| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥999.6B | ¥964.3B | +3.7% |
| Operating Income | ¥176.3B | ¥132.5B | +33.1% |
| Ordinary Income | ¥196.1B | ¥141.5B | +38.5% |
| Net Income | ¥136.2B | ¥87.6B | +55.4% |
| ROE | 10.6% | 7.6% | - |
For the fiscal year ending March 2026, Revenue was ¥999.6B (YoY +¥35.3B +3.7%), Operating Income was ¥176.3B (YoY +¥43.9B +33.1%), Ordinary Income was ¥196.1B (YoY +¥54.5B +38.5%), and Net Income was ¥136.2B (YoY +¥48.6B +55.4%), resulting in higher revenue and substantially higher profits. Operating margin improved to 17.6% (from 13.7% a year ago, +3.9pt), and net margin rose to 13.6% (from 9.1%, +4.5pt), indicating a marked improvement in profitability. Recovery in the Basic Chemicals segment drove a rebound in Operating Income to ¥61.9B (YoY +172.3%), and the Healthcare segment maintained high profitability with Operating Income of ¥71.6B (margin 48.9%). Non-operating items contributed—dividend income received ¥11.0B and foreign exchange gains ¥4.3B—and special gains of ¥23.0B (including gain on sale of investment securities ¥15.2B) were also recorded. Operating Cash Flow was ¥198.8B (1.29x of Net Income), Free Cash Flow was ¥145.1B, and despite total shareholder returns of Dividends ¥27.3B and Share Buybacks ¥60.0B, cash on hand increased. Full-year guidance projects Revenue ¥1,060.0B (+6.0%) and Operating Income ¥190.0B (+7.7%), implying continued revenue and profit growth.
[Revenue] Revenue was ¥999.6B (YoY +¥35.3B +3.7%). By segment, Basic Chemicals ¥417.5B (+10.9%) and Healthcare ¥146.3B (+6.9%) drove growth, while Functional Chemicals ¥286.4B (-4.0%) and Trading & Others ¥186.6B (-4.0%) declined. Basic Chemicals was supported by robust domestic and Asia demand; recovery in demand and spread improvements for chlor-alkali products and epichlorohydrin contributed. Healthcare saw increased sales of pharmaceutical purification materials and analytical instruments, with Europe sales ¥42.7B (YoY +1.6%). Functional Chemicals saw an adjustment in demand for allyl ether derivatives and electrodes; despite increased China sales ¥98.6B (YoY +21.5%), overall declines in domestic and European markets were not fully offset. By region, Japan ¥606.5B (+0.7%), China ¥137.9B (+19.3%), Asia ¥129.1B (+19.7%) increased, while Europe ¥80.7B (-6.5%) decreased.
[Profitability] Cost of sales was ¥662.3B (YoY -1.9%); despite higher revenue, cost decreased, leading gross margin to rise to 33.7% (from 30.0%, +3.7pt). SG&A was ¥160.9B (YoY +2.5%), representing 16.1% of sales (from 16.3%, -0.2pt), showing disciplined control. Operating Income was ¥176.3B (+33.1%), with Operating Margin 17.6% (+3.9pt). Non-operating income totaled ¥22.0B (dividend income ¥11.0B, FX gains ¥4.3B, interest income ¥1.7B, etc.) against non-operating expenses ¥2.2B (interest expense ¥1.4B, FX losses ¥1.1B, etc.), resulting in Ordinary Income ¥196.1B (+38.5%). Special gains of ¥23.0B (gain on sale of investment securities ¥15.2B, gain on liquidation of subsidiaries ¥4.6B, gain on business transfers ¥3.1B) and special losses ¥3.7B (loss on retirement of fixed assets ¥3.1B, impairment losses ¥1.9B, etc.) were recorded, yielding Profit Before Tax ¥215.3B. After Income Taxes ¥61.0B (effective tax rate 28.3%), Net Income was ¥136.2B (+55.4%). One-off gains (special gains - special losses) represent about 14% of Net Income, but improvement at the ordinary level was the primary driver of earnings growth; overall, the company delivered higher revenue and materially higher profits.
The Basic Chemicals segment recovered significantly: Revenue ¥417.5B (YoY +10.9%), Operating Income ¥61.9B (YoY +172.3%), margin 14.8% (from 6.0%, +8.8pt). Spread improvements and demand recovery for chlor-alkali products and epichlorohydrin contributed; domestic ¥346.8B (+0.7%) and Asia ¥48.9B (+131%) were robust. Functional Chemicals: Revenue ¥286.4B (-4.0%), Operating Income ¥46.3B (+7.1%), margin 16.2% (from 14.5%, +1.7pt); despite lower sales, profitability improved. China sales ¥98.6B (+21.5%) grew but could not offset domestic and European declines. Healthcare: Revenue ¥146.3B (+6.9%), Operating Income ¥71.6B (+1.8%), margin 48.9% (from 51.4%, -2.5pt), maintaining high profitability; growth in pharmaceutical purification materials and analytical instruments and stable Europe sales ¥42.7B (+1.6%) supported results. Trading & Others: Revenue ¥186.6B (-4.0%), Operating Income ¥9.5B (+4.6%), margin 5.1% (from 4.7%, +0.4pt) — revenue declined but margins slightly improved. Corporate adjustments (eliminations) were -¥13.0B, roughly flat YoY. Recovery in Basic Chemicals and high profitability in Healthcare drove consolidated Operating Income ¥176.3B.
[Profitability] Operating Margin was 17.6% (from 13.7%, +3.9pt), driven by a large improvement in Gross Margin to 33.7% (up +3.7pt) and a slight improvement in SG&A ratio to 16.1% (down -0.2pt). ROE was 10.6% (Net Margin 13.6% × Total Asset Turnover 0.592 × Financial Leverage 1.31); margin improvement was the main driver though asset turnover edged down. [Cash Quality] Operating Cash Flow was ¥198.8B / Net Income ¥136.2B = 1.46x, indicating solid cash conversion. OCF/EBITDA (Operating CF ÷ (Operating Income + Depreciation)) was 0.90x (above the 0.8x benchmark); accrual ratio ((Operating CF - Net Income) / Total Assets) = -2.6%, indicating strong cash backing. Working capital: DSO (Accounts Receivable ÷ Daily Sales) = 97 days, DIO (Inventory ÷ Daily COGS) = 60 days, DPO (Accounts Payable ÷ Daily Purchases) = 76 days, giving a Cash Conversion Cycle of 81 days, indicating notable inventory/receivable holding. [Investment Efficiency] Capital expenditures were ¥65.3B (6.5% of sales; 1.51x depreciation ¥43.4B), maintaining growth investment pace. Investment securities totaled ¥370.2B and their unrealized gains affect Other Comprehensive Income and Equity. [Financial Soundness] Equity Ratio was 76.2% (from 75.1%, +1.1pt), D/E ratio 0.09x (Total Interest-Bearing Debt ¥75.6B, Net Assets ¥1,285.4B), Debt/EBITDA = 0.34x (Total Interest-Bearing Debt ¥75.6B ÷ (Operating Income ¥176.3B + Depreciation ¥43.4B)), reflecting a very conservative capital structure. Current Ratio 311%, Quick Ratio 277% — liquidity is ample. Interest Coverage (Operating CF ÷ Interest Paid) = 124x, indicating minimal interest burden.
Operating CF was ¥198.8B (YoY +16.6%). Starting from Profit Before Tax ¥215.3B, non-cash expenses including Depreciation ¥43.4B were added back; working capital movements were modest: Inventory +¥0.1B, Accounts Receivable +¥5.1B, Accounts Payable +¥6.2B; after Income Taxes Paid -¥49.7B, the subtotal was ¥234.9B, forming Operating CF. Investing CF was -¥53.6B: CapEx -¥65.3B, Intangible asset investment -¥8.6B, partially offset by proceeds from sale of securities ¥22.4B and subsidies received ¥1.2B. Free Cash Flow was ¥145.1B (Operating CF + Investing CF), up YoY +28.4%. Financing CF was -¥92.7B, mainly Dividends Paid -¥27.3B, Share Buybacks -¥60.0B, and long-term loan repayments -¥4.3B. Total shareholder returns (Dividends ¥27.3B + Share Buybacks ¥60.0B) amounted to ¥87.3B, equivalent to 64% of Net Income, but 60% of Free Cash Flow—thus comfortably covered. Cash and Deposits increased by ¥54.9B during the period, closing at ¥218.6B (prior year ¥163.4B). Cash equivalents at period end were ¥488.0B; including short-term securities ¥269.5B, liquidity on hand is very high. Working capital retention (DSO = 97 days, DIO = 60 days) is a volatility factor for Operating CF; improving inventory and receivables efficiency remains a priority.
Earnings quality is centered on recurring income, with Operating Income ¥176.3B (17.6% of sales) as the core. Non-operating income ¥22.0B (2.2% of sales) comprised dividend income ¥11.0B, FX gains ¥4.3B, interest income ¥1.7B, etc.—largely recurring/stock-like items with high persistence. Special gains ¥23.0B (gain on sale of investment securities ¥15.2B, gain on liquidation of subsidiaries ¥4.6B, gain on business transfers ¥3.1B) accounted for about 14% of Net Income but are one-time. Special losses ¥3.7B (loss on retirement of fixed assets ¥3.1B, impairment losses ¥1.9B, etc.) were also recorded; net special items were +¥19.3B, meaning roughly 12% of Net Income depended on one-offs. Nevertheless, Ordinary Income ¥196.1B substantially exceeded Net Income ¥136.2B, and tax burden ¥61.0B (effective tax rate 28.3%) was appropriate; non-controlling interests -¥0.2B were immaterial, so the improvement at the ordinary level indicates sustainable profitability gains. Operating CF exceeded Net Income by 1.46x, accrual ratio -2.6% and OCF/EBITDA = 0.90x demonstrate strong cash backing and overall high earnings quality. Given limited reproducibility of one-off gains, next year's Net Income will depend on ordinary performance and normalization of financial income.
Full-year guidance: Revenue ¥1,060.0B (YoY +6.0%), Operating Income ¥190.0B (YoY +7.7%), Ordinary Income ¥204.0B (YoY +4.0%), Net Income ¥136.0B (YoY -0.1%), EPS 110.70円, Dividend ¥14. Operating margin is expected at 17.9% (this period 17.6%, +0.3pt), assuming maintained spreads in Basic Chemicals and continued high profitability in Healthcare. Ordinary Income growth being slower than Operating Income (+4.0%) likely reflects an assumption that this period’s elevated non-operating financial income—such as FX gains and higher dividends—will not be repeated. Net Income is flat (-0.1%) because special gains ¥23.0B in this period are expected to drop out; the plan is to offset this with ordinary-level profit improvement. Progress rates are: Revenue (¥999.6B ÷ ¥1,060.0B) = 94.3%, Operating Income (¥176.3B ÷ ¥190.0B) = 92.8%, Ordinary Income (¥196.1B ÷ ¥204.0B) = 96.1% — all tracking well. Forecast Dividend ¥14 implies a Payout Ratio of 12.6% (down from 23.3%), which may reflect adjustment for a year-end stock split. Order backlog and contract liabilities details were not disclosed; segment assumptions rely on sustained demand in Healthcare and Basic Chemicals.
Dividends comprised an interim dividend ¥12 and a year-end dividend ¥16, totaling ¥28 annually, with a Payout Ratio of 23.3% (total dividends ¥27.6B against Net Income ¥136.2B). Prior year dividend was ¥45 (pre-split); on a post-split basis this equates to an annual ¥9, so this represents an effective dividend increase. Total dividends ¥27.6B vs Free Cash Flow ¥145.1B yield coverage of 5.3x; vs Operating CF ¥198.8B coverage is 7.2x, indicating ample capacity to pay. Share buybacks of ¥60.0B were executed (financing CF detail), and total shareholder returns (Dividends ¥27.6B + Share Buybacks ¥60.0B) amounted to ¥87.6B, or 64% of Net Income and 60% of Free Cash Flow. Total Return Ratio 64% strikes a balance between capital efficiency and growth investment. Dividend policy shows a conservative Payout Ratio of 23.3% with flexibility via buybacks. Next year’s forecast Dividend ¥14 (Payout Ratio 12.6% against forecast EPS 110.70円) is lower but likely reflects post-split adjustment and does not necessarily indicate a substantive change in return policy. DOE (Dividend ÷ Equity) is approximately 2.1%, balancing improved capital efficiency and shareholder returns.
Raw material price and spread volatility: The Basic Chemicals segment Operating Income ¥61.9B (35% of consolidated Operating Income) is highly dependent on spread improvements for chlor-alkali products and epichlorohydrin. Increases in raw material costs (salt, electricity, etc.) or declines in product prices could compress spreads and rapidly erode the 14.8% margin. While spread improvement drove a +172.3% recovery in Operating Income this period, the reverse could exacerbate operating leverage and materially impact consolidated Operating Income.
Operating cash flow volatility from working capital retention: With DSO = 97 days and DIO = 60 days, Cash Conversion Cycle is 81 days — long. Accounts Receivable ¥264.7B and Inventory ¥109.9B total ¥374.6B, equivalent to 1.9x Operating CF ¥198.8B. If receivable collections are delayed due to demand shifts or contract changes, Operating CF could decline sharply. Inventory write-downs or increased allowance for doubtful accounts are additional concerns; despite strong balance-sheet health, delayed working capital optimization could cap cash generation.
Valuation volatility of investment securities: Investment securities ¥370.2B (21.9% of total assets) include unrealized gains on securities of ¥175.7B. Market deterioration in equity or bond markets could trigger valuation losses, reducing Net Assets ¥1,285.4B through OCI and lowering Equity Ratio 76.2%. Of Comprehensive Income ¥216.8B, fluctuations in valuation gains on securities ¥62.6B represent a sizable component and could affect next-year Comprehensive Income and ROE.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 17.6% | 7.8% (4.6%–12.3%) | +9.9pt |
| Net Margin | 13.6% | 5.2% (2.3%–8.2%) | +8.5pt |
Profitability materially exceeds industry medians, placing the company in the upper cohort. Improvements were driven by Basic Chemicals spread recovery and high-margin Healthcare.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 3.7% | 3.7% (-0.4%–9.3%) | +0.0pt |
Revenue growth is in line with the industry median and follows broader manufacturing trends.
※Source: Company compilation
Spread improvement in Basic Chemicals and qualitative shift in profitability: Improvement in Operating Margin to 17.6% (from 13.7%, +3.9pt) was driven by a +172.3% recovery in Basic Chemicals Operating Income. Normalization of spreads for chlor-alkali products and epichlorohydrin has transformed the profit structure; guidance assumes Operating Margin will remain high at 17.9% next year. Gross Margin climbed substantially to 33.7% (+3.7pt) due to lower cost ratios, indicating concurrent progress in passing through product prices and stabilization of raw material costs. Healthcare margin remained high at 48.9%, and the favorable segment mix boosted consolidated margins. However, re-escalation of raw material or energy prices or a reversal in product supply-demand could expose downside risk to margins.
Financial soundness and high total return capacity: Equity Ratio 76.2%, D/E 0.09x, Debt/EBITDA 0.34x denote a very conservative capital structure; Interest Coverage 124x indicates minimal interest burden. Free Cash Flow ¥145.1B comfortably covered Dividends ¥27.3B and Share Buybacks ¥60.0B totaling ¥87.3B, and cash on hand increased by ¥54.9B. Cash and Deposits ¥218.6B and short-term securities ¥269.5B yield liquidity ¥488.1B, well above total interest-bearing debt ¥75.6B. Given forecast Dividend ¥14 (post-split adjusted) and room for buybacks, there is scope to increase total returns or accelerate growth investment. The balance sheet exhibits high downside resilience, enabling stable dividends and investment capacity even in downturns.
Dependence on one-off gains and scope to improve working capital efficiency: Of Net Income ¥136.2B, Special Gains ¥23.0B (about 17% of Net Income) such as gains on sale of investment securities and business transfers played a role, indicating one-off dependence. Guidance anticipates flat Net Income (-0.1%) and plans to offset the drop in special gains with ordinary income improvement, but reproducibility of such gains is limited. Working capital shows retention with DSO = 97 days and DIO = 60 days; Cash Conversion Cycle of 81 days is long versus peers. Accounts Receivable ¥264.7B and Inventory ¥109.9B total ¥374.6B (1.9x Operating CF ¥198.8B). Improving working capital efficiency and reducing reliance on one-offs are keys to sustainable EPS and ROE growth.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release 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 made at your own responsibility; please consult a professional advisor as needed.