OSAKA ORGANIC CHEMICAL INDUSTRY (4187) FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥32.29B
• Operating Income: ¥7.58B
• Net Income: ¥5.50B
• EPS: ¥261.86

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

Osaka Organic Chemical Industry delivered a strong FY2026 Q3 cumulative result, led by higher sales and substantially faster operating-profit growth. Revenue for the nine months ended August 2026 rose 21.0% year on year to ¥32.293 billion. Operating income increased 63.6% to ¥7.578 billion. Profit attributable to owners rose 55.0% to ¥5.325 billion. Gross margin reached 36.4%, approximately 443 basis points above the prior-year nine months. Operating margin rose to 23.5% from 17.3%, an expansion of approximately 612 basis points. The net margin attributable to owners improved to 16.5% from 12.9%, or approximately 362 basis points. Cost of sales grew about 13%, slower than revenue, while SG&A increased about 7%. Electronics Materials was the core earnings contributor, generating ¥3.609 billion of segment operating income on ¥15.571 billion of sales. Chemical Products and Specialty Chemicals also recorded double-digit sales growth and faster profit growth. Japan accounted for approximately 71% of reported sales, making domestic demand important to the growth outlook. Nine-month sales reached 76.0% of the full-year forecast, while operating income reached 81.5%. The forecast therefore implies a lower operating margin in Q4 than achieved in the first nine months. The annualized DuPont ROE was 12.7%, supported principally by stronger margins and asset turnover rather than greater leverage. Liquidity is substantial, with ¥16.507 billion of cash and a 4.21x current ratio. Nevertheless, annualized receivable days of approximately 109 and inventory days of approximately 138 leave cash tied up in operations. The resulting annualized cash conversion cycle of approximately 168 days makes collections and inventory discipline central to assessing the durability of the earnings improvement. The full-year dividend forecast of ¥93 per share implies a 28.6% payout against forecast EPS of ¥325.

Profitability Analysis

The reported annualized three-factor DuPont calculation is approximately 16.5% net margin × 0.631x annualized asset turnover × 1.22x financial leverage = 12.7% annualized ROE. On a comparable end-period-asset basis, the prior-year calculation was approximately 12.9% × 0.559x annualized asset turnover × 1.26x leverage, or 9.1% annualized ROE. Margin improvement was the largest favorable component; faster asset turnover also helped, while lower leverage modestly offset the gain. Gross margin expanded approximately 443 basis points to 36.4%, and SG&A fell from approximately 14.6% to 13.0% of sales. Together, these changes lifted operating margin approximately 612 basis points to 23.5%. SG&A growth of about 7% was well below revenue growth of 21%, indicating positive operating leverage. The 0.676 tax burden and 1.040 interest burden in the supplied five-factor analysis indicate that financing costs were not driving returns. Sustainability depends on retaining the improved product economics and volume: the full-year forecast implies a materially lower Q4 operating margin.

Growth Assessment

Electronics Materials is the core business by operating-income contribution: revenue was ¥15.571 billion, up 27.0%, and operating income was ¥3.609 billion, up 71.2%, at a 23.2% margin. Chemical Products generated ¥11.059 billion of revenue, up 11.5%, and ¥2.461 billion of operating income, up 49.4%, at a 22.3% margin. Specialty Chemicals generated ¥5.664 billion of revenue, up 25.2%, and ¥1.577 billion of operating income, up 78.1%, at the highest segment margin of 27.8%. Japan sales rose from approximately ¥18.799 billion to ¥22.962 billion; Asia and Oceania sales rose from approximately ¥6.249 billion to ¥7.632 billion. Against full-year forecasts, nine-month progress was 76.0% for revenue, 81.5% for operating income, 82.2% for ordinary income and 80.7% for profit attributable to owners. None differs from the standard 75% Q3 progress point by more than 10 percentage points. To meet guidance, Q4 requires approximately ¥10.207 billion of revenue and ¥1.722 billion of operating income, implying a 16.9% operating margin versus 23.5% for the first nine months. The disclosures indicate forecast and dividend revisions, but the supplied forecasts do not establish the direction of either revision.

Financial Health

Current assets of ¥40.937 billion cover current liabilities of ¥9.728 billion 4.21 times, leaving ¥31.209 billion of working capital. Cash of ¥16.507 billion alone covers current liabilities approximately 1.70 times. Total liabilities are ¥12.140 billion against ¥56.144 billion of equity; the supplied 0.22x debt-to-equity measure reflects this conservative liabilities-to-equity position. Long-term loans declined 44.2% year on year to ¥449 million. Including the separately reported ¥480 million current portion of long-term loans, reported loan balances total approximately ¥929 million, compared with approximately ¥1.338 billion a year earlier. Cash substantially exceeds these loans, and near-term loan maturities present limited apparent refinancing pressure. Investment securities increased 31.1% to ¥9.890 billion, or 14.5% of assets, increasing sensitivity of book value to securities valuations. Deferred tax liabilities rose from ¥1.014 billion to ¥1.782 billion alongside a higher valuation difference on securities.

Notable B/S Changes

Investment securities: +¥2.345 billion (+31.1%) to ¥9.890 billion; the larger portfolio increases equity sensitivity to market valuations. Work in process: +¥785 million (+37.1%) to ¥2.905 billion; monitor production throughput and eventual conversion into sales. Long-term loans: −¥355 million (−44.2%) to ¥449 million; lower term borrowing reinforces the conservative capital structure. Income taxes payable: −¥1.209 billion (−57.1%) to ¥909 million; the smaller balance reduces this component of current liabilities. Deferred tax liabilities: +¥768 million (+75.7%) to ¥1.782 billion; consistent with greater taxable temporary differences alongside securities-valuation gains. Stocks of subsidiaries and affiliates: +¥277 million (+92.8%) to ¥576 million; a larger affiliate investment balance increases exposure to investee value and performance.

Cash Flow Quality

The rise in operating profit is supported by higher gross margin and limited extraordinary charges, but the balance sheet shows substantial operating capital employed. Trade receivables were ¥12.815 billion, up approximately 10.7% year on year; using annualized nine-month sales, receivable days were approximately 109, above the 60-day warning threshold. This is an improvement from approximately 119 annualized days a year earlier, but slow collection still raises the cash-conversion burden. Raw materials, work in process and finished goods totaled approximately ¥10.372 billion. Inventory days were approximately 138 on annualized cost of sales, essentially unchanged year on year and above the 90-day warning threshold. Work in process rose approximately 37% to ¥2.905 billion; finished goods of ¥4.926 billion represented about 47% of these inventory categories, increasing the importance of demand and obsolescence management. Trade payable days were approximately 79 annualized days, compared with approximately 87 a year earlier. The resulting annualized cash conversion cycle was approximately 168 days, broadly unchanged from approximately 169 days a year earlier and well above the 120-day warning threshold. Shorter supplier financing partly offset the benefit of faster customer collections. These working-capital measures are monitoring signals, not evidence by themselves of accounting manipulation.

Dividend Sustainability

The full-year dividend forecast is ¥93 per share, including the reported ¥43 interim dividend; that implies a ¥50 year-end dividend if the forecast is met. Forecast DPS divided by forecast EPS of ¥325 gives a 28.6% dividend payout ratio. At approximately 20.34 million shares excluding treasury stock, the forecast dividend represents roughly ¥1.89 billion, against forecast profit attributable to owners of ¥6.60 billion. The modest earnings payout and ¥16.507 billion cash balance support dividend capacity, while the long working-capital cycle remains relevant to future distributions.

Risk Assessment

Business risks include Electronics Materials contributes approximately 47% of aggregate segment operating income; changes in electronics-materials demand or customer production schedules would therefore have an outsized earnings impact., Japanese sales represent approximately 71% of revenue, creating material exposure to domestic demand., As a specialty-chemical manufacturer, the company faces raw-material and energy-price volatility, process-safety and environmental-compliance costs, and product-qualification risk..

Financial risks include Annualized receivable days of approximately 109 exceed the 60-day warning threshold. Despite an approximately 10-day year-on-year improvement, slow collections keep substantial cash committed to customers., Annualized inventory days of approximately 138 exceed the 90-day warning threshold and are broadly flat year on year. The 37% rise in work in process heightens production-cycle and inventory-realization risk., The approximately 168-day annualized cash conversion cycle exceeds the 120-day warning threshold. It has not materially improved year on year, limiting how confidently accounting-profit growth can be translated into cash generation., Investment securities equal 14.5% of assets, so market-value movements can materially affect comprehensive income and equity..

Key concerns include Highest priority is converting the higher sales and profits into shorter receivable and inventory cycles; the strong cash balance mitigates near-term liquidity impact but does not remove efficiency risk., The full-year operating-income forecast implies a 16.9% Q4 operating margin, substantially below the 23.5% nine-month margin; the scale of any normalization is important to the outlook..

Investment Implications

Key takeaways include Growth is broad across all three segments, with Electronics Materials providing the largest absolute operating-profit contribution., Approximately 612 basis points of operating-margin expansion and a 12.7% annualized ROE reflect improved operating economics, not increased financial leverage., A strong net-cash position limits solvency risk, while the long cash conversion cycle remains the principal financial-quality concern., Net extraordinary loss was approximately ¥14 million, small relative to ¥7.578 billion of operating income. Non-operating income of ¥320 million was approximately 1.0% of revenue and included ¥142 million of dividends and ¥78 million of FX gains..

Metrics to watch include Q4 operating margin against the approximately 16.9% margin implied by full-year guidance, Annualized receivable days, inventory days and cash conversion cycle, Work-in-process and finished-goods balances relative to sales, Electronics Materials revenue growth and segment margin, Investment-securities valuation movements and their effect on equity.

Regarding relative positioning, The 23.5% nine-month operating margin exceeds the supplied >15% 'excellent' profitability benchmark, while the 4.21x current ratio and low loan balances indicate a stronger liquidity position than the supplied thresholds require. Working-capital efficiency is materially weaker than the supplied manufacturing benchmarks.