TOYOBO CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The first quarter of the fiscal year ending March 2027 recorded increases in both revenue and earnings, with improved profitability in the Films Business and positive operating leverage from the containment of SG&A expenses driving higher profit. Revenue was ¥1,103.7B (¥1,029.1B in the previous year, YoY +7.3%), Operating Income was ¥71.3B (¥55.7B, YoY +28.1%), and Ordinary Income was ¥66.3B (¥42.7B, YoY +55.3%). Net Income attributable to owners of the parent was ¥30.7B (¥15.7B in the previous year, YoY +95.3%), supported by higher Operating Income as well as a reduction in extraordinary losses recorded in the previous year. Consolidated Net Income, including the portion attributable to non-controlling interests, was ¥40.8B (YoY +107.2%).

Factors Affecting Performance

【Revenue】Revenue was ¥1,103.7B, an increase of +7.3% year on year. By segment (based on revenue from external customers), Films was the largest at ¥485.3B (44.0% composition ratio, YoY +8.9%), followed by Environment & Functional Materials at ¥288.4B (26.1%, YoY +11.4%), Fibers at ¥187.6B (17.0%, YoY -4.1%), and Life Science at ¥91.1B (8.3%, YoY +13.3%). While growth in Films and Environment & Functional Materials drove the overall increase in revenue, Fibers and Real Estate (¥11.0B, -2.2%) recorded declines.

【Profit and Loss】Operating Income was ¥71.3B (YoY +28.1%), driven by an improvement in the gross profit margin to 24.8% (equivalent to 24.5% in the previous year) and SG&A expense growth (+3.2%) remaining below revenue growth (+7.3%). Segment profit increased significantly in Films to ¥51.7B (+29.1%, profit margin 10.6%) and in Environment & Functional Materials to ¥27.8B (+90.2%, profit margin 9.1%), while Real Estate maintained high profitability at ¥5.4B (+7.6%, profit margin 39.3%). In contrast, Life Science recorded an Operating Loss of ¥4.8B, turning from a profit of ¥1.6B in the previous year, while Fibers recorded an Operating Loss of ¥3.6B, widening from a loss of ¥0.8B in the previous year. Both segments diluted the company-wide profit margin. Ordinary Income was ¥66.3B (YoY +55.3%); although interest expense of ¥7.7B was incurred, higher Operating Income absorbed this burden. Against Profit Before Tax of ¥57.4B, extraordinary losses of ¥8.9B (impairment losses of ¥2.2B, business-structure reform expenses of ¥1.0B, and valuation losses on investment securities of ¥3.9B) were recorded as one-off factors. After deducting income taxes of ¥16.6B (effective tax rate 28.9%) and Net Income attributable to non-controlling interests of ¥10.1B, Net Income attributable to owners of the parent was ¥30.7B. In conclusion, the company recorded increases in both revenue and earnings, led by improved profitability in Films and Environment & Functional Materials, while improving the profitability of Life Science and Fibers remains a future challenge.

Segment Analysis

Beginning this fiscal year, the reporting segments consist of five categories—Films, Life Science, Environment & Functional Materials, Fibers, and Real Estate—with “Other” added to the structure (the former “Functional Fibers & Trading” was renamed “Fibers”). Segment profit (before adjustments, including intersegment transactions) was centered on Films at ¥51.7B (YoY +29.1%, profit margin 10.6%), while Environment & Functional Materials recorded the largest growth rate at ¥27.8B (YoY +90.2%, profit margin 9.1%). Although Real Estate is small in terms of revenue, its profit margin was exceptionally high at 39.3%. Meanwhile, Life Science recorded revenue of ¥91.3B (YoY +13.3%) but an Operating Loss of ¥4.8B (compared with a profit of ¥1.6B in the previous year), while Fibers recorded revenue of ¥191.2B (YoY -4.1%) but an Operating Loss of ¥3.6B (compared with a loss of ¥0.8B in the previous year), indicating deteriorating profitability in some segments that recorded revenue growth. Adjustments for company-wide expenses and other items narrowed to -¥6.2B from -¥6.8B in the previous year.

Key Financial Indicators

【Profitability】The Operating Margin was 6.5%, improving by approximately 1.1pt from 5.4% in the same period of the previous year. The gross profit margin also improved to 24.8% from the equivalent of 24.5% in the previous year, supported by fixed-cost absorption accompanying revenue growth and improved SG&A efficiency. ROE was 1.6% (based on total net assets), reflecting the increase in Net Income attributable to owners of the parent to ¥30.7B. EPS was ¥34.82 (¥17.84 in the previous year, YoY +95.2%), while BPS was ¥2,414.65, nearly flat from ¥2,417.30 in the previous year.【Cash Quality】Cash and deposits were ¥297.8B, down ¥13.2B from ¥311.1B in the previous year. Accounts receivable of ¥862.0B (¥882.1B in the previous year) and inventories of ¥646.0B (¥667.0B in the previous year) both declined, indicating improved working-capital efficiency, while accounts payable also decreased to ¥424.0B (¥450.8B in the previous year).【Investment Efficiency】Against total assets of ¥6,206.6B, the Return on Assets based on Net Income attributable to owners of the parent remained at approximately 0.5%, indicating room for improvement in asset efficiency.【Financial Soundness】The Equity Ratio (net assets/total assets) was 40.3%, nearly flat from 40.2% in the previous year. Interest-bearing debt totaled approximately ¥2,558.2B, comprising short-term borrowings of ¥599.0B, current portion of long-term borrowings of ¥175.4B, current portion of bonds of ¥100.0B, long-term borrowings of ¥1,013.8B, and bonds of ¥670.0B. The Current Ratio was 167.1% (current assets of ¥2,663.0B/current liabilities of ¥1,593.4B), securing short-term payment capacity.

Cash Flow Analysis

As figures from the statement of cash flows are not included in the disclosed information, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥297.8B, a decrease of ¥13.2B (-4.3%) compared with the same period of the previous year. In terms of working capital, accounts receivable decreased by ¥20.1B and inventories by ¥21.0B, indicating progress in collections and inventory reduction. However, accounts payable also decreased by ¥26.8B, meaning that the reduction in trade payables partially offset the cash-generation effect. In terms of fixed assets, construction in progress decreased by ¥59.4B (-25.8%), from ¥230.2B to ¥170.8B, suggesting progress in the transfer of assets associated with the commencement of operations of investment projects. Regarding interest-bearing debt, short-term borrowings increased by 9.5%, while the current portion of long-term borrowings increased by 41.0%, indicating a slight increase in reliance on short-term funding. Although cash-generation capacity is expected to improve due to higher Operating Income, the increase in short-term debt and decrease in cash balances warrant close monitoring of future funding conditions.

Earnings Quality

The core of earnings for the period was Operating Income of ¥71.3B, generated by recurring business activities. Non-operating income was ¥7.6B, only 0.7% of revenue, indicating limited reliance on such income, including dividend income of ¥0.7B. Meanwhile, extraordinary losses of ¥8.9B (impairment losses of ¥2.2B, business-structure reform expenses of ¥1.0B, and valuation losses on investment securities of ¥3.9B) reduced Profit Before Tax as one-off factors, representing approximately 15.5% of Profit Before Tax of ¥57.4B. Comprehensive Income was ¥44.4B, of which ¥32.8B was attributable to owners of the parent, resulting in a difference of only ¥2.1B from Net Income attributable to owners of the parent of ¥30.7B. This difference resulted from foreign currency translation adjustments of +¥7.3B making a positive contribution, while valuation differences on securities of -¥2.7B and adjustments related to retirement benefits of -¥1.9B had negative effects. The gap between Net Income and Comprehensive Income was limited, and earnings quality can generally be viewed as stable.

Earnings Forecast and Guidance

The full-year earnings forecast calls for revenue of ¥4,350.0B (YoY +3.2%), Operating Income of ¥230.0B (YoY -17.6%), Ordinary Income of ¥185.0B (YoY -19.1%), and Net Income attributable to owners of the parent of ¥70.0B, representing a plan for lower earnings year on year. Q1 progress against these forecasts was 25.4% for revenue, 31.0% for Operating Income, 35.8% for Ordinary Income, and 43.9% for Net Income, all exceeding the simple quarterly allocation of 25%. In particular, progress in Ordinary Income and Net Income is ahead of schedule relative to the forecast for lower full-year earnings, suggesting that the full-year plan may include a certain degree of conservatism. During the quarter, both the earnings forecast and the dividend forecast were revised, and actual performance trends from the first half onward will provide a basis for assessing the validity of the plan.

Shareholder Returns

The annual dividend forecast is ¥40.00 per share. Based on the number of shares calculated by deducting 808,657 treasury shares from 89,048,792 issued shares, total dividends are estimated at approximately ¥35.3B, resulting in a Payout Ratio of approximately 50.4% against the full-year Net Income forecast of ¥70.0B. As the dividend forecast was revised during the quarter, the sustainability of the dividend source of funds should be assessed in light of the cash and deposits balance of ¥297.8B and trends in working-capital reduction.

Risk Factors

1. Concentration of profitability in business segments: The Films Business accounts for 44.0% of revenue from external customers and more than half of segment profit, meaning that supply-demand and pricing trends in this business have a significant impact on company-wide performance.

2. Deteriorating profitability in Life Science and Fibers: Despite revenue growth of +13.3%, Life Science recorded an Operating Loss of ¥4.8B (compared with a profit in the previous year), while Fibers recorded revenue growth of -4.1% and an Operating Loss of ¥3.6B (a wider loss than in the previous year), indicating delayed fixed-cost absorption in some segments with revenue growth.

3. Increase in short-term funding: While short-term borrowings increased by +9.5% year on year and the current portion of long-term borrowings increased by +41.0%, cash and deposits declined to ¥297.8B. The cash coverage ratio against short-term debt (the total of short-term borrowings, the current portion of long-term borrowings, and the current portion of bonds, approximately ¥874.4B) remains at approximately 34%.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Company's Operating Margin and Net Profit Margin are below the manufacturing-industry median, indicating that profitability is relatively low within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate was slightly above the industry median, placing the pace of revenue growth at a standard level within the industry.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. The Operating Margin improved to 6.5% from 5.4% in the same period of the previous year, while the recovery of the Films Business margin to 10.6% and the increase in profit at Environment & Functional Materials (+90.2%) drove company-wide earnings growth. This structure indicates that improved profitability is supported by structural profitability improvements in specific segments.

2. Operating losses in Life Science and Fibers continued despite revenue growth, acting as a drag on the company-wide profit margin. The timing of earnings improvement in both segments will be a structural issue that determines the company-wide margin level going forward.

3. Q1 progress against the full-year plan was ahead of schedule, with Ordinary Income at 35.8% and Net Income at 43.9%, while the increase in short-term liabilities coincided with a decrease in cash balances. Monitoring funding trends, along with the sustainability of the earnings growth trend, will therefore be useful.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type, with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,962–¥2,074 at ±1% for the cost of equity, and ¥2,004–¥2,025 at ±0.1 for ω.

Notes:

• Since Net Income progress against the full-year forecast (44%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of schedule tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net Income is significantly compressed relative to Operating Income due to tax expenses, acquisition-related expenses, and non-controlling interests (Net Income ÷ Operating Income 30%). This figure reflects that compression at face value; if the factors are temporary, underlying earnings power may be higher.
• Since forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model / Interest rate reference month: 2026-07 / This value is not a forecast or guarantee of future share prices)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional as necessary.

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