| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥573.7B | ¥557.4B | +2.9% |
| Operating Income / Operating Profit | ¥21.8B | ¥35.2B | -38.3% |
| Ordinary Income | ¥26.7B | ¥37.5B | -28.7% |
| Net Income / Net Profit | ¥-3.5B | ¥22.1B | -115.8% |
| ROE | -0.6% | 3.7% | - |
For the fiscal year ended March 2026, Revenue was ¥573.7B (YoY +¥16.4B +2.9%), Operating Income was ¥21.8B (YoY -¥13.5B -38.3%), Ordinary Income was ¥26.7B (YoY -¥10.8B -28.7%), and Net Income attributable to owners of the parent was ¥-3.5B (YoY -¥25.6B -115.8%). Revenue increased for the second consecutive year driven by strong performance in the Electronic Materials & Chemical Products Business (+14.9%), but the Functional Materials Business recorded a revenue decline (-8.0%) and turned to loss, and the company posted impairment losses of ¥31.7B, resulting in a net loss. Operating margin deteriorated by 2.5 percentage points to 3.8% (prior year 6.3%), and gross profit margin narrowed by 2.6 percentage points to 15.7% (prior year 18.3%), indicating a structural decline in profitability.
[Revenue] Revenue was ¥573.7B, up +2.9% YoY. By segment, the Electronic Materials & Chemical Products Business led with ¥300.1B (+14.9%, 52.3% of sales), supported by increased demand for piezoelectric materials and conductive polymers. In contrast, the Functional Materials Business declined to ¥262.1B (-8.0%, 45.7% of sales) due to decreased sales of titanium dioxide and other products. Other businesses decreased slightly to ¥27.1B (-6.8%). By region, Japan was ¥337.0B (prior year ¥329.4B), Thailand ¥91.7B (prior year ¥84.5B), and Other ¥145.0B (prior year ¥143.5B), bringing the overseas ratio slightly up to 41.3% (prior year 40.9%).
[Profitability] Cost of sales was ¥483.8B (prior year ¥455.6B), yielding gross profit of ¥89.9B (prior year ¥101.8B) and a gross margin of 15.7% (prior year 18.3%), down 2.6 percentage points. Selling, general and administrative expenses were ¥68.2B (prior year ¥66.5B, +2.5%), which grew only slightly relative to sales and reflects some fixed-cost control, but could not offset the gross margin decline; Operating Income therefore fell to ¥21.8B (prior year ¥35.2B, -38.3%). Non-operating income of ¥6.6B (including dividend income of ¥4.7B) supplemented operating profit, resulting in Ordinary Income of ¥26.7B (prior year ¥37.5B, -28.7%). Special losses of ¥36.7B (impairment losses ¥31.7B, loss on disposal of fixed assets ¥5.0B) led to a loss before income taxes of ¥-9.7B, and after tax adjustments Net Income attributable to owners of the parent was ¥-3.5B (prior year ¥22.1B). In summary, the company reported higher revenue but lower profits and turned to a net loss.
The Electronic Materials & Chemical Products Business posted Revenue of ¥300.1B (+14.9%), Operating Income of ¥24.9B (+39.7%), and an Operating Margin of 8.3%, maintaining high profitability and effectively generating nearly the entire company Operating Income. Improvements in product mix for piezoelectric materials and conductive polymers and expanded external demand contributed to margin improvement. The Functional Materials Business recorded Revenue of ¥262.1B (-8.0%) and an Operating Loss of ¥6.1B (prior year Operating Income ¥14.6B), turning to loss with an Operating Margin of -2.3%. Reduced sales of titanium dioxide and other products, together with recording impairment losses of ¥32.6B (post-adjustment), were the principal causes of the earnings deterioration. Other businesses reported Revenue of ¥27.1B (-6.8%), Operating Income of ¥2.8B (-16.8%), and an Operating Margin of 10.3%, showing a slight contraction. The earnings gap between segments has widened; sustained growth in Electronic Materials and structural correction in Functional Materials are key to restoring company-wide profitability.
[Profitability] Operating margin was 3.8% (prior year 6.3%), Net Profit Margin was -0.6% (prior year 4.0%), both materially deteriorated. ROE was -0.6% (prior year 3.7%), and ROA was -0.4% (prior year 2.5%), showing broad declines in profitability indicators. The 2.6 percentage point contraction in gross margin to 15.7% (prior year 18.3%) was the main driver of operating margin compression, and the Functional Materials segment losses and impairment losses depressed net profit margin. [Cash Quality] Operating Cash Flow / Net Income was -13.0x, a warning-level ratio driven by the one-time non-cash impairment expense of ¥31.7B; OCF/EBITDA was 0.78x (= Operating CF ¥45.4B / EBITDA ¥58.5B), indicating slowed cash conversion efficiency due to working capital stagnation. Working capital turnover days were DSO 107 days, DIO 137 days, DPO 46 days, resulting in CCC of 198 days; inventory accumulation and delayed receivables collection are bottlenecks for capital efficiency. [Investment Efficiency] ROIC (NOPAT / Invested Capital, post-tax operating profit / invested capital) is estimated at around 3.2%, and Capital Expenditure of ¥57.1B is 1.58x depreciation of ¥36.1B, indicating an aggressive investment stance. [Financial Soundness] Equity Ratio was 69.4% (prior year 67.2%), Current Ratio was 296%, and Quick Ratio was 236%, indicating ample liquidity. Interest-bearing debt was ¥100.6B (short-term borrowings ¥22.5B, long-term borrowings ¥58.1B; the combined value including long-term borrowings due within one year of ¥43.2B is ¥124.2B), with Debt/Equity ratio of 0.16x, Debt/EBITDA ratio of 1.72x, and EBITDA Interest Coverage of 41.2x, indicating sufficient debt capacity.
Operating Cash Flow was ¥45.4B (prior year ¥50.6B, -10.2%). From operating cash flow before working capital changes of ¥54.2B, changes in working capital included an increase in trade receivables of -¥7.6B, a decrease in inventories of +¥5.3B, and a decrease in trade payables of -¥2.4B. Investing Cash Flow was -¥62.1B, including Capital Expenditure -¥57.1B, acquisition of intangible assets -¥2.7B, subsidy receipts +¥2.1B, and proceeds from sale of marketable securities +¥0.9B. Free Cash Flow was -¥16.7B (Operating CF ¥45.4B + Investing CF -¥62.1B), negative due to aggressive investment. Financing Cash Flow was -¥12.0B, with long-term borrowing proceeds +¥25.0B offset by long-term borrowing repayments -¥42.3B, net increase in short-term borrowings +¥15.6B, and dividend payments -¥9.1B. Cash decreased by ¥28.2B from opening balance ¥140.1B to closing balance ¥112.7B, including foreign exchange impact of +¥0.5B, resulting in year-end cash of ¥112.7B. Operating CF / Net Income of -13.0x is attributable to non-cash impairment and similar charges; OCF/EBITDA of 0.78x reflects that working capital stagnation (CCC 198 days) impairs cash conversion efficiency. CapEx / Depreciation at 1.58x shows CAPEX materially exceeding depreciation, and achieving positive FCF will require working capital compression and improved Operating CF.
Recurring income comprises Operating Income ¥21.8B and Non-operating income ¥6.6B (including dividend income ¥4.7B and foreign exchange gains ¥0.4B); Non-operating income is limited to 1.1% of Revenue. One-time items were Special Losses of ¥36.7B (impairment losses ¥31.7B, loss on disposal of fixed assets ¥5.0B), equivalent to 418% of Net Income and explaining the bulk of the current-period net loss. Dependence on dividend income in non-operating income is ¥4.7B, representing 21.6% of core Operating Income ¥21.8B, warranting monitoring. In accrual quality terms, Operating CF exceeds Net Income significantly, but this is due to non-cash impairment; OCF/EBITDA 0.78x indicates weak cash conversion efficiency. The ¥35.4B gap between Ordinary Income ¥26.7B and Net Income ¥-3.5B is mainly due to special losses, and normalization is expected next year as one-off items drop out. Comprehensive income was ¥31.0B (attributable to owners of the parent ¥30.4B), and the divergence from Net Income was driven by other comprehensive income of ¥39.5B, including unrealized gains on securities ¥36.8B and translation adjustments ¥1.5B. While Net Income-based quality of earnings is distorted by one-time losses, Ordinary Income and Comprehensive Income provide a fuller view including core operations and balance sheet valuation gains.
For the fiscal year ending March 2027, the company forecasts Revenue ¥595.0B (+3.7%), Operating Income ¥25.0B (+14.9%), Ordinary Income ¥29.0B (+8.5%), Net Income attributable to owners of the parent ¥18.0B (recovering from prior year ¥-3.5B), EPS ¥78.84, and DPS ¥40.00. The recovery in Operating Income assumes the absence of the one-time impairment loss of ¥36.7B, margin recovery in the Functional Materials Business through price pass-through and production efficiency improvements, and continued growth in the Electronic Materials & Chemical Products Business. Revenue growth is expected to be moderate at +3.7% driven by continued demand expansion in Electronic Materials. Ordinary Income growth (+8.5%) is projected to lag Operating Income growth (+14.9%), implying an assumption of limited upside in non-operating income. Net Income recovery to ¥18.0B is mainly driven by the drop-out of special losses; achieving this will require Functional Materials to return to profitability and improved OCF through working capital compression.
Despite Net Income attributable to owners of the parent of ¥-3.5B, the company maintained a total annual dividend of ¥60 (interim ¥20, year-end forecast ¥40). Based on shares outstanding (after treasury stock) of 22,831 thousand shares, total dividend payout amounts to approximately ¥13.7B, implying a negative payout ratio in the current year (effectively funded from retained earnings or cash on hand). Free Cash Flow was -¥16.7B, yielding an FCF coverage of -1.22x and indicating insufficiency; dividends were paid from retained earnings of ¥345.0B (prior year ¥362.9B). The FY2027 forecast sets DPS at ¥40 (implying a payout ratio of approximately 51% based on Net Income ¥18.0B), returning payout ratios to normal range assuming profit recovery. There were no share buybacks in the period (prior year ¥3.1B), so shareholder returns are dividend-centric. Stabilizing dividend capacity will hinge on profit recovery and FCF turning positive.
Risk of continued profitability deterioration in Functional Materials: The Functional Materials Business recorded an Operating Loss of ¥6.1B and impairment losses of ¥31.7B. Delays in price pass-through, adverse product mix shifts, and lower utilization rates are pressuring profitability; if recovery to profitability is delayed, recovery of company-wide Operating Margin (currently 3.8%) will be hindered. Continued reliance on high profitability in Electronic Materials & Chemical Products (Operating Margin 8.3%) would further polarize the portfolio.
Risk of prolonged working capital stagnation: CCC is 198 days (DSO 107 days, DIO 137 days, DPO 46 days), and OCF/EBITDA 0.78x points to weakened cash conversion efficiency. Inventory accumulation (¥97.9B) carries markdown, impairment, and obsolescence risks, and delayed receivables collection (¥168.7B) suggests rising credit risk. Delays in working capital compression may lead to prolonged negative FCF and higher funding costs.
Risk from rising interest rates and increased reliance on borrowings: Short-term borrowings surged to ¥22.5B (prior year ¥6.7B, +233%), raising total interest-bearing liabilities to ¥124.2B (including long-term borrowings due within one year). While Interest Coverage is comfortable at 41.2x, interest rate hikes could raise funding costs, and with negative FCF a higher dependence on borrowings would reduce financial flexibility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.8% | 7.8% (4.6%–12.3%) | -4.0pt |
| Net Profit Margin | -0.6% | 5.2% (2.3%–8.2%) | -5.8pt |
Operating margin is 4.0 percentage points below the industry median of 7.8%, and Net Profit Margin is 5.8 percentage points below the median of 5.2%. Even excluding the one-time impairment, lower gross margin and Functional Materials’ losses place the company in the lower quartile within the industry for profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.9% | 3.7% (-0.4%–9.3%) | -0.8pt |
Revenue growth is 0.8 percentage points below the industry median of 3.7%, placing the company around the median. Strong growth in Electronic Materials & Chemical Products (+14.9%) lifts the company average, but the Functional Materials decline (-8.0%) offsets this.
※ Source: Company compilation
Recovery scenario through one-off loss drop-out: The primary cause of the current Net Loss of ¥-3.5B was impairment losses of ¥31.7B. The company forecasts Net Income of ¥18.0B for the next fiscal year. If one-time items drop out and Functional Materials’ margins are restored (price pass-through and production efficiency) alongside sustained Electronic Materials growth, Operating Margin could improve from 3.8% to around 4.2%, and ROE could normalize. However, gross margin improvement and working capital compression are prerequisites, requiring close monitoring of progress.
Widening earnings gap between segments and increasing reliance on Electronic Materials: The Electronic Materials & Chemical Products Business generated Operating Income of ¥24.9B (Operating Margin 8.3%), effectively producing company Operating Income, while Functional Materials posted an Operating Loss of ¥6.1B. Electronic Materials’ high profitability is supported by demand in semiconductors and electronic components but is cyclical; Functional Materials must return to profitability for stable company earnings. Restoring the Functional Materials margin is a focal point for FY2027.
Room for improvement in working capital and cash flow efficiency: With CCC at 198 days and OCF/EBITDA at 0.78x, cash efficiency ranks low in the industry. If inventory can be reduced (DIO from 137 days to about 120 days) and receivables collection accelerated (DSO from 107 days to about 90 days), Operating CF could improve to over ¥50B. With CapEx / Depreciation at 1.58x and continued aggressive investment, achieving positive FCF through working capital improvements is key to stabilizing dividend capacity and improving capital efficiency.
This report is an AI-generated analysis of XBRL financial statement data. It does not constitute investment advice or a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial statements. Investment decisions are your responsibility; consult professional advisors as necessary.