| Metric | Current | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥4623.4B | ¥4868.0B | -5.0% |
| Operating Income / Operating Profit | ¥189.4B | ¥180.4B | +5.0% |
| Ordinary Income | ¥375.1B | ¥223.7B | +67.7% |
| Net Income | ¥222.0B | ¥97.5B | +127.7% |
| ROE | 4.9% | 2.4% | - |
For the fiscal year ending March 2026, Revenue was ¥4623.4B (YoY -¥244.7B, -5.0%), Operating Income was ¥189.4B (YoY +¥9.0B, +5.0%), Ordinary Income was ¥375.1B (YoY +¥151.4B, +67.7%), and Net income attributable to owners of parent was ¥238.7B (turned positive from a loss of ¥48.2B in the prior year). Despite lower sales, Operating Income increased, supported by an improvement in gross margin to 22.4% (+3.7pt). Ordinary Income rose substantially due to Equity-method investment income of ¥154.5B (41.2% of Ordinary Income) and foreign exchange gains of ¥43.1B as non-operating contributions. Net income turned from a loss of ¥48.2B to a profit of ¥238.7B, and Operating Income margin improved to 4.1% (prior year 3.7%, +0.4pt). By segment, Specialty Products maintained its revenue pillar with Operating Income of ¥97.6B and margin of 15.8%, Polymers & Chemicals returned to profit with Operating Income of ¥81.9B, while High Performance Urethans, despite Revenue expanding +198.1%, posted an operating loss of ¥5.5B. Operating Cash Flow (OCF) was strong at ¥599.8B (YoY +67.4%), but Investment Cash Flow was -¥1402.3B due to M&A and large capital expenditures, leaving Free Cash Flow (FCF) at a substantial -¥802.5B. Total assets expanded to ¥9463.1B (YoY +¥801.3B) with notable asset recognition after investments: tangible fixed assets +¥729.7B, goodwill +¥302.5B, and intangible fixed assets +¥467.0B.
[Revenue] Revenue of ¥4623.4B represents a YoY decline of ¥244.7B (-5.0%). By segment, Specialty Products recorded ¥619.0B (-6.4%), remaining the largest contributor to profit despite lower sales. High Performance Urethans grew to ¥465.5B (+198.1%)—nearly triple—mainly driven by scale expansion from newly consolidated 11 subsidiaries in the period (M&A effect). Pharmaceuticals fell sharply to ¥210.0B (-33.3%), Polymers & Chemicals (the core business) was ¥2512.4B (-8.2%) accounting for 54.3% of sales and declined YoY, and Machinery was ¥684.1B (-21.3%) reflecting weaker order conditions. By region: Japan ¥2062.7B (prior ¥2260.2B), Asia ¥1276.8B (prior ¥1383.9B), Europe ¥673.5B (prior ¥650.1B), North America ¥429.3B (prior ¥384.3B). Declines in Japan and Asia weighed on the total, while North America grew +11.7%. Gross margin improved to 22.4% (prior 18.7%, +3.7pt), indicating effective cost control and better product mix despite lower sales.
[Profit & Loss] Operating Income of ¥189.4B (YoY +¥9.0B, +5.0%) increased despite lower sales. Operating margin improved to 4.1% (prior 3.7%, +0.4pt), although SG&A ratio rose to 18.3% (prior 15.0%, +3.3pt), offsetting some gross margin gains. Segment operating profits: Specialty Products ¥97.6B (-16.4%), High Performance Urethans -¥5.5B (worsened from -¥2.0B), Pharmaceuticals -¥12.6B (turned from ¥11.5B profit), Polymers & Chemicals ¥81.9B (turned positive from -¥7.1B, +1248.5%), Machinery ¥62.4B (-20.8%). The turnaround in Polymers & Chemicals drove consolidated operating profit improvement. Ordinary Income of ¥375.1B (+67.7%) was significantly supported by Equity-method investment income of ¥154.5B (prior ¥76.4B) and foreign exchange gains of ¥43.1B, expanding total non-operating income to ¥247.8B (prior ¥105.4B). Special losses amounted to ¥71.1B (impairment losses ¥27.0B, valuation losses on investment securities ¥0.03B, etc.), but profit before tax turned positive to ¥307.3B (prior -¥108.9B). After tax expense of ¥66.2B (effective tax rate 21.5%) and non-controlling interests of ¥2.4B, Net income attributable to owners of parent was ¥238.7B (prior -¥48.2B), a return to profitability. In summary, the structure is revenue down but profit up.
Specialty Products posted Revenue ¥619.0B (-6.4%), Operating Income ¥97.6B (-16.4%), and margin 15.8%, remaining the company’s highest-margin profit pillar. Despite YoY declines in sales and profit, contribution remains largest, and high-value products (polyimide, separation membranes, separators, etc.) maintain profitability. High Performance Urethans recorded Revenue ¥465.5B (+198.1%) but an operating loss of ¥5.5B (widened from -¥2.0B), margin -1.2%. Sales growth was mainly from M&A-driven consolidation, but profitability improvement remains a challenge. Pharmaceuticals had Revenue ¥210.0B (-33.3%) and Operating loss ¥12.6B (turning from ¥11.5B profit), with drug discovery and contract business headwinds compressing margins. Polymers & Chemicals, the largest segment, had Revenue ¥2512.4B (-8.2%), Operating Income ¥81.9B (turned from -¥7.1B, +1248.5%), margin 3.3%—its return to profitability underpinned consolidated results. Machinery had Revenue ¥684.1B (-21.3%), Operating Income ¥62.4B (-20.8%), margin 9.1%. Despite weaker orders, Machinery maintained a high-single-digit margin and remains a stable earnings source. Corporate adjustments totaled -¥53.6B (prior -¥38.0B), mainly allocation of headquarters costs and higher corporate-level expenses.
[Profitability] Operating margin 4.1% (prior 3.7%), Net margin 5.2% (prior -1.0%). Gross margin 22.4% improved +3.7pt from 18.7%, indicating cost control and better product mix. SG&A ratio rose to 18.3% (prior 15.0%, +3.3pt) due to higher corporate expenses and increased administrative costs from new consolidations. ROE recovered to 5.2% (prior -1.2%)—positive but still low. ROE components: Net margin 5.2% × Total asset turnover 0.489 × Financial leverage 2.08x. [Cash Quality] OCF/Net Income is 2.70x (OCF ¥599.8B / Net Income ¥222.0B), and OCF/EBITDA ~1.34x, indicating good cash conversion. Accrual ratio (Net Income ¥222.0B - OCF ¥599.8B) / Total assets ¥9463.1B = -4.0%, showing negative accruals and healthy earnings quality. [Investment Efficiency] ROA (on Ordinary Income basis) improved to 4.0% (prior 2.6%). ROIC (pre-tax) is about 2.2% (Operating Income ¥189.4B / estimated invested capital ~¥8500B = equity + interest-bearing debt), indicating low capital efficiency. Total asset turnover 0.489x (prior 0.562x) declined due to asset expansion from investments. Construction in progress is high at ¥903.2B (30.5% of tangible fixed assets), indicating awaiting capitalization. [Financial Soundness] Equity Ratio 48.1% (prior 47.6%), Current Ratio 151.2%, Quick Ratio 118.7% indicate solid liquidity. Interest-bearing debt (short-term borrowings ¥807.5B + bonds maturing within 1 year ¥100.0B + long-term borrowings ¥1821.9B + bonds ¥800.0B + lease liabilities ¥51.3B) totals approx. ¥3580B, Debt/Equity 1.08x, Debt/EBITDA ~5.89x (EBITDA estimate: Operating Income ¥189.4B + D&A ¥256.9B ≒ ¥446B; Interest-bearing debt ¥3580B / ¥446B). Leverage is high and resilience to rising rates or adverse markets requires attention. Interest coverage (Operating Income / Interest expense) is 5.47x (¥189.4B / ¥34.6B), indicating some capacity to service interest.
OCF was ¥599.8B (prior ¥358.4B, +67.4%), showing ~1.95x cash generation vs. profit before tax ¥307.3B. OCF subtotal (before working capital changes) was ¥597.2B, including non-cash charges: D&A ¥256.9B, impairment losses ¥27.0B, and Equity-method investment profit adjustment -¥154.5B (Equity-method income boosts profit but is separate from cash inflows). Working capital changes included decrease in trade receivables +¥143.5B (collection progress), increase in inventories -¥4.3B (roughly flat), decrease in trade payables -¥27.7B, and decrease in contract liabilities -¥43.0B, netting a small positive contribution. Corporate tax paid -¥77.5B, interest & dividends received +¥110.3B, interest paid -¥30.2B. Investing CF was -¥1402.3B (prior -¥631.5B), with major outflows: acquisition of shares of subsidiaries -¥715.3B (M&A) and acquisition of tangible & intangible assets -¥724.5B (capex & R&D). Free Cash Flow was a large negative -¥802.5B (OCF ¥599.8B + Investing CF -¥1402.3B). Financing CF was +¥130.3B, including proceeds from long-term borrowings ¥461.3B and bond issuance ¥99.6B, offset by long-term borrowings repayment -¥200.6B, bond redemption -¥100.0B, and dividends paid -¥106.8B. Cash and cash equivalents decreased from ¥1154.4B at period start to ¥525.8B at period end (-¥628.6B, including FX impact +¥43.6B), reducing liquidity on hand. Given rising financial leverage and room to compress inventories/receivables, improving working capital efficiency and monetizing capex will be key to future cash generation.
Of Operating Income ¥189.4B, Equity-method investment income of ¥154.5B (41.2% of Ordinary Income) and foreign exchange gains ¥43.1B contributed substantially as non-operating income, lifting Ordinary Income to ¥375.1B. Equity-method income reflects contributions from affiliates (mainly cement-related equity-method companies, investment amount ¥1817.3B). While this is a recurring income source, its high contribution creates exposure: fluctuations in affiliates’ performance directly affect consolidated profit. Foreign exchange gains ¥43.1B are also volatile. Together, Equity-method income and FX gains total about 104% of Operating Income, meaning over half of profit origin depends on non-operating factors. Non-operating expenses were ¥62.1B (mainly interest expense ¥34.6B and other non-operating expenses ¥18.2B), leaving net non-operating income of ¥185.7B that materially boosted Ordinary Income. Extraordinary items comprised special gains ¥3.3B (proceeds from sale of investment securities ¥2.4B, etc.) and special losses ¥71.1B (impairment losses ¥27.0B, valuation loss on investment securities ¥0.03B, etc.), which reduced Net Income by ¥67.8B temporarily. OCF/Net Income 2.70x and OCF/EBITDA ~1.34x indicate strong cash backing and low accruals. The gap between Ordinary Income ¥375.1B and Net Income ¥222.0B is mainly due to extraordinary losses and tax burden; on an ongoing basis, Equity-method income and FX contributions drive profit volatility.
Company guidance for FY2027 (year ending March 2027) is Revenue ¥4850.0B (YoY +4.9%), Operating Income ¥235.0B (+24.1%), Ordinary Income ¥375.0B (flat), Net income attributable to owners of parent ¥245.0B (+2.6%), and EPS forecast ¥252.2. Operating margin is forecast to improve to about 4.85% (+0.7pt), assuming maintained/improved gross margin, controlled SG&A ratio, reduction of losses in High Performance Urethans, consolidation of Polymers & Chemicals profitability, and continued high profitability in Specialty Products. Progress rate: current Operating Income ¥189.4B represents ~80.6% of next year’s plan of ¥235.0B, implying that achieving the full-year plan will require earnings expansion in H2 (H1 progress not disclosed). The plan assumes Equity-method income and FX contributions remain at similar levels; the flat Ordinary Income forecast suggests a conservative view that does not assume further increases in non-operating income. Net income growth of only +2.6% vs. Operating Income growth +24.1% reflects the phasing out of special items and normalization of tax burden. Dividend forecast for FY2027 is undecided and will be determined after policy review on DOE level. Key assumptions for guidance include capitalization and ramp-up of construction-in-progress leading to higher D&A with fixed-cost absorption, and improvements in working capital turnover (shortening CCC).
Annual dividend is ¥110 per share (interim ¥55 + year-end ¥55), unchanged from prior year. With Net Income ¥222.0B and total dividends ¥106.8B, the payout ratio is approximately 48.1%. Based on average outstanding shares during the period of 97,135 thousand shares, the total dividend amount is approx. ¥106.8B, consistent with XBRL data. The payout ratio is moderate and sustainable on an earnings basis, but with FCF at a large negative -¥802.5B, dividend payments are currently funded by a mix of borrowings / bond issuance and OCF. DOE was 2.7% in the prior year; FY2027 dividend policy is undecided and DOE level will be reconsidered based on improvements in capital efficiency and FCF. Share buybacks were minimal at ¥0.06B (prior ¥0.06B), so total shareholder returns are effectively dividend-centric. Sustainability of dividends at the current level depends on calming investment pace and improved working capital to restore FCF.
Working capital efficiency deterioration and cash strain risk: CCC (cash conversion cycle) is long at 157 days (DSO 73 days, DIO 139 days, DPO 55 days). Excess inventory and slower receivable collection pressure working capital. Construction-in-progress ¥903.2B (30.5% of tangible fixed assets) and large unproductive invested assets reduce capital efficiency, leaving ROIC at 2.2%. Failure to shorten CCC and compress inventory could delay FCF recovery and make simultaneous dividend and investment commitments difficult. For a manufacturer, inventory days of 139 are long, increasing sensitivity to demand swings and obsolescence risk.
High leverage and reduced resilience to financial environment shifts: Debt/EBITDA 5.89x indicates high leverage; cash balances ¥558.3B vs. short-term borrowings ¥807.5B means full short-term debt coverage by cash is not achievable (cash / short-term debt 0.69x). Rising interest rates would increase interest burden; while Interest coverage of 5.47x provides some cushion, it can deteriorate rapidly if EBITDA falls. Ongoing refinancing of short- and long-term borrowings and bond redemptions makes managing refinancing risk critical. Continued FCF deficits from front-loaded large investments could increase reliance on additional borrowings, reducing financial flexibility.
Dependence on non-operating income and related volatility: Equity-method investment income of ¥154.5B accounts for 41.2% of Ordinary Income; combined with FX gains ¥43.1B, non-operating income is about 104% of Operating Income, meaning more than half of profits depend on non-operating factors. Deterioration at equity-method affiliates (mainly cement-related investments, investment amount ¥1817.3B) or adverse FX market moves could materially impact future Ordinary Income. Operating margin 4.1% lags the industry median of 7.8% by -3.7pt, reflecting weaker core operating strength and increasing reliance on non-operating income. Segments with ongoing losses—High Performance Urethans (-¥5.5B) and Pharmaceuticals (-¥12.6B)—and the thin margin in Polymers & Chemicals (3.3%) create concentration risk on Specialty Products (margin 15.8%).
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.1% | 7.8% (4.6%–12.3%) | -3.7pt |
| Net Margin | 4.8% | 5.2% (2.3%–8.2%) | -0.4pt |
Operating margin is -3.7pt below the manufacturing median of 7.8%, indicating lower profitability within the industry. Net margin is roughly in line with the median, but non-operating income (Equity-method & FX gains) inflates profit, leaving room to improve core operating performance.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -5.0% | 3.7% (-0.4%–9.3%) | -8.7pt |
Revenue growth of -5.0% is -8.7pt below the industry median +3.7%, reflecting a marked decline. While M&A raised scale, organic growth remains weak.
※ Source: Company compilation
Gross margin improved +3.7pt and Polymers & Chemicals returned to profit, enabling Operating Income growth despite lower sales and indicating qualitative improvement in earnings structure. OCF ¥599.8B shows strong cash generation, but M&A and large capex drove FCF to -¥802.5B, signaling an investment-led phase. Construction-in-progress ¥903.2B (30.5% of tangible fixed assets) and the volume of unproductive invested assets mean EBITDA gains from future capitalizations and fixed-cost absorption will be critical for profitability. High leverage (Debt/EBITDA 5.89x) and deteriorating working capital efficiency (CCC 157 days) pressure capital efficiency; inventory compression, receivables collection, and a clear timeline for investment monetization will be key evaluation points.
Equity-method income ¥154.5B (41.2% of Ordinary Income) and FX gains ¥43.1B materially support profit, indicating heavy reliance on non-operating income. For next fiscal year, Ordinary Income is forecast flat at ¥375.0B while Operating Income is planned to rise +24.1%, implying the plan assumes normalization of non-operating contributions and relies on operational improvement. Risks include performance swings at equity-method affiliates and FX volatility. Segment-wise, Specialty Products’ high margin (15.8%) and Polymers & Chemicals’ stabilization are positive, but High Performance Urethans (loss ¥5.5B) and Pharmaceuticals (loss ¥12.6B) require remediation. With DOE policy review and undecided dividend outlook, shareholder distributions may be strengthened contingent on capital efficiency and FCF improvements.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are the responsibility of the reader; consult advisors as necessary.