| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥401.8B | ¥388.4B | +3.4% |
| Operating Income / Operating Profit | ¥24.1B | ¥33.4B | -27.7% |
| Ordinary Income | ¥23.8B | ¥32.0B | -25.8% |
| Net Income / Net Profit | ¥27.4B | ¥25.5B | +7.4% |
| ROE | 5.4% | 5.5% | - |
For the fiscal year ended March 2026, Revenue was ¥401.8B (YoY +¥13.4B +3.4%), Operating Income was ¥24.1B (YoY -¥9.3B -27.7%), Ordinary Income was ¥23.8B (YoY -¥8.2B -25.8%), and Net Income was ¥27.4B (YoY +¥1.9B +7.4%). The company experienced revenue growth but profit decline. Revenue expansion was driven by the Functional Products Business (¥188.8B → ¥210.1B), but gross margin deteriorated from 22.5% to 19.9% (-2.6pt) and operating margin fell from 8.6% to 6.0% (-2.6pt). Net Income exceeded prior year due to special gains of ¥15.3B including Investment Securities Sale Gain ¥10.3B and Fixed Assets Sale Gain ¥5.0B. The sharp decline in Functional Products operating income from ¥12.1B to ¥5.1B pressured corporate profitability, and the Chemicals Business also saw margin decline. Operating Cash Flow (OCF) remained robust at ¥53.7B (-15.7%), and OCF/Net Income was 1.96x, indicating good cash backing, but working capital efficiency weakened due to increases in trade receivables and slower inventory turnover.
[Revenue] Revenue increased to ¥401.8B (+3.4%). By segment, Functional Products was the driver at ¥210.1B (+11.3%, double-digit growth), while Chemicals was ¥179.2B (-2.0%) and Leasing was ¥9.4B (+2.1%), roughly flat. Growth in Functional Products was supported by strong demand for electronic ceramic materials and battery/electronic device materials, but price competition and mix changes pressured profitability. Chemicals was affected by lower sales of chrome and silica products, so quantity-driven revenue gains were limited.
[Profitability] Cost of Sales rose to ¥321.8B (+10.7%), outpacing revenue growth, shrinking Gross Profit to ¥80.0B (-8.6%) and worsening Gross Margin from 22.5% to 19.9% (-2.6pt). The main causes are higher raw material and energy costs, product-mix shifts, and delayed pass-through of price increases. SG&A increased to ¥55.8B (+3.2%), SG&A ratio remained 13.9% (prior year 13.9%), but reduced gross profit led Operating Income to decline sharply to ¥24.1B (-27.7%), and Operating Margin fell to 6.0% (prior year 8.6%). By segment, Functional Products Operating Income halved from ¥12.1B to ¥5.1B and margin fell from 6.4% to 2.4%, the primary driver of corporate margin deterioration. Chemicals margin also declined from 8.4% to 7.1%, while Leasing maintained a stable high margin of 57.7% (prior year 57.5%). Non-operating income included Interest and Dividend Income ¥1.5B, while Interest Expense increased to ¥1.7B (prior year ¥1.2B), and net non-operating loss moved from income ¥2.9B to expense ¥3.3B, resulting in net non-operating loss of -¥0.4B. Special gains totaled ¥15.3B (Investment Securities Sale Gain ¥10.3B, Fixed Assets Sale Gain ¥5.0B), while special losses were limited to ¥2.7B (impairment losses ¥0.3B, loss on retirement of fixed assets ¥2.1B). Profit before tax was ¥36.3B (+10.1%), and after income taxes ¥7.4B, Net Income was ¥27.4B (+7.4%), reflecting temporary gains. In summary, revenue rose but operating profit fell: deterioration in Functional Products profitability and lower gross margins substantially depressed operating profitability, while one-off asset sale gains supported Net Income.
Chemicals: Revenue ¥179.2B (-2.0%), Operating Income ¥12.8B (-16.9%), Margin 7.1% (prior year 8.4%) — lower demand for chrome and silica products and rising costs pressured profitability.
Functional Products: Revenue ¥210.1B (+11.3%) with double-digit growth, but Operating Income plunged to ¥5.1B (-57.7%), margin fell from 6.4% to 2.4% (-4.0pt). Despite higher sales of electronic ceramic materials and battery/electronic device materials, intensified price competition, mix changes, and start-up costs appear to have hurt margins.
Leasing: Revenue ¥9.4B (+2.1%), Operating Income ¥5.6B (+2.6%), Margin 57.7% (prior year 57.5%) — stable high profitability; stable real estate leasing management partially supported corporate profit.
Other segments (environmental measurement, etc.): Revenue ¥3.2B (-47.3%), Operating Income ¥0.3B (+3.2%) — minor impact on corporate results. Overall, the sharp deterioration in Functional Products profitability was the largest factor in operating profit decline, compounded by Chemicals' weaker profitability.
[Profitability] Operating Margin declined to 6.0% (prior year 8.6%), down 2.6pt; Gross Margin worsened to 19.9% (prior year 22.5%), down 2.6pt. ROE was 5.4%, slightly down from prior year 5.6%, well below the benchmark 8%. Net Profit Margin improved slightly to 6.8% (prior year 6.6%) but this reflects one-off special gains of ¥15.3B; on an Ordinary Income basis, profitability retreated.
[Cash Quality] OCF/Net Income was 1.96x, indicating strong cash backing. EBITDA (Operating Income + Depreciation) was ¥61.5B, and Operating Cash Flow / EBITDA was 0.87x, slightly below 0.9x, with working capital congestion constraining cash conversion. Days Sales Outstanding (DSO) was 96 days, Days Inventory Outstanding (DIO) 125 days, Days Payable Outstanding (DPO) 37 days, resulting in a Cash Conversion Cycle (CCC) of 184 days, showing a lengthening trend and room for improvement.
[Investment Efficiency] Total Asset Turnover was 0.512x, a low level, and Return on Assets (ROA) based on Ordinary Income was 3.1%. Capital expenditures were ¥49.0B, depreciation ¥37.4B, giving a CapEx/Depreciation ratio of 1.31x, indicating continued capacity expansion and renewal.
[Financial Soundness] Equity Ratio was 64.1% (prior year 61.8%), improved and at a healthy level. Interest-bearing debt was ¥144.0B (short-term borrowings ¥102.8B, long-term borrowings ¥41.2B), Debt/EBITDA was 2.34x, within investment-grade range. Interest Coverage was 14.2x (Operating Income / Interest Expense), indicating strong ability to service interest. However, the short-term debt ratio is high at 71.4%, indicating reliance on short-term borrowings and a need to monitor refinancing risk. Current Ratio was 159.2%, Quick Ratio 139.3%, indicating generally good short-term liquidity, but Cash / Short-term Debt ratio was 0.79x, suggesting further liquidity buffers would be desirable.
OCF was ¥53.7B (prior year ¥63.7B, -15.7%), a decline but still robust at 1.96x of Net Income ¥27.4B. Subtotal (Profit before tax + non-cash adjustments) was ¥58.2B, reflecting Depreciation ¥37.4B and adjustments such as Investment Securities Sale Gain -¥10.3B. Working capital changes included an increase in Trade Receivables -¥11.3B (collection delays), decrease in Inventories +¥13.3B (inventory reduction), and decrease in Trade Payables -¥4.4B (higher payments), with receivables and payables pressuring OCF. After corporate tax payments of ¥4.6B, OCF totaled ¥53.7B.
Investing Cash Flow was -¥33.6B, driven by CapEx -¥49.0B. This was partially offset by Fixed Assets Sale proceeds ¥8.0B, Investment Securities Sale ¥11.4B, and net change in time deposits +¥4.5B. Free Cash Flow was ¥20.1B (OCF ¥53.7B - Investing CF ¥33.6B), sufficient to cover shareholder returns (Dividends ¥9.2B, Share Buybacks ¥2.6B). Financing Cash Flow was -¥18.7B, reflecting Dividends ¥9.2B, Share Buybacks ¥2.6B, net increase in short-term borrowings ¥2.0B, long-term borrowings repayment -¥28.8B, and long-term borrowing proceeds +¥20.0B. Cash and Cash Equivalents increased from ¥76.3B at the beginning of the period to ¥77.8B at the end (+¥1.6B), maintaining a certain level of liquidity.
CapEx/Depreciation ratio of 1.31x is appropriate for renewal and expansion investments and reflects a stance toward mid-term production efficiency improvements. However, working capital congestion (CCC 184 days) constrains OCF growth; accelerating receivables collection and improving inventory turnover are key challenges.
Of Net Income ¥27.4B, ¥15.3B (Investment Securities Sale Gain ¥10.3B, Fixed Assets Sale Gain ¥5.0B, etc.) — about 56% — were special gains, indicating high reliance on one-off items. Ordinary Income was ¥23.8B (prior year ¥32.0B, -25.8%), indicating core business profitability declined. Non-operating income ¥2.9B includes Interest and Dividend Income ¥1.5B, providing a steady income source, but Non-operating expenses ¥3.3B (Interest Expense ¥1.7B, Fees ¥0.5B, etc.) increased, leaving net non-operating loss of -¥0.4B. Comprehensive Income was ¥50.7B, well above Net Income, as Other Comprehensive Income of ¥21.8B (Foreign Currency Translation Adjustment ¥0.4B, Securities Valuation Difference ¥4.8B, Retirement Benefit-related Adjustments ¥16.6B) added to Net Income. The ¥16.6B retirement benefit adjustment stemmed from valuation gains in defined benefit assets (net assets base +¥28.7B), reflecting higher market value of pension assets. From an accrual perspective, OCF ¥53.7B exceeded Net Income ¥27.4B (OCF/NI = 1.96x), indicating good cash backing of profits. However, increases in receivables and decreases in payables have pressured operating cash flow, creating timing mismatches between income recognition and cash collection. Excluding one-off items, ordinary profitability is below the prior year, and the sustainability of Net Income will depend on the reversal of special gains and the recovery of core profitability.
For FY ending March 2027, the company forecasts Revenue ¥408.0B (+1.5%), Operating Income ¥28.0B (+15.9%), Ordinary Income ¥27.0B (+13.7%), and Net Income ¥30.0B (+9.5%). This assumes Operating Margin improving to 6.9% (this period 6.0%), which is achievable if Gross Margin recovers and profitability in Functional Products is restored. Progress rates at the end of the first half are Revenue 98.5%, Operating Income 86.1%, Ordinary Income 88.0%, indicating generally steady progress. However, the rebound from special gains of ¥15.3B in the current fiscal year and the degree of price pass-through and cost improvement will be key to achieving targets. The company appears to be implementing price revisions and productivity measures, but external factors (raw material prices, FX, demand trends) could cause downside risk. Dividend guidance is an interim ¥60 and final dividend undecided; the company likely will determine the final dividend after assessing performance progress.
Annual dividend was ¥120 per share (interim ¥60, year-end ¥60), with total dividends ¥9.2B (prior year ¥8.1B, +13.6%). Payout Ratio was 31.7% (based on Net Income), within a sustainable range. Dividend coverage relative to Free Cash Flow ¥20.1B is approximately 2.18x, indicating ample capacity. Total buybacks of ¥2.6B plus dividends gave total shareholder returns of ¥11.8B, about 58.6% of FCF. Total Return Ratio (dividends + buybacks) was approximately 41.1%, reflecting a balanced shareholder return stance. DOE (Dividend on Equity) was about 1.8%, indicating a focus on stable dividends. Share buybacks of ¥2.6B (prior year ¥2.4B) were continued to improve capital efficiency and shareholder value. For FY March 2027, dividend guidance is interim ¥60 and final undecided (full-year ¥120 may be maintained), with the final decision to be made after assessing performance. Given solid FCF generation and comfortable payout and total return ratios, sustaining current dividend levels appears feasible.
Continued deterioration in Functional Products profitability: Operating Income halved from ¥12.1B to ¥5.1B and margin fell to 2.4%. While demand for electronic ceramic materials and battery/electronic device materials remains solid, intensified price competition, product-mix shifts, and start-up costs are pressuring margins. Functional Products accounts for over half of revenue, so delayed margin recovery could materially affect corporate performance.
Gross margin decline and price pass-through risk: Gross Margin fell from 22.5% to 19.9% (-2.6pt) due to higher raw material and energy costs, mix shifts, and delayed price pass-through. The chemicals industry is sensitive to raw material price volatility; if commodity prices rise further, margin pressure could persist. Progress in price revision negotiations and customer contract terms will be key.
Short-term funding dependence and interest rate risk: Of interest-bearing debt ¥144.0B, short-term borrowings are ¥102.8B (71.4%), indicating high refinancing sensitivity. Interest expense increased from ¥1.2B to ¥1.7B, and in a rising-rate environment interest burden may grow. Although Interest Coverage is 14.2x, extending maturities of short-term debt and securing liquidity are prerequisites for financial stability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.0% | 7.8% (4.6%–12.3%) | -1.7pt |
| Net Profit Margin | 6.8% | 5.2% (2.3%–8.2%) | +1.6pt |
Operating Margin is 1.7pt below the industry median 7.8%, reflecting gross margin deterioration and lower Functional Products profitability. Net Profit Margin is 1.6pt above the industry median 5.2%, but this is due to special gains of ¥15.3B; on an ongoing basis, profitability is below industry levels.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 3.4% | 3.7% (-0.4%–9.3%) | -0.3pt |
Revenue growth is broadly in line with the industry median 3.7%, driven by Functional Products growth offsetting Chemicals decline. The company’s industry position is mid-tier.
※ Source: Company aggregation
Restoring Functional Products profitability is the top priority: Operating Income dropped to less than half year-on-year, dragging down corporate margins. Although demand for electronic ceramic materials and battery/electronic device materials is solid, price competition and mix changes have severely degraded profitability. The company appears to be pursuing price revisions and cost reductions; the +15.9% Operating Income forecast for FY March 2027 incorporates expected effects of these measures. Quarterly gross margin and segment margin trends will be key to tracking recovery pace.
Dependence on one-off gains and assessment of sustainability: Of Net Income ¥27.4B, about 56% were special gains ¥15.3B (Investment Securities Sale Gain ¥10.3B, Fixed Assets Sale Gain ¥5.0B, etc.), while Ordinary Income declined -25.8% YoY. A reversal of special gains is expected next year, so sustainability of Net Income depends on core business recovery. Comprehensive Income ¥50.7B includes a retirement benefit adjustment ¥16.6B that lifted shareholders' equity via pension asset valuation gains, but this is also a one-off. Improving operating profitability and maintaining cash generation are prerequisites for sustainable enterprise value growth.
Working capital efficiency and short-term debt management need improvement: CCC 184 days (DSO 96, DIO 125, DPO 37) is prolonged; improving receivables collection and inventory turnover is key to boosting OCF. Short-term borrowings ratio 71.4% is high, so refinancing risk should be monitored, though Interest Coverage 14.2x and Current Ratio 159.2% indicate sufficient financial safety. CapEx ¥49.0B and CapEx/Depreciation 1.31x show continued investment in capacity expansion and renewal, which should help mid-term production efficiency and cost reduction. FCF ¥20.1B covers dividends and buybacks, supporting the sustainability of shareholder returns.
This report was automatically generated by AI 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 based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.