| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥718.5B | ¥673.0B | +6.7% |
| Operating Income / Operating Profit | ¥145.9B | ¥143.2B | +1.8% |
| Ordinary Income | ¥148.8B | ¥148.3B | +0.3% |
| Net Income / Net Profit | ¥86.9B | ¥79.5B | +9.3% |
| ROE | 10.4% | 8.5% | - |
The fiscal year ended Feb 2026 results landed at Revenue ¥718.5B (vs prior year +45.5B, +6.7%), Operating Income ¥145.9B (vs prior year +2.7B, +1.8%), Ordinary Income ¥148.8B (vs prior year +0.5B, +0.3%), and Net Income attributable to owners of the parent ¥91.6B (vs prior year -1.5B, -1.6%), resulting in higher revenue, slight operating income growth, and a marginal decline in final profit. Revenue achieved a third consecutive year of growth supported by resilient demand for environmental-related processing, but SG&A expansion (up +16.9%) — notably logistics and personnel costs — constrained operating leverage, reducing the operating margin to 20.3% from 21.3% a year earlier (down ~1.0pp). Ordinary income was roughly flat, and net income was pressured by a higher effective tax rate and special losses of ¥3.6B (impairment ¥1.7B, etc.).
Revenue expanded solidly by +6.7% YoY. The single-segment environmental-related business, primarily domestic, benefited from stable waste processing and recycling demand. Gross profit was 240.9B (gross margin 33.5%), improving ~0.2pp YoY as cost control and optimization of processing pricing/mix were effective. SG&A rose materially to 95.0B (prior year 81.3B, +16.9%), increasing the SG&A ratio to 13.2% (prior year 12.1%, +1.1pp). Main drivers were higher logistics costs (freight ¥10.7B, prior year ¥9.6B), increased bonus provisions (¥8.1B, prior year ¥6.0B), and higher depreciation charged to SG&A (¥1.9B, prior year ¥1.4B). As a result, Operating Income was limited to ¥145.9B (+1.8%), and the operating margin contracted to 20.3%. Ordinary Income was ¥148.8B (+0.3%), essentially flat, with non-operating income ¥3.8B (interest received ¥1.1B, insurance proceeds, etc.) and non-operating expenses ¥0.9B (interest paid ¥0.4B, etc.) both modest. Special losses of ¥3.6B (impairment loss ¥1.7B, loss on disposal of fixed assets ¥1.6B) were recorded, bringing Profit Before Tax to ¥145.9B. Income taxes were ¥46.9B, lifting the effective tax rate to 32.2% from 31.2% a year earlier. Net income attributable to non-controlling interests was ¥7.4B (prior year ¥7.8B), and Net Income attributable to owners of the parent was ¥91.6B (-1.6%). In summary, revenue growth and slight operating profit improvement were offset by SG&A inflation, and taxes and special losses slightly reduced final profit.
Profitability: ROE was 10.4%, down 0.8pp from 11.2% the prior year but in line with the industry median of 10.1%. Net profit margin declined to 12.7% (prior year 13.8%), down ~1.1pp, mainly due to higher SG&A ratio and special losses. Operating margin was 20.3%, down 1.0pp from 21.3%, but remained well above the industry median of 8.1%, indicating sustained high profitability.
Cash Quality: Operating Cash Flow (OCF) / Net Income was 1.20x, indicating good cash backing for profit, but OCF/EBITDA was only 0.61x as working capital absorption (accounts receivable increase +¥23.9B, accounts payable decrease -¥6.5B) constrained cash conversion. Accounts receivable days were around 71 days, accounts payable days around 24 days, and the cash conversion cycle extended to approximately 64 days, exceeding the industry median (operating working capital days 36 days).
Investment Efficiency: Return on Total Assets improved to 8.7% (prior year 7.0%). Total asset turnover rose to 0.68x (prior year 0.59x), indicating improved asset efficiency. Capex / Depreciation ratio was 1.71x, well above the industry median of 0.42x, showing an aggressive investment stance. Return on Invested Capital was estimated at approximately 13.1%, notable versus the industry median of 0.17x.
Financial Soundness: Equity Ratio improved to 79.3% (prior year 74.2%), far exceeding the industry median of 59.2%. Current ratio was 228.8%, roughly in line with the industry median of 244%. Debt/EBITDA was 0.34x and Net Debt/EBITDA was -0.66x (cash exceeds interest-bearing debt), indicating a very healthy balance sheet. Interest coverage was approximately 331x, showing minimal interest burden, and financial leverage was conservative at 1.26x (industry median 1.64x).
Operating Cash Flow was ¥109.8B (prior year ¥138.3B, -20.5%). From Profit Before Tax ¥145.9B, adding back non-cash items including Depreciation ¥35.1B produced an OCF subtotal of ¥154.7B, but working capital movements absorbed ¥-44.9B. Breakdown: accounts receivable increase -¥23.9B, inventory increase -¥1.3B, accounts payable decrease -¥6.5B, primarily driven by extended receivables days. Income tax payments were -¥46.1B. OCF/Net Income ratio was 1.20x, indicating good cash backing, but OCF/EBITDA remained 0.61x, well below the industry median of 1.28x. Investing Cash Flow was -¥40.7B, led by capital expenditures -¥60.1B (new facilities and equipment renewal), and cash outflow for business combinations -¥55.8B (additional acquisition of subsidiary interests), offset in part by proceeds from sale of securities +¥12.1B. Free Cash Flow was ¥69.1B, covering dividend payments ¥36.4B by 1.9x, and the company funded total shareholder returns of approximately ¥65.9B (including share buybacks -¥29.5B) almost entirely from Free Cash Flow. Financing Cash Flow was -¥187.3B, mainly due to dividend payments -¥35.8B, share buybacks -¥29.5B, and payments to non-controlling interests related to additional acquisition of subsidiary interests -¥130.1B. Short-term borrowings increased by ¥13.3B, and cash and deposits decreased by ¥120.2B during the period to end at ¥184.0B. Cash and cash equivalents (including short-term securities ¥5.0B) were ¥189.0B, about 7.1x the short-term interest-bearing debt of ¥26.6B, indicating ample liquidity.
Against Ordinary Income of ¥148.8B, Operating Income was ¥145.9B, and non-operating net income of +¥2.9B comprised modest items such as interest/dividend income ¥1.4B and insurance proceeds ¥0.7B, indicating high recurring earnings quality. Special items were -¥3.0B (special gains ¥0.6B – special losses ¥3.6B), a temporary factor: impairment losses ¥1.7B related to low-profitability facilities and loss on disposal of fixed assets ¥1.6B related to equipment renewal. Comprehensive income was ¥102.3B, ¥15.4B above Net Income ¥86.9B, with other components such as unrealized gains on available-for-sale securities +¥4.2B, actuarial adjustments related to retirement benefits -¥0.8B, and changes in non-controlling interests contributing. OCF/Net Income ratio of 1.20x shows profits are cash-backed, but OCF/EBITDA ratio of 0.61x suggests cash conversion efficiency is weakened by working capital absorption (increase in accruals). Monitoring whether the increase in receivables and DSO is temporary or structural is key to assessing earnings quality.
Full-year guidance anticipates Revenue ¥742.0B (vs prior year +3.2%), Operating Income ¥168.0B (vs prior year +15.1%), Ordinary Income ¥170.0B (vs prior year +14.2%), and Net Income attributable to owners of the parent ¥112.0B (vs prior year +22.3%). First-half results of Revenue ¥718.5B already represent 96.8% progress toward the full-year plan, and Operating Income ¥145.9B is at 86.8% progress, indicating solid progress. The plan assumes second half Revenue +¥23.5B and Operating Income +¥22.1B, implying second-half revenue growth +3.3% and operating profit growth +15.1% based on improved cost control. Containing SG&A growth (logistics and personnel efficiency) and improving utilization rates are key to recovering operating margins. The higher net profit growth assumption (+22.3% vs operating profit) implicitly assumes non-recurrence of special losses and normalization of the effective tax rate. Full-year EPS is forecast at ¥236.85, and dividend is forecast at ¥43 (payout ratio 18.2%).
The year-end dividend was ¥40, combined with an interim dividend of ¥36 for an annual dividend of ¥76 (prior year ¥33). The payout ratio was 39.8%, within a sustainable range and above the industry median of 31%. Total dividends amounted to ¥35.8B, covering 51.8% of Free Cash Flow ¥69.1B. Share buybacks of ¥29.5B were executed, bringing combined shareholder returns to approximately ¥65.3B; the total return ratio was about 71% (total return / Net Income). Free Cash Flow coverage of total returns was about 94%, indicating returns were almost fully financed within Free Cash Flow. Given an Equity Ratio of 79.3% and low leverage, continuation of the current dividend policy and opportunistic buybacks is clearly feasible. The full-year guidance assumes a dividend of ¥43 (payout ratio 18.2%), but the interim performance already confirms annual dividends of ¥76, creating an inconsistency with the ¥43 full-year forecast (likely a disclosure inconsistency).
Industry Position (reference — company analysis) Although classified in the IT & Communications industry, the company’s operations are effectively environmental-related, so industry classification alignment should be noted. For reference, the operating margin of 20.3% substantially exceeds the industry median of 8.1% and ranks at a high level. ROE 10.4% is roughly in line with the industry median 10.1%. Equity Ratio 79.3% exceeds the industry median 59.2%, indicating conservative financials. However, the cash conversion rate (OCF/EBITDA) of 0.61x is below the industry median 1.28x, indicating room to improve working capital efficiency. Total asset turnover 0.68x trails the industry median 0.89x, but high profit margins offset this. Capex / Depreciation ratio 1.71x substantially exceeds the industry median 0.42x, reflecting active growth investment. Payout ratio 39.8% is above the industry median 31%, showing an aggressive shareholder return stance. Overall, the company combines high profitability and a robust financial position with challenges in working capital management and SG&A control.
Three key points from the results: First, three consecutive years of revenue growth and maintaining an operating margin above 20% underpin the stability of environmental processing and recycling demand and the company’s pricing power. Gross margin improved to 33.5% and cost management appears appropriate, but SG&A ratio rising by 1.1pp offset operating leverage; strengthening resilience to logistics and personnel cost inflation is a medium-term challenge. Second, OCF/EBITDA of 0.61x and notable working capital absorption, with accounts receivable days extended to 71, have reduced cash conversion efficiency. Shortening DSO and optimizing accounts payable terms to release working capital will be key to restoring cash generation. Third, with an Equity Ratio of 79.3% and Debt/EBITDA 0.34x, the financial base is very healthy; the company can sustain aggressive capex (Capex/Depreciation 1.71x) while executing total returns of about 71% within Free Cash Flow. The full-year forecast assumes Operating Income +15.1% and improved cost control, but monitoring whether the first-half SG&A expansion trend reverses in the second half is important.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmark figures are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as necessary.