Declining Inventory Profitability Due to Obsolescence and Slow-Moving Components Procured in Advance
First written in FY2021. 10 of 16 entries say "Worsened", first in FY2022-Q3. Latest entry: FY2026.
Hpc Systems moved to the "Worse" side of this theme in 2026, 2 years after the typical company in this theme (2024).
The whole theme swung hardest in 2023: 3 of 8 companies on the "Worse" side.
4 other companies' latest entry also says "Worsened".
- FY2026WorsenedAnnual report
「Raw materials and supplies of ¥2,159.002 million were recorded on the company’s consolidated balance sheet, of which raw materials accounted for ¥2,157.353 million, or 18.9% of total assets.」
The raw material balance increased sharply from ¥581.664 million in the previous fiscal year to ¥2,157.353 million, and its percentage of total assets reached 18.9%. Although inventory exposure increased, the inventory valuation loss for the fiscal year was ¥109.071 million. - FY2026-H1WorsenedAnnual report
「This was mainly because inventories increased by ¥498.574 million and advances by ¥227.660 million, although trade receivables decreased by ¥497.230 million and cash and deposits decreased by ¥479.770 million.」
Inventories increased by ¥498.574 million at the end of the interim consolidated accounting period, increasing inventory exposure related to advance-procured components and other items. - FY2025WorsenedAnnual report
「Raw materials and supplies: 631,826; 584,511; of which raw materials: 629,771; 581,664; cost of sales (inventory valuation loss): 105,891; 125,250」
Although the raw material balance decreased, the inventory valuation loss increased from ¥105.891 million in the previous consolidated fiscal year to ¥125.250 million. The decline in profitability associated with obsolescence and stagnation of advance-procured components and other items has continued and expanded as an actual valuation loss. - FY2025-H1MitigatedAnnual report
「Raw materials and supplies: 631,826; 517,032」
Raw materials and supplies decreased from ¥631.826 million at the end of the previous consolidated fiscal year to ¥517.032 million at the end of the interim consolidated accounting period, reducing inventory exposure. - FY2024MaterialisedAnnual report
「Amounts recorded in the consolidated financial statements for the consolidated fiscal year under review: raw materials and supplies ¥631.826 million; of which raw materials ¥629.771 million; cost of sales (inventory valuation loss) ¥105.891 million」
Regarding the risk associated with advance-procured components and other items, the company disclosed raw materials of ¥629.771 million and an inventory valuation loss of ¥105.891 million included in cost of sales. An impairment loss related to the risk was actually recognized. - FY2024-Q3MitigatedAnnual report
「Current assets at the end of the third quarter of the consolidated fiscal year under review amounted to ¥4,967.804 million. The main components were cash and deposits of ¥2,340.549 million, notes and accounts receivable of ¥1,526.201 million, and inventories of ¥708.221 million.」
Inventories decreased from ¥1,198.214 million at the end of the second quarter under review to ¥708.221 million, reducing inventory exposure. There was no disclosure that advance-procured components had actually become obsolete or remained stagnant. - FY2024-Q2WorsenedAnnual report
「Current assets at the end of the cumulative second quarter of the consolidated fiscal year under review amounted to ¥4,304.020 million. The main components were cash and deposits of ¥1,820.147 million, inventories of ¥1,198.214 million, and notes and accounts receivable of ¥682.482 million. Raw materials and supplies amounted to ¥764.807 million.」
Inventories of ¥1,198.214 million and raw materials and supplies of ¥764.807 million were recorded, increasing inventory exposure from the raw material balance of ¥643.039 million at the end of the previous fiscal year. There was no disclosure that obsolescence or stagnation had actually occurred. - FY2023MitigatedAnnual report
「Raw materials and supplies of ¥645.040 million were recorded on the company’s balance sheet, of which raw materials accounted for ¥643.039 million, or 8.2% of total assets.」
The raw material balance decreased from ¥824.349 million, or 18.0% of total assets, in the previous fiscal year to ¥643.039 million, or 8.2%. The company also disclosed an internal rule requiring the book value to be written down according to the holding period. There was no disclosure that obsolescence or stagnation had actually occurred. - FY2023-Q2WorsenedAnnual report
「Cash flows from operating activities during the cumulative second quarter under review resulted in an outflow of ¥3,262.361 million, mainly due to an outflow of ¥3,357.492 million from the increase in inventories.」
The operating cash flow outflow attributable to the increase in inventories was ¥3,357.492 million. Inventories at the end of the quarter had increased by ¥3,357.492 million from the end of the previous fiscal year, while finished goods also increased from ¥25.222 million to ¥2,985.538 million, further increasing inventory exposure, including advance-procured components. There was no disclosure that obsolescence or stagnation had actually occurred. - FY2023-Q1WorsenedAnnual report
「This was mainly because inventories increased by ¥897.189 million, although trade receivables decreased by ¥981.008 million and cash and deposits decreased by ¥280.249 million.」
Inventories increased by ¥897.189 million from the end of the previous fiscal year, and raw materials and supplies also reached ¥944.188 million. Although there was no disclosure that advance-procured components had actually become obsolete or remained stagnant, inventory exposure increased. - FY2022WorsenedAnnual report
「Raw materials and supplies of ¥825.716 million were recorded on the company’s balance sheet, of which raw materials accounted for ¥824.349 million, or 18.0% of total assets. As a general rule, we procure a certain quantity of raw materials (components) based on expected product orders, but we may also procure them in advance in preparation for sharp increases in component prices and supply shortages. Such components may become obsolete as a result of technological innovation, and their profitability may decline if raw materials (components) remain in inventory.」
The raw material balance related to advance-procured components increased to ¥824.349 million, or 18.0% of total assets. Although exposure to lower profitability from obsolescence and stagnation was quantified at a higher level than in the previous fiscal year, no actual obsolescence was disclosed. - FY2022-Q3WorsenedAnnual report
「This was mainly because trade receivables increased by ¥1,886.432 million, inventories by ¥526.115 million, and electronically recorded monetary claims by ¥86.340 million, although cash and deposits decreased by ¥827.340 million.」
Inventories increased by ¥526.115 million from the end of the previous fiscal year, while raw materials and supplies also increased from ¥311.025 million to ¥841.047 million. Although there was no disclosure that component obsolescence or stagnation had occurred, exposure to advance-procured components increased. - FY2021First statedAnnual report
「As a general rule, we procure a certain quantity of raw materials (components) based on expected product orders, but we may also procure them in advance in preparation for sharp increases in component prices and supply shortages. Such components may become obsolete as a result of technological innovation, and their profitability may decline if raw materials (components) remain in inventory. Raw materials amounted to ¥309.357 million, representing 9.4% of total assets.」
The company newly disclosed that advance procurement in preparation for supply shortages and other factors could result in technical obsolescence of components and lower profitability due to inventory stagnation. The raw material balance was also quantified together with its percentage of total assets.