| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥16687.5B | ¥18091.6B | -7.8% |
| Operating Income | ¥738.1B | ¥783.4B | -5.8% |
| Profit Before Tax | ¥686.1B | ¥716.5B | -4.2% |
| Net Income | ¥469.1B | ¥426.3B | +10.0% |
| ROE | 4.7% | 4.4% | - |
For the fiscal year ended March 2026, Mitsui Chemicals reported Revenue ¥16,687.5B (YoY -¥1,404.1B -7.8%), Operating Income ¥738.1B (YoY -¥45.3B -5.8%), Ordinary Income ¥93.4B (YoY -¥104.1B -52.7%), and Net Income attributable to owners of the parent ¥343.8B (YoY +¥21.4B +6.6%). Revenue declined due to weakening overseas demand and deteriorating market conditions in the Basic & Green Materials segment, while Operating Income was supported by an improved gross margin of 22.8% (up +1.3pt from 21.5% a year earlier) and a favorable product mix. Ordinary Income fell substantially due to higher financial expenses (¥164.3B, YoY +¥17.3B), but Net Income increased YoY by +10.0% driven by a large rise in equity-method investment income ¥172.1B (YoY +¥47.8B +38.5%) and lower corporate tax expense (¥217.0B, YoY -¥73.2B). Operating margin improved to 4.4% (from 4.3% a year earlier, +0.1pt) and Net Income margin improved to 2.8% (from 2.4% a year earlier, +0.4pt), indicating resilient profitability despite lower sales.
[Revenue] Revenue was ¥16,687.5B (YoY -7.8%), marking a decrease. By region: Japan ¥8,040.7B (-7.9%), China ¥1,887.8B (-15.4%), Asia ¥2,669.6B (-2.5%), U.S. ¥2,598.7B (-10.7%), Europe ¥1,364.9B (+1.9%), showing demand weakening in major markets. By segment, Life & Healthcare Solutions ¥2,590.8B (+2.9%) and ICT Solutions ¥2,794.4B (+0.7%) recorded revenue growth, while Mobility Solutions ¥5,154.1B (-7.2%) and Basic & Green Materials ¥5,999.2B (-15.5%) saw substantial declines, dragging overall company sales down. Gross profit was ¥3,805.1B (gross margin 22.8%), down only ¥77.8B YoY, with gross margin improving +1.3pt from the prior year. SG&A was ¥2,945.4B (SG&A ratio 17.7%), a slight decrease of ¥9.1B YoY; fixed cost rigidity limited operating margin improvement amid lower sales.
[Profitability] Operating Income decreased to ¥738.1B (YoY -5.8%) but the decline was smaller than the revenue decrease. On a core operating profit basis, core operating profit was ¥1,000.3B (YoY -0.9%), largely flat, while increases in non-recurring losses (negative goodwill gain ¥25.9B, impairment losses ¥219.1B, loss on disposal of fixed assets ¥40.1B, losses from related businesses ¥39.8B) weighed on Operating Income. Equity-method investment income rose sharply to ¥172.1B (YoY +¥47.8B +38.5%), making a material contribution to non-operating income. Financial income was ¥112.3B (YoY +¥32.1B) against financial expenses ¥164.3B (YoY +¥17.3B), resulting in net financial expense of ¥52.0B and Ordinary Income of ¥93.4B (YoY -52.7%). Profit Before Tax was ¥686.1B (YoY -4.2%), and lower corporate taxes (¥217.0B; effective tax rate 31.6%, down -8.9pt from 40.5% prior year) led to Net Income attributable to owners of the parent of ¥343.8B (YoY +6.6%). Non-controlling interests increased to ¥125.3B (YoY +20.7%), composing total Net Income ¥469.1B (YoY +10.0%). In summary, despite lower sales, improvements in gross margin, increased equity-method gains, and reduced tax burden produced higher Net Income, resulting in a revenue-down / profit-up profile.
Life & Healthcare Solutions reported Revenue ¥2,590.8B (YoY +2.9%), Operating Income ¥341.9B (YoY +0.4%), and margin 13.2%, maintaining a high level. Stable demand for vision care materials and oral care materials contributed to revenue growth and preserved high margins. Mobility Solutions posted Revenue ¥5,154.1B (YoY -7.2%), Operating Income ¥509.8B (YoY -7.5%), and margin 9.9%. Weakness in automotive-related demand led to lower sales and profits, but margin remained significantly above the company average, making this the largest contributor to consolidated Operating Income. ICT Solutions achieved Revenue ¥2,794.4B (YoY +0.7%), Operating Income ¥369.0B (YoY +38.0%), and margin 13.2%, delivering substantial profit growth. Higher demand and value-add for semiconductor and electronic component process materials and lithium-ion battery materials drove margin expansion from 9.4% a year earlier (+3.8pt). Basic & Green Materials recorded Revenue ¥5,999.2B (YoY -15.5%), Operating Loss -¥183.6B (worsening from -¥113.6B prior year), and margin -3.1%, posting a large deficit. Declines in petrochemical base-product markets such as ethylene and propylene and narrower spreads hit this segment hard, structurally reducing consolidated operating profit by approximately 110bp. Other segments recorded Revenue ¥149.1B (YoY +1.2%) and Operating Loss -¥1.1B (improved YoY), remaining a small-scale loss. Across segments, the contrasting margin improvement in ICT and the widened deficit in Basic highlight that shifting the portfolio toward high value-added segments is key to improving consolidated margins.
[Profitability] Operating margin was 4.4% (up +0.1pt from 4.3% prior year), still -3.3pt below the industry average of 7.8%. Net Income margin was 2.8% (up +0.4pt from 2.4%), -2.4pt below the industry average of 5.2%. ROE was 4.0% (up +0.2pt from 3.8%), -2.3pt below the industry average of 6.3%, reflecting continued relative weakness in returns. Improved gross margin of 22.8% (up +1.3pt) reflects product mix and raw material cost reductions, but SG&A ratio of 17.7% (up +1.4pt from 16.3%) reflects heavy fixed-cost burden offsetting operating margin gains. [Cash Quality] Operating Cash Flow (OCF) was ¥2,129.9B, 4.54x Net Income ¥469.1B, indicating very strong cash conversion. OCF/Revenue ratio was 12.8%, maintaining double-digit cash generation. Free Cash Flow was ¥782.2B (YoY +123.6% from ¥349.9B), aided by reductions in inventory and trade receivables. [Investment Efficiency] Total asset turnover was 0.776x (down from 0.840x), reflecting deteriorated asset efficiency amid lower sales. Inventory days (DIO) 117 days, receivables days (DSO) 72 days, cash conversion cycle (CCC) 151 days — long inventory and collection cycles are pressuring capital efficiency. Tangible fixed assets ratio was 31.3%, standard for manufacturing, while capital expenditure ¥1,622.1B was 1.55x depreciation ¥1,047.4B, indicating an active investment posture aiming at future capacity expansion. [Financial Soundness] Equity Ratio was 40.2% (up +0.8pt from 39.4%), within a stable range. Current ratio was 168.0%, indicating good short-term liquidity, but interest-bearing debt ¥7,401.9B (short-term ¥2,967.3B, long-term ¥4,434.6B) represents 34.4% of total assets. Debt/EBITDA was approximately 4.15x, somewhat high. Interest coverage (Operating Income ¥738.1B / Financial Expenses ¥164.3B ≒ 4.5x) indicates buffer against interest burden is near the lower bound of investment-grade. Goodwill ¥247.8B is 2.5% of net assets, and intangible assets ¥732.0B are 3.4% of total assets, suggesting limited impairment risk from M&A.
Operating Cash Flow was ¥2,129.9B (YoY +¥124.9B +6.2%), increasing solidly. Compared with Profit Before Tax ¥686.1B, non-cash charges such as Depreciation ¥1,047.4B and impairment losses ¥219.1B were added back, and decreases in trade receivables (cash-in +¥313.5B) and inventory (cash-in +¥383.9B) contributed materially, partially offset by a decrease in trade payables (cash-out -¥303.0B). OCF/Net Income ratio was 4.54x and accrual ratio was -8.3%, indicating high quality of earnings. Investing Cash Flow was -¥1,347.7B (less outflow than -¥1,650.1B prior year), with capital expenditure ¥1,622.1B, acquisitions of subsidiaries ¥37.1B, and purchases of investment securities ¥36.7B as major outflows. Proceeds from sale of subsidiaries ¥54.6B and sale of investment securities ¥54.7B partially offset outflows. Free Cash Flow was ¥782.2B (YoY +123.6% from ¥349.9B), comfortably covering dividends ¥281.7B and share buybacks ¥172.9B combined ¥454.6B (FCF cover ratio 172.0%). Financing Cash Flow was -¥759.3B (nearly flat from -¥744.4B), where increases in commercial paper ¥410.0B and long-term borrowings ¥436.3B were offset by bond redemptions -¥400.0B, repayment of short-term borrowings -¥385.6B, and dividends/share buybacks -¥454.6B. Cash and cash equivalents increased to ¥1,831.1B (up ¥125.0B from ¥1,706.2B) supported by cash generation from inventory and receivables compression, underpinning financial stability.
Of Operating Income ¥738.1B, core operating profit was calculated at ¥1,000.3B; the difference -¥262.2B reflects non-recurring items (negative goodwill gain +¥25.9B, impairment losses -¥219.1B, loss on disposal of fixed assets -¥40.1B, losses from related businesses -¥39.8B, other +¥11.1B). The net impact of one-off items was negative, and underlying recurring operating strength exceeds reported Operating Income. Equity-method investment income ¥172.1B (equivalent to 23.3% of Operating Income) is a recurring source of earnings but depends on investee performance variability. Financial income ¥112.3B represents 0.7% of Revenue and dependence on non-core income is limited. OCF ¥2,129.9B is 4.54x Net Income ¥469.1B and accrual ratio -8.3% indicates strong cash backing for profits. Corporate tax ¥217.0B (effective tax rate 31.6%) fell -8.9pt from 40.5% prior year, boosting Net Income. Comprehensive income ¥797.0B exceeded Net Income ¥469.1B by ¥328.0B, with Other Comprehensive Income ¥327.9B (foreign currency translation differences ¥221.9B, valuation differences on other financial assets ¥60.8B, etc.) contributing to equity accumulation. The divergence between Ordinary Income ¥93.4B and Net Income ¥469.1B is driven by equity-method investment income recorded outside operating profit and tax reductions; excluding one-offs, recurring earning power is better represented by core operating profit ¥1,000.3B.
Full-year guidance projects Revenue ¥1,9000.0B, Operating Income ¥830.0B (YoY +12.5%), Net Income ¥550.0B (YoY +30.9%), and EPS ¥124.48. Progress against full-year Revenue guidance based on this period’s results (Revenue ¥16,687.5B) is 87.8%, broadly in line. Against full-year Operating Income guidance ¥830.0B, this period’s Operating Income ¥738.1B represents 88.9% progress, implying an assumed increase of +¥91.9B in the remaining quarter. Net Income guidance ¥550.0B versus this period’s Net Income ¥469.1B is 85.3% progress, assuming an additional ¥80.9B. The profit increase assumptions likely require contraction of the Basic & Green Materials deficit (market recovery or cost reductions), quantity/price improvements in Mobility and ICT Solutions, and stabilization of cash flow through inventory/CCC normalization. EPS guidance ¥124.48 implies +35.9% from this period’s ¥91.62, with share cancellations (reduced average shares outstanding) also contributing. The dividend forecast is annual ¥37.5 per share (post-split basis), maintaining a Payout Ratio of 30.1%. Achieving the plan depends on market improvement and progress in internal efficiency measures.
Cash dividends paid this period totaled ¥281.7B, giving a payout ratio relative to Net Income attributable to owners of the parent ¥343.8B of 81.9%, a high level. Share buybacks amounted to ¥172.9B, and total returns including dividends were ¥454.6B, with Total Return Ratio 132.2%, exceeding Net Income. Free Cash Flow ¥782.2B sufficiently covered total returns ¥454.6B (FCF cover ratio 172.0%), indicating strong sustainability from a cash-flow perspective. A 2-for-1 stock split effective January 1, 2026 was implemented, and the year-end dividend is planned at ¥37.5 per share on a post-split basis (equivalent to annual dividend ¥150.0 on a pre-split basis). The full-year payout ratio is stated as 87.9%, reflecting a high-return stance, while the full-year forecast anticipates a decline to 30.1% with earnings growth. Treasury stock increased by -¥569.9B (from -¥426.5B prior year, a -¥143.4B increase), reflecting efforts to improve capital efficiency but exerting downward pressure on equity. With interest-bearing debt ratio at 34.4% and relatively high leverage, the high payout and total return levels could be a risk in a rising-rate environment, but current cash generation provides a sufficient base to support the return levels.
Structural deficit risk in Basic & Green Materials: Operating loss -¥183.6B (Revenue ¥5,999.2B, margin -3.1%) erodes about 25% of consolidated Operating Income. Petrochemical base products such as ethylene and propylene are highly sensitive to market swings, and prolonged spread deterioration would continue to weaken consolidated profitability. A significant portion of impairment losses ¥219.1B was attributable to this segment, raising concerns about asset efficiency. If market recovery signs do not appear, a fundamental portfolio review may be required.
Cash flow volatility risk due to low working-capital efficiency: Inventory ¥4,144.7B (DIO 117 days), trade receivables ¥3,276.4B (DSO 72 days), CCC 151 days — long inventory and collection cycles mean working capital accounts for 74.6% of current assets. While inventory compression boosted OCF this period, re-stocking upon demand recovery could trigger large cash outflows and rapid declines in Free Cash Flow. There remains the possibility of inventory valuation losses or disposal losses from stagnant inventory.
Persistent high leverage and interest-rate risk: Interest-bearing debt ¥7,401.9B (Debt/EBITDA ≈ 4.15x) and interest coverage 4.5x indicate financial flexibility is near the lower bound of investment-grade. Financial expenses ¥164.3B (YoY +¥17.3B) have risen, and in a rising rate environment interest burdens would increase and compress Net Income. With a low operating margin of 4.4%, higher interest costs would constrain dividend capacity and investment capacity, raising risks of rating downgrades and higher funding costs.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 4.0% | 6.3% (3.2%–9.9%) | -2.3pt |
| Operating Margin | 4.4% | 7.8% (4.6%–12.3%) | -3.3pt |
| Net Margin | 2.8% | 5.2% (2.3%–8.2%) | -2.4pt |
Profitability falls below industry medians across metrics, with Operating and Net margins in the lower tier. ROE 4.0% is -2.3pt below the industry median 6.3%, highlighting relatively weak capital efficiency.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -7.8% | 3.7% (-0.4%–9.3%) | -11.5pt |
Revenue growth of -7.8% is substantially below the industry median +3.7%, indicating underperformance in growth. Deterioration in basic chemicals markets and weaker overseas demand are the main drivers, and growth in high value-added segments has not fully offset this.
※Source: Company compilation
Strong cash-generation and inventory compression effects: OCF ¥2,129.9B is 4.54x Net Income, and Free Cash Flow ¥782.2B covers total returns ¥454.6B by 1.7x, confirming high cash-generation capacity. Inventory and receivables compression were the main drivers; while re-stocking risk exists upon demand recovery, current cash quality is very high and supports both shareholder returns and capital expenditure. Continuous improvement in DIO (117 days) and CCC (151 days) will be key to improving capital efficiency.
Shift toward high value-added segments: ICT Solutions (Operating Income ¥369.0B, margin 13.2%, YoY +38.0%) and Life & Healthcare Solutions (Operating Income ¥341.9B, margin 13.2%) accounted for 96.3% of consolidated Operating Income and contributed to the gross margin improvement to 22.8% (YoY +1.3pt). Mobility Solutions maintained stable margin 9.9% despite lower profits, while the Basic & Green Materials deficit -¥183.6B dilutes consolidated margins. If profitability in Basic can be restored (market recovery, cost reductions, business restructuring), Operating margin could potentially improve above 5%.
Monitor financial leverage and interest risk: With Debt/EBITDA ≈ 4.15x and interest coverage 4.5x, financial flexibility sits near the lower bound of investment-grade. The increase in financial expenses ¥164.3B (YoY +¥17.3B) highlights interest-rate sensitivity; achieving full-year profit plans depends on Basic segment returning to profit and controlling interest costs. High payout ratio 87.9% and Total Return Ratio 132.2% signal an aggressive return policy, but in the event of downside, dividend cuts or return policy revisions are risk factors. Next fiscal year improvements in leverage and interest burdens will be critical to financial stability assessments.
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