| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥386.3B | ¥398.2B | -3.0% |
| Operating Income | ¥32.1B | ¥33.6B | -4.7% |
| Ordinary Income | ¥32.0B | ¥31.9B | +0.2% |
| Net Income | ¥28.0B | ¥20.2B | +38.8% |
| ROE | 1.3% | 0.9% | - |
FY2026 Q1 results: Revenue ¥386.3B (YoY -¥11.9B -3.0%), Operating Income ¥32.1B (YoY -¥1.6B -4.7%), Ordinary Income ¥32.0B (YoY +¥0.1B +0.2%), Net Income ¥28.0B (YoY +¥7.7B +38.8%). Although Revenue declined, gross margin improved to 30.4% from 27.9% a year ago (+2.5pt), securing a slight increase at the ordinary profit stage. The large increase in Net Income was mainly driven by non-recurring gains of ¥12.2B including ¥8.8B gain on sale of fixed assets, indicating reliance on one-off factors. By segment, the core Basic Chemicals Business recorded both revenue and profit declines (Revenue -11.0%, Operating Income -27.7%), while High-Functionality Materials posted Operating Income +201.4%, Polymer & Oligomer +39.1%, and Processed Resin Products +33.5%, highlighting strong growth in high value-added product areas and qualitative improvement of the portfolio.
[Revenue] Revenue ¥386.3B represented a YoY decrease of -3.0%. By segment, Basic Chemicals, the largest segment, recorded ¥167.1B (YoY -11.0%) and posted a double-digit revenue decline due to deteriorating market conditions. Conversely, High-Functionality Materials recorded ¥28.3B (YoY +13.0%), Polymer & Oligomer ¥94.7B (YoY +3.6%), Adhesive Materials ¥35.7B (YoY +4.8%), and Processed Resin Products ¥71.5B (YoY +2.3%), each achieving revenue growth and indicating a shift toward high value-added products. Other segments amounted to ¥10.1B (YoY +8.8%) and remained modest but steady.
[Profit & Loss] Cost of sales was ¥269.0B, resulting in Gross Profit ¥117.3B (Gross Margin 30.4%), an improvement of +2.5pt from 27.9% a year earlier. SG&A was ¥85.3B (SG&A ratio 22.1%), up ¥13.5B YoY and +2.6pt from 19.5% the prior year. Consequently, Operating Income was ¥32.1B (Operating Margin 8.3%), down -4.7% YoY and the Operating Margin contracted -0.2pt from 8.4% previously. Non-operating income included interest income ¥0.5B, dividend income ¥1.6B, and equity-method income ¥0.3B contributing to income, while foreign exchange loss ¥2.7B and interest expense ¥0.8B pressured ordinary profit, which amounted to ¥32.0B (YoY +0.2%). Extraordinary gains included Special Income ¥12.2B including gain on sale of fixed assets ¥8.8B, while Special Losses included loss on disposal of fixed assets ¥1.1B and others totaling ¥4.6B, producing a net +¥7.5B uplift to profit before tax. Profit before tax was ¥39.5B; after deducting corporate taxes ¥11.5B, Net Income was ¥28.0B (YoY +38.8%). Thus, under a structure of revenue decline and operating profit contraction, one-off gains lifted Net Income.
Basic Chemicals Business: Revenue ¥167.1B (YoY -11.0%), Operating Income ¥16.5B (YoY -27.7%, margin 9.9%) — despite being the core segment, it experienced the largest revenue and profit decline due to worsening market conditions. Polymer & Oligomer Business: Revenue ¥94.7B (YoY +3.6%), Operating Income ¥8.8B (YoY +39.1%, margin 9.3%) — achieved revenue and profit growth with notable profitability improvement. Adhesive Materials Business: Revenue ¥35.7B (YoY +4.8%) grew, but Operating Income fell to ¥0.2B (YoY -83.7%, margin 0.7%), revealing short-term profit issues. High-Functionality Materials Business: Revenue ¥28.3B (YoY +13.0%), Operating Income ¥4.4B (YoY +201.4%, margin 15.4%) — achieved substantial profit growth while maintaining the highest margin. Processed Resin Products Business: Revenue ¥71.5B (YoY +2.3%), Operating Income ¥6.7B (YoY +33.5%, margin 9.4%) — continued stable growth. Other Businesses: Revenue ¥10.1B (YoY +8.8%), Operating Income ¥1.5B (YoY -1.9%, margin 15.1%) — steady. Corporate expenses allocated were ¥6.1B (prior year ¥5.1B), up ¥1.0B YoY.
[Profitability] Operating Margin 8.3% narrowed -0.2pt from 8.4% a year ago, while Gross Margin 30.4% improved +2.5pt from 27.9%. SG&A Ratio 22.1% rose +2.6pt from 19.5%, offsetting gross margin improvements. Net Margin 7.3% improved +2.2pt from 5.1%, largely due to Special Income ¥12.2B (3.2% of Revenue). ROE remained low at 1.3%. [Cash Quality] Of non-operating income ¥2.7B, dividend income ¥1.6B and interest income ¥0.5B represent stable financial income. Comprehensive income ¥36.3B exceeded Net Income ¥28.0B by +¥8.3B, with Other Comprehensive Income from valuation differences on available-for-sale securities ¥5.8B and foreign currency translation adjustments ¥2.8B contributing. [Investment Efficiency] Total assets ¥2,841.1B, with asset turnover annualized at approximately 0.54x, indicating low turnover. Tangible fixed assets ¥1,304.4B indicate high capital intensity, and investment securities ¥369.5B account for 13.0% of total assets. [Financial Soundness] Equity Ratio 75.3% (prior year 74.3%) indicates a solid financial base. Interest-bearing debt totaled ¥206.4B (short-term borrowings ¥68.7B, long-term borrowings ¥37.7B, corporate bonds ¥100.0B), resulting in a D/E ratio of 0.10x versus equity ¥2,128.1B, which is extremely low. Current Ratio 233.6%; liquidity assets comprising Cash & Deposits ¥205.2B and Short-term Investment Securities ¥40.0B total ¥245.2B, indicating ample liquidity.
Cash flow statement data was not disclosed; funding trends were analyzed from changes in the balance sheet. Cash & Deposits were ¥205.2B, down ¥40.0B from ¥245.2B a year earlier; Short-term Investment Securities were ¥40.0B, down ¥30.0B from ¥70.0B. Total liquidity assets decreased by ¥70.0B, which may have been used for working capital investment or shareholder returns such as dividends and share buybacks. Inventories increased to ¥262.6B (up ¥7.9B from ¥254.7B), and Notes & Accounts Receivable were ¥358.4B (down ¥21.6B from ¥380.0B). Treasury stock increased to -¥30.8B (prior year -¥9.6B), expanding by -¥21.2B, confirming active share buybacks. Tangible fixed assets increased to ¥1,304.4B (up ¥13.9B from ¥1,290.5B), indicating continued capital expenditures. The sum of long-term borrowings and corporate bonds remained ¥137.7B unchanged from the prior year, and interest-bearing debt remained stable.
Ordinary Income ¥32.0B versus Net Income ¥28.0B: Special items net +¥7.5B raised profit before tax to ¥39.5B. Major component of Special Income ¥12.2B was gain on sale of fixed assets ¥8.8B, meaning one-off factors accounted for about 27% of Net Income. Non-operating items show non-operating income ¥2.7B versus non-operating expenses ¥2.8B, a small net expense, with foreign exchange loss ¥2.7B suppressing ordinary profit. Comprehensive Income ¥36.3B exceeded Net Income ¥28.0B by ¥8.3B, driven by valuation differences on available-for-sale securities ¥5.8B and foreign currency translation adjustments ¥2.8B. These reflect unrealized gains on held equities and yen depreciation effects but do not directly translate into cash generation. Core earning power is approximately Operating Income ¥32.1B plus equity-method income ¥0.3B and financial income (interest income ¥0.5B + dividend income ¥1.6B) totaling about ¥34.5B; excluding Special Income, normalized Net Income is estimated in the low-¥20B range.
Full Year guidance: Revenue ¥1,670.0B (YoY +2.9%), Operating Income ¥145.0B (YoY +2.3%), Ordinary Income ¥151.0B (YoY +0.2%), Net Income ¥115.0B (EPS forecast ¥108.56). Q1 progress rates vs full year: Revenue 23.1% (¥386.3B/¥1,670.0B), Operating Income 22.1% (¥32.1B/¥145.0B), Ordinary Income 21.2% (¥32.0B/¥151.0B), Net Income 24.3% (¥28.0B/¥115.0B), broadly in line with standard progress (around 25%). No revisions to the full-year earnings forecast or dividend forecast were made in Q1. While full-year Revenue growth target is +2.9%, Q1 recorded -3.0%, suggesting the plan assumes accelerated growth in High-Functionality Materials and Polymer areas in H2 and recovery in Basic Chemicals market conditions. Full-year Operating Margin forecast is 8.7% (¥145.0B/¥1,670.0B) versus Q1 actual 8.3%, indicating some shortfall; controlling SG&A in H2 and volume-driven fixed-cost absorption are challenges.
A Q1 dividend per share of ¥32.50 has been paid. Full-year dividend forecast is ¥35.00, implying a payout ratio of 32.2% based on full-year EPS forecast ¥108.56, at a conservative level. The dividend was maintained at ¥32.50 in the prior year. Treasury stock changed by -¥30.8B (prior year -¥9.6B), expanding by -¥21.2B, indicating active share buybacks. Using the weighted-average shares outstanding for the period of 106,713 thousand shares (issued shares 108,000 thousand less treasury stock 1,860 thousand), Q1 EPS of ¥26.00 annualized is approximately ¥104, broadly consistent with the full-year EPS forecast ¥108.56. Combined dividend and share buybacks (total return) — dividend ¥35 (total dividend amount about ¥3.7B) plus share buybacks ¥2.12B — sum to about ¥5.8B, representing roughly a 50% total return ratio versus full-year Net Income forecast ¥115B. Given Cash & Deposits ¥205.2B, Short-term Investment Securities ¥40.0B liquidity and stable Operating Cash Flow, concerns over sustainability of dividends and buybacks are limited.
Market fluctuation risk in Basic Chemicals Business: The largest segment, Basic Chemicals (Revenue share 43.3%), saw Revenue -11.0% and Operating Income -27.7%, and deterioration in market conditions is dragging on consolidated results. If the spread between feedstock prices such as naphtha and product prices continues to compress, the H2 recovery scenario underpinning full-year targets may be at risk.
Sharp profit decline in Adhesive Materials Business: Operating Income in Adhesive Materials fell -83.7% YoY, with margin down to 0.7%. Despite Revenue growth of +4.8%, fixed-cost absorption did not progress, indicating possible product mix deterioration or intensified price competition. Delays in segment restructuring or structural reforms could impede medium-term profitability improvements.
Foreign exchange volatility and working capital management risk: A foreign exchange loss of ¥2.7B was recorded in non-operating expenses, with yen depreciation increasing procurement costs and valuation losses on foreign-currency assets suppressing ordinary income. Inventories increased YoY by ¥7.9B while receivables decreased ¥21.6B; deteriorating inventory turnover could lower capital efficiency and pressure cash flow. Concurrent inadequate FX hedging and expansion of working capital could constrain financial flexibility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.3% | 6.8% (2.9%–9.0%) | +1.5pt |
| Net Margin | 7.3% | 5.9% (3.3%–7.7%) | +1.3pt |
The company's profitability exceeds the manufacturing median and ranks at a relatively high level within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -3.0% | 13.2% (2.5%–28.5%) | -16.2pt |
Revenue growth is significantly below the industry median, and short-term growth momentum lags peers.
※ Source: Company compilation
Progress in portfolio shift to high value-added segments: Against a backdrop of revenue and profit decline in Basic Chemicals, High-Functionality Materials (Operating Income +201.4%, margin 15.4%), Polymer & Oligomer (Operating Income +39.1%, margin 9.3%), and Processed Resin Products (Operating Income +33.5%, margin 9.4%) posted significant profit growth, improving sales composition. Gross Margin improved to 30.4% from 27.9% (+2.5pt), showing that the shift to high value-added products is contributing to improved profitability. If growth in High-Functionality Materials persists in H2, it could raise consolidated Operating Margin.
Challenge of exiting reliance on special gains and assessing normalized earning power: The large increase in Net Income to ¥28.0B (YoY +38.8%) was supported by Special Income ¥12.2B including gain on sale of fixed assets ¥8.8B; on a normal earnings basis, Operating Income was down -4.7% and Ordinary Income only marginally up +0.2%. SG&A ratio rose +2.6pt YoY to 22.1% (¥85.3B), and without SG&A control and better fixed-cost absorption, achieving full-year Operating Income ¥145.0B (Operating Margin 8.7%) will be difficult. Cost control from Q2 onward and volume expansion in high value-added products are key to meeting the full-year plan.
Strong financial base and active shareholder return stance: Equity Ratio 75.3%, D/E ratio 0.10x — financial soundness remains high within the industry. Liquidity assets ¥245.2B (Cash ¥205.2B + Short-term Investment Securities ¥40.0B) secure ample liquidity. Treasury stock increased by -¥21.2B YoY, confirming active buybacks. Full-year dividend forecast ¥35.00 (payout ratio 32.2%) combined with buybacks suggests total return ratio of about 50%, indicating high sustainability of shareholder returns. Whether using financial capacity for growth investment versus shareholder returns will improve medium-term capital efficiency is a point to watch.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement disclosure data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on public financial data. Investment decisions are your responsibility; please consult a professional advisor as appropriate.