| Indicator | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2579.7B | ¥2383.1B | +8.2% |
| Operating Income / Operating Profit | ¥474.1B | ¥453.1B | +4.6% |
| Ordinary Income | ¥503.7B | ¥465.7B | +8.1% |
| Net Income / Net Profit | ¥353.9B | ¥321.5B | +10.1% |
| ROE | 11.9% | 11.5% | - |
For the fiscal year ended March 2026, results closed with revenue of ¥2,579.7B (YoY +¥196.6B +8.2%), Operating Income of ¥474.1B (YoY +¥21.0B +4.6%), Ordinary Income of ¥503.7B (YoY +¥38.0B +8.1%), and Net Income attributable to owners of the parent of ¥353.9B (YoY +¥32.4B +10.1%), representing year-on-year increases in both revenue and profit. The operating income margin was 18.4% (down 0.6pt from 19.0% in the prior year), while the net profit margin remained high at 13.7% (up 0.2pt from 13.5%). A large expansion in the Chemical Pharmaceuticals segment (Revenue +59.1%, Operating Income +154.9%) drove overall corporate growth, and extraordinary gains of ¥88.4B (gain on sales of investment securities ¥87.7B) lifted net income. Free Cash Flow of ¥314.4B was secured, and total shareholder returns of approximately ¥315B (dividends ¥115.5B plus share buybacks ¥200.1B) were funded from internal resources.
[Revenue] Revenue increased to ¥2,579.7B (YoY +8.2%). By segment, the Chemical Pharmaceuticals Business surged to ¥616.9B (+59.1%), with expanded demand for defense-related and aerospace-related products driving company-wide growth. The Pharmaceuticals, Medical & Health Business grew steadily to ¥510.2B (+3.8%), while the Functional Chemicals Business declined to ¥1,504.1B (-2.8%). By region, domestic sales rose significantly to ¥1,862.7B from ¥1,659.1B in the prior year, and the proportion of overseas sales decreased to 27.8% (prior year 30.4%). Sales to major customer Ryohin Keikaku amounted to ¥294.8B (down from ¥322.4B, -8.6%), reducing customer concentration.
[Profitability] Operating Income was ¥474.1B (+4.6%). Cost of sales ratio worsened to 65.5% (up 1.2pt from 64.3% prior), SG&A ratio improved to 16.2% (down 0.5pt from 16.7% prior), resulting in a gross margin of 34.5%. By segment, Chemical Pharmaceuticals recorded Operating Income of ¥79.8B (+154.9%), Pharmaceuticals, Medical & Health posted ¥158.2B (+0.8%), and Functional Chemicals recorded ¥268.5B (-9.9%). The Chemical Pharmaceuticals segment’s operating margin improved significantly to 12.9% (up 4.8pt from 8.1% prior). Non-operating items, including dividend income ¥11.7B and foreign exchange gains ¥8.2B, boosted Ordinary Income. Extraordinary gains of ¥88.4B (primarily gain on sales of investment securities ¥87.7B) drove Profit Before Tax to ¥573.3B (up from ¥507.8B, +12.9%). Income taxes were ¥166.7B (effective tax rate 29.1%), minority interests ¥1.1B were deducted, resulting in Net Income attributable to owners of the parent of ¥353.9B (+10.1%).
The Functional Chemicals Business recorded revenue of ¥1,504.1B (-2.8%), Operating Income ¥268.5B (-9.9%), and an operating margin of 17.8% (down 2.0pt from 19.8% prior). Weak demand for core product groups such as fatty acids and surfactants, and limited pass-through of increased raw material costs, were the primary drivers of the revenue and profit decline. The Pharmaceuticals, Medical & Health Business reported revenue of ¥510.2B (+3.8%), Operating Income ¥158.2B (+0.8%), and an operating margin of 31.0% (down 0.7pt from 31.7% prior), maintaining high profitability. Demand for DDS pharmaceutical formulation ingredients and biocompatible materials supported revenue growth. The Chemical Pharmaceuticals Business rapidly expanded to revenue ¥616.9B (+59.1%), Operating Income ¥79.8B (+154.9%), and an operating margin of 12.9% (up 4.8pt from 8.1% prior). Strong demand for defense-related products and investments in defense-related equipment associated with early deployment progressed; depreciation expense of ¥157.3B (up 558% from ¥23.9B prior) was recorded, but sales growth far outpaced cost increases. Other segments posted revenue of ¥101.1B (+6.4%) and Operating Income ¥4.3B (+24.7%). The sharp expansion of the Chemical Pharmaceuticals Business was the primary driver of company-wide growth and advanced the diversification of the segment portfolio.
[Profitability] Operating margin of 18.4% decreased 0.6pt from 19.0% prior, while net margin improved 0.2pt to 13.7% from 13.5% prior. ROE was 11.9% (XBRL-disclosed value), composed of net margin 13.7% × total asset turnover 0.65 (Revenue ¥2,579.7B ÷ Total Assets ¥3,991.7B) × financial leverage 1.35 (Total Assets ¥3,991.7B ÷ Net Assets ¥2,964.7B). ROA was 8.9% (Ordinary Income ¥503.7B ÷ Total Assets ¥3,991.7B), indicating stable earning power. [Cash Quality] Operating Cash Flow was ¥358.6B ÷ Net Income ¥353.9B = 1.01x, showing good alignment between profit and cash; however, Operating CF ÷ EBITDA (Operating Income ¥474.1B + Depreciation ¥221.2B = ¥695.3B) = 0.52x, and cash conversion remained low due to working capital expansion. Days Sales Outstanding (DSO) was 106 days (Accounts receivable ¥747.8B ÷ Revenue ¥2,579.7B × 365), Days Inventory Outstanding (DIO) was 139 days (Inventory ¥322.9B ÷ Cost of Sales ¥1,688.7B × 365), indicating prolonged holdings and a Cash Conversion Cycle (CCC) of 199 days, leaving substantial room for working capital efficiency improvements. [Investment Efficiency] Capital expenditures ¥143.9B ÷ Depreciation ¥221.2B = 0.65x, indicating restrained replacement investment and a cautious stance prioritizing recovery of invested capital. Total assets expanded to ¥3,991.7B (up 11.8% from ¥3,572.0B prior), driven mainly by accounts receivable +26.2% and tangible fixed assets +13.7%. [Financial Soundness] Equity Ratio 74.3%, Current Ratio 274.6% (Current Assets ¥2,368.2B ÷ Current Liabilities ¥862.4B), Quick Ratio 237.2% — liquidity is extremely ample. Interest-bearing debt was ¥33.0B (Short-term borrowings ¥13.4B + Long-term borrowings ¥19.6B) versus cash and deposits ¥883.6B, yielding net cash ¥850.6B, Debt/EBITDA ratio 0.05x, and Interest Coverage (Operating Income ¥474.1B ÷ Interest expense ¥1.4B) approximately 339x, indicating very strong financial resilience.
Operating Cash Flow was ¥358.6B (up 23.8% from ¥289.8B prior). From Profit Before Tax ¥573.3B, a subtotal of ¥493.8B was generated, and increases in working capital (Accounts receivable -¥151.5B, Inventory -¥67.3B, Accounts payable -¥24.0B, Advances received +¥117.4B) resulted in a net outflow of ¥135.2B, with income taxes paid of -¥150.0B. Investing Cash Flow was -¥44.3B (reduced outflow from -¥137.5B prior), where capital expenditures -¥143.9B were partially offset by proceeds from sales of investment securities ¥108.1B. Free Cash Flow was ¥314.4B (Operating CF + Investing CF), a material improvement from ¥152.3B prior, though it includes a one-off factor of investment securities sales. Financing Cash Flow was -¥314.1B, mainly due to dividend payments -¥115.5B and share buybacks -¥200.1B. Cash and cash equivalents at period-end were ¥829.7B (up ¥2.7B from ¥827.1B at period-begin), remaining stable. Operating CF ÷ Net Income 1.01x indicates alignment between profit and cash, but working capital expansion (DSO 106 days, DIO 139 days, CCC 199 days) constrains Operating CF generation, making inventory optimization and accounts receivable collection management urgent priorities.
Operating Income ¥474.1B reflects core business earning power. The ¥29.6B difference between Ordinary Income ¥503.7B and Operating Income is attributable to non-operating income of ¥37.5B (dividend income ¥11.7B, foreign exchange gains ¥8.2B, etc.) less non-operating expenses ¥8.0B. Extraordinary gains of ¥88.4B (mostly gain on sales of investment securities ¥87.7B) are one-off factors and should be distinguished from recurring earning power. Excluding extraordinary gains from Profit Before Tax ¥573.3B yields ¥484.9B, indicating the recurring profit level is close to this figure. Comprehensive income of ¥485.2B exceeded Net Income ¥353.9B by ¥131.3B, including Other Comprehensive Income of ¥78.7B (Foreign currency translation adjustments ¥15.3B, Net unrealized gains on available-for-sale securities ¥42.0B, Remeasurements of defined benefit plans ¥21.3B). The ¥42.0B valuation gain on investment securities is due to fair value increases and is a non-cash gain. The subtotal before interest and taxes from Operating CF of ¥493.8B versus Operating Income ¥474.1B reflects non-cash adjustments such as depreciation ¥221.2B; accruals are not at an unusually abnormal level. Earnings quality is stable on an ordinary-income basis, but high reliance on extraordinary gains and deterioration in cash generation efficiency due to working capital expansion are risk factors.
The full-year guidance was maintained at Revenue ¥3,190.0B (YoY +23.7%), Operating Income ¥500.0B (YoY +5.5%), Ordinary Income ¥510.0B (YoY +1.3%), and Net Income attributable to owners of the parent ¥390.0B (EPS ¥169.60). Versus actual results to date (Revenue ¥2,579.7B, Operating Income ¥474.1B, Ordinary Income ¥503.7B, Net Income ¥353.9B), progress rates are Revenue 80.9%, Operating Income 94.8%, Ordinary Income 98.8%, indicating high progress. Operating and Ordinary Income have already reached about 95% of the full-year forecasts, leaving limited room for further profit gains in the remaining period. Revenue progress is relatively low at 80.9%, and additional revenue of ¥610.3B (+23.6%) is expected in the second half. Continued expansion of the Chemical Pharmaceuticals Business and steady performance in Pharmaceuticals, Medical & Health are assumed, but if the downward trend in the Functional Chemicals Business continues, revenue shortfall risk exists. Net Income forecast ¥390.0B versus actual ¥353.9B (progress 90.8%) is below forecast despite recognizing extraordinary gains of ¥88.4B, suggesting the full-year result may land at ordinary-income-based profit levels once extraordinary gains dissipate.
Annual dividend is ¥61 per share (interim ¥26, year-end ¥35), a substantial increase from ¥21 in the prior year (+190.5%). The payout ratio is 29.2% (XBRL-disclosed value), and total dividends against Net Income ¥353.9B equate to approximately ¥140B. Share buybacks of ¥200.1B were conducted, with average shares outstanding during the period of 229,951 thousand shares and treasury shares at period-end of 10,089 thousand shares (prior year treasury share carrying amount ¥62.7B), a substantial increase. The total shareholder return amount combining dividends total ¥115.5B (per the Cash Flow Statement) and share buybacks ¥200.1B is approximately ¥315B, and the total return ratio relative to Net Income attributable to owners of the parent ¥353.9B is about 89%. Free Cash Flow ¥314.4B almost fully covered the ¥315B total return, indicating shareholder returns funded by operating cash. However, Free Cash Flow includes a one-off factor of investment securities sales ¥108.1B, so assessment of sustainable return capacity requires verification on a recurring FCF basis. Cash and deposits ¥883.6B and net cash ¥850.6B provide abundant liquidity, supporting dividend continuity. The forecast dividend policy indicates a projected annual dividend of ¥35 (year-end ¥35), a reduction from the current-year ¥61, but the company appears intent on maintaining a payout ratio level around 29.2%.
Risk of deteriorating working capital efficiency: With DSO 106 days, DIO 139 days, CCC 199 days, prolonged receivables and inventory holdings constrain Operating CF generation. Accounts receivable increased 26.2% YoY to ¥747.8B and inventory increased 13.7% YoY to ¥322.9B, expanding at a pace well above revenue growth of +8.2%. Continued working capital expansion could make sustained Free Cash Flow generation difficult, potentially constraining continuation of dividends/share buybacks and growth investment capacity.
Order/demand volatility risk in the Chemical Pharmaceuticals Business: While the Chemical Pharmaceuticals Business expanded rapidly (Revenue +59.1%, Operating Income +154.9%), defense- and aerospace-related products depend on policy, regulation, and order timing. Investments in defense-related equipment for early deployment have driven depreciation to ¥157.3B (from ¥23.9B prior, +558%), and if orders fall short of plans, the fixed cost burden could weigh heavily on profits. Disclosure of backlog-to-sales ratios is lacking, limiting transparency on future revenue outlook.
Risk of profitability decline in the Functional Chemicals Business: The Functional Chemicals Business saw revenue -2.8% and Operating Income -9.9%, with operating margin at 17.8% (down 2.0pt from 19.8% prior). Rising raw material costs for fatty acids and petrochemical products and delayed price pass-through have compressed margins; prolonged high energy costs or weak demand would pressure company-wide earnings. Revenue to key customer Ryohin Keikaku declined by -8.6%; while decreased customer concentration aids risk diversification, reduced demand from a major customer could impede revenue recovery.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 18.4% | 7.8% (4.6%–12.3%) | +10.6pt |
| Net Margin | 13.7% | 5.2% (2.3%–8.2%) | +8.5pt |
Operating margin 18.4% and net margin 13.7% substantially exceed manufacturing medians, and contribution from high value-added segments (Pharmaceuticals, Medical & Health; defense-related) positions the company among the industry leaders in profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 8.2% | 3.7% (-0.4%–9.3%) | +4.5pt |
Revenue growth of +8.2% outperformed the manufacturing median of +3.7%, driven by the large expansion of the Chemical Pharmaceuticals Business.
※ Source: Company compilation
Rapid expansion and high operating margins in the Chemical Pharmaceuticals Business (18.4%) underpin corporate earnings, and sustained defense-related demand plus improved utilization from early deployment investments will be catalysts for future profit growth. The Pharmaceuticals, Medical & Health Business maintains high profitability with a 31.0% operating margin; continued demand expansion for DDS pharmaceutical formulation ingredients and biocompatible materials could further enhance the quality of the segment portfolio.
Working capital expansion (DSO 106 days, DIO 139 days, CCC 199 days) constrains Operating CF generation, making inventory optimization and accounts receivable collection management urgent. If working capital efficiency improves, Operating CF/EBITDA ratio, sustainable Free Cash Flow generation, and ROE via asset turnover could improve, strengthening the continuity of dividends and share buybacks. Capital expenditure/depreciation ratio of 0.65x indicates restrained replacement investment; however, early deployment investment in the Chemical Pharmaceuticals Business is progressing, and monitoring future utilization rates and ROIC will be important.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not recommend investment in any particular security. Industry benchmarks are reference information compiled by the company from public financial statement data. Investment decisions are your own responsibility; please consult professionals as necessary.