| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2009.1B | ¥1948.0B | +3.1% |
| Operating Income / Operating Profit | ¥148.7B | ¥186.5B | -20.3% |
| Ordinary Income (JGAAP) | ¥137.4B | ¥178.3B | -22.9% |
| Net Income / Net Profit | ¥85.3B | ¥125.1B | -31.8% |
| ROE | 1.1% | 1.7% | - |
For Q1 of the fiscal year ending March 2026, Revenue was ¥2,009.1B (YoY +¥61.1B +3.1%), Operating Income was ¥148.7B (YoY -¥37.8B -20.3%), Ordinary Income was ¥137.4B (YoY -¥40.9B -22.9%), and quarterly Net Income attributable to owners of the parent was ¥85.3B (YoY -¥39.8B -31.8%). While Revenue held a slight increase, profitability weakened across all stages with double-digit declines. Operating margin declined to 7.4% from 9.6% in the prior-year period (-2.2pt), and Net margin declined to 4.2% from 6.4% (-2.2pt), indicating a material deterioration in profitability. The largest downward pressure came from margin compression in the core Vinyl Acetate business, partially offset by improved results in Functional Materials and Fibers & Textiles.
【Revenue】 Revenue increased slightly to ¥2,009.1B (YoY +3.1%). By segment, Functional Materials led growth at ¥528.2B (+10.5%), Isoprene ¥215.3B (+9.4%), Trading ¥177.9B (+6.8%), and Fibers & Textiles ¥139.5B (+4.0%). The core Vinyl Acetate business maintained a slight increase at ¥1,019.3B (+1.5%). Conversely, Other segments declined significantly to ¥71.7B (-34.3%). Overall, diversification across major segments delivered revenue growth, but the growth rate was well below the industry median of 13.2%.
【Profitability】 Gross profit was ¥634.3B (gross margin 31.6%), down 1.0pt from 32.6% in the prior-year period. SG&A was ¥485.6B (SG&A ratio 24.2%), up from ¥449.4B (23.1%) in the prior-year period (+1.1pt). SG&A increased by 8.1%, outpacing Revenue growth (+3.1%), causing operating leverage to reverse. Operating Income fell sharply to ¥148.7B (operating margin 7.4%), down 20.3% YoY. By segment, Vinyl Acetate posted a large decline to ¥110.3B (-30.7%, margin 10.8%) which dragged down consolidated profits, while Functional Materials recovered to ¥33.8B (+148.3%, margin 6.4%) and Fibers & Textiles improved to ¥11.4B (+291.1%, margin 8.2%). Corporate expenses (mainly basic research costs) increased to -¥47.1B from -¥41.6B. Non-operating items were a net -¥11.3B: interest and dividend income was ¥5.1B versus interest expense of ¥8.6B, resulting in Ordinary Income of ¥137.4B (-22.9%). Extraordinary items were net -¥19.9B (gains on sales of investment securities ¥11.8B offset by extraordinary losses ¥31.7B), which depressed profit before tax. After income taxes of ¥32.2B (effective tax rate 27.4%), Net Income was ¥85.3B (-31.8%). In conclusion, the company recorded higher Revenue but lower profits.
Vinyl Acetate (Revenue ¥1,019.3B, Operating Income ¥110.3B) achieved revenue growth but saw margin decline to 10.8% from 15.9% a year earlier (-5.1pt), with Operating Income down -30.7%. This suggests compression of price-to-feedstock spreads and/or rising costs. Functional Materials (Revenue ¥528.2B, Operating Income ¥33.8B) reported +10.5% revenue growth and Operating Income +148.3%, improving margin to 6.4%. This includes the transfer of the Electronics Materials Promotion Division from Other to Functional Materials following an organizational restructure. Isoprene (Revenue ¥215.3B, Operating Income ¥28.9B) grew +9.4% with Operating Income +2.4%, maintaining the highest segment margin at 13.4%. Trading (Revenue ¥177.9B, Operating Income ¥15.6B) grew +6.8% with Operating Income +13.6%, margin 8.8%. Fibers & Textiles (Revenue ¥139.5B, Operating Income ¥11.4B) increased Revenue +4.0% and Operating Income +291.1%, nearing a turnaround with margin 8.2%. Other (Revenue ¥71.7B, Operating Income ¥4.0B) declined -34.3% in Revenue and -49.2% in Operating Income, margin 5.5%. Overall, the earnings deterioration in core Vinyl Acetate was partially offset by improvements in Functional Materials and Fibers & Textiles.
【Profitability】Operating margin 7.4% (prior 9.6%, -2.2pt), Net margin 4.2% (prior 6.4%, -2.2pt) — profitability declined broadly. ROE 1.1% (prior 1.7%), ROIC 1.3% — capital efficiency is low with room for improvement. Gross margin 31.6% (prior 32.6%, -1.0pt), SG&A ratio 24.2% (prior 23.1%, +1.1pt) — operating leverage reversed. 【Cash Quality】Cash and deposits ¥1,028.9B — liquidity sufficient. Interest-bearing debt ¥2,009.4B (short-term borrowings ¥450.9B, current portion of long-term borrowings ¥274.9B, long-term borrowings ¥1,558.6B, bonds ¥500.0B, CP ¥210.0B), cash cover ratio 0.51x. Interest paid ¥8.6B, interest burden ratio 0.43%. 【Investment Efficiency】Total asset turnover 0.61x (annualized) — at manufacturing norms. Fixed asset turnover 1.09x. EPS ¥25.62 (prior ¥37.07, -30.9%), BPS ¥2,444, PBR cannot be calculated due to lack of share price data. 【Financial Soundness】Equity Ratio 57.2% (prior 57.0%) — high and stable. Current ratio 249.2%, Quick ratio 169.5% — short-term liquidity robust. D/E ratio 0.27x, Net D/E ratio 0.13x — leverage not excessive. Interest coverage 17.3x (Operating Income / Interest Paid) — ample headroom. Defined benefit obligation ¥326.2B vs. pension assets ¥59.3B — deficit exists but limited concern relative to overall balance sheet health.
As the cash flow statement is not disclosed, cash movements are inferred from balance sheet trends. Cash and deposits were ¥1,028.9B, down ¥12.1B from ¥1,041.0B a year earlier — broadly flat. Trade receivables declined to ¥1,685.5B (prior ¥1,783.3B, -¥97.8B), indicating improved collections, while inventories increased to ¥1,858.7B (prior ¥1,780.2B, +¥78.5B, +4.4%), suggesting inventory buildup. Trade payables fell to ¥509.9B (prior ¥584.9B, -¥75.0B), implying settlement of purchase obligations. Interest-bearing debt rose to ¥2,009.4B (prior ¥1,863.2B, +¥146.2B), likely supplementing liquidity via increased short-term borrowings and CP. Treasury stock increased to -¥116.2B (prior -¥16.2B, -¥100.0B), confirming approximately ¥10B-scale share buybacks. Net assets were ¥7,529.0B, slightly down from ¥7,551.8B, with buybacks and dividend payments offsetting Net Income. Although Operating Cash Flow (OCF) is not directly disclosed, the combination of inventory increases and trade payable decreases suggests cash outflow to working capital, implying limited cash generation relative to Net Income.
Operating Income of ¥148.7B underpins recurring earnings, which were diluted to Ordinary Income ¥137.4B by net non-operating items of -¥11.3B. Non-operating income totaled ¥14.2B (interest income ¥5.1B, investment partnership income ¥3.8B, other ¥3.5B), representing 0.7% of Revenue — low dependence. Non-operating expenses totaled ¥25.5B (interest expense ¥8.6B, other ¥16.9B), continuously pressuring Ordinary Income. Extraordinary items were net -¥19.9B: gains on sales of investment securities ¥11.8B were outweighed by extraordinary losses ¥31.7B (business reorganization losses ¥5.6B, loss on disposal of fixed assets ¥4.9B, etc.), lowering profit before tax. Comprehensive income was ¥166.1B, significantly above Net Income ¥85.3B, with Other Comprehensive Income contributing ¥80.8B (foreign currency translation adjustment ¥82.3B, valuation difference on available-for-sale securities -¥3.4B, deferred hedge gains/losses ¥0.6B, etc.). Yen depreciation likely contributed to unrealized gains. From an accrual perspective, the mix of rising inventories and declining receivables suggests timing differences in converting profits to cash; improving working capital efficiency is key to enhancing earnings quality.
Full Year plan: Revenue ¥8,500.0B (YoY +5.1%), Operating Income ¥700.0B (+18.9%), Ordinary Income ¥640.0B (+24.2%), Net Income ¥400.0B, EPS ¥132.80. Q1 progress rates vs. full-year plan: Revenue 23.6% (standard 25% -1.4pt), Operating Income 21.2% (standard -3.8pt), Ordinary Income 21.5% (standard -3.5pt), Net Income 21.3% (standard -3.7pt). Revenue progress is roughly in line, but profit metrics lag the standard pace by 3–4pt, indicating a weak start relative to initial assumptions. The sharp decline in Vinyl Acetate profitability in Q1 and higher corporate expenses are the main causes; recovery in H2 will require price pass-through, cost containment, and product mix improvements. Dividend guidance is annual ¥64 (ordinary ¥54 + commemorative ¥10); payout ratio vs. full-year EPS projection ¥132.80 is 48.2%, within a sustainable range. No revisions to earnings or dividend forecasts have been announced as of Q1.
Annual dividend forecast ¥64 (ordinary ¥54 + commemorative ¥10), a significant increase from ¥27 a year earlier. Payout ratio vs. full-year EPS projection ¥132.80 is 48.2%, sustainable on a profit basis. Q1 EPS ¥25.62 annualized roughly ¥102.5, implying that achieving full-year EPS forecast requires improvement from Q2 onward. Treasury stock purchases expanded from -¥16.2B in the prior-year period to -¥116.2B this period, confirming large-scale buybacks of approximately ¥10B. Combined dividends and buybacks increase total shareholder returns and demonstrate intent to improve capital efficiency. With cash ¥1,028.9B, no direct OCF disclosure, and a solvent balance sheet (Equity Ratio 57.2%), capacity exists to sustain dividends and share repurchases.
Vinyl Acetate profitability risk: Core segment Operating Income declined -30.7%. Revenue ¥1,019.3B (composition ratio 50.7%) — the largest business — saw margin decline to 10.8% from 15.9% (-5.1pt). Causes likely include narrowing price-to-feedstock spreads or rising energy costs. Continued delays in price pass-through or worsening supply-demand balance poses a material risk to achieving full-year targets.
Working capital efficiency deterioration risk: Inventories rose to ¥1,858.7B from ¥1,780.2B (+4.4%), indicating inventory accumulation. Trade payables decreased to ¥509.9B (prior ¥584.9B, -¥75.0B), increasing cash outflow pressure to working capital. Prolonged inventory stagnation could impair cash flow generation and reduce capacity for investment amid rising interest burdens.
Rising interest burden risk: Interest-bearing debt increased to ¥2,009.4B (prior ¥1,863.2B, +7.8%). Interest paid rose to ¥8.6B (prior ¥6.6B, +30.3%), expanding the burden. Although interest coverage is 17.3x, in a rising rate environment pressure on Ordinary Income could increase. Interest burden ratio 0.43% is low, but relative impact grows when operating margins decline.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.4% | 6.8% (2.9%–9.0%) | +0.6pt |
| Net Margin | 4.2% | 5.9% (3.3%–7.7%) | -1.7pt |
Operating margin is 0.6pt above the industry median, but Net margin is 1.7pt below, highlighting issues at the non-operating and extraordinary stages.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 3.1% | 13.2% (2.5%–28.5%) | -10.1pt |
Revenue growth trails the industry median of 13.2% by a wide margin, placing growth momentum in the lower quartile.
※ Source: Company aggregation
Short-term headwinds from core business margin decline and working capital deterioration. Vinyl Acetate’s -30.7% Operating Income decline is the primary driver of consolidated profit weakness; the effectiveness of price pass-through and cost controls will determine full-year outcomes. The combination of rising inventories and declining payables suggests cash outflows to working capital and a nascent risk to OCF generation.
Medium-term support from segment diversification and strengthened shareholder returns. Strong recoveries in Functional Materials (Operating Income +148.3%) and Fibers & Textiles (+291.1%) partially offset Vinyl Acetate weakness, evidencing portfolio diversification effects. Approximately ¥10B in treasury stock repurchases and dividend guidance of ¥64 (payout ratio 48.2%) expand total returns and signal commitment to improve capital efficiency. The balance sheet remains healthy (Equity Ratio 57.2%, Current Ratio 249.2%, Interest Coverage 17.3x), preserving room for business recovery and continued shareholder returns in H2.
This report is an earnings analysis document automatically generated by AI analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by our firm from public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.