| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥198.7B | ¥168.1B | +18.2% |
| Operating Income / Operating Profit | ¥42.4B | ¥30.4B | +39.6% |
| Ordinary Income | ¥45.2B | ¥28.1B | +60.8% |
| Net Income / Net Profit | ¥30.5B | ¥19.6B | +55.4% |
| ROE | 3.1% | 2.1% | - |
FY2026 Q1 delivered revenue ¥198.7B (YoY +¥30.6B +18.2%), Operating Income ¥42.4B (YoY +¥12.0B +39.6%), Ordinary Income ¥45.2B (YoY +¥17.1B +60.8%), and Net Income ¥30.5B (YoY +¥10.9B +55.4%), achieving top-line growth with operating-and-below profit growth substantially outpacing revenue growth. Revenue growth was driven by the Chemicals Business (Revenue ¥146.1B +26.1%), supported by expansion of fine chemical products and consolidation effects from subsidiaries such as PT Timuraya Tunggal. On the profit side, gross margin improved to 46.8% (prior 44.9% +1.9pt), Operating Margin to 21.3% (prior 18.1% +3.2pt), and Net Margin to 15.4% (prior 11.7% +3.7pt), while SG&A ratio declined to 25.5% (prior 26.8% -1.3pt). Non-operating items included interest income ¥1.7B and foreign exchange gains ¥1.9B, offset by foreign exchange losses ¥3.5B, resulting in a net non-operating impact of -¥1.6B; nonetheless Ordinary Income rose 60.8% driven by strong operating profit growth. EPS rose sharply to ¥70.33 (prior ¥43.08 +63.3%). Progress toward the full-year plan stood at Revenue 22.6%, Operating Income 29.4%, Ordinary Income 31.2%, and Net Income 30.5%, with profit items exceeding the standard 25% quarterly benchmark, suggesting sustained margin improvement or first-half weighting.
[Revenue] Revenue ¥198.7B (+18.2%) was driven by the core Chemicals Business with Revenue ¥146.1B (+26.1%). Within Chemicals, inorganic chemical products amounted to ¥39.2B, organic chemical products ¥44.5B, and fine chemicals ¥62.4B, with fine chemicals expanding significantly YoY (+56.5%). The Building Materials Business recorded Revenue ¥50.0B (+1.7%), a slight increase led by Exterior ¥44.2B and Wall Materials ¥5.8B. Other businesses declined to ¥3.3B (-13.7%). The consolidation of PT Timuraya Tunggal and PT Pradipa Persada as subsidiaries during Q1 increased Chemical segment assets by ¥74.6B and recognized goodwill ¥20.6B, with the enlarged consolidation scope underpinning revenue growth. While product-level disclosure is limited, the substantial expansion in Fine Chemicals suggests increasing demand for higher value-added products and broader sales channels.
[Profitability] Gross margin improved to 46.8% (prior 44.9% +1.9pt), and gross profit rose to ¥93.0B (+23.3%), outpacing revenue growth. Cost of sales increased to ¥105.7B (+14.1%), a lower rate than revenue growth, reflecting stable raw material prices and a shift to higher value-added product mix that boosted gross margin. SG&A amounted to ¥50.6B (+12.3%), reducing SG&A ratio to 25.5% (prior 26.8% -1.3pt), and included advertising expenses ¥2.5B and R&D ¥5.5B (2.8% of sales). SG&A growth lagged revenue growth, enabling favorable operating leverage and resulting in Operating Income ¥42.4B (+39.6%) and Operating Margin 21.3% (prior 18.1% +3.2pt). Non-operating items netted +¥2.8B (prior -¥2.3B), including interest income ¥1.7B, foreign exchange gains ¥1.9B, and dividend income ¥0.5B, partially offset by foreign exchange losses ¥3.5B and interest expenses ¥1.5B. Net FX impact was -¥1.6B, but increased interest income helped turn non-operating items positive. Ordinary Income rose to ¥45.2B (+60.8%). Extraordinary items netted +¥0.5B, with gains on sales of investment securities ¥2.9B offset by extraordinary losses including impairment/loss on disposal of fixed assets ¥0.5B and others totaling ¥2.5B; these one-off items did not materially impede the substantial Ordinary Income growth. Income before income taxes was ¥45.7B (+56.4%), with income taxes ¥15.2B (effective tax rate 33.2%) and non-controlling interests ¥0.1B, resulting in Net Income attributable to owners of the parent of ¥30.5B (+58.0%). Comprehensive income was ¥40.9B (+72.4%), with Other Comprehensive Income totaling +¥10.3B (valuation difference on available-for-sale securities ¥9.5B, foreign currency translation adjustments ¥1.0B, retirement benefit adjustments -¥0.2B), and comprehensive income attributable to owners of the parent ¥40.8B, significantly exceeding Net Income. In conclusion, robust revenue growth in the core Chemicals Business, along with simultaneous improvement in gross margin and SG&A ratio, drove strong operating profit growth, and impacts from non-operating and extraordinary items were limited, indicating the revenue and profit expansion is supported by recurring earnings.
The Chemicals Business reported Revenue ¥146.1B (+26.1%), Operating Income ¥37.6B (+39.1%), and a segment margin of 25.7%, representing 88.7% of consolidated Operating Income ¥42.4B and remaining the core highly profitable business. Inorganic chemical products ¥39.2B (+1.8%) showed slight growth, organic chemical products ¥44.5B (+18.9%) were steady, and fine chemicals ¥62.4B (+56.5%) expanded substantially, with a shift to higher value-added products driving margins. Consolidation of PT Timuraya Tunggal and PT Pradipa Persada increased assets by ¥74.6B and generated goodwill ¥20.6B, with M&A effects contributing to revenue and profit growth. The Building Materials Business posted Revenue ¥50.0B (+1.7%), Operating Income ¥3.6B (+31.0%), and a segment margin of 7.2% (prior 5.6% +1.6pt); margin improved but absolute contribution remains small at 8.5% of consolidated Operating Income. Exterior ¥44.2B (-4.1%) slightly declined, while Wall Materials ¥5.8B (+86.1%) expanded strongly but remains small in scale, limiting its impact on overall building materials results. Other businesses recorded Revenue ¥3.3B (-13.7%), Operating Income ¥0.1B (-69.7%), and a segment margin of 3.1%, indicating low profitability in non-core areas such as information systems and food businesses. The margin gap between segments is wide at 18.5pt (Chemicals 25.7% vs Building Materials 7.2%), meaning the consolidated profitability is highly dependent on the Chemicals Business; improving profitability and scale in Building Materials remains a medium-term challenge.
[Profitability] Operating Margin 21.3% (prior 18.1%) and Net Margin 15.4% (prior 11.7%) improved across the board. Gross Margin 46.8% (prior 44.9%) improved due to stabilized raw material prices and a higher share of high value-added products, and SG&A Ratio declined to 25.5% (prior 26.8%) through cost control relative to sales growth, demonstrating effective operating leverage. ROE is low at 3.1% but shows improvement YoY. [Cash Quality] Net non-operating items relative to sales were +1.4%, with interest income 0.9%, net FX -0.8%, and dividend income 0.3% — non-operating elements are minor and most profit is generated from operating activities. Extraordinary items net +¥0.5B (1.6% of Net Income), indicating limited contribution from one-offs. Comprehensive income ¥40.9B exceeded Net Income ¥30.5B by ¥10.4B, mainly due to valuation gains on securities ¥9.5B, but these are unrealized and not directly cash-generating. [Investment Efficiency] With Total Assets ¥1,512.6B and Net Income ¥30.5B, annualized ROA is 8.1%; with Equity ¥965.7B and ROE shown as annualized 12.6% (quarterly data requires full-year evaluation). R&D ¥5.5B equals 2.8% of sales, somewhat low, suggesting room to reallocate investment to high value-added areas such as Fine Chemicals. Construction-in-progress ¥62.2B (18.0% of tangible fixed assets) indicates an investment pipeline for capacity expansion and efficiency gains that could improve ROIC post-commissioning. [Financial Soundness] Equity Ratio 64.4% (prior 65.0%), Current Ratio 313.8%, Quick Ratio 272.1% — extremely robust. Cash and deposits ¥326.2B plus short-term investments ¥111.98B total ¥438.2B, 1.6x of Current Liabilities ¥270.7B, indicating minimal short-term liquidity risk. Interest-bearing debt totaled ¥275.7B (short-term borrowings ¥46.9B and long-term borrowings including current portion ¥228.8B), with Debt/Equity 28.5% and interest-bearing debt-to-total assets 18.2% — conservative. Interest expense ¥1.5B vs Operating Income ¥42.4B yields interest coverage of 28.3x, indicating minimal interest burden. Investment securities ¥241.2B (24.8% of net assets) carry market risk but provide substantial liquidity backing.
Cash flow statement disclosure is limited, but balance sheet movements indicate cash trends. Cash and deposits declined to ¥326.2B (prior ¥355.3B -¥29.1B), and short-term investments decreased to ¥111.98B (prior ¥118.95B -¥7.0B), bringing total cash equivalents to ¥438.2B (prior ¥474.3B -¥36.1B). Meanwhile interest-bearing debt increased markedly to ¥275.7B (prior ¥208.5B +¥67.2B), reflecting cash outflows for subsidiary acquisitions and accelerated investment into construction-in-progress ¥62.2B (prior ¥30.5B +¥31.7B). Accounts receivable and notes increased to ¥173.8B (prior ¥151.4B +¥22.4B), and inventories rose to ¥113.0B (prior ¥98.4B +¥14.6B), expanding working capital by ¥37.0B. Accounts payable increased to ¥118.4B (prior ¥89.8B +¥28.6B) but was insufficient to offset increases in receivables and inventories, tightening cash tied up in operations. Investment securities decreased to ¥241.2B (prior ¥274.7B -¥33.5B) through partial sales to raise cash, but not enough to fully cover large M&A and capital expenditures, leading to increased borrowings and cash drawdown. Retained earnings rose to ¥708.2B (prior ¥690.9B +¥17.3B), and after deducting dividends ¥10.8B (¥25 per share × 43.25 million shares assumed) from Net Income ¥30.5B, internal retention aligns at about ¥19.7B. Of Comprehensive Income ¥40.9B, ¥10.4B exceeded Net Income and is unrealized OCI, with valuation gains on investment securities ¥9.5B reflected in accumulated other comprehensive income increasing to ¥161.6B (prior ¥151.3B), enhancing potential future liquidation capacity. Overall, despite high Operating Income ¥42.4B, working capital expansion ¥37.0B and investment outflows exceeding ¥94B (construction-in-progress +¥31.7B, M&A-related asset increases +¥74.6B, etc.) resulted in funding via increased borrowings +¥67.2B and cash drawdown -¥29.1B. Improving working capital efficiency (reducing receivables and inventories) will be key to improving cash conversion.
Earnings quality is high: Ordinary Income ¥45.2B is largely driven by Operating Income ¥42.4B. Non-operating items netted +¥2.8B, small relative to sales at 1.4%, comprising interest income ¥1.7B, dividend income ¥0.5B, and foreign exchange gains ¥1.9B (total ¥4.1B) offset by foreign exchange losses ¥3.5B and interest expense ¥1.5B, yielding a limited net effect. Net FX impact was -¥1.6B, but increased interest income offset this to produce positive non-operating results. Extraordinary items net +¥0.5B, with gains on sales of investment securities ¥2.9B offset by extraordinary losses including disposal of fixed assets ¥0.5B and others totaling ¥2.5B; these are not material to operating performance. Income before income taxes ¥45.7B and income taxes ¥15.2B (effective tax rate 33.2%) are within normal ranges with no evident tax anomalies. Comprehensive income ¥40.9B exceeded Net Income ¥30.5B by ¥10.4B, mainly due to valuation gains on investment securities ¥9.5B, foreign currency translation ¥1.0B, and retirement benefit adjustments -¥0.2B; the gap is driven by unrealized valuation gains and thus does not directly translate into cash generation, though it represents potential realized gains upon disposal. Ratios of Operating Income and Net Income to Revenue (21.3% and 15.4%, respectively) are high, indicating operating activities underpin earnings. In conclusion, earnings quality is high with low dependence on one-off or non-operating items, supporting sustainable profitability.
The full-year plan calls for Revenue ¥880.0B (+24.5%), Operating Income ¥144.0B (+32.5%), Ordinary Income ¥145.0B (+21.6%), and Net Income attributable to owners of the parent ¥100.0B, with EPS forecast ¥231.22 and dividend forecast ¥30. Q1 progress against the full-year plan was Revenue 22.6%, Operating Income 29.4%, Ordinary Income 31.2%, and Net Income 30.5%, with profit items exceeding the standard 25% quarterly benchmark by 4.4–6.2pt, suggesting either sustained margin improvement or first-half weighting. Revenue progress 22.6% is slightly below the benchmark, but faster progress in profit items indicates gross margin and SG&A ratio improvements may be proceeding at a pace to outperform the full-year plan. Quarterly forecasts have been revised (details not disclosed), but the strong profit progress in Q1 increases the likelihood of achieving the full-year plan. Note that Q1 benefited from M&A effects in the Chemicals Business and expansion of consolidation scope, which boosted progress rates and should be considered. Remaining required sales for the last three quarters are ¥681.3B (quarterly average ¥227B) and required Operating Income ¥101.6B (quarterly average ¥34B). Achieving levels slightly above Q1 results (Revenue ¥198.7B, Operating Income ¥42.4B) would make the plan achievable, so the probability of plan attainment is high.
Q1 dividend was ¥25 per share, unchanged from the prior year period. The full-year dividend forecast is ¥30 (assumed ¥15 interim and ¥15 year-end), implying a payout ratio of about 13% based on the full-year EPS forecast ¥231.22, a conservatively modest level. On a base of 44,870 thousand shares outstanding less 1,620 thousand treasury shares, the year-end share count of 43,249 thousand shares implies total full-year dividend payments of approximately ¥1.3B. A payout ratio of 13% reflects a policy prioritizing retained earnings for growth while maintaining stable dividends, supporting investments such as construction-in-progress ¥62.2B and M&A. Cash and deposits ¥326.2B plus short-term investments ¥112.0B total ¥438.2B, more than 33 times the total dividend payout, indicating very strong liquidity to sustain dividends. Net cash is ¥162.5B (cash equivalents ¥438.2B − interest-bearing debt ¥275.7B), supporting dividend capacity from a financial perspective. No share buyback was disclosed; returns are dividend-only with a Total Return Ratio equal to the payout ratio at about 13%. Retained earnings ¥708.2B (72.9% of net assets) are ample, providing room for future dividend increases or special dividends, though current policy prudently prioritizes growth investments.
Concentration risk in the Chemicals Business: The Chemicals segment accounts for 73.5% of Revenue and 88.7% of Operating Income, creating a high concentration risk where demand fluctuations, pricing competition, or regulatory changes in this segment could materially affect consolidated results. The substantial increase in Fine Chemicals sales (+56.5%) may also raise customer or application concentration risk, creating potential for sharp revenue declines if end-market conditions deteriorate or substitutes emerge. The Building Materials Business contributes only 8.5% of operating profit, limiting portfolio diversification benefits.
Deterioration of working capital efficiency: Accounts receivable ¥173.8B (+14.8%) and inventories ¥113.0B (+14.9%) have increased at a pace below revenue growth (+18.2%), but quarterly inventory turnover days are suggested to exceed ~200 days and receivable days ~320 days, indicating lengthening. Inventories comprise finished goods ¥113.0B, raw materials ¥61.6B, and work-in-progress ¥2.6B, with a high proportion of finished goods; prolonged sales cycles or inventory stagnation could impair cash conversion. While increases in accounts payable (+31.8%) correlate with higher purchases, they are insufficient to offset receivables and inventory funding, and expansion of working capital ¥37.0B may pressure operating cash flow and necessitate additional working capital financing.
M&A integration risk and goodwill impairment potential: Acquisitions of PT Timuraya Tunggal and PT Pradipa Persada increased Chemicals assets by ¥74.6B and generated goodwill ¥20.6B (prior goodwill ¥0.7B, a 30.6x increase). Goodwill is provisionally measured and allocation of acquisition cost is incomplete, creating the risk that amounts may change upon finalization. Goodwill ¥21.2B equals 2.2% of net assets ¥973.9B and is relatively small, but if M&A integration fails to realize expected synergies or if business conditions deteriorate, goodwill impairment could occur and temporarily depress profits. Additionally, foreign exchange losses (¥3.5B) highlight the risk of currency volatility impacting overseas subsidiaries and consolidated results.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 21.3% | 6.8% (2.9%–9.0%) | +14.5pt |
| Net Margin | 15.4% | 5.9% (3.3%–7.7%) | +9.4pt |
The company’s Operating and Net Margins materially exceed industry medians, reflecting concentration in high value-added chemical products (Fine Chemicals) and margin-management superiority.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 18.2% | 13.2% (2.5%–28.5%) | +5.0pt |
Revenue growth outpaced the industry median by 5.0pt, driven by M&A effects and expansion of core products.
※ Source: Company aggregation
High profitability in the core Chemicals Business and realization of M&A integration effects: Operating Margin 21.3% (prior 18.1% +3.2pt) and Net Margin 15.4% (prior 11.7% +3.7pt) improved materially across the board, and Fine Chemicals sales +56.5% support a shift to higher value-added product mix. Acquisition of PT Timuraya Tunggal increased Chemicals segment assets by ¥74.6B and generated goodwill ¥20.6B, expanding consolidation scope; Q1 progress of 29.4% of full-year Operating Income plan (+4.4pt vs plan) suggests early realization of integration benefits. Construction-in-progress ¥62.2B (prior ¥30.5B +104%) indicates a substantial investment pipeline that could raise productivity and capacity post-commissioning, contributing to margin uplift.
Robust financial base and capital allocation flexibility: Equity Ratio 64.4%, Current Ratio 313.8%, cash equivalents ¥438.2B (1.6x current liabilities) reflect a very strong balance sheet. Debt/Equity 28.5% and interest coverage 28.3x indicate conservative capital structure and resilience to rising rates. The payout ratio of about 13% is restrained, prioritizing growth investments (construction-in-progress, M&A) while maintaining stable dividends. Net cash position ¥162.5B supports agility for additional M&A or CAPEX, offering options to accelerate medium-term growth.
Importance of improving working capital efficiency: Expansion of accounts receivable ¥173.8B (+14.8%) and inventories ¥113.0B (+14.9%) increased working capital by ¥37.0B, constraining cash conversion despite high Operating Income ¥42.4B. Lengthening inventory and receivable turnover days are structural bottlenecks reducing capital efficiency and hindering ROE (currently 3.1%). Inventory reduction and shortening receivable collection periods are essential to enhance cash generation and ROIC. While the probability of achieving the full-year plan is high, optimizing working capital is a prerequisite for sustainable growth.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly available financial statement data. Investment decisions are the responsibility of the investor; please consult professionals as needed before making investment decisions.