| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥200.3B | ¥174.0B | +15.1% |
| Operating Income / Operating Profit | ¥44.2B | ¥29.2B | +51.4% |
| Ordinary Income | ¥46.0B | ¥30.4B | +51.2% |
| Net Income / Net Profit | ¥32.0B | ¥22.1B | +44.6% |
| ROE | 5.8% | 4.4% | - |
FY2026 Q2 results: Revenue ¥200.3B (YoY +¥26.3B +15.1%), Operating Income ¥44.2B (YoY +¥15.0B +51.4%), Ordinary Income ¥46.0B (YoY +¥15.6B +51.2%), Net Income ¥32.0B (YoY +¥9.9B +44.6%). High-margin segments—Electronic Materials Business (Revenue +23.9%, Operating Income +68.4%) and Specialty Chemicals Business (Revenue +21.3%, Operating Income +60.4%)—drove performance, lifting the operating margin sharply to 22.1% (from 16.8% a year ago, +5.3pt). Gross margin improved to 35.6% (from 31.7%, +3.9pt) while SG&A ratio declined to 13.5% (from 14.9%, -1.4pt), indicating structural improvement in profitability. Progress vs. Full Year guidance is ahead of the standard pace (50%): Revenue 51.4%, Operating Income 59.0%, Net Income 61.5%.
[Revenue] Revenue ¥200.3B, up +15.1% YoY, with all three major segments delivering growth. By segment, Electronic Materials accounted for the largest share at ¥96.9B (48.4% of total, +23.9% YoY) and led overall top-line expansion. Functional Chemicals recorded ¥39.9B (19.9%, +21.3% YoY) maintaining high growth, and Chemical Products came in at ¥66.8B (33.4%, +2.4% YoY) sustaining steady growth. By region: Domestic ¥142.6B, Asia & Oceania ¥48.8B, Americas ¥5.9B, Europe ¥3.0B—domestic accounts for ~70%, but Asia & Oceania grew from ¥40.4B to +20.8% YoY, showing overseas expansion. Shift to higher value-added products and demand recovery were primary drivers.
[Profitability] Cost of sales ¥129.0B (cost ratio 64.4%) yielded gross profit ¥71.4B (gross margin 35.6%, improving +3.9pt from 31.7%). SG&A ¥27.1B (SG&A ratio 13.5%, down -1.4pt from 14.9%) rose, but was more than offset by gross profit expansion, delivering Operating Income ¥44.2B (Operating margin 22.1%, +5.3pt from 16.8%)—a substantial increase. Non-operating income ¥1.8B (dividends received ¥0.8B, foreign exchange gains ¥0.5B, insurance proceeds ¥1.0B, etc.) less non-operating expenses ¥0.0B (including foreign exchange losses ¥1.0B) produced Ordinary Income ¥46.0B (YoY +51.2%). After recording extraordinary losses ¥0.1B (impairment of land ¥0.08B, disposal loss ¥0.03B), pretax income was ¥45.9B. Income taxes ¥13.9B (effective tax rate 30.4%) and non-controlling interests ¥1.1B were deducted, resulting in Net Income attributable to owners of the parent of ¥32.0B (Net margin 16.0%, up +3.7pt from 12.3%). In conclusion, a mix shift to higher value-added products and appropriate SG&A control drove revenue and profit growth.
Electronic Materials Business delivered Revenue ¥96.9B (+23.9% YoY) and Operating Income ¥21.9B (+68.4% YoY, margin 22.6%), the largest contributor to profit. Recovery in semiconductor and display-related demand and introduction of higher value-added products significantly improved margins. Functional Chemicals Business posted Revenue ¥39.9B (+21.3% YoY) and Operating Income ¥9.9B (+60.4% YoY, margin 24.8%), achieving the highest margin and reflecting the advantage of specialty chemicals. Chemical Products Business recorded Revenue ¥66.8B (+2.4% YoY) and Operating Income ¥12.7B (+26.9% YoY, margin 19.1%), maintaining stable growth. Expansion of high-margin segments (Electronic Materials and Functional Chemicals) increased the consolidated operating margin.
[Profitability] Operating margin 22.1% improved +5.3pt from 16.8% last year; gross margin 35.6% (up +3.9pt from 31.7%), SG&A ratio 13.5% (down -1.4pt from 14.9%). ROE is 5.8%, up +1.5pt from 4.3% last year, but despite Net margin improving to 16.0%, asset efficiency gains were limited with Total Asset Turnover at 0.29x (0.27x prior). EBITDA margin is high at 28.7% (Operating Income ¥44.2B + Depreciation ¥13.3B = ¥57.5B / Revenue ¥200.3B).
[Cash Quality] Operating Cash Flow (OCF) ¥26.0B vs Net Income ¥32.0B gives an OCF/Net Income ratio of 0.81x, indicating weak cash conversion; OCF/EBITDA ratio stands at 0.45x (¥26.0B / ¥57.5B). Working capital increases (Inventory -¥11.3B, Accounts Receivable -¥11.1B) substantially absorbed the subtotal Operating CF of ¥46.3B. DSO is 231 days (Accounts receivable ¥126.6B ÷ annualized daily sales ¥0.55B), DIO is 292 days (Inventory ¥103.0B ÷ annualized daily COGS/turnover ¥0.35B), and CCC is 330 days—indicating significant working capital retention.
[Investment Efficiency] Capital expenditures ¥9.0B vs Depreciation ¥13.3B yields CapEx/Depreciation ratio 0.68x, indicating restrained investment.
[Financial Soundness] Equity Ratio 79.6% (up +1.6pt from 78.0%) is very strong; Current Ratio 367.3%, Quick Ratio 367.3%. Cash ¥171.1B vs Interest-bearing debt ¥10.7B (Short-term borrowings ¥5.0B + Long-term borrowings ¥5.6B) results in Net Cash ¥160.4B. Debt/EBITDA is 0.19x, Interest Coverage 2,012x (EBIT ¥44.2B / Interest expense ¥0.02B), indicating significant financial capacity.
Operating Cash Flow (OCF) was ¥26.0B, down -28.7% from ¥36.5B a year ago. Operating CF subtotal (before working capital changes) was ¥46.3B and remained robust, but inventory increase -¥11.3B (build-up of raw materials, WIP, finished goods) and accounts receivable increase -¥11.1B (collection delays from sales expansion) heavily reduced cash, partially offset by accounts payable increase +¥9.7B. Corporate tax payments -¥21.0B also pressured operating cash. Investing CF was -¥8.5B, including CapEx -¥9.0B (up from -¥5.7B prior) and purchases of investment securities -¥1.2B. Free Cash Flow (FCF) was positive at ¥17.5B (OCF ¥26.0B + Investing CF -¥8.5B). Financing CF was -¥11.5B, comprising dividend payments -¥8.1B, long-term debt repayments -¥2.7B, and share buybacks -¥0.0B. Cash increased from ¥159.2B at the beginning of the period to ¥171.1B (+¥8.0B). OCF/Net Income ratio 0.81x and OCF/EBITDA 0.45x indicate weak cash conversion; improving working capital is a short-term priority. However, FCF covers dividends comfortably (FCF coverage 2.15x), supporting financial sustainability.
Non-operating income ¥1.8B (0.9% of Revenue) relative to Operating Income ¥44.2B is limited; breakdown includes dividends received ¥0.8B, foreign exchange gains ¥0.5B, insurance proceeds ¥1.0B, etc. Foreign exchange losses ¥1.0B occurred, net FX impact roughly -¥0.5B and immaterial. Ordinary Income ¥46.0B vs extraordinary losses ¥0.1B (impairment ¥0.08B, disposal loss ¥0.03B) shows one-off items amount to only ~0.3% of Net Income, indicating earnings are highly recurring. Comprehensive income ¥55.6B vs Net Income ¥32.0B leaves a difference of ¥23.6B, mainly from valuation differences on available-for-sale securities ¥22.9B, meaning unrealized gains on investment securities boosted the balance sheet. The gap between OCF ¥26.0B and Net Income ¥32.0B (-¥6.0B) is due to working capital build-up; accrual ratio (Net Income - OCF) / Net Income is 18.8%, a reasonably healthy level, but working capital retention is delaying cash conversion and warrants attention.
Full Year guidance is unchanged: Revenue ¥390.0B (YoY +7.5%), Operating Income ¥75.0B (YoY +21.2%), Ordinary Income ¥77.0B (YoY +17.4%), EPS ¥255.50. As of Q2-end, progress vs. FY guidance: Revenue 51.4% (¥200.3B / ¥390.0B), Operating Income 59.0% (¥44.2B / ¥75.0B), Ordinary Income 59.7% (¥46.0B / ¥77.0B), Net Income 61.5% (¥32.0B / ¥52.0B)—all above the standard 50% pace. If the operating margin improvement trend continues into H2, upside to the full-year plan is possible. Dividend guidance is ¥43 per share (payout ratio 16.8%), conservative, leaving room for potential increases if results exceed guidance.
Q2 dividend was ¥43; full-year dividend forecast is ¥43. Net Income for the period ¥32.0B vs total dividends ¥8.1B yields a dividend payout ratio of 31.2% (annualized, based on full-year Net Income forecast ¥52.0B and total dividends ¥8.7B gives 16.8%), leaving ample room. FCF ¥17.5B covers dividend payments ¥8.1B with FCF coverage 2.15x, indicating strong dividend-paying capacity. No share buybacks (¥0.0B); shareholder returns are dividend-centric. With cash ¥171.1B and Net Cash ¥160.4B, financial headroom is substantial, supporting dividend sustainability and potential increases.
Working capital retention risk: DSO 231 days, DIO 292 days, CCC 330 days indicate prolonged working capital cycles and weak cash conversion (OCF/Net Income 0.81x). Inventory increase -¥11.3B and AR increase -¥11.1B have heavily pressured OCF; asset efficiency lags sales growth. Low Total Asset Turnover 0.29x could constrain cash generation, limiting investment and returns if working capital improvement is delayed.
Demand volatility in Electronic Materials Business: Representing 48.4% of Revenue and 49.6% of Operating Income, the Electronic Materials Business depends on semiconductor and display demand; market swings directly affect profitability. This period achieved +23.9% revenue growth and +68.4% profit growth, but cyclical reversal could cause margin compression via price pressure and inventory adjustments. Changes in high-margin product mix can materially impact consolidated operating margin.
Valuation fluctuation risk of investment securities: Investment securities ¥108.9B (15.7% of total assets) produced valuation gains ¥22.9B this period, increasing deferred tax liabilities to ¥21.7B (+¥11.6B). Market reversals could reverse unrealized gains, reducing equity and affecting deferred tax liabilities, thereby pressuring the Equity Ratio of 79.6%. Valuation reserves and translation adjustments totaling ¥60.9B can materially influence equity.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 22.1% | 8.8% (3.0%–11.0%) | +13.3pt |
| Net Margin | 16.0% | 5.4% (1.1%–8.2%) | +10.5pt |
Operating margin 22.1% exceeds the manufacturing median 8.8% by +13.3pt, placing the company among the top performers in the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 15.1% | 11.7% (-5.4%–28.3%) | +3.4pt |
Revenue growth of 15.1% is +3.4pt above the median 11.7%, indicating the company maintains a standard industry growth pace.
※ Source: Company aggregation
Structural shift toward higher value-added products drove operating margin improvement to 22.1% (YoY +5.3pt). Expansion of Electronic Materials (margin 22.6%) and Functional Chemicals (margin 24.8%) increased the profit mix, strengthening the revenue base via a shift to specialty chemicals. With FY progress at 59% and a front-loaded pace, if margin trends persist into H2, upside to the full-year plan is plausible.
Working capital retention (CCC 330 days, OCF/Net Income 0.81x) is a near-term focal point. Inventory and receivables increases have caused OCF to lag Net Income, and OCF/EBITDA 0.45x signals weak cash generation. Conversely, Net Cash ¥160.4B and Debt/EBITDA 0.19x afford substantial financial flexibility, and payout ratio 31.2% indicates available room for returns. If working capital is released in H2, cash quality will improve, enabling expanded investment and returns. With CapEx/Depreciation 0.68x, investment is restrained; balancing accelerated growth investment with working capital efficiency is key to sustainable value creation.
This report was automatically generated by AI analyzing XBRL earnings disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.