| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥5897.9B | ¥5888.2B | +0.2% |
| Operating Income | ¥497.3B | ¥520.5B | -4.5% |
| Ordinary Income | ¥547.1B | ¥491.0B | +11.4% |
| Net Income | ¥350.9B | ¥356.8B | -1.7% |
| ROE | 9.2% | 10.2% | - |
For the fiscal year ended March 2026, Kansai Paint Co., Ltd. reported Revenue of ¥5897.9B (YoY +¥9.7B +0.2%), Operating Income of ¥497.3B (YoY -¥23.2B -4.5%), Ordinary Income of ¥547.1B (YoY +¥56.1B +11.4%), and Net Income attributable to owners of the parent of ¥316.4B (YoY -¥67.0B -17.4%). Gross margin improved to 32.4% (approx. +0.8pt YoY), while SG&A ratio rose to 24.0% (approx. +1.3pt), resulting in an Operating Margin decline to 8.4% (prior 8.8%). At the ordinary income level, non-operating gains such as foreign exchange gains of ¥52.7B and interest income of ¥19.3B contributed to profit growth; however, a reversal in one-off items in special gains/losses (prior +¥161.7B → current +¥23.0B) and a high effective tax rate of 39.3% led to a decline in final profit. By region, Africa posted higher revenue and profit with a strong Operating Margin of 11.9%, while Europe continued to be low-margin at 1.5%.
[Revenue] Revenue was ¥5897.9B (YoY +0.2%), broadly flat. By region: Japan ¥1756.3B (-2.0%), India ¥1384.8B (-2.8%), Europe ¥1629.5B (+4.0%), Asia ¥710.1B (-1.1%), Africa ¥518.8B (+9.0%). Declines in Japan and India were partly offset by increases in Europe and Africa, with the core Japan market softening. Gross profit was ¥1913.5B, with a gross margin of 32.4% (approx. 31.6% prior), an improvement of about 0.8pt, reflecting progress in raw material cost responses and price pass-through.
[Profitability] Operating Income was ¥497.3B (-4.5%), and Operating Margin fell to 8.4% (prior 8.8%). SG&A amounted to ¥1416.2B, raising the SG&A ratio to 24.0% (prior approx. 22.7%), an increase of about 1.3pt. The increase in fixed costs, including goodwill amortization of ¥53.4B, was the main cause, revealing negative operating leverage under flat sales. Ordinary Income rose to ¥547.1B (+11.4%), driven by non-operating income such as foreign exchange gains of ¥52.7B (prior foreign exchange loss ¥1.6B), interest income ¥19.3B, and equity-method investment income ¥41.6B. Special gains/losses netted +¥23.0B (gains ¥79.7B, losses ¥56.7B), a large decline from prior +¥161.7B, mainly due to a reduction in fixed asset sale gains from ¥122.0B prior to ¥50.2B. Profit before tax was ¥570.2B (-12.6%); after income taxes of ¥224.1B (effective tax rate 39.3%), Net Income attributable to owners of the parent was ¥316.4B (-17.4%). Overall, the pattern was flat revenue, lower operating profit, higher ordinary income, and lower net income.
The Japan segment reported Revenue ¥1756.3B (-2.0%), Operating Income ¥206.7B (-8.7%), Operating Margin 11.8%. Despite being the core market and experiencing revenue and profit declines with margin deterioration YoY, it maintained double-digit margins. India: Revenue ¥1384.8B (-2.8%), Operating Income ¥136.3B (-5.1%), Margin 9.8%, showing declines. Europe: Revenue ¥1629.5B (+4.0%) but Operating Income ¥25.1B (-28.5%), Margin 1.5%, remaining low-margin and dilutive to group margin. Asia: Revenue ¥710.1B (-1.1%), Operating Income ¥59.7B (+0.5%), Margin 8.4%, stable profits despite slight revenue decline. Africa: Revenue ¥518.8B (+9.0%), Operating Income ¥61.8B (+49.7%), Margin 11.9%, a strong increase and the largest contributor to group profit growth. Others (Americas etc.): Revenue ¥90.0B (-10.3%), Operating Income ¥7.6B (-48.4%), small scale but large decline in profits.
[Profitability] Operating Margin was 8.4% (prior 8.8%), down 0.4pt; Net Margin was 5.4% (prior 6.5%), down 1.1pt. Gross Margin improved to 32.4% (approx. +0.8pt YoY), but the SG&A ratio rise to 24.0% (approx. +1.3pt) compressed operating-level margins. ROE was 9.2%, down from 13.2% prior, driven mainly by lower net margin and a slight decline in total asset turnover. [Cash Quality] Operating Cash Flow was ¥526.2B, 1.50x Net Income of ¥350.9B, indicating high quality; OCF/EBITDA was 0.68x (EBITDA = Operating Income ¥497.3B + Depreciation & Amortization ¥232.8B = ¥730.1B), below the ideal >0.9x, suggesting room to improve working capital efficiency. Days Sales Outstanding (DSO) approx. 80 days (Accounts receivable ¥1295.4B ÷ Daily Sales ¥16.2B), Days Inventory Outstanding (DIO) approx. 51 days (Inventories ¥560.0B ÷ Daily Sales ¥11.0B); inventory efficiency is good but receivables collection is around standard. [Investment Efficiency] Total Asset Turnover was 0.74x (prior 0.78x) slight decline; Capital Expenditure was ¥260.6B, 1.12x Depreciation ¥232.8B, indicating a healthy balance between growth and replacement investment. [Financial Soundness] Equity Ratio was 47.5% (prior 46.6%) slight increase; Current Ratio 192.2%, indicating ample short-term liquidity. Debt/EBITDA approx. 0.30x (interest-bearing debt approx. ¥221.6B = Short-term borrowings ¥196.0B + Long-term borrowings ¥26.5B - convertible bond-type instruments excluded), a low level showing sufficient financial capacity, but short-term debt ratio 88.1% indicates concentration of maturities and maturity risk to watch. Cash and deposits ¥786.6B plus short-term investment securities ¥403.8B provide a liquidity buffer of ¥1190.4B, covering short-term debt by over 4.0x.
Operating CF was ¥526.2B (YoY +50.5%), a substantial increase, formed from subtotal operating cash of ¥690.6B adjusted for working capital changes (inventory decrease ¥45.3B, accounts receivable increase -¥66.0B, accounts payable decrease -¥31.0B) and tax payments -¥192.9B. Operating CF to Net Income ratio was 1.50x (Net Income ¥350.9B); OCF/EBITDA was 0.68x, leaving room to improve working capital efficiency. Investing CF was -¥270.3B, primarily capital expenditures -¥260.6B and intangible asset acquisitions -¥56.2B, narrower than prior -¥392.0B. Free Cash Flow was ¥255.9B (Operating CF ¥526.2B + Investing CF -¥270.3B), covering dividend payments -¥147.7B and share buybacks -¥4.9B, yielding an FCF coverage of 1.31x in the sustainable range. Financing CF was -¥221.8B, including bond redemptions -¥4097.9B and bond issuances +¥4077.9B effectively a refinance, long-term loan repayments -¥1.7B, dividend payments -¥147.7B, etc. Cash and cash equivalents at year-end were ¥672.3B, up ¥40.8B from ¥631.5B at the beginning of the period.
Operating Income ¥497.3B versus Ordinary Income ¥547.1B shows an uplift of ¥49.8B, reflecting contributions from non-operating income such as foreign exchange gains ¥52.7B, interest income ¥19.3B, and equity-method income ¥41.6B, offset by interest expense ¥30.9B and foreign exchange losses ¥15.6B. The high contribution from foreign exchange gains indicates earnings sensitivity to FX movements. Special gains included gains on fixed asset sales ¥50.2B and gains on sales of available-for-sale securities ¥26.0B (total one-off gains ¥79.7B), while one-off losses included impairment losses ¥10.7B and losses on valuation of investment securities ¥10.0B (total one-off losses ¥56.7B), netting +¥23.0B, a significant decrease from prior +¥161.7B. Comprehensive income was ¥473.1B, ¥122.2B higher than Net Income ¥350.9B, with other comprehensive income contributions including foreign currency translation adjustments ¥56.9B, retirement benefit adjustments ¥17.1B, and OCI from equity-method affiliates ¥42.8B. Operating CF roughly corresponds to Operating Income at 1.06x, indicating cash realization of profits is generally sound, though OCF/EBITDA below 0.7x suggests room to improve working capital management.
Full Year guidance: Revenue ¥6100.0B (YoY +3.4%), Operating Income ¥530.0B (+6.6%), Ordinary Income ¥550.0B (+0.5%), and Net Income attributable to owners of the parent planned at ¥270.0B. First-half results: Revenue ¥2948.0B (progress 48.3%), Operating Income ¥252.8B (progress 47.7%), Ordinary Income ¥257.0B (progress 46.7%). Revenue, Operating Income, and Ordinary Income are broadly on track, but progress of Net Income attributable to owners of the parent is unknown as the half-year figure was not disclosed; the full-year plan of ¥270.0B is conservative compared with prior ¥316.4B. Forecasted Operating Margin is 8.7% (¥530.0B ÷ ¥6100.0B), an improvement of 0.3pt from the current year 8.4%, conditional on SG&A control and correction in low-margin regions. Dividend forecast is annual ¥55 (assumed ¥55 interim and ¥55 year-end), a halving from actual annual ¥110, suggesting a revision in per-share dividends; payout ratio is approx. 35.9% (¥55 ÷ forecast EPS ¥153.37) at a reasonable level.
Annual dividend was ¥110 (interim ¥55, year-end ¥55). On a parent-company-net-income basis of ¥316.4B, total dividends of ¥147.7B (actual) imply a payout ratio of approx. 46.7%. On a consolidated Net Income basis of ¥350.9B, the payout ratio is approx. 42.1%. Dividend guidance is annual ¥55; assuming forecast parent-company-net-income ¥270.0B and forecast EPS ¥153.37, payout ratio would be approx. 35.9%, set at a conservative level. Share buybacks were limited at ¥4.9B, bringing total shareholder returns to ¥152.6B and a Total Return Ratio of approx. 48.2% (dividends + buybacks ÷ Net Income attributable to owners of the parent). Dividend payments of ¥147.7B against Free Cash Flow ¥255.9B yield an FCF coverage of 1.73x, in the sustainable range. With an Equity Ratio of 47.5% and cash & deposits ¥786.6B, financial capacity is ample, so dividend sustainability is high. However, FX volatility and tax burden upside pose potential risks to dividend funding.
Prolonged low-margin risk in the Europe segment: Europe’s Operating Margin of 1.5% is well below the group average of 8.4% and, with Revenue of ¥1629.5B, depresses group margin by approx. 0.9pt. Operating Income declined sharply from ¥35.1B prior to ¥25.1B (-28.5%), and if structural margin improvement is delayed, recovery in group profitability will be hindered.
Increased FX sensitivity: Foreign exchange gains improved from a prior loss of ¥1.6B to a gain of ¥52.7B (+¥54.3B), significantly boosting Ordinary Income; however, in a yen appreciation scenario the effect would reverse, increasing volatility at the ordinary income level. Foreign currency translation adjustments of ¥56.9B also contributed to comprehensive income, amplifying FX impact on the financial structure.
Negative operating leverage from rising SG&A ratio: SG&A ratio rose approx. 1.3pt to 24.0%, causing Operating Margin to decline by 0.4pt in a flat sales environment. If SG&A growth outpaces sales growth, sustainable margin improvement will be difficult. The increase in fixed costs, including goodwill amortization of ¥53.4B, is a key driver; strengthening cost control and improving working capital efficiency (improving DSO and DIO) to raise Operating CF/EBITDA is necessary.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.4% | 7.8% (4.6%–12.3%) | +0.7pt |
| Net Margin | 5.9% | 5.2% (2.3%–8.2%) | +0.8pt |
Profitability exceeds the industry median, indicating relatively high profitability within manufacturing.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 0.2% | 3.7% (-0.4%–9.3%) | -3.5pt |
Revenue growth lags the industry median by 3.5pt, indicating relatively weak top-line expansion.
※ Source: Company compilation
The tug-of-war between gross margin improvement and rising SG&A ratio is determining operating-level profitability. Next year, SG&A restraint and correction in low-margin regions (particularly Europe) will be key to recovering Operating Margin. If Europe’s Operating Margin of 1.5% can be raised to the industry median, there is potential to improve group margin by approx. 0.5–1.0pt.
Operating CF is solid at 1.50x Net Income, but OCF/EBITDA remains at 0.68x, leaving room to improve working capital efficiency. Shortening the cash conversion cycle by improving DSO (80 days) and DIO (51 days) and optimizing accounts payable could further enhance FCF generation and shareholder return capacity.
Financial soundness is high (Debt/EBITDA 0.30x, Equity Ratio 47.5%), and cash + short-term investment securities provide a liquidity buffer of ¥1190.4B, supporting dividend resilience even in a downturn. However, FX volatility and tax burden (effective tax rate 39.3%) materially affect Net Income, so progress in FX hedging and reducing the effective tax rate should be monitored.
This report was 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 company based on publicly disclosed financial statements. Investment decisions are your responsibility; please consult professionals as needed.