Aica Kogyo Company,Limited FY2027 Q1 Earnings Report

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Executive Summary

The quarter was characterized by higher revenue and earnings, with the emergence of operating leverage driven by price revisions and an improved product mix being the key feature. Revenue was ¥71.38B (+19.4% YoY), Operating Income was ¥9.16B (+44.9%), and Ordinary Income was ¥9.67B (+34.8%), all expanding at rates exceeding revenue growth. Meanwhile, quarterly Net Income attributable to owners of the parent was limited to ¥4.73B (+5.7% YoY), as the recognition of an extraordinary loss of ¥0.91B and an increase in the effective tax rate restrained bottom-line growth. The revenue increase was primarily attributable to demand recovery and price pass-through in both the Construction and Decorative Materials and Chemicals segments, while earnings improved due to the gross margin increasing to 29.0% (up +1.5pt from 27.5% in the previous year) and the SG&A ratio improving to 16.1% (down -0.8pt from 16.9%).

Factors Affecting Business Performance

【Revenue】Revenue was ¥71.38B (+19.4% YoY), with both the Construction and Decorative Materials and Chemicals segments recording double-digit revenue growth. Construction and Decorative Materials generated ¥34.12B (+27.7%), while Chemicals generated ¥38.38B (+12.6%, including intersegment internal revenue). Demand recovery, price revisions, and an improved product mix were the primary drivers of revenue growth.

【Profit and Loss】Operating Income was ¥9.16B (+44.9% YoY), and Ordinary Income was ¥9.67B (+34.8%), both expanding at rates exceeding revenue growth. Segment Operating Income was ¥6.95B for Construction and Decorative Materials (+30.0%, operating margin 20.4%) and ¥3.50B for Chemicals (+66.8%, operating margin 9.1%, up +3.0pt from 6.1% in the previous year). Chemicals recorded a significant improvement in its operating margin due to cost improvements and changes in the product mix. Meanwhile, quarterly Net Income attributable to owners of the parent was limited to ¥4.73B (+5.7%), due to the recognition of an extraordinary loss of ¥0.91B and an increase in the effective tax rate (36.2%, compared with 32.1% in the previous year). Revenue and earnings both increased.

Segment Analysis

The Construction and Decorative Materials segment recorded revenue of ¥34.12B (+27.7% YoY), Operating Income of ¥6.95B (+30.0%), and an operating margin of 20.4% (up +0.4pt from 20.0% in the previous year), making it the company’s largest source of earnings. The Chemicals segment recorded revenue of ¥38.38B (+12.6%, including intersegment internal revenue), Operating Income of ¥3.50B (+66.8%), and an operating margin of 9.1% (up +3.0pt from 6.1% in the previous year), reflecting substantial improvement due to stabilized raw material costs and a better product mix. Segment profit totaled ¥10.46B; after deducting the company-wide expense adjustment of △¥1.30B, Operating Income was ¥9.16B. Construction and Decorative Materials accounted for approximately 66.5% of profit contribution, indicating that the earnings structure remains highly dependent on the high-margin business.

Key Financial Metrics

【Profitability】The Operating Income margin was 12.8%, improving +2.2pt from 10.6% in the previous year, while the gross margin increased to 29.0% from 27.5%. The Net Income margin, based on income attributable to owners of the parent, was 6.6%, slightly lower than 7.5% in the previous year, indicating that Net Income growth has not kept pace with revenue growth. ROE was 2.5%. 【Cash Flow Quality】Cash and deposits were ¥54.73B, down -7.6% from ¥59.21B in the previous year, while accounts receivable were ¥57.13B (+12.7% YoY) and inventories were ¥20.76B (+15.0%), both increasing at rates below the revenue growth rate of +19.4%; no significant deterioration in working capital was observed. 【Investment Efficiency】Goodwill increased sharply to ¥20.18B (+1,116.8% from ¥1.66B in the previous year), while intangible assets rose to ¥27.38B (+203.3% from ¥9.03B), reflecting the impact of M&A. Total assets expanded to ¥344.38B (+5.5% YoY). ROE remains low relative to the pace of asset growth, making the realization of investment returns a future challenge. 【Financial Soundness】The Equity Ratio was 64.2%, slightly improving from 63.5% in the previous year. Current assets of ¥195.79B versus current liabilities of ¥93.04B resulted in a robust current ratio of 210.5%. Long-term borrowings were limited to ¥0.77B (¥1.30B in the previous year) compared with short-term borrowings of ¥33.02B, resulting in an interest-bearing debt structure weighted toward short-term borrowings.

Cash Flow Analysis

Cash and deposits declined -7.6% to ¥54.73B from ¥59.21B in the same period of the previous year, while investments in goodwill (+¥18.52B) and intangible assets (+¥18.35B) accumulated, suggesting that M&A-related funding was one factor behind the decline in cash. Property, plant and equipment also increased to ¥86.91B (+15.1% from ¥75.45B in the previous year), indicating more active business investment. Short-term borrowings decreased to ¥33.02B (¥35.18B in the previous year), and long-term borrowings declined to ¥0.77B (¥1.30B in the previous year), with interest-bearing debt trending downward overall. In terms of working capital, the growth rates of accounts receivable (+12.7%) and inventories (+15.0%) were below revenue growth (+19.4%), and funding efficiency remained broadly stable.

Earnings Quality

Compared with Ordinary Income of ¥9.67B (+34.8% YoY), quarterly Net Income attributable to owners of the parent was ¥4.73B (+5.7%), representing a significant divergence. The primary factors were the recognition of an extraordinary loss of ¥0.91B and an increase in the effective tax rate (36.2%, compared with 32.1% in the previous year). In addition, consolidated Net Income was ¥5.60B, while the amount attributable to owners of the parent was ¥4.73B; Net Income attributable to non-controlling interests of ¥0.87B, which doubled from ¥0.40B in the previous year, accounted for the difference. Non-operating income was ¥0.82B, approximately 1.1% of revenue, consisting primarily of dividend income of ¥0.32B and interest income of ¥0.16B. Its composition was stable and had limited one-time characteristics. The extraordinary loss was a temporary factor, while growth at the Operating Income and Ordinary Income levels, which reflects normal earning power, was favorable; therefore, underlying earnings quality can be assessed as sound.

Earnings Forecast and Guidance

Progress against the full-year earnings forecast was 24.6% for Revenue (¥71.38B/¥290.00B), 26.3% for Operating Income (¥9.16B/¥34.80B), 27.4% for Ordinary Income (¥9.67B/¥35.30B), and 24.2% for Net Income attributable to owners of the parent (¥4.73B/¥19.50B). Compared with the standard quarterly progress rate of 25%, Operating Income and Ordinary Income were slightly ahead, while Revenue and Net Income were broadly at standard levels. The company revised its earnings forecast and dividend forecast during Q1, and visibility toward the full-year plan is considered favorable if contributions from the high-margin segments continue.

Shareholder Returns

The full-year dividend forecast is ¥144.00 per share, representing a substantial increase from the previous year’s annual dividend of ¥66. Based on the dividend forecast, full-year Net Income forecast of ¥19.50B, and average shares outstanding during the period of 63,276 thousand shares, the estimated annual total dividend is approximately ¥9.11B, resulting in a Payout Ratio of approximately 46.7%. Considering the cash and deposits balance of ¥54.73B and the Equity Ratio of 64.2%, this dividend level is considered to be within a sustainable range. The revision to the dividend forecast during Q1 should be noted as an indication that the shareholder return policy may be under review.

Risk Factors

1. Impairment risk associated with increases in goodwill and intangible assets: Goodwill increased sharply to ¥20.18B (+1,116.8% from ¥1.66B in the previous year), while intangible assets rose to ¥27.38B (+203.3% from ¥9.03B). Although the increase in goodwill recognized through M&A resulted in a goodwill-to-net-assets ratio of approximately 9.1%, and the balance sheet burden is currently within an acceptable range, goodwill impairment could arise depending on the results of impairment testing if demand fluctuates in the future.

2. Dependence on short-term liabilities: Long-term borrowings were limited to ¥0.77B compared with short-term borrowings of ¥33.02B, resulting in an interest-bearing debt structure weighted toward short-term borrowings. Although liquidity is robust, with a current ratio of 210.5% (current assets of ¥195.79B/current liabilities of ¥93.04B), changes in refinancing conditions amid shifts in the interest-rate environment could affect earnings sensitivity.

3. Higher effective tax rate and increase in income attributable to non-controlling interests: The effective tax rate increased to approximately 36.2% from 32.1% in the previous year, while Net Income attributable to non-controlling interests increased to ¥0.87B from ¥0.40B in the previous year. Compared with Ordinary Income growth of +34.8%, Net Income attributable to owners of the parent increased only +5.7%, creating a structure in which tax burdens and non-controlling interests restrain bottom-line growth.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Return

The company’s Operating Income margin and Net Income margin both exceed the industry median and are at high levels within the industry.

Growth and Capital Efficiency

The revenue growth rate significantly exceeded the industry median and represented strong growth above the upper limit of the IQR.

Source: Compiled by the Company

Key Points from the Earnings Results

1. The Operating Income margin improved to 12.8% (up +2.2pt from 10.6% in the previous year), confirming operating leverage resulting from the higher gross margin (+1.5pt) and lower SG&A ratio (-0.8pt). In particular, profitability improved in both segments, with an operating margin of 20.4% for Construction and Decorative Materials and 9.1% for Chemicals (+3.0pt).

2. Compared with Ordinary Income growth of +34.8%, Net Income attributable to owners of the parent increased only +5.7%, as the extraordinary loss of ¥0.91B, the higher effective tax rate (36.2%), and the increase in Net Income attributable to non-controlling interests restrained bottom-line growth. Full-year progress was 24.2% on a Net Income basis, a standard level.

3. The sharp increases in goodwill and intangible assets (+1,116.8% and +203.3%, respectively) reflect the impact of M&A. While the business portfolio is expanding, the extent to which integration benefits are realized and future impairment risk will be key monitoring points.

Theoretical Stock Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: ¥3,431–¥3,630 at ±1% for the cost of equity, and ¥3,528–¥3,529 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: residual income model / interest-rate reference month: 2026-06 / this value does not forecast or guarantee the future stock price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmark is reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, and professional advice should be sought as necessary.

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