| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥357.5B | ¥336.4B | +6.3% |
| Operating Income / Operating Profit | ¥34.8B | ¥22.8B | +52.4% |
| Ordinary Income (JGAAP) | ¥32.5B | ¥6.3B | +414.8% |
| Net Income / Net Profit | ¥25.2B | ¥24.9B | +1.3% |
| ROE | 6.5% | 6.5% | - |
FY2026 results recorded Revenue ¥357.5B (YoY +¥21.1B +6.3%), Operating Income ¥34.8B (YoY +¥12.0B +52.4%), Ordinary Income ¥32.5B (YoY +¥26.2B +414.8%), and Net Income ¥25.2B (YoY +¥0.3B +1.3%). The company achieved both revenue and profit growth, but recognition of foreign exchange losses ¥13.2B caused significant volatility at the ordinary income level, with deterioration in non-operating profit and loss weighing on Ordinary Income. Special gains ¥2.8B (primarily gain on sale of available-for-sale securities ¥2.7B) supported Net Income, resulting in final profit roughly in line with the prior year. Operating margin improved to 9.7% (prior year 6.8%) up 2.9pt, and gross margin rose to 28.9% (prior year 24.8%) up 4.1pt, while SG&A ratio increased to 19.2% (prior year 18.0%) up 1.2pt.
[Revenue] Revenue ¥357.5B was up +6.3% YoY and remained solid. The company operates manufacturing and sales of chemical industry products as a single business and does not disclose segment breakdowns; given Cost of Goods Sold ¥254.2B (YoY +0.5%) versus revenue growth +6.3%, it is inferred that price revisions and improved product mix progressed. Gross margin improved to 28.9%, a 4.1pt increase from 24.8% last year, likely reflecting stabilization of raw material costs and a shift toward higher value-added products.
[Profitability] Operating Income ¥34.8B was up +52.4% YoY, with operating margin improving to 9.7% (prior year 6.8%) up 2.9pt. In addition to gross margin improvement, operating leverage from revenue growth absorbed fixed costs. SG&A was ¥68.5B (prior year ¥60.7B), +12.9% increase, outpacing revenue growth of +6.3%, but the significant gross margin improvement absorbed this increase. Ordinary Income ¥32.5B was up +414.8% YoY; however, non-operating profit/loss deteriorated by a net ¥-2.3B (non-operating income ¥9.0B vs. non-operating expenses ¥11.3B). The primary driver was recognition of foreign exchange losses ¥13.2B, partly offset by foreign exchange gains ¥6.1B and equity-method investment income ¥1.1B. Net Income ¥25.2B was essentially flat (+1.3% YoY), supported by special gains ¥2.8B (gain on sale of investment securities ¥2.7B, gain on sale of fixed assets ¥0.1B) while partially offset by special losses ¥0.9B (impairment losses ¥2.3B, loss on retirement of fixed assets ¥0.9B). Income before income taxes was ¥34.4B, with income taxes ¥9.1B (effective tax rate 26.5%) and non-controlling interests ¥0.1B deducted to finalize Net Income. In conclusion, while revenue and operating profit increased, foreign exchange impacts in non-operating items and reliance on one-off special gains limited growth in final profit.
[Profitability] Operating margin was 9.7%, up 2.9pt from 6.8% last year, driven mainly by a 4.1pt improvement in gross margin to 28.9% (prior year 24.8%). Net profit margin was 7.1%, slightly down from 7.4% due to foreign exchange losses and special item effects. ROE was 6.5%, improved 4.3pt from 2.2% last year, primarily driven by improved net profit margin. EPS ¥103.85 was up +218.2% from ¥32.64, showing material improvement in per-share profitability. [Cash Quality] Operating Cash Flow (OCF) was ¥51.6B, 2.05x Net Income ¥25.2B, maintaining high quality, but OCF/EBITDA remained at 0.76x with inventory increase -¥20.4B and trade receivables increase -¥3.7B absorbing working capital. Free Cash Flow (FCF) was ¥36.8B, 71.3% of OCF, solid, but CapEx ¥17.4B vs. depreciation ¥33.2B yields a CapEx/Depreciation ratio of 0.52x, indicating signs of underinvestment in renewals. DIO 226 days, DSO 68 days, CCC 266 days show deterioration in working capital efficiency YoY, notably inventory build-up: Finished goods ¥85.4B and work-in-progress ¥28.7B. [Investment Efficiency] Total asset turnover was 0.534x (prior year 0.519x), slightly improved; financial leverage was 1.71x (prior year 1.68x), slightly increased. BPS ¥1,592.13 (prior year ¥1,565.62) rose +1.7%, reflecting accumulation of equity. [Financial Soundness] Equity Ratio 58.3% decreased 1.1pt from 59.4% but remains high, and Current Ratio 299.6% ensures ample liquidity. Debt/EBITDA 2.39x and Interest Coverage 7.68x are within investment-grade ranges; interest-bearing debt ¥162.6B vs. cash ¥111.4B yields net interest-bearing debt of ¥51.2B, indicating modest financial burden. Cash/Short-term Debt ratio 5.06x shows very strong short-term payment capability and limited maturity mismatch risk.
OCF was ¥51.6B, up +47.4% YoY, demonstrating high cash generation, 2.05x Net Income ¥25.2B. Operating cash flow subtotal ¥59.2B was offset by inventory increase -¥20.4B and trade receivables increase -¥3.7B absorbing working capital, while trade payables increase +¥8.3B partially offset these. After income taxes paid -¥4.4B, OCF was finalized. Investing Cash Flow was -¥14.8B, driven mainly by CapEx -¥17.4B and partially offset by subsidy receipts +¥12.5B. With depreciation ¥33.2B vs. CapEx/Depreciation ratio 0.52x, renewal investment appears insufficient, and machinery/equipment aging rate has reached about 76%. Financing Cash Flow was -¥9.9B, adjusting interest-bearing debt via long-term loan repayments -¥51.9B, short-term borrowings increase +¥19.0B and new long-term borrowings +¥33.0B. Dividends paid -¥6.8B and share buybacks -¥3.2B delivered shareholder returns. FCF (OCF + Investing CF) was ¥36.8B, sufficient to fully cover total dividends and buybacks of ¥9.99B, giving FCF coverage 5.38x and high sustainability of returns. Cash balance increased by +¥22.2B to ¥111.4B, further strengthening liquidity. However, OCF/EBITDA at 0.76x remains low, indicating that working capital efficiency will be key to improving cash conversion going forward.
Operating Income ¥34.8B vs. Ordinary Income ¥32.5B yields net non-operating loss of -¥2.3B, primarily due to foreign exchange losses ¥13.2B. Foreign exchange gains ¥6.1B and equity-method income ¥1.1B partially offset this, but FX volatility impacted earnings quality. Special gains ¥2.8B (gain on sale of investment securities ¥2.7B) are one-off factors and represent about 11% of Net Income ¥25.2B, so ongoing earning power should be evaluated on the operating result base of ¥34.8B. The fact OCF is 2.05x Net Income indicates strong cash realization of earnings, but inventory increase -¥20.4B and trade receivables increase -¥3.7B have accrued and normalization of inventory and receivables turnover will be important for sustaining earnings and stabilizing cash generation. Comprehensive income ¥14.5B is ¥10.7B below Net Income ¥25.2B, mainly due to foreign currency translation adjustments -¥13.6B, reflecting OCI deterioration from translating overseas subsidiaries. The divergence between comprehensive income and net income reflects FX impact and necessitates continuous monitoring of FX risk when assessing earnings quality.
Full Year / FY guidance: Revenue ¥370.0B (YoY +3.5%), Operating Income ¥30.0B (YoY -13.8%), Ordinary Income ¥20.0B (YoY -38.6%), Net Income ¥15.0B, EPS ¥62.12, Dividend ¥15.0. Actual results represent 96.6% progress for Revenue (¥357.5B vs. ¥370.0B), 116.0% for Operating Income (¥34.8B vs. ¥30.0B), 162.5% for Ordinary Income (¥32.5B vs. ¥20.0B), and 168.0% for Net Income (¥25.2B vs. ¥15.0B) — substantially exceeding profit guidance. The company’s guidance anticipated year-on-year decreases in Operating Income and Ordinary Income, but actual results achieved substantial increases (Operating Income +52.4%, Ordinary Income +414.8%), indicating the guidance was set conservatively. The guidance likely reflects prudence given one-off special gains ¥2.8B (gain on sale of securities ¥2.7B) and FX volatility. While the company forecast Dividend ¥15.0, it paid interim dividend ¥14.0 and year-end dividend ¥14.0 for a total of ¥28.0, delivering shareholder returns well above the forecast. Going forward, FX impacts and progress on inventory adjustments are key variables to monitor for potential upside to the full-year forecast.
Annual dividend was ¥28.0 (interim ¥14.0, year-end ¥14.0), resulting in a Payout Ratio of 79.7% relative to Net Income ¥25.2B, a high level. However, calculated on an EPS ¥103.85 basis, a per-share dividend of ¥28.0 corresponds to an approximate payout ratio of 27.0%. With FCF ¥36.8B vs. total dividends ¥6.8B, FCF coverage is 5.38x, indicating very high sustainability of dividends. Share buybacks amounted to ¥3.2B; combined with dividends, Total Return Ratio is approximately 40%, and returns were executed within FCF. With cash ¥111.4B and stable OCF ¥51.6B, dividend sustainability is assessed as high. Next fiscal year dividend guidance is ¥15.0; on company-forecast EPS ¥62.12 this implies a payout ratio of about 24%, a conservative level. Given past dividend increases (from ¥12.0 last year to ¥28.0 this year, +133% increase), the company appears willing to increase dividends linked to performance, leaving room for additional returns as earnings improve.
Risk of deteriorating working capital efficiency and declining cash conversion: DIO 226 days, DSO 68 days, CCC 266 days indicate notable inventory and receivables accumulation, particularly Finished Goods ¥85.4B and Work-in-Progress ¥28.7B. OCF/EBITDA 0.76x is low; prolonged inventory correction or deterioration in collection terms could suppress cash generation efficiency and limit ROE growth. Failure to normalize working capital could impact future investment capacity and shareholder return ability.
Risk of volatility in non-operating profit/loss from FX fluctuations and resulting earnings instability: The company recorded foreign exchange losses ¥13.2B this period, an adverse effect equivalent to about 38% of Operating Income ¥34.8B. FX impact relative to Operating Income reached -20.3%, increasing earnings volatility. Comprehensive income ¥14.5B well below Net Income ¥25.2B, driven by foreign currency translation adjustments -¥13.6B; insufficient hedging of overseas operations could perpetuate short-term profit swings.
Risk of competitive deterioration from equipment aging and underinvestment in renewals: CapEx/Depreciation ratio 0.52x shows renewal investment substantially below depreciation, with machinery aging rate around 76%. CapEx ¥17.4B (4.9% of sales) is at a standard level but insufficient relative to Depreciation ¥33.2B. This raises risks of higher maintenance costs, declines in quality/yield, and worsening energy efficiency. To maintain medium-term productivity and competitiveness, advancing equipment renewal and increasing investment intensity will be needed.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 9.7% | 7.8% (4.6%–12.3%) | +2.0pt |
| Net Profit Margin | 7.1% | 5.2% (2.3%–8.2%) | +1.9pt |
Operating margin exceeds the median by 2.0pt, placing the company in the upper range within the industry and indicating solid profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 6.3% | 3.7% (-0.4%–9.3%) | +2.6pt |
Revenue growth exceeds the median by 2.6pt, indicating mid-to-upper-range growth within the industry.
※ Source: Company compilation
Core business profitability has materially improved: operating margin expanded to 9.7% (prior 6.8%) up 2.9pt and gross margin improved to 28.9% (prior 24.8%) up 4.1pt. Effects of price revisions and product mix improvements have become apparent, strengthening competitiveness at the operating level. However, recognition of foreign exchange losses ¥13.2B created volatility at the ordinary income level, so optimizing FX hedging and currency strategies is important for earnings stability.
Deterioration in working capital efficiency is hindering cash conversion: DIO 226 days and CCC 266 days show notable inventory and receivables backlog. OCF/EBITDA 0.76x is low relative to peers; if inventory turnover normalizes, OCF/EBITDA could improve toward about 0.9x. Improving working capital efficiency is a near-term KPI and a catalyst for stronger cash generation and ROE improvement.
Continued underinvestment for renewals with CapEx/Depreciation 0.52x and machinery aging ~76% poses a medium-term risk to competitiveness. However, financial soundness is strong (Debt/EBITDA 2.39x, Current Ratio 300%) and FCF ¥36.8B provides ample cash generation, suggesting financial capacity exists to accelerate equipment renewal and increase investment intensity. The company’s CapEx policy and renewal schedule going forward will be critical to sustaining revenue growth and quality competitiveness.
This report is an earnings analysis document automatically generated by AI from 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 from public financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.