| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥3078.9B | ¥3211.2B | -4.1% |
| Operating Income | ¥221.4B | ¥139.8B | +58.4% |
| Profit Before Tax | ¥226.0B | ¥125.0B | +80.7% |
| Net Income | ¥156.6B | ¥84.7B | +84.9% |
| ROE | 2.1% | 1.2% | - |
2026 Q1 results were lower revenue, higher profits: Revenue ¥3078.9B (YoY -¥132.3B -4.1%), Operating Income ¥221.4B (YoY +¥81.6B +58.4%), Ordinary Income ¥226.0B (YoY +¥113.9B +91.0%), Net Income ¥156.6B (YoY +¥72.0B +84.9%). The Semiconductor & Electronic Materials segment delivered double-digit growth with Revenue ¥1346.6B (+21.1%) and Core Operating Income ¥340.0B (+73.7%), driving consolidated profits. Gross margin improved to 29.9% (from 23.1% prior, +6.9pt) and operating margin improved to 7.2% (from 4.4% prior, +2.8pt), reflecting a marked recovery in profitability; however, losses in Chemicals (¥-16.0B) and Kurasas Chemical (¥-5.4B) weighed on group margins. Core Operating Income was ¥336.2B (10.9% of Revenue), indicating underlying earning power above reported operating income after excluding non-recurring expenses of ¥131.7B. Progress against full-year guidance (Operating Income ¥1050.0B) stood at 21.1%, implying a front-loaded cautious / back-loaded recovery assumption, contingent on sustained recovery in the semiconductor cycle and normalization in commodity markets.
[Revenue] Revenue was ¥3078.9B (YoY -4.1%), a decline. By segment, Semiconductor & Electronic Materials ¥1346.6B (+21.1%, 43.7% of consolidated sales) achieved double-digit growth due to volume/mix improvement and price recovery, partially offsetting consolidated decline. Mobility ¥473.0B (+0.9%) was marginally up, Innovation Materials ¥227.3B (+3.4%) also grew. Conversely, Kurasas Chemical ¥517.1B (-34.3%) fell sharply due to market deterioration, Chemicals ¥408.4B (+8.3%) grew but remained loss-making, and Others ¥106.5B (-56.8%) declined substantially. The overall revenue decline was driven by contraction outside the core segment, while product mix shifted toward higher value-added items.
[Profitability] Cost of goods sold was ¥2157.2B (prior ¥2470.3B), producing gross profit of ¥921.7B and gross margin of 29.9% (prior 23.1%, +6.9pt). This was mainly due to a higher share of high-margin Semiconductor & Electronic Materials products and price recovery. SG&A was ¥587.5B (prior ¥593.3B, -1.0%) and essentially flat in absolute terms, representing 19.1% of sales (prior 18.5%, +0.6pt), indicating good cost control. Operating Income was ¥221.4B (prior ¥139.8B, +58.4%), with operating margin 7.2% (prior 4.4%, +2.8pt). By segment, Semiconductor & Electronic Materials generated Operating Income ¥340.0B (margin 25.2%) driving core earnings; Mobility recovered to ¥29.2B (+159.4%). However, Chemicals loss ¥-16.0B and Kurasas Chemical loss ¥-5.4B continued to drag on margins. Other expenses of ¥131.7B occurred below operating income, lowering reported operating income from Core Operating Income of ¥336.2B (10.9% of sales). Financial income ¥12.4B and financial expenses ¥36.4B yielded net financial expense ¥-24.0B; together with equity-method income ¥28.5B, Profit Before Tax was ¥226.0B (prior ¥125.0B, +80.7%). After deducting income taxes ¥69.4B (effective tax rate 30.7%), Net Income was ¥156.6B (prior ¥84.7B, +84.9%). Conclusion: lower revenue, higher profit.
Semiconductor & Electronic Materials: Revenue ¥1346.6B (+21.1%), Operating Income ¥340.0B (+73.7%, margin 25.2%), leading group profitability. Volume gains and price improvements in CMP slurries, epoxy encapsulants, SiC epitaxial wafers contributed. Mobility: Revenue ¥473.0B (+0.9%), Operating Income ¥29.2B (+159.4%, margin 6.2%) reflecting margin recovery in molded resin products and friction materials. Innovation Materials: Revenue ¥227.3B (+3.4%), Operating Income ¥24.4B (+14.0%, margin 10.7%) showing stable growth. Chemicals: Revenue ¥408.4B (+8.3%) but Operating Loss ¥-16.0B (prior ¥-63.0B, loss narrowed; margin -3.9%) as spreads in basic chemicals and industrial gases remain pressured. Kurasas Chemical: Revenue ¥517.1B (-34.3%), Operating Loss ¥-5.4B (prior ¥8.3B, turned to loss; margin -1.0%) hit by petrochemical market deterioration (olefins). Others: Revenue ¥106.5B (-56.8%), Operating Income ¥17.4B (+64.8%, margin 16.3%) maintaining high profitability despite scale contraction.
[Profitability] Operating margin 7.2% (prior 4.4%, +2.8pt), Net margin 5.1% (prior 2.6%, +2.5pt) — a substantial recovery. Gross margin 29.9% (prior 23.1%, +6.9pt) reflects shift to high value-added Semiconductor & Electronic Materials and price recovery. Core Operating Margin was 10.9%, indicating underlying earning power above reported figures after non-recurring expenses. ROE 2.1% (prior 1.2%, +0.9pt) remains low; improvement in net margin is offset by low total asset turnover and limited leverage. [Cash Quality] Cash and cash equivalents ¥2819.0B (prior ¥2619.7B, +7.6%) provide ample liquidity. Working capital was released by collections: Trade receivables ¥2421.98B (-13.6%), while inventories ¥2165.3B (+5.1%) rose, increasing inventory risk. Inventory days 366 days (alert) well above industry average, suppressing asset turnover. [Investment Efficiency] Total assets ¥21093.0B (prior ¥21067.2B, +0.1%) vs. Revenue ¥3078.9B gives annualized total asset turnover of 0.58x, low. ROIC 2.1% (alert) indicates room to improve capital efficiency. Intangible assets ¥4075.1B (19.3% of total assets) show high dependence on technology/IP assets — monitor impairment risk. Equity-method investments ¥746.6B (prior ¥715.4B, +4.4%) and equity-method income ¥28.5B accounted for roughly 13% of profit before tax. [Financial Soundness] Equity Ratio 33.7% (prior 33.2%, +0.5pt) is at the lower end for chemical/materials peers. Interest-bearing debt (bonds and borrowings) ¥9407.7B (short-term ¥1712.2B, long-term ¥7695.5B) yields D/E 1.86x — relatively high leverage. Interest coverage is EBIT ¥221.4B / financial expenses ¥36.4B ≒ 6.1x — acceptable. Current ratio ≈181% (current assets ¥8578.5B / current liabilities ¥4744.7B) supports short-term liquidity.
The quarterly cash flow statement was not disclosed, but balance sheet changes indicate cash trends. Cash and cash equivalents increased ¥199.3B (+7.6%), suggesting cash generation from operations. Trade receivables decreased ¥3803.2B (-13.6%), releasing working capital, while inventories increased ¥1046.9B (+5.1%), causing inventory build-up to tie up cash. Trade payables decreased ¥1198.5B (-7.4%), indicating earlier paydowns that reduced working capital benefit. Accrued expenses increased ¥1189.6B (+28.7%), expanding short-term liabilities due to timing of expense recognition. Net, working capital contraction likely contributed circa ¥26.4B of cash inflow (estimated), indicating solid operating cash generation. Long-term borrowings and bonds decreased ¥746.2B (-1.0%), showing repayments and some cash outflow in financing. Deferred tax liabilities decreased ¥318.6B (-4.5%), reflecting impacts from FX and valuation differences. Overall, improved underlying earnings and working capital efficiency enhanced liquidity and progressed financial stabilization. Inventory days at 366 and inventory buildup remain, so inventory reduction is key for future cash generation.
Against Operating Income ¥221.4B, Core Operating Income ¥336.2B (10.9% of Revenue) leaves a difference of ¥114.8B attributable to non-recurring items. Other expenses ¥131.7B occurred below operating income as one-off items, and impairment losses ¥1.98B (included in COGS/SG&A) were recorded. Financial items were Financial income ¥12.4B and Financial expenses ¥36.4B (net ¥-24.0B); adding equity-method income ¥28.5B produced Profit Before Tax ¥226.0B. Recurring earning power should be assessed on a core basis (¥336.2B); most non-recurring expenses appear related to structural reform and portfolio adjustments. Comprehensive income was ¥227.0B (owners of parent ¥226.0B, non-controlling interests ¥1.0B) — above Net Income ¥156.6B due to Other Comprehensive Income ¥70.4B, mainly FX translation gains ¥65.2B (large swing from prior year -¥265.2B). The divergence between comprehensive and net income stems from temporary valuation changes such as FX and remeasurement of defined benefit plans, and is independent of recurring earnings. Income taxes ¥69.4B imply an effective tax rate of 30.7% on Profit Before Tax ¥226.0B; given past utilization of deferred tax assets, this is broadly standard. Non-controlling interests' share of profit ¥3.8B reflects a reduction in non-controlling interest (¥279.6B, prior ¥287.6B, -2.8%) and has minimal impact on consolidated net income quality. Overall, recurring earnings are solid on a core basis, but the magnitude of non-recurring expenses warrants attention to short-term profit volatility. Accrual-wise, inventory increase may pressure operating cash flow, while trade receivables reduction suggests strong collection and cash-backed earnings.
Full-year forecast: Revenue ¥13100.0B, Operating Income ¥1050.0B (YoY +125.0%), Net Income ¥790.0B (YoY +165.2%). Q1 results represent Revenue progress 23.5% (3078.9/13100.0), Operating Income progress 21.1% (221.4/1050.0), Net Income progress 19.9% (156.6/790.0) — indicating a somewhat front-cautious / back-loaded assumption. The company assumes continued recovery in Semiconductor & Electronic Materials, spread normalization in Chemicals/Kurasas Chemical, and stronger seasonality in H2 to build the remaining ¥829B in Operating Income. Guidance was adjusted in this quarter, implying potential for upward revision of full-year guidance. Full-year operating margin is forecast at 8.0% (1050.0/13100.0), above Q1 7.2%, assuming convergence toward core margin 10.9%. Net Income forecast ¥790.0B and Q1 progress 19.9% is feasible if seasonal tax timing and reduction in non-recurring expenses occur in H2. Dividend forecast is ¥0, prioritizing internal reserves, financial stabilization, and growth investments. EPS forecast ¥425.45 with Q1 actual ¥84.44 (progress 19.8%); H2 profit buildup and restraint of non-recurring expenses are key.
No dividend was paid this period and the full-year dividend forecast remains ¥0, yielding a Payout Ratio of 0%. Cash and cash equivalents ¥2819.0B provide room to resume dividends in the future, but current policy prioritizes internal reserves and financial health. No share buyback was disclosed; Total Return Ratio is 0%. Given interest-bearing debt ¥9407.7B and D/E 1.86x, deleveraging and capital efficiency improvement are likely prioritized over shareholder distributions. If ROE/ROIC and cash generation stabilize, dividend policy revision could be considered.
Semiconductor cycle volatility: Semiconductor & Electronic Materials account for a majority of group profit (Operating Income ¥340.0B, composition 154%), so inventory adjustments and demand swings can materially affect volumes and prices. Q1 grew +21.1%, but semiconductor cycles are inherently volatile and downside would heavily impact consolidated results. Portfolio concentration increases single-segment dependency risk.
Commodity market risk: Ongoing losses in Chemicals (Operating loss ¥-16.0B) and Kurasas Chemical (Operating loss ¥-5.4B) reflect compressed spreads in acrylonitrile, ammonia, olefins, etc., pressuring group margins. Markets depend on raw material costs and supply/demand; short-term improvement is uncertain. Continued losses and inventory build-up (¥2165.3B, +5.1%) raise mark-to-market loss risk.
Inventory efficiency / capital turnover risk: Inventory days 366 (alert) and inventory buildup contribute to low total asset turnover (0.58x) and depressed ROIC 2.1%. Risk of obsolescence or valuation losses exists and trapped working capital pressures cash generation. Delays in inventory compression would impede capital efficiency improvement and delay shareholder value enhancement.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.2% | 6.8% (2.9%–9.0%) | +0.4pt |
| Net Margin | 5.1% | 5.9% (3.3%–7.7%) | -0.8pt |
Operating margin is +0.4pt above industry median (moderate), but net margin is -0.8pt below median, reflecting relatively higher financial or non-recurring expense burden.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -4.1% | 13.2% (2.5%–28.5%) | -17.2pt |
Revenue growth is materially below industry median by -17.2pt; while the industry posted double-digit growth, the company is in a revenue contraction phase, evidencing relative growth lag.
※ Source: Company compilation
High profitability in Semiconductor & Electronic Materials is driving consolidated profit, with Operating Income ¥340.0B (margin 25.2%) establishing structural earning power. Continued volume/mix improvements in high value-added products (CMP slurry, SiC epi wafers etc.) could further enhance consolidated operating margin. Core Operating Margin 10.9% materially exceeds reported 7.2%, indicating robust underlying earnings excluding non-recurring items.
Eliminating losses in Chemicals and Kurasas Chemical and compressing inventory are drivers for improving ROE and ROIC. Normalizing inventory days from 366 would release working capital and improve total asset turnover. Profitability correction in loss-making segments would stabilize group margins and improve portfolio quality.
Progress against full-year guidance (Operating Income ¥1050.0B, Net Income ¥790.0B) is roughly one-fifth in Q1, implying back-loaded assumptions reliant on sustained semiconductor recovery and chemical market normalization. Interest coverage approx. 6.1x and current ratio approx. 181% indicate sufficient near-term resilience, and the financial base supports H2 earnings buildup.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.