| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥107.8B | ¥98.7B | +9.2% |
| Operating Income / Operating Profit | ¥9.5B | ¥6.9B | +37.1% |
| Ordinary Income | ¥9.8B | ¥7.7B | +27.4% |
| Net Income / Net Profit | ¥7.0B | ¥5.6B | +25.6% |
| ROE | 1.5% | 1.3% | - |
FY2026 Q1 results delivered revenue ¥107.8B (YoY +¥9.1B +9.2%), Operating Income ¥9.5B (YoY +¥2.6B +37.1%), Ordinary Income ¥9.8B (YoY +¥2.1B +27.4%), Net Income ¥7.0B (YoY +¥1.4B +25.6%), representing top-line and bottom-line growth. Operating margin improved to 8.8% (up +1.8pt from 7.0% a year earlier) and net margin to 6.5% (up +0.8pt from 5.7%), indicating material profitability improvement. Gross profit was ¥27.6B (YoY +¥4.3B +18.3%), outpacing revenue growth by 9.1pt, reflecting realized effects of price revisions and product-mix improvement. The Chemicals segment (Revenue ¥50.4B; Operating Income ¥5.9B) led earnings, and Fertilizers continued double-digit growth at ¥33.0B (+12.5%).
[Revenue] Revenue was ¥107.8B (YoY +9.2%). By segment, Chemicals ¥50.4B (+12.6%, 46.8% of total) was largest, comprising Water Treatment Chemicals ¥33.1B and Functional Materials ¥16.7B, with expansion in high value-added product sales contributing. Fertilizers ¥33.0B (+12.5%, 30.6% of total) grew on seasonal demand capture and price revisions. Building Materials ¥9.6B (+2.8%) and Transportation ¥8.6B (+9.6%) remained firm. Real Estate ¥3.5B (-1.1%) was essentially flat; Petroleum ¥5.1B (-16.1%) declined due to weaker market conditions. The Company-wide shift from commodities to high-performance products continues, underpinning top-line growth.
[Profitability] Cost of sales totaled ¥80.2B, yielding gross profit ¥27.6B (gross margin 25.6%, up +2.0pt from 23.6% a year earlier). Price pass-through and higher weight of high-margin segments lifted gross margin. SG&A was ¥18.1B (SG&A ratio 16.8%, up +0.2pt from 16.6%) and rose in line with revenue, leaving Operating Income ¥9.5B (Operating margin 8.8%, up +1.8pt from 7.0%). Non-operating income ¥0.5B (including dividend income ¥0.2B) less non-operating expense ¥0.1B (foreign exchange loss ¥0.1B) produced Ordinary Income ¥9.8B (Ordinary income margin 9.1%). Extraordinary items included an impairment on investment securities of ¥0.1B, netting to ▲¥0.01B, which was minor. Pre-tax income ¥9.8B less income taxes ¥2.8B (effective tax rate 28.5%), and excluding non-controlling interests ¥0.1B, resulted in Net Income ¥7.0B (Net margin 6.5%, up +0.8pt from 5.7%). The company achieved a virtuous cycle of revenue and profit growth.
The Chemicals segment reported Revenue ¥50.4B (YoY +12.6%) and Operating Income ¥5.9B (YoY +51.4%, margin 11.7%), with higher sales of Water Treatment Chemicals and Functional Materials and price revisions substantially boosting margins. The Fertilizers segment posted Revenue ¥33.0B (+12.5%) and Operating Income ¥2.0B (+5.3%, margin 6.0%); seasonal demand and price pass-through supported revenue, but raw material cost increases constrained margins. Building Materials: Revenue ¥9.6B (+2.8%), Operating Income ¥0.6B (+215.8%, margin 6.3%)—a large profit rebound from the prior-year trough. Transportation: Revenue ¥8.6B (+9.6%), Operating Income ¥1.1B (+21.7%, margin 13.1%) benefitting from higher utilization and freight rate revisions. Real Estate: Revenue ¥3.5B (-1.1%), Operating Income ¥1.8B (-4.8%, margin 51.6%) maintained stable high profitability. Petroleum: Revenue ¥5.1B (-16.1%), Operating Income ¥0.1B (+25.0%, margin 1.0%) saw sales decline while profitability slightly improved. After deducting corporate adjustments of ▲¥1.99B, consolidated Operating Income was ¥9.5B.
[Profitability] Operating margin 8.8% (up +1.8pt from 7.0%), Net margin 6.5% (up +0.8pt from 5.7%), showing notable profitability improvement. Gross margin 25.6% (up +2.0pt from 23.6%) was supported by price revisions and higher weight of high value-added products. SG&A ratio 16.8% (slight increase from 16.6%). ROE 1.5% (Net margin 6.5% × Total asset turnover 0.16 × Financial leverage 1.51x) remains low but improved YoY primarily due to net margin improvement.
[Cash Quality] DSO 383 days (Accounts receivable ¥112.9B ÷ Quarterly revenue ¥107.8B × 90 days), DIO 362 days (Inventory ¥52.1B ÷ Quarterly cost of sales ¥80.2B × 90 days), CCC 398 days, indicating a long working capital cycle. Accounts receivable turnover equates to ~0.96 turns/year, inventory turnover ~1.54 turns/year, indicating capital efficiency challenges.
[Investment Efficiency] ROIC 1.7% (Operating Income ¥9.5B × (1-0.285) ÷ (Net assets ¥453.9B + Interest-bearing debt ¥4.9B)), indicating low investment efficiency. Total asset turnover 0.16 turns/year suggests significant room for improvement.
[Financial Soundness] Equity Ratio 66.3% (prior year 65.8%), current ratio 271%, quick ratio 224% reflect a very solid balance sheet. Interest-bearing debt ¥4.9B vs. Cash and deposits ¥67.8B yields net cash ¥62.9B, D/E 0.01x—effectively debt-free. Interest coverage 236x (Operating Income ¥9.5B ÷ Interest expense ¥0.04B) implies minimal interest burden.
The cash flow statement was not disclosed, but balance sheet movements indicate cash trends: Cash and deposits ¥67.8B (down ▲¥3.9B from ¥71.7B a year earlier). Accounts receivable ¥112.9B (up ¥3.3B from ¥109.6B) and inventories ¥52.1B (up ¥4.3B from ¥47.8B) show working capital expansion, which is pressuring Operating Cash Flow. Accounts payable ¥76.1B (up ¥1.3B from ¥74.8B) rose only modestly. Investment securities ¥201.8B (up ¥29.4B from ¥172.4B) suggest funds were directed to investing activities due to fair-value gains and additional investments. Comprehensive income ¥26.9B (Net Income ¥7.0B + Other Comprehensive Income ¥19.8B) led to Retained earnings ¥311.9B (up ¥0.7B from ¥311.2B), and internal reserves exceeded dividend payments of ¥6.3B (average shares outstanding during period 8,339 thousand shares × prior fiscal year-end dividend ¥75). Improving working capital (faster receivables collection and inventory optimization) is key to enhancing future cash generation.
Of Ordinary Income ¥9.8B, Operating Income ¥9.5B accounted for the majority, indicating strong core business profitability. Non-operating income ¥0.5B comprised Dividend income ¥0.2B and Interest income ¥0.1B, reflecting income generation from Investment securities ¥201.8B. Non-operating expense ¥0.1B was mainly foreign exchange loss ¥0.1B, and interest expense ¥0.04B was negligible. Extraordinary items included an impairment on investment securities ¥0.1B, netting to ▲¥0.01B—limited one-off impact. Comprehensive income ¥26.9B consists of Net Income ¥7.0B plus Securities valuation difference ¥20.0B (after tax), meaning unrealized gains on investment securities bolstered equity. Most net income was generated from recurring operating activities, indicating a low dependency on one-offs and generally good earnings quality. However, the large increase in comprehensive income is valuation-driven and not realized cash, which warrants caution.
Full Year / FY forecast: Revenue ¥430.0B (YoY +2.4%), Operating Income ¥24.5B (YoY ▲22.6%), Ordinary Income ¥30.5B (YoY ▲19.3%), Net Income ¥26.5B—planning for lower full-year profits versus prior year. Q1 progress rates are Revenue 25.1% (¥107.8B ÷ ¥430.0B), which is standard, but Operating Income 3.9% (¥9.5B ÷ ¥24.5B), Ordinary Income 3.2% (¥9.8B ÷ ¥30.5B), Net Income 2.6% (¥7.0B ÷ ¥26.5B) show significantly low profit progress. This likely assumes seasonal Fertilizer demand peaking in Q2 and Real Estate project recognition skewed to the back half. As of Q1, margin improvements from price revisions and product mix have materialized; achieving full-year plan hinges on seasonal factors from Q2 onward and stabilization of raw material costs. No forecast revision has been made; upside/downside risk to plan is currently neutral.
Year-end dividend forecast ¥80 (ordinary dividend ¥80) versus prior-year payout ¥75 (ordinary dividend ¥60 + commemorative ¥5 + special ¥10), representing a ¥20 increase on an ordinary dividend basis. With forecast EPS ¥317.79, the payout ratio is approximately 25.2%, a conservative level. Retained earnings at Q1-end were ¥311.9B and Cash and deposits ¥67.8B, indicating sufficient dividend funding and high sustainability. Treasury stock held 1,120 thousand shares (approximately 11.8% of issued shares), leaving broad options for future buybacks or cancellations as part of capital policy. Dividend forecast is maintained, reflecting a stable dividend orientation. Total Return Ratio is not disclosed, but given current payout ratio and financial capacity, there is room for additional shareholder returns.
Working capital expansion risk: With DSO 383 days, DIO 362 days, CCC 398 days, the prolonged working capital cycle and increases in Accounts receivable ¥112.9B (YoY +3.0%) and Inventories ¥52.1B (YoY +8.9%) are pressuring Operating Cash Flow. Low inventory turnover 1.54 turns/year and accounts receivable turnover 0.96 turns/year mean slow cash conversion; delays in improving these metrics could impair liquidity.
Raw material price volatility risk: Fertilizer segment depends on feedstock markets such as ammonia and ammonium sulfate; Chemicals segment is exposed to naphtha and petroleum-related feedstock price swings. Q1 succeeded in passing through prices, but raw material spikes and lags in price pass-through could compress the gross margin of 25.6%. Stability in raw material costs is a prerequisite for achieving second-half profit plans.
Investment securities valuation risk: Investment securities ¥201.8B (29.5% of total assets) produced a valuation gain ¥20.0B in Q1. Since 74% of comprehensive income derives from valuation gains, market declines could reduce Equity Ratio 66.3% and AOCI ¥122.2B and affect Deferred tax liabilities ¥50.3B. Fluctuations in valuation differences could impact shareholders’ equity stability.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating margin | 8.8% | 6.8% (2.9%–9.0%) | +1.9pt |
| Net margin | 6.5% | 5.9% (3.3%–7.7%) | +0.6pt |
Profitability exceeds industry median, ranking higher due to price revisions and higher share of high value-added products.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth (YoY) | 9.2% | 13.2% (2.5%–28.5%) | -4.0pt |
Revenue growth trails the industry median by 4.0pt, placing the company from mid- to lower-quartile on growth pace.
※Source: Company compilation
Price revisions and product-mix improvement drove gross margin to 25.6% (YoY +2.0pt) and Operating margin to 8.8% (YoY +1.8pt), substantially improving profitability. The Chemicals segment’s Operating margin of 11.7% (YoY +3.5pt) led the improvement, and the short-term trend toward higher margins is expected to continue. However, full-year profit progress is weak (Operating 3.9%, Net 2.6%), and the plan assumes Fertilizer seasonality (centered in Q2) and Real Estate project recognition skewed to the latter half; therefore, performance from Q2 onward is critical to meeting guidance.
Financial position is extremely solid with Net cash ¥62.9B, Equity Ratio 66.3%, and Current ratio 271%, providing strong resilience against interest rate rises and credit tightening. Conversely, capital efficiency is low (ROE 1.5%, ROIC 1.7%), principally due to the extended working capital cycle (CCC 398 days). Improving receivables and inventory turnover to enhance cash conversion efficiency is a medium-term management priority; realizing this would expand FCF generation and shareholder return capacity.
Investment securities ¥201.8B (29.5% of total assets) recorded valuation gains ¥20.0B in Q1, with 74% of comprehensive income attributable to valuation gains. While unrealized gains have boosted equity, market declines could reverse this effect. The dividend payout ratio of 25.2% is conservative and dividend funding is ample, but volatility in valuation differences warrants ongoing monitoring regarding shareholder equity stability.
This report is an AI-generated earnings analysis document produced by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult professional advisors as necessary before making investment decisions.