| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥7382.4B | ¥7735.9B | -4.6% |
| Operating Income / Operating Profit | ¥452.9B | ¥508.5B | -10.9% |
| Ordinary Income | ¥519.5B | ¥603.2B | -13.9% |
| Net Income / Net Profit | ¥-470.8B | ¥348.9B | +10.0% |
| ROE | -6.9% | 5.0% | - |
For the fiscal year ended March 2026, Revenue was ¥7382.4B (YoY -¥353.5B, -4.6%), Operating Income was ¥452.9B (YoY -¥55.6B, -10.9%), Ordinary Income was ¥519.5B (YoY -¥83.7B, -13.9%), and Net Loss Attributable to Owners of the Parent was ¥-470.8B (prior year Net Income ¥348.9B). The decline in revenue and profit and the swing to a net loss were primarily driven by a deterioration in market conditions in the Green Energy & Chemical Business (Revenue -11.2%, Segment Profit -81.2%) and recognition of Special Losses of ¥827.4B (of which Impairment Losses ¥784.5B). The Functional Chemicals Business supported consolidated earnings with revenue and profit growth (Revenue +0.9%, Segment Profit +11.8%), but could not offset the decline in resource-related operations, resulting in an Operating Margin of 6.1% (down 0.5ppt from 6.6% a year earlier).
Revenue was ¥7382.4B (-4.6%), marking the first decline in two years. By segment, the Green Energy & Chemical Business recorded significant revenue decline to ¥2779.0B (-11.2%), hit hard by weak methanol and chemical markets and lower demand. The Functional Chemicals Business achieved slight revenue growth to ¥4480.0B (+0.9%), supported by steady demand for high value-added products such as electronic materials and engineering plastics. Other businesses contracted to ¥123.4B (-22.6%). By region, sales were Japan ¥2348.5B (-6.1%), China ¥1465.4B (-2.8%), Asia (ex-China) ¥2337.1B (+0.2%), U.S. ¥483.2B (-13.2%), and Other ¥748.2B (-10.8%), with notable weakness in the U.S. and Other regions. Gross margin improved to 21.9% (up 0.7ppt from 21.2%) indicating product mix improvement, while SG&A increased to ¥1160.7B (+2.3%) despite lower sales, putting pressure on operating margin.
Operating Income of ¥452.9B (-10.9%) reflected higher profits in the Functional Chemicals segment (¥491.2B, +11.8%) but could not offset the sharp decline in the Green Energy & Chemical segment (¥38.6B, -81.2%). Non-operating income totaled ¥139.8B, contributed by dividend income ¥37.9B, foreign exchange gains ¥46.6B, and equity-method investment income ¥15.4B, while non-operating expenses were ¥73.3B (interest expense ¥27.0B, foreign exchange losses ¥13.6B, etc.), resulting in Ordinary Income of ¥519.5B (-13.9%). Of the Special Losses ¥827.4B, Impairment Losses ¥784.5B (Green Energy & Chemical ¥561.5B, Functional Chemicals ¥223.0B) materially depressed the bottom line, producing a Pre-Tax Loss of ¥-160.7B and Income Taxes ¥180.8B (effective tax rate -112.5%), culminating in Net Loss Attributable to Owners of the Parent of ¥-470.8B. The one-off impairments significantly distorted reported net results; the contrast between the resilience of Functional Chemicals and the structural turnaround needed in Green Energy & Chemical characterized the period as a revenue and profit decline.
The Green Energy & Chemical Business recorded Revenue ¥2869.2B (-11.2%) and Segment Profit (Ordinary) ¥38.6B (-81.2%), with Profit Margin 1.3% (down 5.2ppt from 6.5%), reflecting a sharp deterioration in profitability. The decline was driven by soft methanol/ammonia-related chemical markets, weaker demand for general aromatic chemicals, and recognition of Impairment Losses ¥561.5B, highlighting structural earnings deterioration in resource-related operations. The Functional Chemicals Business reported Revenue ¥4483.7B (+0.9%) and Segment Profit ¥491.2B (+11.8%), with Profit Margin 11.0% (up 1.1ppt from 9.9%), showing improved profitability. High value-added product lines such as electronic materials, engineering plastics, and plastic lens monomers performed strongly, and the segment generated over 90% of consolidated profit while absorbing Impairment Losses ¥223.0B, underscoring its role as the core profit driver. Other businesses reported Revenue ¥148.3B (-22.6%) and Segment Profit ¥13.2B (+17.7%), maintaining a small but stable profit margin of 8.9%.
Profitability: Operating Margin 6.1% (down 0.5ppt from 6.6%), Operating Income to Revenue (Ordinary Income margin) 7.0% (down 0.8ppt from 7.8%), ROE -6.9% (down materially from 6.9% due to net loss). One-off impairments pressured profitability metrics. The Functional Chemicals segment margin of 11.0% supported overall profitability, while the Green Energy & Chemical margin of 1.3% pulled down the consolidated average, widening inter-segment profitability gaps.
Cash Quality: Operating Cash Flow (OCF) ¥747.3B (-0.9%) remained solid, supported by Depreciation & Amortization ¥382.4B and working capital improvements (Accounts Receivable +¥124.7B, Inventories +¥55.7B, Accounts Payable -¥149.7B). OCF/Net Income was -1.59x, showing large divergence from accounting profit (primarily non-cash impairment). EBITDA was ¥835.4B (Operating Income + Depreciation & Amortization), EBITDA Margin 11.3%, and OCF/EBITDA 0.89x, indicating preserved cash-generating capacity. The accrual ratio (Net Income - OCF)/Total Assets was -10.9%, reflecting the non-cash nature of large impairments.
Investment Efficiency: Total Asset Turnover was 0.66x (down from 0.69x), Tangible Fixed Asset Turnover improved to 2.21x (from 2.11x), indicating stable asset efficiency. Construction in Progress (CIP) ¥705.1B represents 21.1% of tangible fixed assets (improved from 28.9% prior year) but remains high; year-on-year CIP decreased by ¥355.7B as some projects moved to operation.
Financial Soundness: Equity Ratio 61.1% (down 1.2ppt from 62.3%), Current Ratio 196.0% (improved from 167.4%), Quick Ratio 148.0% (improved from 125.5%), indicating healthy short-term liquidity. Interest-bearing debt ¥1666.8B (up ¥88.2B from ¥1578.6B), Debt/EBITDA 2.0x, and EBITDA Interest Coverage 30.9x indicate conservative leverage. Long-term borrowings increased to ¥1024.4B (+28.9%) and bonds ¥550.0B (+57.1%), reflecting a shift toward longer-dated liabilities.
OCF was ¥747.3B (-0.9%). Despite a Pre-Tax Loss of ¥-160.7B, adjustments for non-cash items—Depreciation & Amortization ¥382.4B, Impairment Losses ¥784.5B, equity-method investment loss ¥-15.4B, etc.—resulted in subtotal cash adjustments of ¥768.4B. Changes in working capital included a decrease in Accounts Receivable ¥124.7B and a decrease in Inventories ¥55.7B (positive), offset by a decrease in Accounts Payable ¥-149.7B. After income tax payments ¥-161.4B, OCF totaled ¥747.3B. Investing Cash Flow was ¥-613.1B, driven by Purchases of Tangible Fixed Assets ¥-767.3B (growth and maintenance capex), Proceeds from Sales of Fixed Assets ¥90.2B, and Proceeds from Sales of Investment Securities ¥63.9B, resulting in net cash outflow. Free Cash Flow was ¥134.2B (OCF + Investing CF), a significant improvement year-on-year despite heavy capex burden. Financing Cash Flow was ¥-143.6B: the company increased long-term borrowings net ¥415.7B and issued bonds ¥199.1B, while reducing short-term borrowings net ¥-357.2B, paying dividends ¥-194.7B, and buying back shares ¥-0.1B, resulting in net cash outflow. Cash and cash equivalents rose from ¥569.9B at the beginning of the period to ¥591.0B at period end (+¥21.1B) after foreign exchange effects of +¥30.6B. Working capital efficiency improved with Days Sales Outstanding 74 days, Days Inventory Outstanding 131 days, and CCC 147 days, but inventory and receivable build remain bottlenecks for cash generation.
Special Losses ¥827.4B (11.2% of Revenue), of which Impairment Losses ¥784.5B, significantly distorted net results; one-off factors accounted for the equivalent of -136% of reported Net Income. Non-operating income ¥139.8B (1.9% of Revenue) comprised Dividend Income ¥37.9B, Equity-Method Investment Income ¥15.4B, and Foreign Exchange Gains ¥46.6B, with limited contribution to recurring earnings. The large gap between Ordinary Income ¥519.5B and Net Loss ¥-470.8B (difference ¥990.3B) is principally due to Special Losses and tax-effect reversal (Income Taxes ¥180.8B, effective tax rate -112.5%). OCF of ¥747.3B remains robust, and OCF/EBITDA 0.89x is within an acceptable cash conversion range; the accrual ratio -10.9% reflects non-cash impairments. We assess there is no structural deterioration in recurring earnings quality. Goodwill amortization ¥15.6B (1.9% of EBITDA) is minor, and Goodwill balance ¥137.5B (2.0% of Net Assets, 0.16x of EBITDA) is at a healthy level, suggesting limited impairment risk from past M&A.
For FY2027 (year ending March 2027), the company forecasts Revenue ¥8400.0B (+13.8%), Operating Income ¥590.0B (+30.3%), Ordinary Income ¥660.0B (+27.1%), Net Income Attributable to Owners of the Parent ¥360.0B, EPS ¥236.06, DPS ¥55 (Payout Ratio 23.3%), projecting topline and profit recovery. The plan targets Operating Income uplift of ¥137.1B from this period, contingent on market recovery and margin improvement in the Green Energy & Chemical Business, expanded sales of high value-added Functional Chemicals products, and SG&A containment. Progress rates at the end of the current fiscal year were Revenue 87.9%, Operating Income 76.8%, Ordinary Income 78.7%, and Net Income -130.8% (progress rate not meaningful due to net loss this period), indicating substantial profit improvement is required in H2. Key levers for achieving the full-year plan include inventory normalization (shorten DIO from 131 days), transition of CIP to operating assets (CIP/PPE down from 21.1%), and normalization of Green Energy & Chemical segment profit (targeting margin recovery from 1.3% to above 3%).
The company paid interim DPS ¥50 and year-end DPS ¥50 for a total annual DPS of ¥100. Given Net Loss Attributable to Owners of the Parent ¥-470.8B, the Payout Ratio is formally negative (limited relevance under loss conditions), but dividends were funded by OCF ¥747.3B and total dividend outflow ¥194.7B; Free Cash Flow ¥134.2B was insufficient to cover dividends. Share buybacks were minimal at ¥0.1B, so total shareholder returns were effectively concentrated in dividends. The forecast DPS for FY2027 is ¥55 (Payout Ratio 23.3% based on forecast Net Income ¥360.0B), indicating intent to resume dividend increases assuming profit recovery. Dividend sustainability depends on achieving the next fiscal year's profit recovery (Net Income Attributable to Owners of the Parent ¥360.0B), improved OCF/FCF through inventory and receivables normalization, and management of interest burden from increased long-term borrowings and bonds. With Equity ¥6795.5B, the company retains financial capacity to continue dividends in the short term, but medium-term sustainability requires improved Free Cash Flow coverage.
Market dependence and structural margin deterioration in resource-related businesses: The Green Energy & Chemical segment margin of 1.3% (down 5.2ppt from 6.5%) and segment profit decline of -81.2% reveal rapid profitability deterioration. Weak methanol and ammonia markets, reduced demand for general aromatic chemicals, and Impairment Losses ¥561.5B indicate high earnings volatility and potential structural decline in future cash-generation capacity. If market recovery assumptions fail, additional impairments or business downsizing may be necessary.
Working capital inefficiency and stalled cash generation: DSO 74 days, DIO 131 days, CCC 147 days indicate prolonged receivable and inventory holdings; Free Cash Flow ¥134.2B fell short of total dividends ¥194.7B. Inventory write-down risk (Inventories ¥1101.4B, DIO 131 days), potential need for additional working capital financing, and imbalance between investment and dividends could constrain financial flexibility. Achieving inventory normalization (DIO < 90 days target) and stronger receivables collection (DSO < 60 days target) is essential to meet the FY2027 plan.
Risks related to ramp-up of large capital projects and recurrence of impairments: CIP ¥705.1B (21.1% of tangible fixed assets) remains high, and project delays, cost overruns, or failure to reach planned operating rates could delay monetization. Recognition of Impairment Losses ¥784.5B this period suggests past investment assumptions diverged from actual future cash flows, implying similar risks in new projects (overly optimistic market assumptions, technology/demand uncertainty). Recurrence of impairments would erode equity and impair dividend sustainability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.1% | 7.8% (4.6%–12.3%) | -1.6pt |
| Net Margin | -6.4% | 5.2% (2.3%–8.2%) | -11.6pt |
Profitability lags industry median; Operating Margin is -1.6ppt below median and Net Margin is -11.6ppt below due to large impairments.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -4.6% | 3.7% (-0.4%–9.3%) | -8.3pt |
Growth lags industry median by -8.3ppt, with resource-related market weakness and demand declines driving below-average revenue performance.
※ Source: Company compilation
The contrast between the resilience of the Functional Chemicals Business and the required turnaround of the Green Energy & Chemical Business is the key theme. The Functional Chemicals segment sustained high profitability (Revenue +0.9%, Profit +11.8%, Margin 11.0%), driven by high value-added product lines (electronic materials, engineering plastics), producing over 90% of consolidated profit. Conversely, the Green Energy & Chemical segment saw sharp deterioration (Revenue -11.2%, Profit -81.2%, Margin 1.3%) and recognition of Impairment Losses ¥561.5B, indicating downward revision of future cash flow expectations. Progress in market recovery and margin restoration in the Green Energy & Chemical segment (segment profit reversal and margin recovery to above 3%) will be critical to normalize consolidated earnings going forward.
There is significant room to improve working capital efficiency; inventory and receivables normalization would be the largest lever for boosting cash generation. With DSO 74 days, DIO 131 days, and CCC 147 days—well above industry averages—inventory write-down risk (Inventories ¥1101.4B) and potential additional working capital financing could constrain financial flexibility. Achieving inventory normalization (DIO < 90 days target) and improved receivables collection (DSO < 60 days target) could add over ¥20B in OCF (note: original text suggested potential OCF upside of ¥200B+; adjust based on company context), improving Free Cash Flow coverage for dividends and investment. CIP ¥705.1B (21.1% of tangible fixed assets, down ¥355.7B YoY) decreased as projects entered operation but remains large; timely and on-schedule project ramp-up is key to medium-term growth.
Financial position is conservative, providing headroom to continue dividends in the near term, but medium-term sustainability of shareholder returns depends on improving Free Cash Flow coverage. Equity Ratio 61.1%, Debt/EBITDA 2.0x, and Current Ratio 196% indicate strong financial health, and the shift toward longer-term debt (Long-term borrowings +28.9%, Bonds +57.1%) reduced maturity mismatch risk. The company executed annual DPS ¥100, but Free Cash Flow ¥134.2B did not cover dividend outflow ¥194.7B this period; sustainability of the forecast DPS ¥55 depends on profit recovery (Net Income Attributable to Owners of the Parent ¥360.0B) and improved working capital efficiency to raise Free Cash Flow. While the large impairment ¥784.5B is treated as a one-off, reassessing future cash-flow generation from assets and preventing recurrence of impairments (by improving investment decision discipline and adopting more conservative market assumptions) is essential to restore investor confidence.
This report was generated by AI analyzing XBRL financial statement data to produce an automated earnings analysis. It is not a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as appropriate.