A ¥4.36 Billion Subsidy Is Why TAUNS' Net Profit Fell Only 13% While Operating Profit Halved

A quiet COVID season took nearly a quarter off the top line

TAUNS Co., Ltd. (TSE: 197A), the Shizuoka-based maker of in-vitro diagnostic reagents and rapid test kits, published non-consolidated results for the year to June 30, 2026 on August 13, 2026 under Japanese GAAP. Revenue fell 22.9% to ¥14,369 million, operating profit 49.2% to ¥4,200 million and ordinary profit 51.9% to ¥3,952 million. Net profit fell only 13.0% to ¥5,495 million, for earnings per share of ¥52.28 against ¥62.07. The company reports a single segment, in-vitro diagnostics, so the whole business moves together.

The demand mix flipped. The influenza season began unusually early, in late September, and ran for a long stretch, while COVID-19 circulated at a level far below the prior year. Because coronavirus-linked products are the larger part of the book, that change cost revenue: COVID-19 single-test kits fell 28.7% to ¥3,460 million, COVID-19/influenza combination kits 30.2% to ¥5,529 million and influenza kits 18.6% to ¥2,697 million, with only other products higher, up 5.7% to ¥2,682 million. Lower volume against a largely fixed cost base pushed the gross margin down 7.2 points to 61.4% and the operating margin down 15.2 points to 29.2% — which is why operating profit fell roughly twice as fast as revenue.

The bottom line is standing on a subsidy that will not repeat

Net profit fell far less than the lines above it for one reason: the company recorded a government subsidy of ¥4,363 million in extraordinary income. Pre-tax profit was therefore ¥7,895 million against ¥8,201 million, down only 3.7%, and the net margin rose to 38.2% from 33.9% even as the operating margin collapsed. Without that subsidy the year's net profit would have looked nothing like ¥5,495 million. Earnings per share fell 15.8%, slightly faster than net profit, because the average share count rose about 3.3% to 105,104,210 on the exercise of share acquisition rights. Return on equity fell to 29.8% from 40.7%, and ordinary profit to total assets to 9.7% from 25.0%.

That is also why the FY6/2027 guidance reads the way it does. The company expects revenue of ¥16,730 million (+16.4%), operating profit of ¥4,374 million (+4.1%) and ordinary profit of ¥4,026 million (+1.9%) — but net profit of ¥2,965 million, down 46.0%, for earnings per share of ¥27.80. The operating line recovers; the bottom line halves, because the subsidy does not repeat. The annual dividend is guided up to ¥29.00 from ¥28.00, split ¥14.50 interim and ¥14.50 final, which against the reduced profit forecast implies a payout ratio of 104.3%, up from 53.6% this year. The company manages the business on an annual basis and publishes no first-half forecast.

A new plant, funded with debt, has drained the cash

The balance sheet grew hard. Total assets rose ¥8,105 million to ¥44,620 million as the new factory formally entered operation, lifting buildings and machinery, with trade receivables and investment securities also higher. Liabilities rose ¥6,102 million to ¥25,200 million, mainly long-term borrowings raised to fund the plant, and net assets rose ¥2,002 million to ¥19,420 million, largely through the fixed-asset compression reserve booked against the subsidy. The equity ratio fell to 43.5% from 47.7% even so, while book value per share rose to ¥182.01 from ¥168.99.

Cash tells the harder story. Operating cash flow swung to an outflow of ¥2,825 million from an inflow of ¥6,818 million — a ¥9,643 million reversal the company attributes to higher trade receivables, a ¥1,145 million consumption-tax refund receivable and lower trade payables. Investing absorbed a further ¥6,175 million on fixed assets and investment securities, and although financing brought in ¥3,297 million after ¥3,749 million of dividends paid, cash and equivalents fell to ¥3,563 million from ¥9,266 million. One counterweight: the fourth quarter was a recovery. Revenue was ¥3,705 million, up 263.3% against a prior-year quarter depressed by channel-inventory adjustment, the fourth-quarter gross margin was 48.0% against 8.8%, and fourth-quarter operating profit was ¥690 million against a ¥1,065 million loss. In July 2026 the company also won approval for ImmunoAce® SARS-CoV-2/Flu II, a combination kit that cuts read time from 15 minutes to 10 and extends shelf life from 12 months to 22, and it is pushing distribution through a co-promotion with Shionogi & Co., Ltd. — while assuming some decline in unit selling prices.

JapanStockPulse provides informational content only and does not constitute investment advice. Figures are taken from the company's published earnings short report and may be subject to subsequent revision.