal of fixed assets ¥0.4B, impairment on investment securities ¥0.2B), netting -¥0.5B — limited impact. Profit before tax was ¥104.8B; income taxes were ¥36.6B (effective tax rate 34.9%), resulting in Net Income ¥68.2B (YoY -7.7%). In conclusion, revenue and profit decreased, but core earning power remained intact; the profit decline was mainly due to higher SG&A and the impact appears limited and largely temporary.
The Rental-related Business reported Revenue ¥1067.5B (YoY -0.8%) and Operating Income ¥103.3B (YoY -5.1%), with a segment margin of 9.7% (prior 10.1%), down 0.4pt. The revenue decline reflected a pause in construction/infrastructure demand, but gross margin improvement limited the decline in profit to below the revenue drop. Other businesses (import/distribution of overseas manufactured construction equipment, construction machinery manufacturing, insurance & real estate leasing) recorded Revenue ¥41.0B (YoY -3.6%) and Operating Loss ¥0.1B (prior Operating Income ¥3.1B), showing deterioration in profitability. The Rental-related Business continues to account for almost all group Operating Income, and stable earnings generation from the core business supports consolidated performance.
Profitability: Operating Margin was 9.8% (prior 10.2%) and Net Margin was 6.3% (prior 6.6%), slightly down, while Gross Margin improved to 42.8% (prior 40.2%) up 2.6pt, evidencing effective price and utilization management. ROE was 4.7% (DuPont: Net Margin 6.2% × Asset Turnover 0.34x × Financial Leverage 2.18x), remaining low. EBITDA was ¥275.8B (margin 25.6%), maintaining a high level; Goodwill/EBITDA was 0.02x, indicating negligible accounting distortion. Cash Quality: Operating Cash Flow / Net Income was 1.92x, favorable, but OCF/EBITDA was 0.48x, low, suggesting room to improve working capital management. DSO (days sales outstanding) was 148 days, prolonged; improving collection efficiency is key to enhancing cash conversion. Investment Efficiency: CapEx / Depreciation was 0.23x, low, contributing to short-term cash generation but posing risk of insufficient mid-to-long-term equipment renewal, potentially reducing utilization and raising maintenance costs. Financial Soundness: Equity Ratio was 45.8% (prior 46.6%), Debt/EBITDA 1.85x, Debt/Capital 26.0%, indicating stable leverage. Interest Coverage was 10.4x (based on EBITDA 27.2x), sufficient to cover interest. Current Ratio 143.7%, Quick Ratio 140.8%, Cash / Short-term Debt 12.4x — no immediate short-term liquidity concerns.
Operating Cash Flow was ¥131.1B (prior ¥147.1B, -10.9%), 1.92x Net Income ¥68.2B, maintaining strong cash generation. Operating cash flow before working capital changes was ¥167.8B; decreases in trade receivables ¥9.4B, decreases in inventories ¥4.3B, and increases in accounts payable ¥9.7B contributed to working capital improvement, while corporate tax payments ¥27.4B and interest payments ¥9.8B were cash outflows. Investing Cash Flow was -¥45.9B, with CapEx ¥39.3B (prior ¥19.5B) increased but still well below Depreciation ¥170.2B, reflecting continued restraint in investment. Financing Cash Flow was -¥34.7B; long-term borrowings raised ¥115.2B while repayments of long-term debt ¥58.4B, dividend payments ¥36.4B, and lease liability repayments ¥59.8B were executed. Free Cash Flow remained positive at ¥85.2B (OCF ¥131.1B + Investing CF -¥45.9B), adequately covering dividend payments. Cash and deposits increased by ¥51.5B to ¥673.5B (prior ¥622.0B), preserving a healthy liquidity buffer. The low OCF/EBITDA of 0.48x highlights working capital management (notably DSO 148 days) as an area for improvement; tightening collection terms and improving efficiency are future priorities.
Operating Income ¥105.7B and Ordinary Income ¥105.3B differ by only ¥0.4B — minimal — indicating non-operating items are nearly neutral. Non-operating income ¥10.1B comprised foreign exchange gains ¥1.7B, subsidies ¥2.5B, and other ¥5.3B, largely recurring sources. Non-operating expenses ¥10.4B were mainly interest expense ¥10.1B, within financial costs. Extraordinary items netted -¥0.5B (extraordinary income ¥0.7B, extraordinary loss ¥1.1B), so one-off effects were extremely limited. Comprehensive Income was ¥87.3B, ¥19.1B above Net Income ¥68.2B, driven by foreign currency translation adjustments ¥14.5B, valuation differences on securities ¥4.6B, and deferred hedge gains/losses ¥0.2B — significant contributions from other comprehensive income. OCF ¥131.1B is 1.92x Net Income ¥68.2B, indicating healthy cash realization of profits. Depreciation ¥170.2B vs. CapEx ¥39.3B shows continued investment restraint; while this supports high short-term cash generation, accelerating renewal investment is needed to sustain competitiveness medium-to-long term. Overall, earnings quality is sound; core business profits convert to cash without significant accounting accrual distortions.
Full-year guidance is unchanged: Revenue ¥2,200B (YoY +2.3%), Operating Income ¥200B (YoY +2.0%), Ordinary Income ¥190B (YoY +0.9%), Net Income ¥122B. Interim progress rates vs. guidance are Revenue 49.0%, Operating Income 52.9%, Ordinary Income 55.4%, Net Income 55.9%, exceeding the standard 50% and reflecting a conservative guidance that assumes stronger second-half profit growth. Interim Operating Margin 9.8% exceeds the full-year forecast margin 9.1% by 0.7pt, likely due to seasonal allocation of costs and gross margin improvement. Despite interim revenue and profit declines, second-half demand recovery and cost discipline are expected, raising the medium-high probability of achieving full-year targets. However, construction/infrastructure investment trends, utilization rates, and the persistence of SG&A increases are risk factors for second-half performance. There were no revisions to quarterly earnings forecasts or dividend forecasts this period; management outlook remains unchanged.
No interim dividend was paid; full-year dividend forecast is ¥132 per share. Dividend payments during the period amounted to ¥36.4B, equal to 42.7% of this period’s Free Cash Flow ¥85.2B, indicating sufficient cash capacity for dividends. Dividend payout ratio vs. full-year forecast Net Income ¥122B (total dividends ¥132 × shares outstanding 27,763 thousand ≒ ¥36.6B) is approximately 30%, a sustainable level. Cash and deposits ¥673.5B and Net Interest-bearing Debt (Interest-bearing debt ¥634.9B - Cash ¥673.5B = △¥38.6B) are near net cash, providing strong capacity to continue dividends. Debt/EBITDA 1.85x and Interest Coverage 10.4x reflect healthy leverage, supporting dividend policy stability. No share buyback disclosure; shareholder returns are concentrated on dividends.
Business Concentration Risk: The Rental-related Business represents 98.9% of Revenue and nearly all Operating Income — a highly concentrated business structure. Cyclical swings in construction/infrastructure demand or intensified price competition could directly impact consolidated results. While interim sales only declined slightly YoY (-0.8%), deterioration in demand conditions in the second half could widen declines in revenue and profit.
Working Capital Efficiency Risk: DSO of 148 days is prolonged, indicating low collection efficiency. OCF/EBITDA of 0.48x is below industry benchmarks; delayed improvements in working capital management could further impair cash conversion efficiency and strain liquidity. Inventories declined significantly YoY (-29.4%), but in a demand reversal scenario there is a risk to supply responsiveness.
Competitiveness Risk from Investment Restraint: CapEx/Depreciation at 0.23x is low, and aging equipment/longer average age is progressing. While this supports short-term Free Cash Flow, mid-to-long-term risks include lower utilization, higher maintenance costs, and slower response to customer needs, potentially degrading competitiveness and profitability. Accelerating renewal investments from the second half onward is a key challenge.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.8% | 14.0% (3.8%–18.5%) | -4.2pt |
| Net Margin | 6.3% | 9.2% (1.1%–14.0%) | -2.9pt |
Operating Margin trails the industry median by 4.2pt, with high SG&A ratio being a relative weakness in profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -3.3% | 21.0% (15.5%–26.8%) | -24.3pt |
Revenue growth rate lags the industry median by 24.3pt, with a pause in construction demand and maturation of the core business driving the relative weakness in growth.
※ Source: Company compilation
Gross Margin Improvement and Strong Cash Generation: Gross Margin improved to 42.8% (prior 40.2%) up 2.6pt, reflecting effective price maintenance and utilization management. OCF/Net Income 1.92x and positive Free Cash Flow ¥85.2B confirm healthy core earnings and cash generation. Debt/EBITDA 1.85x and Interest Coverage 10.4x indicate financial stability and high sustainability of dividends (payout ratio ~30%). Given progress vs. full-year guidance exceeding standard (Operating 53%, Net 56%), upside in the second half is possible.
Rising SG&A Ratio and Cash Conversion Efficiency Challenges: SG&A ratio rose to 33.0% (prior 30.0%) up 3.0pt, reversing operating leverage. OCF/EBITDA 0.48x and DSO 148 days reveal room to improve working capital management; stricter collection terms and SG&A efficiency will be key to improving profitability and cash conversion. Continued investment restraint (CapEx/Depreciation 0.23x) could lead to equipment aging, higher maintenance, and competitiveness erosion — monitoring renewed investment and trends in utilization and maintenance costs from the second half is important.
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 specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed financial statements. Investment decisions are your responsibility; please consult a professional advisor as necessary.