Resonac Holdings (4004) FY2026 Q1 Earnings Report

Quick View

Executive Summary

Despite a decline in revenue, the first quarter delivered substantial profit growth, indicating qualitative improvement in the earnings structure. Revenue decreased to 3078.9B yen (-4.1% YoY), while Operating Income increased significantly to 221.4B yen (+58.4%), and Net Income rose to 156.6B yen (+84.9%). The primary driver was improved profitability in the Semiconductor and Electronic Materials Business, with the gross margin rising substantially from the previous-year period to 29.9%. Meanwhile, the deterioration in market conditions for Kurasus Chemical, which fell into the red, was the main cause of the revenue decline, highlighting divergent performance across the business portfolio.

Factors Affecting Performance

【Revenue】Company-wide revenue was 3078.9B yen, down -4.1% YoY. The Semiconductor and Electronic Materials Business grew strongly by +21.1%, while Kurasus Chemical declined by -34.3% and Other Businesses decreased by -56.8%, weighing on company-wide results. Mobility (+0.9%), Innovation Materials (+3.4%), and Chemicals (+8.3%) maintained moderate revenue growth.

【Profit and Loss】Operating Income was 221.4B yen (+58.4% YoY), and the operating margin improved to 7.2% from 4.4% in the previous-year period. Cost of sales decreased by 12.7%, while SG&A expenses also declined by 1.0%, allowing margins to expand despite lower revenue. Core Operating Income in the Semiconductor and Electronic Materials Business was 340.0B yen (+73.7% YoY), with a 25.2% margin, making it the central contributor to company-wide profit. The Chemicals segment’s loss narrowed to 16.0B yen, while Kurasus Chemical fell from a profit in the previous-year period to a loss of 5.4B yen. Equity-method investment income of 28.5B yen exceeded net finance costs of 24.0B yen, resulting in Profit Before Tax of 226.0B yen, above Operating Income. Net Income was 156.6B yen (+84.9% YoY), representing a period of lower revenue but higher profit.

Segment Analysis

The Semiconductor and Electronic Materials Business generated revenue of 1346.6B yen (+21.1% YoY) and Operating Income of 340.0B yen (+73.7%), with a 25.2% margin—the highest level among all segments and the core driver of company-wide profit growth. Mobility was nearly flat, with revenue of 473.0B yen (+0.9%), but profitability improved significantly, with Operating Income rising to 29.2B yen (+159.4%). Innovation Materials remained solid, recording revenue of 227.3B yen (+3.4%) and Operating Income of 24.4B yen (+14.0%). Chemicals recorded revenue growth of +8.3% to 408.4B yen, while its Operating Loss narrowed to 16.0B yen from a loss of 62.7B yen in the previous-year period. Kurasus Chemical suffered a substantial revenue decline of -34.3% to 517.1B yen, and its operating result fell into a loss of 5.4B yen. Market fluctuations in petrochemical-related businesses are causing variability in company-wide earnings.

Key Financial Metrics

【Profitability】The operating margin was 7.2%, improving from 4.4% in the previous-year period, while the net margin was 5.1%. The gross margin rose substantially to 29.9% from 23.1% in the previous-year period, supported by cost reductions and an improved product mix.【Cash Flow Quality】Although Operating Cash Flow has not been disclosed, trade receivables decreased by 380.3B yen from the end of the previous fiscal year, while inventories increased by 104.7B yen, resulting in inventory days of approximately 92 days on an annualized basis and suggesting some inventory buildup. Core Operating Income was 336.2B yen versus reported Operating Income of 221.4B yen, with the 131.7B yen increase in other expenses constraining the conversion into reported profit as a non-core adjustment.【Investment Efficiency】ROE (annualized) was 8.5%. With total assets of 21093.0B yen and net assets of 7379.8B yen, capital efficiency remained at a mid-range level.【Financial Soundness】The equity ratio was 33.7%, while bonds and borrowings totaled 9407.7B yen, approximately 81.8% of which was non-current, indicating a predominantly long-term funding structure. Current assets of 8578.5B yen exceeded current liabilities of 4744.7B yen, indicating sound short-term liquidity.

Cash Flow Analysis

As the statement of cash flows was not disclosed for this reporting period, funding trends are analyzed based on changes in the balance sheet. Cash and cash equivalents increased by 199.3B yen to 2819.0B yen from 2619.7B yen at the end of the previous fiscal year, indicating an accumulation of funds. While trade receivables decreased by 280.2B yen, inventories increased by 104.7B yen, with inventory buildup placing pressure on working capital. Trade payables decreased by 120.0B yen, while accrued expenses increased by 119.0B yen. Bonds and borrowings totaled 9407.7B yen on a combined current and non-current basis, remaining approximately at the level recorded at the end of the previous fiscal year, with no significant funding or repayment activity observed. Net assets increased by 103.7B yen from the end of the previous fiscal year to 7379.8B yen, supported by accumulated retained earnings and an improvement in foreign currency translation adjustments.

Earnings Quality

Operating Income of 221.4B yen reflects Core Operating Income of 336.2B yen at the segment level, adjusted for impairment losses of 2.0B yen, other income of 19.0B yen, and other expenses of 131.7B yen. The net deterioration in non-core items constrained the growth in reported Operating Income. Other expenses increased by 54.0B yen from 77.7B yen in the previous-year period, while other income decreased by 52.0B yen from 69.9B yen. Consequently, the +58.4% YoY growth in Operating Income was substantially below the +126.4% growth in Core Operating Income. Finance income of 12.4B yen versus finance costs of 36.4B yen resulted in net finance costs of 24.0B yen; however, equity-method investment income of 28.5B yen exceeded this amount, allowing Profit Before Tax to surpass Operating Income. The effective tax rate was 30.7%, and profit attributable to owners of the parent, after reflecting corporate income tax expense of 69.4B yen, amounted to 67.6% of Profit Before Tax. As Operating Cash Flow has not been disclosed, the cash conversion rate of earnings has not been included in the evaluation.

Earnings Forecast and Guidance

Q1 progress against the Full-Year forecast was 23.5% for revenue (3078.9B yen / 13100B yen), 21.1% for Operating Income (221.4B yen / 1050B yen), and 19.8% for Net Income (156.6B yen / 790B yen). Compared with the standard progress rate of 25%, revenue was only 1.5pt below, but profit progress lagged further. The Full-Year forecast operating margin is 8.0%, approximately 0.8pt above the Q1 actual result of 7.2%, indicating that the Full-Year plan incorporates an increase in margins from Q2 onward. While the earnings forecast was revised during the quarter, the dividend forecast was unchanged.

Shareholder Returns

The Full-Year forecast dividend per share is 65.00 yen, and the Payout Ratio based on the Full-Year forecast EPS of 425.45 yen is 15.3%, substantially below a generally accepted sustainability benchmark. Based on the average number of shares outstanding during the period, the estimated annual dividend total is approximately 117.6B yen, providing earnings coverage of approximately 6.7x against forecast Net Income of 790.0B yen. There was no revision to the dividend forecast, and no change was observed in the dividend policy for the current period. As no disclosure regarding share repurchases was provided, the Total Return Ratio has not been calculated.

Risk Factors

1. Deterioration in market conditions for the petrochemical-related business (Kurasus Chemical): Revenue declined -34.3% YoY to 517.1B yen, and the operating result fell into a loss of 5.4B yen. If raw material and fuel prices or unfavorable supply-demand conditions persist, the downward pressure on company-wide profit may continue.

2. Inventory buildup risk: Inventories increased by 104.7B yen from the end of the previous fiscal year to 2165.3B yen, and inventory days extended to approximately 92 days on an annualized basis. Demand fluctuations in chemicals and electronic materials could create risks of valuation losses and operating adjustments.

3. Concentration of profit in Semiconductor and Electronic Materials: Core Operating Income in this business was 340.0B yen, accounting for the core of company-wide profit, with a high margin of 25.2%. The business structure is susceptible to the semiconductor capital investment cycle and customer inventory adjustments.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The operating margin is at the same level as the industry median, while the net margin is somewhat below the median.

Growth and Capital Efficiency

The revenue growth rate is substantially below the industry median, indicating top-line underperformance relative to peers that are on a revenue growth trajectory.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The substantial profit growth despite lower revenue indicates the emergence of operating leverage driven by improved profitability in the Semiconductor and Electronic Materials Business. Although the operating margin improved YoY, achieving the Full-Year forecast requires the continuation of this high profitability.

2. Kurasus Chemical’s move into the red and the increase in inventories (inventory days of approximately 92 days) suggest high market sensitivity within the business portfolio. Operating conditions in the petrochemical-related business will require close monitoring going forward.

3. Q1 profit progress against the Full-Year forecast was 21.1% for Operating Income and 19.8% for Net Income, below the standard 25%, making an improvement in profit margins in the second half a prerequisite for achieving the Full-Year plan.

Theoretical Share Price (Reference Value)

Sensitivity: 4,082 yen–4,330 yen at ±1% for the cost of equity, and 4,196 yen–4,214 yen at ±0.1 for ω.

Note:

• Net assets as of the quarter-end are used (there is a timing difference from the Full-Year forecast).

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated values based solely on publicly disclosed data; these are not forecasts of market prices or recommendations for specific investment actions, and do not predict or guarantee future share prices.)

---

This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not constitute a recommendation to invest in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting a professional where necessary.

---End of Report---