| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥480.4B | ¥485.8B | -1.1% |
| Operating Income / Operating Profit | ¥37.1B | ¥48.8B | -23.9% |
| Ordinary Income | ¥42.3B | ¥47.7B | -11.4% |
| Net Income / Net Profit | ¥47.1B | ¥45.8B | +2.8% |
| ROE | 7.4% | 7.8% | - |
For the fiscal year ended March 2026, Revenue was ¥480.4B (YoY -¥5.4B -1.1%), Operating Income was ¥37.1B (YoY -¥11.6B -23.9%), Ordinary Income was ¥42.3B (YoY -¥5.4B -11.4%), and Net Income attributable to owners of the parent was ¥30.5B (YoY -¥1.2B -3.9%). Revenue slightly declined, but Operating Income fell by double digits, resulting in a significant deterioration in profitability. Operating margin deteriorated by 2.3pt to 7.7% from 10.0% a year earlier, mainly due to the Functional Resins segment turning to a loss and an increase in SG&A (¥150.5B, YoY +¥7.3B +5.1%). Net Income was supported by special gains from the sale of investment securities of ¥4.2B, limiting the decline. Total assets increased to ¥864.1B (YoY +¥65.5B +8.2%), and total equity rose to ¥636.1B (YoY +¥50.8B +8.7%), with an Equity Ratio of 73.6% (prior year 73.3%) remaining at a high level.
[Revenue] ¥480.4B (YoY -1.1%). By segment, the core Functional Dyes achieved ¥263.5B (+3.2%) and led consolidated growth. Meanwhile, Functional Resins were ¥79.5B (-8.4%), Basic Chemicals ¥74.1B (-3.7%), Agro Science ¥51.1B (-7.3%), and Logistics-related ¥32.1B (-1.2%), all declining. Functional Dyes account for 54.8% of total sales, and the segment’s strength helped mitigate the overall top-line slowdown.
[Profitability] Cost of sales was ¥292.8B, gross profit ¥187.6B (gross margin 39.1%, down 0.4pt from 39.5% prior year). SG&A was ¥150.5B (YoY +5.1%) and increased despite lower sales, resulting in Operating Income ¥37.1B (Operating margin 7.7%, down 2.3pt from 10.0%). By segment, Functional Dyes generated Operating Income of ¥35.1B (prior year ¥38.4B, -8.5%), remaining the primary contributor to consolidated profit. Functional Resins posted an operating loss of -¥5.9B (widening from -¥0.5B the prior year), the main driver of consolidated operating decline. Basic Chemicals Operating Income was ¥3.2B (-22.0%), Agro Science ¥0.7B (-78.5%) with significant declines. Logistics-related contributed ¥3.6B (+2.8%) as a modest supporting profit. Non-operating income included dividends received ¥3.8B, interest received ¥1.1B, foreign exchange gains ¥1.4B, totaling ¥7.6B, while non-operating expenses included foreign exchange losses ¥4.4B and interest paid ¥1.1B, totaling ¥2.4B, resulting in net non-operating income of +¥5.2B. Ordinary Income was ¥42.3B (-11.4%). Special gains were ¥4.4B (mainly investment securities sale gains ¥4.2B), special losses ¥0.8B (impairment losses ¥0.5B, investment securities valuation losses ¥0.5B, etc.), yielding income before income taxes ¥45.9B. Income taxes -¥1.1B (negative tax expense due to deferred tax asset recognition) produced Net Income attributable to owners of the parent of ¥30.5B (-3.9%). In conclusion, the company reported lower revenue and profit.
Functional Dyes: Revenue ¥263.5B (composition 54.8%, YoY +3.2%), Operating Income ¥35.1B (margin 13.3%, YoY -8.5%). Despite revenue growth, Operating Income fell and margin declined 1.7pt from 15.0%, but the segment accounts for 94.6% of consolidated Operating Income and remains the main pillar.
Functional Resins: Revenue ¥79.5B (composition 16.5%, -8.4%), Operating Loss -¥5.9B (widened from -¥0.5B), margin -7.4% indicating a severe loss and the largest factor behind consolidated Operating Income decline.
Basic Chemicals: Revenue ¥74.1B (composition 15.4%, -3.7%), Operating Income ¥3.2B (margin 4.4%, -22.0%).
Logistics-related: Revenue ¥32.1B (composition 6.7%, -1.2%), Operating Income ¥3.6B (margin 11.2%, +2.8%) — modest increase supporting results.
Agro Science: Revenue ¥51.1B (composition 10.6%, -7.3%), Operating Income ¥0.7B (margin 1.3%, -78.5%) — substantial decline.
Other: Revenue ¥3.2B, Operating Income ¥0.4B — small but profitable. Functional Dyes’ stable earnings power and Logistics’ modest gains provide support, but correcting the Functional Resins loss and restoring profitability in Basic Chemicals and Agro are key to improving consolidated margins.
[Profitability] Operating margin 7.7% (down 2.3pt from 10.0%), Gross margin 39.1% (down 0.4pt from 39.5%). ROE was 7.4%, below the prior year and below the industry standard above 8%, indicating weaker capital efficiency. Net margin improved to 9.8% (up 0.4pt from 9.4%), but this includes one-off contributions from special gains and tax effects.
[Cash Quality] Operating Cash Flow (OCF) ¥60.9B (YoY +7.5%), which is 1.29x Net Income ¥47.1B, indicating good cash backing. OCF/EBITDA ratio was 0.86x (slightly below the 0.9x target), with increases in accounts receivable (-¥9.3B) and inventories (-¥2.0B) pressuring working capital. Free Cash Flow was ¥10.7B (OCF ¥60.9B – Investing CF ¥50.3B), covering dividends of ¥7.7B (actual dividends ¥7.3B + non-controlling interest portion ¥2.1B = approx. ¥9.5B), supporting dividend sustainability.
[Investment Efficiency] R&D expenditure was ¥59.2B (12.3% of sales), indicating continued proactive investment. Construction-in-progress ¥44.7B (up from ¥18.9B +136%) shows large-capex projects underway; with depreciation ¥34.1B and PPE & intangible asset purchases ¥63.3B, the company is in an expansion investment phase.
[Financial Soundness] Equity Ratio 73.6%, Current Ratio 273%, Quick Ratio 209% — extremely healthy. Interest-bearing debt ¥83.7B (short-term borrowings ¥41.6B, long-term borrowings ¥42.1B, lease liabilities ¥2.5B), Debt/EBITDA 1.18x, Interest Coverage 33x — ample financial capacity. However, the short-term borrowing ratio of 49.7% implies relatively higher refinancing sensitivity.
OCF ¥60.9B (YoY +¥4.2B +7.5%), derived from operating cash subtotal ¥66.7B less working capital changes -¥5.8B (accounts receivable -¥9.3B, inventories -¥2.0B, accounts payable +¥4.5B). After tax payments -¥10.3B, net OCF was ¥60.9B. Working capital increases were driven by receivables and inventory build-up, indicating scope to improve collection terms and inventory efficiency. Investing CF was -¥50.3B, mainly PPE & intangible asset purchases -¥63.3B (large capex), net decrease in time deposits ¥27.5B (inflows ¥33.9B – outflows ¥21.1B), investment securities purchases -¥5.4B, long-term loans -¥1.4B. Financing CF was -¥6.9B, with long-term borrowings raised ¥20.0B and net borrowings from short-term borrowings/long-term repayments -¥12.6B resulting in net +¥7.4B, dividends -¥7.7B (owners of parent -¥7.3B, non-controlling interests -¥2.1B), lease payments -¥1.2B. Free Cash Flow was ¥10.7B and covered dividends; cash & cash equivalents increased to ¥81.3B (prior year ¥76.0B +¥5.3B). With cash and deposits ¥101.4B versus short-term interest-bearing debt ¥41.6B, liquidity is ample, allowing simultaneous large investments and dividend payments.
Of Net Income attributable to owners of the parent ¥30.5B, special gains ¥4.4B (mainly investment securities sale gains ¥4.2B) accounted for approximately 14%, indicating a limited but notable one-off contribution. Non-operating income ¥7.6B (dividends received ¥3.8B, interest received ¥1.1B, FX gains ¥1.4B, etc.) is 1.6% of Revenue and contributes to stable recurring financial income. Conversely, non-operating expenses ¥2.4B (FX losses ¥4.4B, interest paid ¥1.1B, etc.) resulted in a net FX impact of -¥3.0B, introducing earnings volatility. Income taxes -¥1.1B (negative effective tax rate) reflect deferred tax asset recognition (deferred tax assets ¥20.2B, up ¥11.5B from ¥8.7B prior year), a temporary tax burden reduction based on future taxable income assumptions. OCF ¥60.9B / Net Income ¥47.1B = 1.29x shows strong cash backing; accrual (Net Income – OCF) is -¥13.8B (negative), indicating high earnings quality. The inversion of Ordinary Income ¥42.3B and Net Income ¥47.1B is due to tax effects and is within a range manageable excluding special items.
Full Year guidance: Revenue ¥520.0B (YoY +8.2%), Operating Income ¥34.0B (-8.4%), Ordinary Income ¥33.0B (-22.0%). Progress rates versus first-half results are Revenue 92.4%, Operating Income 109.1%, Ordinary Income 128.2%, reflecting conservative guidance that incorporates slower second-half assumptions. Revenue is expected to recover, but Operating margin is projected to deteriorate to 6.5% (from 7.7% in H1, -1.2pt), assuming continued losses in Functional Resins, start-up costs for investments, and price revision lags. EPS forecast is ¥81.75 with dividend forecast ¥30.00 (payout ratio approx. 37%), representing planned profit decline and dividend cut from H1 results (H1 EPS ¥192.07, dividend ¥50, payout ratio 26%), reflecting second-half uncertainty. Given high progress rates, the likelihood of achieving the full-year plan is high, but the pace of second-half profit improvement is a monitoring point.
Annual dividend ¥50.00 (interim ¥25.00, year-end ¥25.00), an increase of ¥5.00 from prior year ¥45.00. Payout ratio 26.0% (based on Net Income attributable to owners of the parent ¥30.5B) and at a conservative, sustainable level. Free Cash Flow ¥10.7B relative to dividends to owners of parent ¥7.3B yields an FCF coverage of 1.47x, indicating sufficient dividend payment capacity. Share buybacks were minimal (CF impact -¥0.0B), so returns are dividend-focused. Dividends ¥7.7B (owners + non-controlling interest) represent about 7.6% of cash & deposits ¥101.4B, leaving room in cash balances. The full-year dividend forecast ¥30.00 is a reduction from H1 ¥50.00 and aligns with the profit plan (with full-year net profit forecast ¥13.0B, implying H2 net loss of -¥17.5B when subtracting H1 ¥30.5B), but if actual results exceed plan there is room for dividend increase. Planned payout ratio on the forecast is 37%, indicating flexible policy responsive to earnings variability.
Segment concentration risk: Functional Dyes represent 54.8% of Revenue and 94.6% of Operating Income, so performance is highly correlated with supply-demand and pricing in that market. A further decline in Functional Dyes’ margin from 15.0% to 13.3% shows vulnerability; adverse competitive dynamics or customer concentration could rapidly deteriorate consolidated earnings.
Continued Functional Resins loss risk: Operating loss -¥5.9B (widened from -¥0.5B) with margin -7.4% is severe. Given revenue of ¥79.5B, ongoing losses would materially pressure consolidated Operating Income. Slow market recovery or delayed structural reforms could keep margins depressed into subsequent fiscal years.
Working capital funding constraint risk: Accounts receivable ¥116.4B (DSO 88 days) and inventories ¥87.5B (Inventory days 109) indicate rising working capital that pressures OCF. Receivables increase -¥9.3B and inventories +¥2.0B have hampered cash generation; continued weak collections or delays in demand-linked production could elevate liquidity risk.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.7% | 7.8% (4.6%–12.3%) | -0.0pt |
| Net Margin | 9.8% | 5.2% (2.3%–8.2%) | +4.6pt |
Operating margin is in line with the industry median, while Net margin significantly exceeds the median due to special gains and tax effects.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -1.1% | 3.7% (-0.4%–9.3%) | -4.8pt |
Revenue growth lags the industry median by 4.8pt, indicating weaker top-line expansion capability.
※ Source: Company compilation
The core Functional Dyes maintain revenue growth and high profitability (margin 13.3%), but Functional Resins’ -¥5.9B loss is the primary cause of consolidated operating decline. Functional Resins has scale with ¥79.5B in sales; the pace of loss correction (demand recovery, price adjustments, structural reforms) is the most important driver for full-year performance recovery. The full-year Operating Income forecast of ¥34.0B (down -8.4%) is conservative; improvement in Functional Resins could be an upside driver.
Construction-in-progress ¥44.7B (up from ¥18.9B +136%) indicates major capex underway for future capacity expansion and higher value-added products. With depreciation ¥34.1B and PPE & intangible purchases ¥63.3B (CapEx/Depreciation 1.86x), expansion investments continue and post-startup revenue and gross profit contributions could be mid-term catalysts. Short-term, start-up costs may pressure Operating margin; timing of ramp-up and yield improvements are monitoring points.
Working capital constraint (Accounts receivable +¥9.3B, inventories +¥2.0B) is pressuring OCF, and OCF/EBITDA at 0.86x misses the 0.9x target. DSO 88 days and inventory days 109 indicate substantial scope to improve working capital efficiency; strengthening credit control and demand-driven production to shorten CCC (current 190 days → target below 120 days) would structurally enhance Free Cash Flow generation, expanding dividend capacity and room for additional investment.
This report is an AI-generated financial analysis automatically produced from XBRL earnings disclosure data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions should be made at your own responsibility, and you should consult a professional advisor as necessary.