| Metric | Period | Year-ago Period | YoY |
|---|---|---|---|
| Revenue | ¥255.8B | ¥288.1B | -11.2% |
| Operating Income | ¥20.9B | ¥27.1B | -22.6% |
| Ordinary Income | ¥19.3B | ¥26.1B | -26.1% |
| Net Income | ¥13.7B | ¥17.9B | -23.4% |
| ROE | 1.9% | 2.5% | - |
The Q1 results for FY2026 show Revenue of ¥255.8B (YoY -¥32.3B, -11.2%), Operating Income of ¥20.9B (YoY -¥6.1B, -22.6%), Ordinary Income of ¥19.3B (YoY -¥6.8B, -26.1%), and Net Income attributable to owners of parent of ¥13.5B (YoY -¥4.2B, -23.8%). Operating in a single Chemicals Business segment, the company experienced revenue decline due to concurrent volume decreases and selling price declines, and operating margin weakened to 8.2% (down -1.2pt from 9.4% a year earlier) due to weaker fixed-cost absorption. Ordinary Income was supported by equity-method income of ¥0.8B, but non-operating expenses increased by ¥2.1B, and double-digit declines persisted through the Net Income line. Progress against the full-year plan is weak at 2.2% of Revenue and 1.5% of Operating Income versus the standard 25%, implying a back-end weighted recovery scenario is assumed.
【Revenue】 Revenue was ¥255.8B, down ¥32.3B (−11.2%) year-on-year. As a single-segment Chemicals Business, detailed product breakdowns are not disclosed, but volume declines and selling price reductions proceeded in parallel. Cost of sales was ¥200.5B (vs ¥228.2B a year earlier), down ¥27.6B; due to cost reductions smaller than the revenue decline, gross profit decreased to ¥55.3B (vs ¥59.9B a year earlier), down ¥4.6B, while gross margin improved to 21.6% (up +0.8pt from 20.8% a year earlier). Stabilization of raw material prices and improvements in product mix are inferred to have supported the gross margin.
【P&L】 Selling, general and administrative expenses were ¥34.3B (vs ¥32.9B a year earlier), up ¥1.5B (+4.5%), so fixed costs increased counter to the revenue decline. SG&A ratio rose to 13.4% (up +2.0pt from 11.4% a year earlier), and Operating Income was ¥20.9B (vs ¥27.1B a year earlier), down ¥6.1B (−22.6%); Operating margin deteriorated to 8.2% (down −1.2pt from 9.4%). In non-operating items, equity-method investment income of ¥0.8B and interest and dividend income of ¥0.2B contributed to non-operating income of ¥0.4B, while non-operating expenses including interest expense of ¥0.6B totaled ¥2.1B, resulting in net non-operating loss of −¥1.6B. Ordinary Income was ¥19.3B (vs ¥26.1B a year earlier), down ¥6.8B (−26.1%), and Ordinary Income margin was 7.5% (down −1.5pt from 9.1%). No extraordinary items were recorded, so profit before income taxes equals Ordinary Income at ¥19.3B. Income taxes were ¥5.5B (effective tax rate 28.8%), and Net Income attributable to non-controlling interests was ¥0.2B, leaving Net Income attributable to owners of parent at ¥13.5B (vs ¥17.7B a year earlier), down ¥4.2B (−23.8%). Net margin was 5.3% (down −0.9pt from 6.1%). In conclusion, weaker fixed-cost absorption due to lower revenue caused operating leverage to reverse, resulting in a revenue and profit decline.
【Profitability】Operating margin of 8.2% deteriorated −1.2pt from 9.4% a year earlier. While gross margin improved to 21.6% (+0.8pt), SG&A ratio rose to 13.4% (+2.0pt), and weaker fixed-cost absorption pressured margins. Ordinary Income margin was 7.5% (down −1.5pt from 9.1%), and Net margin was 5.3% (down −0.9pt from 6.1%). ROE was 1.9%, a significant decline from the prior-year capital base, primarily driven by lower Net Income and reduced asset efficiency. 【Cash Quality】Interest coverage, Operating Income ¥20.9B ÷ Interest paid ¥0.6B = 37.4x, shows strong tolerance for interest burden. Cash and deposits were ¥38.8B, down ¥28.4B (−42.3%) from ¥67.2B a year earlier, reflecting large payables reductions and working capital adjustments. 【Investment Efficiency】Total asset turnover annualized is about 0.84x (quarterly Revenue ¥255.8B × 4 ÷ Total assets ¥1,222.5B), remaining low. Inventories of ¥174.8B (vs ¥194.8B a year earlier) declined but remain skewed toward product inventories; receivables ¥297.9B (vs ¥328.8B a year earlier) are still high, and heavy working capital constrains asset efficiency. 【Financial Soundness】Equity Ratio was 59.4% (up +3.6pt from 55.8% a year earlier), solid. Current ratio improved to 160.4% (up +11.7pt from 148.7%), and quick ratio to 113.4% (up +8.2pt from 105.2%), indicating improved short-term liquidity. Interest-bearing debt totals ¥194.0B comprising short-term borrowings ¥104.0B, corporate bonds ¥50.0B, and commercial paper ¥40.0B, giving a 100% short-term debt ratio and a notable maturity mismatch. Cash ÷ short-term interest-bearing debt is 0.27x, thin, indicating high refinancing dependence. Debt/Equity ratio is 26.7%, reflecting a conservative capital structure.
Although a full cash flow statement is not disclosed, balance sheet movements indicate cash trends: Cash and deposits declined to ¥38.8B from ¥67.2B a year earlier (−¥28.4B, −42.3%). Receivables decreased to ¥297.9B from ¥328.8B (−¥30.8B, −9.4%), generating cash through lower sales and improved collections; however, payables decreased to ¥132.0B from ¥224.0B a year earlier (−¥92.0B, −41.1%), and compression of trade payables absorbed liquidity. Inventories fell to ¥174.8B from ¥194.8B (−¥20.0B, −10.3%), indicating normalization. Commercial paper increased to ¥40.0B from ¥20.0B (＋¥20.0B), supplementing liquidity via short-term funding. Overall, while receivables collection and inventory reduction generated cash, rapid payables compression absorbed working capital, resulting in a net decline in cash balances. This appears to be a temporary cash squeeze associated with simultaneous adjustment of inventories, receivables, and payables.
Non-operating income of ¥0.4B centered on equity-method investment income ¥0.8B and interest/dividend income ¥0.2B, small in scale and limited in one-off nature. Non-operating expenses of ¥2.1B were mainly interest expense of ¥0.6B; financial costs are minor at about 3% of Operating Income. Comprehensive income was ¥18.5B (¥18.3B attributable to owners of parent), and the ¥4.8B difference from Net Income ¥13.5B breaks down into valuation gains on available-for-sale securities ¥4.9B, foreign currency translation adjustments ¥0.1B, and pension-related adjustments −¥0.2B. Market valuation gains on securities boosted comprehensive income, so core operating profitability should be assessed on a Net Income basis. From an accrual perspective, simultaneous compression of receivables and payables caused working capital to absorb cash, likely widening the gap between Operating Income and Operating Cash Flow. The difference between Ordinary Income and Net Income is mainly tax burden and non-controlling interests; there is no evidence of distortions from accounting standard differences or extraordinary items. Earnings quality is closely tied to core volume/price trends and fixed-cost absorption.
Full-year plan: Revenue ¥1,140.0B (YoY −1.0%), Operating Income ¥135.0B (YoY +20.0%), Ordinary Income ¥126.0B (YoY +16.7%), Net Income attributable to owners of parent ¥87.0B. Q1 progress rates are Revenue 2.2%, Operating Income 1.5%, Ordinary Income 1.5%, Net Income 1.5%, well below the standard 25% progress. Achieving the full-year plan requires a back-end weighted scenario with volume recovery, selling price correction, completion of inventory normalization, and control of fixed costs from Q2 onward. Whether progress rates approach a 50% level by Q2 will be a litmus test for full-year plan feasibility.
Interim dividend per share at the end of Q1 is ¥52.5 (interim dividend). Full-year dividend forecast is ¥55.0, implying a payout ratio of approximately 22% against company-plan EPS ¥248.51, a conservative level. The interim dividend matches the prior-year interim dividend of ¥52.5, reflecting emphasis on dividend policy stability. Against the full-year Net Income plan of ¥87.0B attributable to owners of parent, total dividends are approximately ¥19.3B (outstanding shares 37,149 thousand − treasury stock 2,141 thousand × ¥55), which is coverable by retained earnings and cash balance. No share buyback is disclosed; shareholder returns are concentrated in dividends. Given cash and deposits ¥38.8B and a 100% short-term debt ratio, dividend capacity is somewhat constrained short-term, but the likelihood of continued dividends is high considering potential recovery in Operating Cash Flow and liquidity buffer in investment securities ¥92.2B.
Prolonged demand weakness and selling price declines: The −11.2% Revenue decline reflects downward pressure from both volume and price. If weak chemical market conditions persist, spread compression and worsening fixed-cost absorption could further reduce Operating margin. Failure of the assumed back-end recovery scenario would make achieving Operating Income ¥135.0B difficult.
Cash squeeze from working capital adjustment: Receivables −¥30.8B and payables −¥92.0B led to working capital absorption and cash and deposits down −¥28.4B. Simultaneous inventory reduction and trade payables compression can strain short-term liquidity, and reliance on refinancing of short-term borrowings ¥104.0B and commercial paper ¥40.0B raises refinancing and funding-cost risk in a rising-rate environment.
Rising fixed costs and deteriorating operating leverage: SG&A rose to ¥34.3B (vs ¥32.9B a year earlier), up ¥1.5B (+4.5%), increasing contrary to revenue decline. SG&A ratio rose to 13.4% (up +2.0pt), and if revenue recovery is delayed, fixed-cost absorption will weaken further, prolonging Operating margin deterioration. Achieving full-year targets requires absolute restraint on SG&A and simultaneous revenue recovery.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.2% | 6.8% (2.9%–9.0%) | +1.3pt |
| Net Margin | 5.4% | 5.9% (3.3%–7.7%) | -0.6pt |
Although Operating Margin exceeds the industry median, the deterioration from the prior year is notable and the company’s relative advantage appears to be narrowing.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -11.2% | 13.2% (2.5%–28.5%) | -24.3pt |
Revenue growth lags the industry median significantly, reflecting softer chemical market conditions compared with peers.
※ Source: Company compilation
Key to full-year attainment is realization of back-end recovery: Q1 progress rates of Revenue 2.2% and Operating Income 1.5% are well below the standard 25%, and achieving the full-year Operating Income target of ¥135.0B (＋20.0% YoY) requires concurrent volume recovery, selling price correction, completion of inventory normalization, and SG&A restraint from Q2 onward. Whether progress rates approach 50% at Q2 will be the litmus test; monitor quarterly trends in Operating margin and Revenue.
Cash management during working capital adjustment: Simultaneous compression of receivables, payables and inventories led to a ¥28.4B (−42.3%) decline in cash and deposits, and with short-term interest-bearing debt of ¥144.0B, the cash cushion is thin at ¥38.8B. Until inventory digestion and receivables collection normalize Operating Cash Flow, refinancing dependence on short-term borrowings and commercial paper will remain high, and interest-rate and market funding conditions will directly impact cash flow. Investment securities ¥92.2B could serve as a liquidity buffer, but are subject to market price volatility.
Fixed-cost control and reversal of operating leverage: SG&A increased +4.5% despite revenue decline, raising SG&A ratio to 13.4% (up +2.0pt). Achieving the full-year plan requires absolute control of SG&A and revenue recovery to improve fixed-cost absorption; quarterly SG&A ratio and Operating margin trends will signal reversal of operating leverage. Gross margin improved +0.8pt, and if raw material price stability and product-mix improvements continue, profit elasticity in a revenue recovery phase could be expected.
This report is an AI-generated financial analysis document created by analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.