| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥10199.2B | ¥10633.8B | -4.1% |
| Operating Income / Operating Profit | ¥955.3B | ¥989.1B | -3.4% |
| Ordinary Income | ¥1067.5B | ¥1030.0B | +3.6% |
| Net Income / Net Profit | ¥404.4B | ¥489.2B | -17.3% |
| ROE | 4.4% | 5.4% | - |
For the fiscal year ended March 2026, revenue was ¥10199B (YoY -¥435B, -4.1%), Operating Income was ¥955B (YoY -¥34B, -3.4%), Ordinary Income was ¥1068B (YoY +¥37B, +3.6%), and Net Income was ¥404B (YoY -¥85B, -17.3%). Revenue declined due to weak market conditions in the core Petrochemicals (-15.7%) and Chlor-alkali (-7.2%) segments, while gross margin improved to 25.6% (up +0.6pt from 25.0% a year earlier) and SG&A ratio was maintained at 16.2%, limiting the decline in Operating Income to a small decrease. At the ordinary profit level, gains were reported on foreign exchange amounting to ¥66B, leading to a turnaround to higher Ordinary Income; however, Special Losses of ¥214B (primarily impairment losses of ¥196B) were significant, resulting in Net Income declining 17.3% YoY. Operating margin improved slightly to 9.4% (from 9.3%), and Ordinary Income margin increased to 10.5% (from 9.7%), while Net Income margin fell to 4.0% (from 4.6%). ROE decreased to 4.4% (from 7.2%) due to one-off losses. Financial soundness remained high with an Equity Ratio of 65.2% (from 62.3%).
【Revenue】 Revenue was ¥10199B (YoY -¥435B, -4.1%). By segment, Petrochemicals recorded ¥2988B (-15.7%) with a significant decline due to softer market conditions, and Chlor-alkali was ¥3901B (-7.2%) reflecting weakened demand and narrower price spreads. Engineering increased to ¥2033B (+8.7%) through project intake, and Functional Products remained firm at ¥2942B (+0.4%). By region, Japan was ¥5063B, China ¥1292B, Other Asia ¥2343B, and Other Regions ¥1501B; shipments to China fell sharply to ¥1292B from ¥1538B (-16.0%). Overall, both volumes and prices were weak, with high-value-added Functional Products and Engineering underpinning the top line.
【Profitability】 Operating Income was ¥955B (YoY -¥34B, -3.4%), a modest decline. Cost of sales was ¥7589B (cost of sales ratio 74.4%), yielding Gross Profit of ¥2610B (gross margin 25.6%, up +0.6pt from 25.0%). SG&A was ¥1655B (SG&A ratio 16.2%). By segment, margins improved in Engineering to 19.9% (from 18.0%) and Functional Products to 13.6% (from 13.2%), while Chlor-alkali deteriorated to 0.5% (from 2.3%) and Petrochemicals to 3.3% (from 4.0%) due to market pressure. Ordinary Income rose to ¥1068B (YoY +¥37B, +3.6%), supported by non-operating income of ¥160B (including foreign exchange gains of ¥66B, dividend income ¥18B, and equity-method gains ¥26B), net of non-operating expenses ¥48B (interest expense ¥35B). Profit before income taxes was ¥893B after Special Income of ¥40B (gain on sale of investment securities ¥39B) and Special Losses of ¥214B (impairment ¥196B, loss on retirement of fixed assets ¥17B). After income taxes of ¥319B and non-controlling interests of ¥158B, Net Income was ¥404B (YoY -17.3%). In summary, profit increases in high-value-added segments partially offset declines in market-exposed segments: Operating Income saw a slight decrease, Ordinary Income turned positive, and Net Income declined due to one-off losses.
Operating Income was highest in Engineering at ¥404B (YoY +¥68B, +20.1%, margin 19.9%), driven by progress on large projects and margin improvement. Functional Products delivered ¥399B (YoY +¥13B, +3.4%, margin 13.6%), supported by steady sales of electronic materials and fine products. By contrast, Petrochemicals fell to ¥97B (YoY -¥46B, -32.0%, margin 3.3%) amid market deterioration, and Chlor-alkali plunged to ¥19B (YoY -¥76B, -79.8%, margin 0.5%) due to PVC and caustic soda price declines and weaker demand. Other segments contributed ¥36B (YoY +¥7B, +24.1%) from logistics and information processing. Segment assets were: Chlor-alkali ¥3729B, Functional Products ¥3759B, Engineering ¥2443B, Petrochemicals ¥1642B, indicating large asset bases in capital-intensive petrochemical and PVC operations and an increasing bifurcation in margins. Impairments were concentrated in Functional Products at ¥194B, versus Chlor-alkali ¥1.1B and Petrochemicals ¥0.2B, reflecting asset revaluation amid changing business conditions.
【Profitability】Operating margin 9.4% (up +0.1pt from 9.3%), Ordinary Income margin 10.5% (up +0.8pt from 9.7%)—improvement at the ordinary level due to better non-operating results—and Net Income margin 4.0% (down -0.6pt from 4.6%) due to Special Losses. ROE was 4.4% (vs. 7.2% prior) depressed by one-off losses; ROA (on Ordinary Income basis) was stable at 7.8% (from 7.9%). EBITDA was ¥1436B (Operating Income ¥955B + Depreciation & Amortization ¥481B) yielding an EBITDA margin of 14.1%. 【Cash Quality】Operating Cash Flow (OCF) was ¥1146B, 2.8x Net Income (¥404B), aided by non-cash impairment of ¥196B. OCF/EBITDA was 0.80x, reflecting heavy working capital. DSO was 87 days, DIO 117 days, and CCC 152 days, indicating high levels of inventory and receivables with scope for efficiency improvements. 【Investment Efficiency】Total Asset Turnover was 0.72x, Tangible Fixed Asset Turnover 2.41x, and Construction in Progress was ¥873B (20.6% of PPE), indicating large ongoing investments. 【Financial Soundness】Equity Ratio 65.2% (up +2.9pt from 62.3%), Debt/Equity 0.20x, Current Ratio 225%, and Interest Coverage (EBITDA / Interest Paid) 41x, demonstrating a strong financial base. Short-term debt ratio was 63.2%, with short-term borrowings of ¥1447B comprising the bulk of total interest-bearing debt of ¥2290B; attention is needed for refinancing concentration.
Operating Cash Flow was ¥1146B (YoY +¥81B, +7.8%). From OCF subtotal ¥1348B, changes in working capital (inventory +¥53B, receivables +¥62B, payables -¥97B; net approx. -¥18B cash outflow) and payments for income taxes ¥221B and interest/dividend net flows ¥18B resulted in the net figure. Investing Cash Flow was -¥721B (prior -¥816B), mainly acquisitions of tangible/intangible fixed assets -¥698B, acquisition of investment securities -¥2B, and net loan recoveries/issuances +¥1B. Free Cash Flow was ¥424B (up 46% from ¥290B), covering dividends of ¥317B. Financing Cash Flow was -¥97B: long-term borrowings provided ¥579B, net increase in short-term borrowings ¥71B, long-term borrowings repayments -¥126B, dividend payments -¥317B, and share repurchases -¥250B, resulting in net cash outflow. After foreign exchange effects +¥50B, cash increased by ¥377B to an ending cash balance of ¥1766B (from ¥1389B). The quality of OCF is supported by non-cash items: Depreciation & Amortization ¥481B and Impairment ¥196B; improving working capital efficiency is key to sustainable cash generation.
Ordinary Income of ¥1068B exceeded Operating Income of ¥955B, driven by non-operating income of ¥160B (foreign exchange gains ¥66B, dividend income ¥18B, equity-method gains ¥26B). The foreign exchange gain of ¥66B is a transitory item tied to USD/JPY movements and may lack persistence. Special items netted to -¥174B (Special Income ¥40B, Special Losses ¥214B); impairment losses of ¥196B are non-recurring write-downs related to asset revaluation, and a ¥39B gain on sale of investment securities is also temporary. Comprehensive Income was ¥779B, ¥375B higher than Net Income of ¥404B, with Other Comprehensive Income of ¥205B (pension remeasurement ¥109B, valuation differences on available-for-sale securities ¥71B, foreign currency translation adjustments ¥24B) contributing significantly. From an accrual perspective, Operating Cash Flow ¥1146B relative to Operating Income ¥955B indicates a cash conversion multiple of 1.2x, reflecting the coexistence of non-cash charges (depreciation, impairment) and working capital absorption. Part of the ordinary-level earnings depends on FX and financial income; core earnings on an operating basis underpin sustainability.
An annual dividend of ¥100 (interim ¥50, year-end ¥50 assumed) was implemented, with total dividends ¥319B (actual payments ¥317B). Payout Ratio was 54.9% (Annual Dividend ¥100 / EPS ¥132.4) and the ratio of total dividends to Net Income attributable to owners of the parent (¥416B, XBRL) was approximately 77%. Share buybacks totaled ¥250B; treasury shares held number 17.19M shares (5.3%) against a weighted average shares outstanding of 31,432M shares during the period. Total returns via dividends and buybacks amounted to approximately ¥569B, exceeding Free Cash Flow ¥424B. Cash and deposits of ¥1796B and OCF of ¥1146B provide ample liquidity, so short-term dividend sustainability is not a concern, but the excess of total returns over FCF implies depletion of liquidity buffers and raises the need to balance returns with investment priorities over the medium term. The payout based on parent-company profit is about 77%, a high level; sustainability should improve as one-off losses drop out and Net Income recovers.
Market Volatility Risk: The Petrochemicals and Chlor-alkali segments are highly correlated with crude oil / naphtha prices and PVC / caustic soda market conditions. This fiscal year, combined Operating Income for these two segments fell to ¥117B (from ¥211B prior, -45%). Operating margins are low at 3.3% for Petrochemicals and 0.5% for Chlor-alkali; absent market recovery, earnings vulnerability will persist.
Working Capital Efficiency Risk: CCC is 152 days (DSO 87 days, DIO 117 days) and remains elevated, with inventories ¥1484B and receivables ¥2436B tying up ¥3920B in funds. Working capital increases compress OCF generation. A 10-day reduction in CCC could improve cash flow by about ¥282B, but delays in improvement would constrain investment capacity and shareholder returns.
Short-term Debt Concentration Risk: Short-term borrowings of ¥1447B account for 63.2% of total interest-bearing debt ¥2290B, concentrated within one year. Cash and deposits of ¥1796B can cover short-term liabilities, but in a market downturn or with reduced OCF, refinancing costs could rise. Long-term borrowings increased to ¥842B (from ¥461B, +82.7%), indicating some extension of maturities, but reducing the short-term share remains key to financial stability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.4% | 7.8% (4.6%–12.3%) | +1.6pt |
| Net Income Margin | 4.0% | 5.2% (2.3%–8.2%) | -1.2pt |
Operating margin is +1.6pt above the industry median, reflecting cost management and contributions from high-value-added segments (Functional Products, Engineering). Net margin is -1.2pt below the median due to Special Losses of ¥214B (impairment ¥196B) depressing post-tax earnings.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -4.1% | 3.7% (-0.4%–9.3%) | -7.8pt |
Revenue growth lags the industry median by -7.8pt, driven by weak markets in Petrochemicals and Chlor-alkali. Engineering +8.7% and Functional Products +0.4% were not sufficient to offset declines, and accelerating portfolio shift is key to restoring growth.
※ Source: Company compilation
Operating and ordinary-level earnings are stable, with Operating Margin 9.4% and Ordinary Income Margin 10.5%. Net Income, however, declined to ¥404B due to Special Losses of ¥214B (impairments ¥196B), and Net Income margin fell to 4.0% from 4.6%. Impairments were concentrated in Functional Products (¥194B); should asset revaluation complete, Net Income recovery is expected next fiscal year as one-off losses drop out. ROE of 4.4% declined from 7.2%, but excluding one-offs capital efficiency is stable.
Segment-wise, the bifurcation is clear: Engineering (Operating Income ¥404B, margin 19.9%) and Functional Products (¥399B, margin 13.6%) account for about 84% of profits. Petrochemicals (¥97B, -32.0%) and Chlor-alkali (¥19B, -79.8%) suffered sharp declines from adverse market conditions. Construction in progress ¥873B (20.6% of PPE) and large investments are ongoing; conversion to operation and resulting EBITDA uplift are expected to be future growth drivers.
Improving working capital efficiency is a critical issue. CCC 152 days, DSO 87 days, DIO 117 days indicate prolonged receivables and inventories, with working capital of ¥4435B tying up funds. Reducing CCC by 10 days could yield about ¥282B of cash flow improvement; efficiency gains would enhance OCF quality and balance between shareholder returns and investments. Concentration of short-term debt at 63.2% is also a concern; increasing long-term borrowings and compressing working capital will determine financial flexibility.
This report is an AI-generated earnings analysis document created by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company from publicly disclosed financial statements. Investment decisions are your responsibility; consult a professional advisor as needed before making any investment.