| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥814.5B | ¥844.1B | -3.5% |
| Operating Income | ¥64.5B | ¥60.9B | +5.9% |
| Ordinary Income | ¥65.5B | ¥62.8B | +4.2% |
| Net Income | ¥28.8B | ¥51.5B | -44.1% |
| ROE | 3.6% | 6.5% | - |
For the fiscal year ended March 2026, Revenue was ¥814.5B (¥-29.6B year-on-year, -3.5%), Operating Income was ¥64.5B (¥+3.6B, +5.9%), Ordinary Income was ¥65.5B (¥+2.7B, +4.2%), and Net Income was ¥28.8B (¥-22.7B, -44.1%). Despite a decline in sales, operating profit increased; however, Net Income fell sharply due to an impairment loss of ¥29.8B in the Cosmetics Materials segment. Revenue was weighed down by weaker demand for Titanium Oxide & Zinc products (-22.0%), Resin Additives (-11.9%), and Cosmetics Materials (-35.7%), partially offset by growth in Electronic Materials (+13.6%) and Catalysts (+10.5%). Operating margin improved to 7.9% (up 0.7pt from 7.2% a year earlier), supported by a gross margin improvement to 25.4% (up 1.4pt) and contributions from higher-margin segments. Special losses of ¥36.4B (impairment loss ¥29.8B, disposal of fixed assets ¥2.5B) reduced profit before tax to ¥45.1B, pushing Net Income margin down to 3.4%. Operating Cash Flow was strong at ¥144.8B (+20.6%), aided by non-cash impairment charges and working capital improvements.
[Revenue] Consolidated Revenue of ¥814.5B was down 3.5% year-on-year. By segment, Electronic Materials ¥113.8B (+13.6%) drove growth, supported by rising demand for high-purity dielectric materials. Catalysts ¥35.6B (+10.5%), Organic Chemicals ¥72.0B (+7.9%), and Contract Manufacturing ¥69.5B (+3.2%) also secured revenue gains. Conversely, Titanium Oxide & Zinc products ¥105.1B (-22.0%) suffered from weak market conditions; Cosmetics Materials ¥17.2B (-35.7%) was affected by demand decline and inventory adjustments in the cosmetics industry. Resin Additives ¥115.2B (-11.9%) and Inorganic Materials ¥60.0B (-11.2%) declined due to stagnation in customer industries. Medical ¥83.9B (-1.5%) and Hygiene Materials ¥53.5B (-4.8%) saw only slight decreases. By region, Japan ¥673.1B accounted for 82.6% of sales, while Asia ¥109.9B (-13.2%) contracted year-on-year despite being the main export market.
[Profitability] Cost of sales was ¥607.4B (cost ratio 74.6%), yielding gross profit of ¥207.0B and a gross margin of 25.4%, up 1.4pt from 24.0% a year earlier. Optimization of product mix and expansion of high-margin segments (Electronic Materials margin 16.0%, Inorganic Materials 20.0%, Catalysts 18.2%) contributed. SG&A was ¥142.5B (SG&A ratio 17.5%, up 0.7pt from 16.8% a year earlier) and included ¥1.1B of goodwill amortization; allocation of ¥25.0B of corporate expenses produced adjusted Operating Income of ¥64.5B (+5.9%). Operating margin improved to 7.9% (up 0.7pt from 7.2%), reflecting cost control and a shift toward higher-profit areas despite revenue decline. Non-operating items included dividend income ¥2.2B and foreign exchange gains ¥0.9B, while interest expense was restrained at ¥1.6B. Ordinary Income was ¥65.5B (+4.2%). Extraordinary items comprised Special Income ¥16.0B (primarily gain on sale of fixed assets ¥14.9B) versus Special Losses ¥36.4B (impairment loss ¥29.8B, disposal of fixed assets ¥2.5B), netting to -¥20.4B. Profit before tax was ¥45.1B, down 24.6% from ¥59.7B a year earlier. After income taxes ¥16.3B and non-controlling interests ¥1.2B, Net Income attributable to owners was ¥27.5B, a large decline of 45.1% from ¥50.1B. Although operating profit grew amid revenue decline, impairment in the Cosmetics Materials segment turned the result into lower revenue and profit.
The largest contributor to Operating Income was Electronic Materials at ¥18.2B (margin 16.0%), posting revenue +13.6% and profit +21.6%. Inorganic Materials recorded revenue -11.2% but Operating Income of ¥12.0B (+45.3%) with a margin at a high 20.0%. Catalysts recovered sharply to Operating Income ¥6.5B from ¥0.2B a year earlier (+3500.0%), with a high margin of 18.2%. Titanium Oxide & Zinc products reported Operating Income ¥12.2B (-17.4%) with margin 11.6%. Contract Manufacturing posted Operating Income ¥8.1B (+29.8%) with margin 11.6%. Resin Additives ¥10.7B (-23.3%), Organic Chemicals ¥7.2B (-6.4%), and Hygiene Materials ¥4.6B (+7.0%) were steady. In contrast, Cosmetics Materials recorded an Operating Loss of ¥4.4B (turning from a ¥2.9B profit the prior year) with margin -25.4%; the majority of the ¥29.8B impairment was recognized in this segment and it is targeted for structural reform. Medical recorded an Operating Loss of ¥0.5B (prior year -¥0.2B), widening the loss. While the portfolio is shifting toward higher-margin Electronic Materials, Inorganic, and Catalysts, immediate priorities include restoring profitability in Cosmetics Materials and Medical.
[Profitability] Operating margin of 7.9% improved 0.7pt from 7.2%. Gross margin of 25.4% rose 1.4pt, reflecting contributions from higher-margin segments and cost control. Net Income margin declined to 3.4% from 6.0% (down 2.6pt) mainly due to the ¥29.8B impairment. ROE of 3.6% fell from 6.6%, as the one-off compression of Net Income reduced capital efficiency. [Cash Quality] Operating Cash Flow / Net Income was 5.03x, temporarily elevated by the non-cash impairment and working capital improvements. Free Cash Flow was ¥98.3B, after deducting ¥60.7B of capital expenditures from Operating Cash Flow ¥144.8B. Accrual ratio stood at -10.0%, indicating a cash-led earnings profile. [Investment Efficiency] Total asset turnover was 0.69x (prior 0.68x), a slight increase. Inventory turnover days were 143 days and accounts receivable days 94 days, indicating signs of longer-held balances. CCC was 185 days, suggesting slower working capital turnover. [Financial Soundness] Equity Ratio was 67.3% and debt-to-equity ratio 0.49x, indicating conservatism. Current ratio was 258.6% and quick ratio 198.3%, showing very strong short-term liquidity. Debt/EBITDA was 1.28x and interest coverage 39.8x, indicating ample financial capacity. Short-term debt ratio 64.3% shows concentration in short-term borrowings, but Cash/Short-term Debt at 1.85x indicates healthy liquidity.
Operating Cash Flow of ¥144.8B increased 20.6% from ¥120.1B a year earlier and is 5.03x Net Income of ¥28.8B, an exceptionally high level. The main drivers were the non-cash impairment of ¥29.8B and working capital improvements: inventories decreased ¥31.2B and accounts receivable decreased ¥20.2B. Including depreciation ¥37.4B, the operating cash subtotal was ¥157.0B, and after paying corporate taxes of ¥14.6B, the level remained strong. Investing Cash Flow was -¥46.5B, led by capital expenditures of ¥60.7B. Proceeds from sale of tangible fixed assets ¥16.4B partially offset this, resulting in a net outflow narrower than the prior year’s -¥57.1B. Free Cash Flow ¥98.3B covers dividends of ¥21.9B by 4.5x, and covers dividend + capex of ¥82.6B by 1.19x. Financing Cash Flow was -¥105.9B, including short-term borrowings repayment -¥23.4B and long-term borrowings repayment -¥43.7B as the company reduced debt, and repurchases of treasury stock ¥25.0B plus dividends ¥21.9B. Cash and deposits were ¥155.0B, down ¥6.8B from ¥161.8B the prior year, used for total returns and deleveraging. OCF/EBITDA was 1.42x, indicating stable cash generation.
Ordinary Income of ¥65.5B versus Net Income of ¥28.8B shows a divergence rate of -56.0%, largely due to Special Losses of ¥36.4B. The breakdown centers on impairment loss ¥29.8B and disposal of fixed assets ¥2.5B, both one-time charges related to structural weakness in the Cosmetics Materials segment. Special Income of ¥16.0B (primarily gain on sale of fixed assets ¥14.9B) partially offset losses, but net special items amounted to -¥20.4B. Non-operating income ¥4.9B was mainly dividend income ¥2.2B and foreign exchange gains ¥0.9B, representing 0.6% of Revenue and not an excessive dependence. Operating Cash Flow / Net Income at 5.03x was temporarily elevated by non-cash impairment add-backs; the accrual ratio of -10.0% reflects the same effect. One-off items / Net Income was 171.7%, indicating earnings quality is significantly affected by transient items. The recurring earnings base (Operating Income and non-operating items) remains stable, implying considerable scope for Net Income normalization in the next fiscal year if impairments do not recur. Comprehensive Income of ¥42.0B exceeded Net Income of ¥28.8B, supported by ¥8.0B in valuation differences on available-for-sale securities and ¥4.2B in retirement benefit adjustments.
Against full-year guidance (Revenue ¥817.0B, Operating Income ¥60.0B, Ordinary Income ¥61.0B, Net Income ¥44.0B), actual results were Revenue ¥814.5B (Progress 99.7%), Operating Income ¥64.5B (107.5%), Ordinary Income ¥65.5B (107.4%), and Net Income ¥27.5B (62.5%). Operating and Ordinary exceeded guidance, with management covering top-line decline through higher-margin mix and expense control. Net Income fell well short of guidance due to the one-off impairment loss of ¥29.8B. Assuming the impairment does not recur, there is significant upside for Net Income next year; EPS guidance of ¥282.00 versus actual ¥176.42 reflects the same factor. The outperformance in Operating and Ordinary results demonstrates management efforts, while the Net Income shortfall reflects realized costs of portfolio correction.
The company paid an annual dividend of ¥145 (interim ¥65, year-end ¥80), representing a payout ratio of 43.7%. Total dividends of ¥21.9B against Net Income of ¥28.8B imply the payout ratio is based on EPS of ¥176.42. Operating Cash Flow ¥144.8B and Free Cash Flow ¥98.3B comfortably cover dividends (FCF/Dividend 4.5x), indicating high cash sustainability. Total returns including share buybacks (¥25.0B in Financing Cash Flow) amounted to ¥46.9B, which is covered 2.1x by FCF. The Total Return Ratio based on Net Income is 162.8%, appearing high, but this is driven by Net Income being temporarily depressed by impairment. On an Operating Cash Flow basis, total returns are 32.4%, a healthy level. Dividend + capital expenditure of ¥82.6B is covered by FCF 1.19x, supporting the coexistence of growth investments and shareholder returns. Shares outstanding were 16.00M, treasury shares 0.689M, and the average shares during the period were 15.603M, with buybacks contributing to improved capital efficiency.
Structural deterioration risk in the Cosmetics Materials segment: Revenue ¥17.2B (-35.7%), Operating Loss ¥4.4B (margin -25.4%), and recognition of an impairment loss ¥29.8B. If market contraction and profitability weakness persist, further impairments or business withdrawal/sale may be required, causing volatility in consolidated earnings. Delayed demand recovery in the cosmetics industry and prolonged customer inventory adjustments would amplify this risk.
Risk of prolonged working capital turnover: Inventory turnover days 143, accounts receivable days 94, and CCC 185 show expanded balances. Working capital expansion would slow the growth of Operating Cash Flow and squeeze funds available for growth investments and shareholder returns. Continued soft demand in customer industries, lax credit control, or delays in inventory optimization could deteriorate cash conversion efficiency and pressure ROE.
Refinancing risk from concentration of short-term borrowings: Short-term debt ratio 64.3% (short-term borrowings ¥83.6B, long-term borrowings ¥46.4B) indicates reliance on short-term borrowings, which could expose the company to higher costs or refinancing risk in a rising interest rate environment. While Cash/Short-term Debt of 1.85x mitigates this, a slowdown in Operating Cash Flow generation or simultaneous unexpected cash demands could reduce financial flexibility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.9% | 7.8% (4.6%–12.3%) | +0.2pt |
| Net Income Margin | 3.5% | 5.2% (2.3%–8.2%) | -1.7pt |
Operating margin is in line with the industry median, reflecting effective cost control and higher-margin mix. Net Income margin is below the median due to one-off impairment, but there is substantial room for rebound next year.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -3.5% | 3.7% (-0.4%–9.3%) | -7.2pt |
Revenue growth lags the industry median, driven by weak market conditions in Titanium Oxide and Cosmetics Materials. Recovery in Electronic Materials and Catalysts will be key to top-line recovery.
※Source: Company compilation
Note the significant scope for Net Income recovery next fiscal year if the one-off impairment does not recur. Operating and Ordinary results exceeded guidance, confirming stability of recurring earnings. Progress in structural reform of Cosmetics Materials (business withdrawal, sale, or margin restoration) will be a trigger for margin recovery and improved capital efficiency from next fiscal year onward.
Resource allocation is shifting toward high-margin segments (Electronic Materials margin 16.0%, Inorganic Materials 20.0%, Catalysts 18.2%), and portfolio optimization gains are reflected in the +0.7pt improvement in Operating margin. Future capital allocation and order trends are key to sustaining margin improvements. Execution of working capital improvement measures (inventory reduction, stricter credit control) is essential to lift ROE and FCF generation.
This report was automatically generated by AI analyzing XBRL earnings disclosure 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 own responsibility; consult a professional advisor as needed.