| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥3999.0B | ¥4093.5B | -2.3% |
| Operating Income | ¥175.3B | ¥190.6B | -8.0% |
| Profit Before Tax | ¥214.9B | ¥232.0B | -7.4% |
| Net Income | ¥175.0B | ¥184.5B | -5.2% |
| ROE | 4.3% | 4.7% | - |
For the fiscal year ended March 2026, Revenue was ¥3,999.0B (YoY -¥94.5B, -2.3%), Operating Income was ¥175.3B (YoY -¥15.3B, -8.0%), Ordinary Income was ¥203.8B (YoY +¥26.9B, +15.2%), and Net Income was ¥175.0B (YoY -¥9.5B, -5.2%). Revenue declined due to deterioration in volumes and spreads in the core Materials Business, and Operating Income fell due to higher SG&A; however, Ordinary Income rose 15% driven by higher financial income and lower financial expenses, and lower tax burden limited the decline in Net Income to 5.2%. Gross margin improved to 18.7% (up +1.5pt from 17.2% a year earlier) as raw material stability and pricing actions took effect, but SG&A ratio rose to 14.4% (up +1.4pt from 13.0%) and higher fixed costs pressured profitability, leaving the Operating Margin at 4.4% (down -0.3pt from 4.7%).
Revenue of ¥3,999.0B (−2.3%) comprised Materials Business ¥2,788.1B (−5.2%) and Solutions Business ¥1,210.9B (+5.1%). Materials saw declines as commodity products such as acrylic acid and esters experienced lower volumes and compressed spreads; Solutions achieved growth driven by higher-value products such as concrete admixtures and electronic materials. Gross margin improved to 18.7% (from 17.2%), reducing cost of sales ratio to 81.3% (from 82.8%) as raw material and energy cost stabilization and price pass-through were effective.
On the income side, Operating Income was ¥175.3B (−8.0%), Operating Margin 4.4% (−0.3pt). SG&A amounted to ¥576.4B, up from ¥532.9B (＋8.2%), raising the SG&A ratio to 14.4% (＋1.4pt) as growth investment and organizational strengthening increased fixed costs offsetting gross margin improvement. EBITDA (adding back depreciation of ¥322.4B) was ¥497.7B, with an EBITDA margin of 12.4% (up +0.1pt from 12.3%), indicating resilient pre-depreciation profitability. Financial income was ¥39.4B (prior year ¥25.2B) due to increased investment securities-related gains, while financial expenses fell to ¥11.7B (prior year ¥24.0B) from lower interest payments, improving non-operating results by ¥28.5B. Equity-method investment income was ¥12.0B, down −70.1% from ¥40.2B, adding volatility to consolidated results. Ordinary Income of ¥203.8B (+15.2%) rose substantially on improved non-operating items. Profit Before Tax was ¥214.9B, with income taxes of ¥40.0B (effective tax rate 18.6%, down from 20.5%), yielding Net Income attributable to owners of the parent ¥167.6B (−3.6%). The year was characterized by revenue decline but profit expansion in some measures due to financial items.
Materials Business: Revenue ¥2,788.1B (−5.2%), Operating Income ¥119.4B (−24.8%), Operating Margin 4.3% (down -0.1pt from 4.4%). Reduced demand and compressed spreads in commodity chemicals led to lower revenue and profit; equity-method investment income also declined to ¥17.1B (prior ¥29.9B), resulting in segment profit (Operating Income + equity-method results) of ¥119.4B (prior ¥158.9B, −24.8%). Solutions Business: Revenue ¥1,210.9B (+5.1%), Operating Income ¥60.0B (−2.4%), Operating Margin 5.0% (down -0.1pt from 5.1%). Growth in high-performance products supported revenue, but R&D and SG&A investments caused profit to decline; deterioration in equity-method results to an equity-method loss of ¥5.1B (prior year equity-method profit ¥10.3B) also weighed, leaving segment profit at ¥60.0B (prior ¥61.4B, −2.3%). The Materials Business accounts for 68% of consolidated Operating Income, so its profit volatility continues to directly affect group results.
Profitability: ROE 4.3% decreased −0.2pt from 4.5%. DuPont decomposition (Net Profit Margin 4.2% × Total Asset Turnover 0.69x × Financial Leverage 1.43x) indicates the decline was mainly due to lower Total Asset Turnover (0.69x vs. 0.75x prior), driven by increased tangible fixed assets (¥2,231.3B, up +14.9% from ¥1,942.4B) and expanded consolidation scope. Operating Margin 4.4% (prior 4.7%) and Net Profit Margin 4.2% (prior 4.2%) remain in a similar range. EBITDA margin 12.4% (up +0.1pt) shows stable pre-depreciation earning power.
Cash Quality: Operating Cash Flow / Net Income ratio is 3.06x, indicating strong cash conversion, with an accrual ratio of −5.8%. Cash conversion cycle (CCC) is long at 122 days, comprised of DSO 83 days, DIO 96 days, and DPO 58 days; inventory and receivables buildup pressure working capital efficiency.
Investment Efficiency: Total Asset Turnover 0.69x (prior 0.75x) declined due to capital expenditures and asset acquisitions; Fixed Asset Turnover 1.20x (prior 1.57x) also deteriorated. Receivables days 83 and inventory days 96 indicate significant room for improvement.
Financial Soundness: Equity Ratio 68.4% (prior 70.5%), Debt/Equity 12.6% (prior 10.5%) indicates low leverage. Debt/EBITDA 1.18x and Interest Coverage 10.4x (EBIT ¥122.2B ÷ interest expense ¥11.7B) reflect high safety. Long-term borrowings rose to ¥356.2B (prior ¥182.7B, +95.0%), arranged to fund growth investments and M&A and to reduce maturity mismatch risk.
Operating Cash Flow was ¥535.4B (YoY +14.0%), 3.06x Net Income ¥175.0B, indicating high-quality earnings. Operating cash flow subtotal (before working capital changes) was ¥571.1B; decreases in receivables +¥87.9B and inventories +¥24.2B contributed cash inflows, partially offset by a decrease in payables −¥57.0B, resulting in net working capital generation of +¥55.1B. Income tax payments ¥73.2B rose sharply from ¥17.0B prior, reflecting the loss of prior-year refund effects. Investing cash flow was −¥483.2B, including capital expenditure ¥490.1B (1.52x depreciation ¥322.4B) as active growth investment, and acquisition of subsidiaries related to scope changes ¥72.6B. Proceeds from sales/redemptions of investment securities totaled ¥90.4B. Free Cash Flow was positive at ¥52.2B, but Financing Cash Flow paid dividends ¥165.3B and share buybacks ¥70.0B totaling ¥235.3B, so total returns significantly exceeded FCF; FCF coverage was 0.22x. Net decrease in short-term borrowings was ¥62.5B and long-term borrowings increased ¥259.6B to extend debt maturities; cash and cash equivalents remained stable at ¥518.2B (down −5.0% from ¥545.7B).
Ordinary Income ¥203.8B comprises Operating Income ¥175.3B plus non-operating income/expense +¥28.5B, with improvement driven by financial income ¥39.4B (increased investment securities-related gains) and lower financial expenses ¥11.7B (lower interest). Non-operating income accounted for about 1.0% of revenue and does not represent excessive dependency; core operating profitability remains central. Equity-method investment income ¥12.0B declined −70.1% from ¥40.2B, contributing to consolidated net income volatility. Impairment losses included in other operating expenses were ¥20.7B (prior ¥4.4B); while a one-off impact, this represents 1.2% of net income and is modest. Operating Cash Flow was 3.06x Net Income, accrual ratio −5.8%, and OCF/EBITDA = 1.08x, indicating solid cash backing for profits and no issue with recurring cash generation. The gap between Ordinary Income and Net Income was limited by a lower tax rate of 18.6% (prior 20.5%), and deferred tax assets increased by ¥46.2B (prior ¥38.6B), reflecting expectations of future taxable income.
Dividends for the period were interim ¥50 and year-end ¥63, annualizing to ¥113, unchanged from prior year annual ¥113 (interim ¥54, year-end ¥59). Payout Ratio is ¥113 ÷ EPS ¥112.15 = 100.8%, effectively returning the entirety of earnings. In addition, share buybacks of ¥70.0B were executed, making total returns ¥235.3B, which is 1.34x Net Income ¥175.0B, implying a Total Return Ratio equivalent to 134%. Against Free Cash Flow ¥52.2B, total returns were 4.51x, leaving FCF coverage at 0.22x. Treasury stock acquisition ¥70.0B and partial cancellation/disposition (cancellation amount ¥103.3B) reduced treasury stock balance to ¥38.5B (prior ¥72.6B), indicating intent to improve capital efficiency. However, the current level of returns exceeds internally generated funds during a growth investment phase; medium-term sustainability will require either rationalizing the payout or expanding FCF. No explicit dividend policy was stated, but the stance appears to prioritize stable dividends.
Dependence on Materials Business and earnings volatility: Materials accounts for 69.7% of revenue and 68% of Operating Income contribution, and is highly sensitive to spreads and demand cycles for commodity chemicals; this segment reported −24.8% profit decline this period. Volatility in equity-method investment income (−70.1%) further amplifies consolidated results exposure. Raw material and energy prices and FX fluctuations can materially compress spreads and margins.
Working capital stagnation and cash flow volatility risk: With DSO 83 days, DIO 96 days, and CCC 122 days, working capital turnover is elongated, and receivables ¥912.9B plus inventories ¥857.6B total ¥1,770.5B of funds tied up. Although Operating Cash Flow benefitted this period from reductions in receivables and inventory, working capital could rise again with business expansion and strain liquidity. DPO 58 days is relatively short, indicating room to improve payable terms.
Balance between capital efficiency and sustainability of returns: ROE 4.3% and estimated ROIC 3.1% (NOPAT estimated ¥17.9B?* ÷ Invested Capital ¥5,802B) remain below capital cost, and Total Asset Turnover 0.69x is low. While capital expenditure ¥490.1B (1.52x depreciation) and M&A ¥72.6B represent proactive investment, Total Return Ratio 134% and FCF coverage 0.22x indicate returns exceed internal generation. If investment payback delays or Operating Cash Flow weakens, financial flexibility could deteriorate.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 4.3% | 6.3% (3.2%–9.9%) | -2.0pt |
| Operating Margin | 4.4% | 7.8% (4.6%–12.3%) | -3.4pt |
| Net Profit Margin | 4.4% | 5.2% (2.3%–8.2%) | -0.8pt |
Profitability metrics are below industry medians; ROE and Operating Margin place the company in the lower quartile of the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -2.3% | 3.7% (-0.4%–9.3%) | -6.0pt |
Revenue growth trails the industry median by 6.0pt, and the revenue contraction weighs on growth assessment.
※ Source: Company compilation
Tension between gross margin improvement and higher SG&A compressing operating margin: Gross margin improved to 18.7% (+1.5pt) due to raw material stabilization and pricing measures, but SG&A ratio rose to 14.4% (+1.4pt) and fixed cost increases offset improvements, leaving Operating Margin at 4.4% (−0.3pt). With EBITDA margin at 12.4% and stable pre-depreciation profitability, controlling SG&A and improving utilization will be key to restoring Operating Margin.
Front-loaded growth investment and sustainability of returns exceeding FCF: Capital expenditure ¥490.1B (1.52x depreciation) and M&A ¥72.6B reflect continued active investment, funded partly by a +95.0% increase in long-term borrowings. However, Total Return Ratio 134% suggests returns exceed FCF, and if investment recovery and FCF expansion do not follow, a reassessment of the return policy will be needed. High-quality Operating Cash Flow at 3.06x Net Income is reassuring, but working capital re-expansion risk and ramp-up of new capacity will determine FCF sustainability.
Solutions growth and working capital optimization are the acid test for ROIC improvement: Solutions achieved +5.1% revenue growth and operates at a higher margin (5.0%) than Materials (4.3%), though profit contracted slightly amid investment phase. DSO 83, DIO 96, CCC 122 indicate working capital drag; inventory reduction and receivables collection improvements combined with margin expansion in Solutions could improve Total Asset Turnover and margins, opening a path to ROIC improvement. Under the mid-term plan (2025–27), recovery of investment payback and raising the share of high-value-added products are conditions for restoring ROE into the 6% range in line with industry.
This report was auto-generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult professional advisors as needed.