Resonac Holdings (4004) FY2026 Q2 Earnings Report

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Executive Summary

The Company reported higher revenue and substantially higher profit, with improved profitability being the defining feature of the results. Revenue was ¥6,768.5B (+5.4% year on year), Operating Income was ¥733.1B (+124.8%), and Net Income was ¥490.4B (+146.2%). Profit growth substantially outpaced revenue growth, primarily due to expanding demand and an improved product mix in the Semiconductor and Electronic Materials segment, as well as the realization of operating leverage through control of SG&A expenses. Meanwhile, progress against the full-year company forecast was 45.8% for Operating Income and 43.1% for Net Income, below the 58.1% progress for Revenue, indicating a structure that requires the realization of high profit margins in the second half.

Factors Affecting Performance

【Revenue】Revenue increased 5.4% year on year to ¥6,768.5B. By segment, SemiconductorAndElectronicMaterials was the largest and fastest-growing segment at ¥2,989.6B (44.2% of total revenue, YoY +29.6%), driving overall growth. In contrast, CrasusChemical (¥1,300.6B, YoY -13.2%), Mobility (¥846.2B, YoY -5.6%), and OperatingSegmentsNotIncludedInReportableSegmentsAndOther (¥214.2B, YoY -55.8%) reported lower revenue, indicating significant divergence among businesses beneath the overall revenue increase.

【Profit and Loss】Operating Income was ¥733.1B (YoY +124.8%), and the Operating Income margin improved by +575bp year on year to 10.8%. The main driver was SemiconductorAndElectronicMaterials, which posted Operating Income of ¥814.9B (YoY +91.8%, margin 27.3%) and accounted for the majority of combined segment profits. Chemicals continued to report an Operating Loss of ¥6.1B, although the loss narrowed by 92.5% from the previous year, while CrasusChemical staged a sharp recovery, with profit increasing 576.2%. SG&A expenses increased only 1.3% year on year, below the revenue growth rate, also contributing to margin expansion. Net Income was ¥490.4B (YoY +146.2%), implying an effective tax rate of approximately 32.6% against Profit Before Tax of ¥727.5B. Profit growth substantially exceeded revenue growth, indicating that the results were driven by improved profitability even within the context of higher revenue and higher profit.

Segment Analysis

SemiconductorAndElectronicMaterials is the largest segment, accounting for 44.2% of total revenue, and serves as the core of company-wide earnings, with Revenue up YoY +29.6%, Operating Income up YoY +91.8%, and a profit margin of 27.3%. InnovationEnablingMaterials maintained stable profitability, with revenue of ¥500.0B (YoY +11.3%) and a profit margin of 12.6%. While CrasusChemical revenue declined 13.2%, Operating Income increased 576.2%, indicating a significant recovery and suggesting improvements in its cost structure. Chemicals achieved YoY revenue growth of +17.0% but continued to report an Operating Loss, indicating delayed earnings improvement. Mobility reported lower revenue, while profit increased 227.4%, indicating that profitability improvement is progressing ahead of revenue recovery. Overall, earnings are highly dependent on Semiconductor and Electronic Materials, and market fluctuations in this business have a significant impact on consolidated performance.

Key Financial Metrics

【Profitability】The Operating Income margin improved by 575bp to 10.8% from 5.1% in the same period of the previous year, while the Net Income margin improved by 410bp to 7.2% from 3.1%. Profit growth substantially exceeded the 5.4% revenue growth rate.【Cash Quality】Operating Cash Flow (OCF) was ¥844.0B, approximately 1.7 times Net Income of ¥490.4B. As the accrual ratio remained negative, the Company’s cash generation supporting earnings was strong.【Investment Efficiency】ROE (annualized) was 12.2%. In addition to the improvement in the Net Income margin, financial leverage (total assets/equity) of approximately 2.75 times also contributed to the increase in ROE.【Financial Soundness】The Equity Ratio improved to 35.6% from 33.2% in the same period of the previous year, and the current ratio was approximately 154%, indicating limited concern regarding short-term payment capacity. However, inventories increased 19.3% year on year, outpacing revenue growth, making working capital efficiency a point requiring attention.

Cash Flow Analysis

Operating Cash Flow (OCF) increased substantially by +143.7% year on year to ¥844.0B, exceeding Net Income of ¥490.4B and indicating strong cash generation. From the OCF subtotal of ¥965.5B, the increase in inventories of ¥386.8B and the increase in trade receivables of ¥165.9B were uses of funds, while the increase in trade payables of ¥228.0B partially offset these outflows. Investing Cash Flow was an outflow of ¥569.9B, primarily consisting of capital expenditures of ¥524.2B, equivalent to 7.7% of revenue and near the upper end of the standard range for manufacturing companies. Free Cash Flow (OCF + Investing Cash Flow) was a surplus of ¥274.1B, amply covering dividend payments of ¥117.3B. Financing Cash Flow was an inflow of ¥94.8B, as the increase in short-term borrowings exceeded repayments of long-term borrowings, resulting in a shorter maturity profile for funding. Consequently, cash and cash equivalents increased by +¥479.2B from the end of the previous fiscal year to ¥3,270.7B, expanding liquidity at period-end.

Earnings Quality

The increase in profit for the period did not depend on extraordinary gains or losses but was based on a substantive improvement in Operating Income, indicating high earnings quality. In non-operating items, financial income of ¥24.3B was offset by financial expenses of ¥76.4B, resulting in a net negative amount. However, other expenses of ¥190.2B exceeded financial expenses and weighed on Profit Before Tax, making it useful to confirm their breakdown. Equity-method income of ¥46.5B accounted for approximately 9.6% of Net Income, indicating that fluctuations in the performance of investees have a certain impact on consolidated Net Income. As OCF reached 1.7 times Net Income and the accrual ratio was also negative, there are limited signs of dependence on accounting profits not accompanied by cash generation. On the other hand, inventories increased 19.3% year on year, outpacing revenue growth, and the risk of future inventory write-downs and the impact on gross margins should be closely monitored.

Earnings Forecast and Guidance

The full-year company forecast is Revenue of ¥11,650B, Operating Income of ¥1,600B (YoY +278.5%), and Net Income of ¥1,140B (YoY +287.5%), and the earnings forecast was revised during the current quarter. While first-half progress was 58.1% for Revenue, above the standard 50%, progress was somewhat low on the profit side at 45.8% for Operating Income and 43.1% for Net Income. This indicates a plan incorporating substantial margin improvement in the second half, with Operating Income of ¥866.9B, equivalent to an Operating Income margin of 17.8%, required in the second half to achieve the full-year Operating Income target. This level requires an improvement of more than 700bp from the first-half Operating Income margin of 10.8%, making market conditions, capacity utilization, and raw material costs in the second half key to achieving the plan.

Shareholder Returns

As of the end of Q2, the dividend per share was ¥0, and there was no revision to the dividend forecast during the current quarter. The full-year company dividend forecast is ¥65 per share, and the total dividend amount calculated based on the number of shares outstanding is approximately ¥124B. The Payout Ratio against forecast Net Income of ¥1,140B is approximately 11%. Share repurchases were minimal at ¥0.2B, and shareholder returns during the period centered on dividends. First-half Free Cash Flow of ¥274.1B exceeded dividend payments of ¥117.3B, indicating sound coverage of dividends by internally generated funds.

Risk Factors

1. Increase in inventories and lengthening of inventory days: Inventories reached ¥2,457.9B, up +19.3% year on year, accumulating at a pace substantially exceeding the 5.4% revenue growth rate. If demand slows or products become obsolete, this could lead to inventory write-downs and deterioration in gross margins.

2. Back-end loading of the full-year profit plan: Achieving the full-year Operating Income forecast of ¥1,600B requires an Operating Income margin of 17.8% in the second half, premised on a substantial improvement from the first-half actual result of 10.8%. If market conditions or capacity utilization fall below assumptions, there is a risk of missing the plan.

3. Shortening of the funding maturity profile: While short-term bonds and borrowings increased +55.5% year on year to ¥2,637.0B, long-term bonds and borrowings decreased 13.6%, shortening the maturity profile of liabilities. Cash and liquid financial assets exceed short-term interest-bearing liabilities, but changes in refinancing terms require attention.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Return

The Company’s profitability exceeds the industry median for both metrics and is relatively strong within the manufacturing industry.

Growth and Capital Efficiency

The revenue growth rate is below the industry median, indicating that the pace of revenue growth is relatively moderate within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings

1. The Operating Income margin improved by 575bp to 10.8%, achieving profit growth substantially exceeding revenue growth. The Semiconductor and Electronic Materials segment was the main driver, confirming the high earnings dependence on this business.

2. OCF was approximately 1.7 times Net Income, and Free Cash Flow was a surplus of ¥274.1B, demonstrating that first-half earnings generation was supported by cash flow. However, the pace of inventory growth exceeded revenue growth, making inventory trends a factor that will influence future profitability.

3. The full-year plan assumes substantial margin improvement in the second half, making the progress gap between the first and second halves an important point to monitor in future earnings results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥4,848–¥5,148 at ±1% for the cost of equity, and ¥4,973–¥5,028 at ±0.1 for ω.

Notes:

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

(Valuation 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 the market share price or recommendations for specific investment actions, and do not forecast or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment 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 discretion and responsibility, after consulting with a professional as necessary.

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