| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1242.9B | ¥1247.6B | -0.4% |
| Operating Income / Operating Profit | ¥76.1B | ¥70.0B | +8.6% |
| Ordinary Income | ¥84.9B | ¥77.6B | +9.4% |
| Net Income / Net Profit | ¥89.0B | ¥131.8B | -32.5% |
| ROE | 6.3% | 10.1% | - |
The fiscal year ended March 2026 reported revenue of ¥1242.9B (YoY -¥4.7B, -0.4%), a slight decline, while Operating Income improved to ¥76.1B (YoY +¥6.1B, +8.6%) and Ordinary Income rose to ¥84.9B (YoY +¥7.3B, +9.4%), indicating progress in profitability. Net Income was ¥89.0B (YoY -¥42.8B, -32.5%), a significant decline driven by a negative comparison to the prior year, which included ¥77.6B in gains on disposal of fixed assets within Special Gains of ¥81.1B. This period also recorded Special Gains of ¥32.7B, including gains on sales of investment securities of ¥28.1B. Gross margin improved to 21.0% (prior year 20.2%, +0.8pt) and Operating Margin to 6.1% (prior year 5.6%, +0.5pt), with the core Color & Functional Products segment driving Operating Income up by 32.1%. However, working capital efficiency remains an issue. Operating Cash Flow (OCF) of ¥90.5B improved substantially YoY (+117.2%) but the OCF/EBITDA ratio of 0.71x is below the industry benchmark of 0.9x.
【Revenue】Consolidated revenue was ¥1242.9B (YoY -0.4%) and remained in a flat range. By segment, Color & Functional Products supported overall performance with ¥690.5B (+2.5%), while Graphic & Printing Materials was ¥313.6B (-3.0%) and Polymer & Coating Materials was ¥245.5B (-4.9%), which offset gains. By region, Japan was resilient at ¥923.4B (+1.5%) while Asia declined to ¥250.9B (-5.3%) due to market slowdown. Revenue composition was Color & Functional 55.6%, Graphic & Printing 25.2%, Polymer & Coating 19.7%, indicating high concentration in the core business.
【Profitability】Cost of sales was ¥982.5B, representing a cost-to-sales ratio of 79.0%, and Gross Profit was ¥260.4B with a Gross Margin of 21.0% (prior year 20.2%, +0.8pt). SG&A was ¥184.3B (SG&A ratio 14.8%), up +1.2% YoY despite the slight revenue decline, but gross margin improvement drove Operating Income to ¥76.1B (Operating Margin 6.1%), up +8.6% YoY. Non-operating income included interest income ¥3.5B, dividend income ¥5.0B, equity-method gains ¥2.5B, etc., totaling non-operating revenue of ¥16.5B; non-operating expenses were ¥7.7B including interest expense ¥3.0B and foreign exchange losses ¥0.5B, resulting in Ordinary Income of ¥84.9B (YoY +9.4%). Special gains were ¥32.7B (gains on sale of investment securities ¥28.1B, gains on business transfers ¥4.5B, etc.), substantially smaller than prior year Special Gains of ¥81.1B which included gains on sale of fixed assets of ¥77.6B. Special losses were limited to ¥2.2B (impairment of fixed assets ¥1.7B, etc.), yielding Profit Before Tax ¥115.5B and Income Taxes ¥32.5B (effective tax rate 28.1%). Net income attributable to owners of the parent was ¥81.0B (YoY -21.3%, before deduction of non-controlling interests ¥2.0B), and Net Income / Net Profit was ¥89.0B (YoY -32.5%). In conclusion, operating-stage profitability improved via gross margin enhancement and SG&A control, but final-stage profit declined due to the reversal of prior-year special gains.
Color & Functional Products was the largest profit contributor with Revenue ¥691.6B (YoY +2.5%) and Operating Income ¥41.4B (YoY +32.1%). Its Operating Margin improved to 6.0% from 3.1% the prior year (+2.9pt), supported by product mix improvement and volume recovery. Graphic & Printing Materials had Revenue ¥313.6B (YoY -3.0%) but increased Operating Income to ¥8.5B (YoY +19.1%), with Operating Margin improving to 2.7% from 0.7% (+2.0pt) due to strengthened cost management. Polymer & Coating Materials recorded Revenue ¥245.5B (YoY -4.9%) and Operating Income ¥25.9B (YoY -17.7%), with Operating Margin steady at 10.5% (prior year 10.5%) though absolute profit declined; this reflects a challenging market environment. Segment margin disparities are significant: Polymer & Coating maintains high margin at 10.5% while Graphic & Printing remains low at 2.7%. Allocation of resources toward high-profit segments is a priority issue.
【Profitability】Operating Margin 6.1% improved from 5.6% (+0.5pt), supported by Gross Margin 21.0% (prior year 20.2%, +0.8pt). ROE was 6.3%, down from 8.4% due primarily to lower Net Income from the reversal of Special Gains. ROA (on Ordinary Income basis) was 4.2%, a slight improvement from 4.0% last year. 【Cash Quality】OCF/Net Income ratio was 1.02x (OCF ¥90.5B ÷ Net Income ¥89.0B), indicating good cash backing of profits. However, OCF/EBITDA was 0.71x, below the industry benchmark of 0.9x, with working capital increases constraining OCF. Days Sales Outstanding (DSO) was 121 days, Days Inventory Outstanding (DIO) 122 days, Days Payable Outstanding (DPO) 100 days, resulting in a Cash Conversion Cycle (CCC) of 143 days, which is prolonged. Free Cash Flow was ¥69.8B (OCF ¥90.5B - CapEx ¥55.9B), and the CapEx/Depreciation ratio was 1.09x, at an appropriate level. 【Investment Efficiency】Total Asset Turnover was 0.605x, down from 0.634x, indicating deteriorated asset efficiency. Fixed asset turnover was 2.54x, inventory turnover 4.69x. 【Financial Soundness】Equity Ratio was 68.7% (prior year 66.3%, +2.4pt), remaining high. Current Ratio was 240.1%, Quick Ratio 194.2%, indicating sufficient short-term solvency. Interest-bearing debt (short-term borrowings ¥90.2B + long-term borrowings ¥95.0B) totaled ¥185.2B, with Debt/EBITDA at 1.45x and Interest Coverage at 25.0x, showing strong financial safety. Cash/Short-term Liabilities ratio was 2.60x, ensuring substantial liquidity.
OCF was ¥90.5B, a substantial improvement from ¥41.7B (+117.2% YoY). Starting from Profit Before Tax ¥115.5B, adjustments included Depreciation ¥51.2B, decrease in retirement benefit liabilities -¥13.1B, increase in trade receivables -¥5.3B, increase in inventories -¥0.4B, decrease in trade payables -¥15.6B, etc., and tax payments -¥21.3B. OCF subtotal (before working capital changes) was ¥106.3B (prior year ¥55.6B, +91.2%), indicating improved core cash generation. Investing Cash Flow was -¥20.6B: CapEx -¥55.9B and intangible asset acquisitions -¥10.8B offset by proceeds from sale of investment securities ¥34.1B and net change in time deposits +¥25.5B. Financing Cash Flow was -¥67.4B, including net decrease in short-term borrowings -¥14.7B, proceeds from long-term borrowings ¥16.0B, repayment of long-term borrowings -¥24.3B, dividend payments -¥30.3B (including non-controlling interests), and purchase of treasury stock -¥11.1B. Shareholder returns (dividends + buybacks) totaled ¥41.4B against Free Cash Flow ¥69.8B, giving an FCF coverage of 0.59x, which is healthy. Cash and cash equivalents slightly increased from ¥219.7B at the beginning of the period to ¥219.9B at the end, indicating ample on-hand liquidity.
Quality of earnings shows Operating Income ¥76.1B as the base, with non-operating revenue ¥16.5B (dividend income ¥5.0B, interest income ¥3.5B, equity-method gains ¥2.5B, etc.) added to reach Ordinary Income ¥84.9B; non-operating revenue accounted for 1.3% of revenue and is limited. One-off items included Special Gains of ¥32.7B (gains on sale of investment securities ¥28.1B, gains on business transfers ¥4.5B, etc.), representing about 28% of Profit Before Tax ¥115.5B. Prior year Special Gains were ¥81.1B including gains on sale of fixed assets ¥77.6B, with non-recurring factors contributing 56% then; dependency on one-off gains remains high this period as well. The gap between Ordinary Income ¥84.9B and Net Income ¥89.0B is +4.9%, with Special Gains lifting the final-stage profit. OCF/Net Income ratio 1.02x is healthy and the accrual ratio -0.3% indicates cash backing, but OCF/EBITDA 0.71x is constrained by working capital increases (trade receivables +¥8.8B, inventories +¥5.0B, trade payables -¥14.0B equivalent). Comprehensive Income was ¥143.3B, ¥54.3B higher than Net Income ¥89.0B, composed of valuation gains on other securities ¥16.6B, actuarial gains/losses adjustments related to retirement benefits ¥38.6B, and foreign currency translation adjustments ¥4.3B, indicating accumulation of valuation gains affecting capital quality.
The company plan for FY2027 Full Year forecasts Revenue ¥1266.0B (YoY +1.9%), Operating Income ¥84.0B (YoY +10.4%), Ordinary Income ¥95.0B (YoY +11.9%), and Net income attributable to owners of the parent ¥66.0B (EPS ¥96.69). The plan assumes continued margin improvement in core segments leading to higher operating profits, while Net Income is forecast to decline due to the drop-off of Special Gains (this period’s ¥28.1B gains on sale of investment securities are expected to be limited next year) and normalization of tax burden. Progress against current-year results is Revenue 98.2%, Operating Income 90.6%, Ordinary Income 89.4%; the operating stage finished above plan, while Net Income was substantially above plan due to the heft of Special Gains. The next fiscal year assumes inventory reduction and improved working capital efficiency to expand CF, and the conservative profit plan appears to be a hedge against uncertainty.
Dividends this period were interim ¥87 and year-end ¥133, totaling ¥220 (including ordinary dividend + special dividend), with a payout ratio of 186.0% (total dividends ¥2.68B ÷ Net income attributable to owners of the parent ¥81.0B × pre-treasury-adjusted shares 68.5 million) at a high level. Including treasury stock acquisitions of ¥11.1B, the Total Return Ratio was approximately 47% (total return ¥37.9B ÷ Net income attributable to owners of the parent ¥81.0B). The sum of dividends + buybacks ¥41.4B against Free Cash Flow ¥69.8B yields an FCF coverage of 0.59x, within a healthy range, but the payout ratio of 186% is excessive relative to Net Income. This was due to a special year-end dividend of ¥15 included in the year-end payment. Next year, following a stock split (effective April 1, 2026, 1 share → 4 shares), the company plans to normalize to an annual dividend of ¥27.5 (equivalent to interim/ year-end each ¥27.5 split-adjusted, including special dividend). Post-split implied payout ratio is expected to return to a reasonable level at 28.4% (forecast dividend ¥27.5 × 4 shares equivalent ÷ forecast EPS ¥96.69). The dividend policy is to maintain stable ordinary dividends and add special dividends opportunistically; sustainability depends on expanding OCF and reducing reliance on Special Gains.
Working capital efficiency weakness: DSO 121 days, DIO 122 days, CCC 143 days indicate prolonged collection and inventory cycles, and OCF/EBITDA 0.71x is below the industry benchmark 0.9x. If compression of trade receivables ¥412.6B and inventories ¥209.4B does not progress, cash generation will be constrained, affecting funding for growth investment and shareholder returns. Year-on-year trade receivables +¥32.5B and inventories +¥5.0B show an increasing trend, impeding OCF growth.
Dependence on Special Gains: Of Net Income ¥89.0B this period, Special Gains ¥32.7B (gains on sale of investment securities ¥28.1B, etc.) account for approximately 37%; prior year Special Gains ¥81.1B were about 61%, indicating final profit has been formed at levels exceeding recurring operating earnings. The company holds investment securities ¥206.3B, with valuation/translation reserves ¥25.3B (prior year ¥19.3B, +31%) and unrealized gains expanding, but market reversals could cause valuation losses or reduced realized gains, materially impacting Net Income.
Segment concentration and market sensitivity: Color & Functional Products accounts for 55.6% of revenue and 54.4% of Operating Income, creating high concentration such that market or customer changes in that segment directly affect company-wide performance. Polymer & Coating Materials has high Operating Margin 10.5% but revenue fell -4.9% YoY; if demand weakness continues, maintaining margin will be difficult. End markets (automotive, packaging, etc.) are cyclical, and global demand slowdowns would manifest as revenue and profit declines.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.1% | 7.8% (4.6%–12.3%) | -1.6pt |
| Net Profit Margin | 7.2% | 5.2% (2.3%–8.2%) | +2.0pt |
Operating profitability is 1.6pt below the industry median on Operating Margin, but Net Profit Margin is 2.0pt above. Final-stage profitability is relatively high due to Special Gains, while operating-stage competitiveness is slightly below industry average.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -0.4% | 3.7% (-0.4%–9.3%) | -4.1pt |
Growth lags the industry median by 4.1pt and remains in a flat range. Although the core segment is growing, declines in other segments offset gains, placing the company at a relatively low position within the industry.
※Source: Company aggregation
Monitor whether operating-stage profitability improvements are sustainable. Gross Margin 21.0% improved from 20.2% (+0.8pt) and Operating Margin 6.1% also rose from 5.6% (+0.5pt). This improvement was driven by product mix improvement and volume recovery in the core Color & Functional Products segment, whose Operating Margin improved from 3.1% to 6.0% (+2.9pt), pulling up consolidated results. However, relative to the industry benchmark Operating Margin 7.8%, the company is still 1.6pt below, and convergence toward the industry average is the next focus. Graphic & Printing remains low at 2.7% Operating Margin and Polymer & Coating shows divergence with revenue and profit declines. Addressing segment-level profitability gaps is key to medium-term margin improvement.
There is significant room to improve working capital efficiency, which could expand cash generation. With DSO 121 days, DIO 122 days, CCC 143 days and OCF/EBITDA 0.71x well below the 0.9x benchmark, trade receivables increased +8.0% YoY and inventories +2.5%, limiting OCF despite OCF ¥90.5B (+117.2% YoY). If working capital can be reduced by 10%, approximately ¥60B of additional CF could be unlocked, improving ROIC and shareholder return capacity. The company’s emphasis on working capital efficiency in its plan is a positive.
Confirm the path to normalization of dividend policy and improvement of capital efficiency. The payout ratio of 186% this period is unusually high due to special dividends, but next year is planned to normalize to annual ¥27.5 (post-split), implying an effective payout ratio of 28.4% and FCF coverage in a healthy range. However, ROE 6.3% and ROA 4.2% remain low, showing room for improvement against industry averages and capital costs. Breaking dependence on Special Gains (37% of Net Income this period) and achieving sustainable operating profit growth and working capital efficiency improvements will determine whether sustained ROE improvement and shareholder value creation are achievable.
This report is an AI-generated financial analysis document created by analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information aggregated by the company based on public financial statements. Investment decisions are your own responsibility; consult professionals as appropriate.