| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥5796.3B | ¥5865.3B | -1.2% |
| Operating Income / Operating Profit | ¥420.7B | ¥610.1B | -31.0% |
| Ordinary Income | ¥451.3B | ¥623.2B | -27.6% |
| Net Income / Net Profit (attributable to owners of parent) | ¥61.0B | ¥587.6B | -89.6% |
| ROE | 1.6% | 15.7% | - |
For the fiscal year ended March 2026, Revenue was ¥5,796B (YoY -¥69B, -1.2%), Operating Income was ¥421B (YoY -¥189B, -31.0%), Ordinary Income was ¥451B (YoY -¥172B, -27.6%), and Net Income attributable to owners of parent was ¥61B (YoY -¥527B, -89.6%). The company recorded declines in revenue and profit, with Net Income substantially impaired—approximately a 90% YoY decrease—due to the recognition of a large impairment loss of ¥328B. Operating margin declined to 7.3% (down 3.1pp from 10.4% prior year), and Net Profit margin fell to 1.1% (down 8.9pp from 10.0%), indicating a marked deterioration in profitability. Comprehensive income was ¥273B, materially exceeding Net Income of ¥61B, with a notable contribution from foreign currency translation adjustments of ¥184B.
[Revenue] Revenue was ¥5,796B (YoY -1.2%), a slight decline. By segment, Engineering Plastics was ¥2,549B (+2.7%), Safety ¥1,042B (+6.7%), Medical & Healthcare ¥162B (+12.5%)—all increased—whereas Materials was ¥1,739B (-11.4%) and declined sharply. Revenue by region (based on customer location) was: Japan ¥1,992B, China ¥1,261B, Other Asia ¥1,329B, Other ¥1,214B. China increased by +3.6% from ¥1,218B prior year, while Other Asia decreased -7.1% from ¥1,430B. Gross margin was 25.2% (down 2.9pp from 28.1% prior year), pressured by higher raw material and energy costs and adverse price/mix.
[Profitability] Operating Income was ¥421B (YoY -31.0%), a large decline. SG&A was ¥1,042B (up slightly +0.5% from ¥1,037B prior year) and remained roughly flat, but the decline in gross profit compressed operating margin to 7.3%. Non-operating results were a positive ¥31B, supported by dividend income ¥24B, interest income ¥8B, and equity in earnings of affiliates ¥25B, offset by interest expense ¥32B and foreign exchange losses ¥10B. Ordinary Income was ¥451B (YoY -27.6%). Extraordinary items were a loss of ¥190B: extraordinary gains ¥200B (gain on sale of investment securities ¥175B, gain from negative goodwill ¥5B, etc.) were far exceeded by extraordinary losses ¥390B (impairment losses ¥328B, loss on disposal of fixed assets ¥35B, valuation losses on investment securities ¥10B, etc.). Impairment losses were ¥324B in Engineering Plastics and ¥4B in Safety. Profit before income taxes was ¥262B, income taxes ¥147B (effective tax rate 56.3%), and profit attributable to non-controlling interests was ¥13B, resulting in Net Income attributable to owners of parent of ¥61B (YoY -89.6%). In conclusion, declines in revenue and operating profit combined with one-time factors substantially impaired Net Income.
Engineering Plastics (Revenue ¥2,549B, Operating Income ¥192B, margin 7.5%) posted revenue growth but profit decline—Revenue +2.7% while Operating Income down -29.1%. Materials (Revenue ¥1,739B, Operating Income ¥150B, margin 8.6%) saw declines in both Revenue (-11.4%) and Operating Income (-49.5%). Safety (Revenue ¥1,042B, Operating Income ¥61B, margin 5.9%) achieved growth in both Revenue (+6.7%) and Operating Income (+55.0%). Smart (Revenue ¥379B, Operating Income ¥5B, margin 1.4%) posted slight increases; Operating Income improved from ¥2B prior year (+169%). Medical & Healthcare (Revenue ¥162B, Operating Income ¥4B, margin 2.6%) also grew, with Operating Income up from ¥3B prior year (+63.6%). Others (Revenue ¥199B, Operating Income ¥9B, margin 4.5%) showed slight declines. Deterioration in margins at core Engineering Plastics and Materials was the primary driver of company-wide profit decline.
[Profitability] Operating margin 7.3%, Net Profit margin 1.1%, ROE 1.6%, ROA (on Ordinary Income basis) 5.5%. ROE declined 12.2pp from 13.8% prior year, primarily due to the sharp deterioration in Net Profit margin. Gross margin 25.2% (down 2.9pp from 28.1% prior year), SG&A ratio 18.0% (up 0.3pp from 17.7% prior year), indicating a reversal of operating leverage.
[Cash Quality] Operating Cash Flow (OCF) ¥678B, Free Cash Flow ¥201B. OCF/Net Income is 11.1x, a high level, but significantly influenced by non-cash reversal effects from impairment. OCF/EBITDA (Operating Income + depreciation ¥854B) is 0.79x, indicating slower cash conversion.
[Investment Efficiency] Capital expenditure ¥653B was 1.51x depreciation ¥433B, reflecting continued growth investment. Construction in progress ¥599B indicates a substantial capex pipeline.
[Financial Soundness] Equity Ratio 44.4% (up 0.2pp from 44.2% prior year), Current Ratio 204%, Quick Ratio 116%. Interest-bearing debt comprised short-term borrowings ¥501B, long-term borrowings ¥1,700B, and corporate bonds ¥700B, totaling ¥2,901B. Debt/Equity ratio 78.3%, interest-bearing debt to total assets 34.8%.
OCF was ¥678B (YoY -27.4%). Profit before tax ¥262B plus depreciation ¥433B and impairment losses ¥328B among other non-cash expenses were added back. Working capital changes included inventories decrease +¥105B and trade receivables decrease +¥42B as positive contributions, and trade payables decrease -¥63B as a drag. Income taxes paid -¥250B, interest and dividends received +¥53B, and interest paid -¥29B were reflected, producing ¥678B from subtotal ¥898B after working capital and other adjustments. Investing Cash Flow was -¥477B, led by capital expenditure -¥653B, partly offset by proceeds from sale of fixed assets ¥61B and proceeds from sale of securities ¥204B. Free Cash Flow was ¥201B. Financing Cash Flow was -¥228B, with long-term borrowings procured ¥362B, long-term borrowings repayments -¥176B, net increase in short-term borrowings ¥127B, bonds redemption -¥200B, dividends paid -¥159B, and share buybacks -¥138B. Cash and cash equivalents increased ¥21B from ¥647B at the beginning of the period to ¥668B at period-end. Working capital efficiency (DIO 147 days, DSO 68 days, CCC 165 days) indicates inventory stagnation and longer collections, representing a bottleneck for CF generation.
There is a large gap between Ordinary Income ¥451B and Net Income attributable to owners of parent ¥61B, primarily due to extraordinary losses ¥390B (centered on impairment losses ¥328B) and a high effective tax rate of 56.3%. Of Non-operating income ¥88B, dividend income ¥24B and equity in earnings of affiliates ¥25B are the main components; dependence on these items is limited at 1.5% of Revenue. Extraordinary gains ¥200B (gain on sale of investment securities ¥175B) are one-off factors; core recurring earnings are centered on Operating Income ¥421B. Comprehensive income ¥273B significantly exceeded Net Income ¥61B; other comprehensive income ¥159B comprised mainly of foreign currency translation adjustments +¥184B and valuation differences on available-for-sale securities -¥47B. Foreign currency translation adjustments contributed to comprehensive income exceeding Net Income, reflecting balance-sheet level asset valuation improvement from yen depreciation. OCF ¥678B is 11.1x Net Income, but the large non-cash reversal from the ¥328B impairment materially contributes to this; OCF/EBITDA 0.79x is below the expected benchmark (>0.9x) for underlying cash-generation capacity. Given deterioration in accrual quality—working capital efficiency deterioration (CCC 165 days) and heavy income tax payments ¥250B—cautious evaluation is warranted.
Full Year guidance (Revenue ¥5,950B, Operating Income ¥425B, Ordinary Income ¥430B, Net Income attributable to owners of parent ¥320B, EPS ¥125.30) versus actual results: Revenue ¥5,796B (progress 97.4%), Operating Income ¥421B (99.1%), Ordinary Income ¥451B (104.9%), Net Income attributable to owners of parent ¥61B (19.1%). Operating and Ordinary stages are largely met to exceeded, but Net Income fell significantly short due to the ¥328B impairment. FY YoY guidance was Revenue +2.7%, Operating Income +1.0%, Ordinary Income -4.7%; the variance versus actuals is mainly due to one-off factors (impairment). Outlooks for subsequent fiscal years will be announced alongside the new medium-term strategy on 2026-05-22, with focus on the pace of profit recovery after impairment reversals.
Annual dividend is ¥60 (interim ¥30, year-end ¥30), totaling approximately ¥160B. Payout Ratio relative to Net Income attributable to owners of parent ¥61B is 262%, an extremely high level. Including share buybacks ¥138B, total shareholder returns amount to approximately ¥298B. Free Cash Flow ¥201B does not fully cover total returns, with portions funded from cash on hand and borrowings. Prior year dividend was annual ¥30 (total approx. ¥160B); while total dividend amount remains flat this year, the drastic drop in Net Income has caused the payout ratio to surge. Sustainability of the payout ratio depends on profit recovery and normalization of FCF generation. Next fiscal year dividend policy will be announced with the new medium-term strategy on 2026-05-22, with potential reconsideration of the high payout policy. Share buybacks were slightly reduced to ¥138B from ¥150B prior year. Total Return Ratio (dividend + share buybacks / Net Income) is approximately 488%, extremely high, highlighting the need for reassessment of financial strategy.
Working capital efficiency deterioration: Inventories ¥1,745B (20.9% of total assets) with inventory turnover days 147, trade receivables days 68, and CCC 165 days—indicating prolongation. Inventory buildup and delayed collections are bottlenecks for cash generation and carry additional downside risks from further price declines and valuation losses. If optimization of working capital ¥2,056B is delayed, free cash flow generation will be constrained and interest-bearing cost (short-term borrowings ¥501B) may increase.
Earnings deterioration in core businesses: Operating margins in Engineering Plastics (7.5%, down 3.4pp from 10.9% prior year) and Materials (8.6%, down 6.5pp from 15.1% prior year) have markedly worsened. Delayed pass-through of higher raw material and energy costs and demand softening could entrench structurally lower margins if price/mix improvements do not materialize. Even after impairment recognition, fundamental earnings recovery is not yet evident; ROE 1.6% is well below cost of capital.
Constraints on financial flexibility: Total shareholder returns ¥298B exceed Free Cash Flow ¥201B, and short-term borrowings increased from ¥359B to ¥501B (+39.6%). Interest-bearing debt ¥2,901B and Debt/EBITDA 3.4x (EBITDA base ¥854B) suggest some financial capacity, but rising interest rates would increase refinancing costs and the continuation of a high payout policy would pressure liquidity. The persistently high effective tax rate of 56.3% also weighs on Net Income and FCF, posing risks to sustainable capital allocation.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.3% | 7.8% (4.6%–12.3%) | -0.5pp |
| Net Profit Margin | 1.1% | 5.2% (2.3%–8.2%) | -4.1pp |
Operating margin is slightly below the industry median of 7.8% (-0.5pp), and Net Profit margin is materially below the median of 5.2% (-4.1pp). Impairments and high tax burden have placed the company in the lower half of the industry in terms of profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth (YoY) | -1.2% | 3.7% (-0.4%–9.3%) | -4.9pp |
Revenue growth lags the industry median of +3.7% by 4.9pp, indicating slower growth relative to peers.
※ Source: Company compilation
Verify scenarios for margin recovery in core businesses: Operating margins in Engineering Plastics and Materials deteriorated by 3–6pp YoY, and company-wide operating margin of 7.3% is well below historical levels. Progress in inventory adjustment (shortening DIO 147 days), effectiveness of price pass-through, and raw material cost trends will determine margin recovery. The ¥328B impairment compresses asset bases and is expected to reduce future depreciation burden, but recovery of underlying earnings power is a precondition. Continued profit gains in Safety and Medical could help stabilize group-level margins.
Sustainability of shareholder returns: Payout Ratio 262% and Total Return Ratio 488% are extremely high, with Free Cash Flow ¥201B insufficient to cover returns, causing increases in short-term borrowings. Profit recovery (impairment reversal not expected; tax rate normalization) and improvement in FCF generation are prerequisites for sustaining returns. If working capital efficiency correction (shortening CCC 165 days) is delayed, return capacity will be constrained. The new medium-term strategy announcement (2026-05-22) will be watched for dividend policy revisions and potential adjustments to the pace of share buybacks. Continuation of high dividends requires recovery of Operating Cash Flow/EBITDA to >0.9x and working capital normalization.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.