| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥681.2B | ¥640.6B | +6.3% |
| Operating Income | ¥41.7B | ¥38.6B | +8.2% |
| Ordinary Income | ¥48.0B | ¥42.3B | +13.3% |
| Net Income | ¥36.5B | ¥34.2B | +6.6% |
| ROE | 2.8% | 2.7% | - |
The results for 2026 FY Q1 delivered revenue of ¥681.2B (YoY +¥40.6B, +6.3%), Operating Income of ¥41.7B (YoY +¥3.2B, +8.2%), Ordinary Income of ¥48.0B (YoY +¥5.6B, +13.3%), and Net Income of ¥36.5B (YoY +¥2.3B, +6.6%), representing growth in both top line and profit. Gross margin was 25.4% (up +0.7pt from 24.7% a year ago), supported by stabilization of raw material costs and the entrenchment of price revisions. Operating margin improved slightly to 6.1% (up +0.1pt from 6.0%), and despite SG&A ratio rising to 19.3% (up +0.6pt from 18.6%), operating leverage worked positively. At the ordinary income level, equity-method investment income of ¥5.3B (¥3.5B prior year) and foreign exchange gains of ¥1.7B (¥1.4B prior year) were contributors, resulting in double-digit growth in Ordinary Income.
[Revenue] Revenue was ¥681.2B (YoY +6.3%). By region/product: Printing Inks Americas ¥276.6B (+8.2%), Printing Inks Europe ¥62.4B (+19.1%), Printing Inks Asia ¥143.0B (+2.0%), Functional Materials (Digital & Specialty) ¥75.2B (+15.3%), Printing Inks & Equipment Japan ¥121.8B (-2.5%). Europe benefited from currency effects and market recovery; Americas showed solid performance driven by price revision penetration and recovery in volumes. Functional Materials continued double-digit growth, with expansion of high-value-added products improving the company-wide mix. Japan was affected by structurally declining printing demand but maintained resilience through comprehensive proposals including graphic arts equipment.
[Profitability] Cost of sales was ¥508.1B (cost ratio 74.6%, prior year 75.3%), and stabilization in raw material and energy costs lifted gross margin to 25.4%. SG&A was ¥131.3B (SG&A ratio 19.3%, prior year 18.6%), rising due to proactive investment in personnel and R&D, but expansion in gross profit absorbed these increases and Operating Income rose to ¥41.7B (+8.2%), outpacing revenue growth. Non-operating items included equity-method investment income of ¥5.3B (up +53.8% from ¥3.5B) and foreign exchange gains of ¥1.7B, while interest expense declined to ¥2.2B (prior year ¥2.4B), resulting in Ordinary Income of ¥48.0B (+13.3%). Extraordinary items were disposal gains ¥0.1B and valuation losses ¥0.0B, net +¥0.1B and immaterial. After deducting corporate taxes of ¥11.6B (effective tax rate 24.1%) from pre-tax income of ¥48.0B, Net Income attributable to owners of the parent was ¥33.1B (prior year ¥30.8B, +7.7%), and Net Income including non-controlling interests of ¥3.3B totaled ¥36.5B (+6.6%). In conclusion, the company achieved revenue and profit growth.
Operating Income was led by Printing Inks Asia ¥16.6B (prior year ¥16.0B, +3.6%, margin 11.6%), followed by Printing Inks Americas ¥12.9B (prior year ¥15.5B, -16.9%, margin 4.7%), Functional Materials ¥6.1B (prior year ¥6.1B, +0.2%, margin 8.1%), Printing Inks Japan ¥5.6B (prior year ¥2.7B, +105.8%, margin 4.6%), Printing Inks Europe ¥2.3B (prior year ¥0.9B, +167.1%, margin 3.6%), and Other ¥0.5B (prior year ¥1.2B, -57.0%, margin 3.1%). Asia maintained stable high profitability; Japan doubled profits through cost efficiency and profit-focused sales measures. Europe expanded its profit breadth alongside revenue growth. Americas recorded a decline in profit despite revenue increase due to upfront burdens from raw materials and logistics, but margins remained resilient at 4.7%. Functional Materials sustained sales growth while preserving above-average profitability at an 8.1% margin.
[Profitability] Operating margin was 6.1% (up +0.1pt from 6.0%), Net Income margin 5.4% (up +0.1pt from 5.3%). The gross margin improvement to 25.4% (up +0.7pt) was mainly driven by price revisions and raw material cost stabilization, while SG&A ratio rose to 19.3% (up +0.6pt) reflecting ahead-of-schedule investment in personnel and R&D. [Cash Quality] Interest coverage was 19.1x (Operating Income ¥41.7B ÷ interest expense ¥2.2B), indicating minimal interest burden. Non-operating income totaled ¥9.1B, representing 1.3% of revenue, and thus low reliance on non-operating items and a largely recurring earnings structure. [Investment Efficiency] ROE was 2.8% (Equity Ratio 56.1%, Total Assets ¥2,289.3B vs. Net Assets ¥1,284.2B), indicating substantial room to improve capital efficiency. Asset turnover on an annualized basis was approximately 1.19x (Q1 revenue ¥681.2B ×4 ÷ Total Assets ¥2,289.3B), and financial leverage was 1.78x (Total Assets ¥2,289.3B ÷ Net Assets ¥1,284.2B). [Financial Soundness] Equity Ratio was 56.1% (prior year 56.0%), Current Ratio 202.9% (Current Assets ¥1,285.8B ÷ Current Liabilities ¥633.9B), Quick Ratio 172.5% (Current Assets − Inventories ¥193.5B), indicating healthy short-term liquidity. Interest-bearing debt totaled ¥308.8B (short-term borrowings ¥111.7B, long-term borrowings ¥187.1B, bonds maturing within one year ¥10.0B). Cash and deposits were ¥208.1B, yielding net interest-bearing debt of ¥100.7B. Debt/Equity ratio was 24.1% (Interest-bearing debt ¥308.8B ÷ Net Assets ¥1,284.2B), a conservative level.
Breakdown of non-operating income: equity-method investment income ¥5.3B, foreign exchange gains ¥1.7B, interest received ¥0.7B, dividend received ¥0.2B, others ¥1.2B, indicating mainly recurring items. Extraordinary gains/losses were disposal gains on investment securities ¥0.1B and valuation losses ¥0.0B, net +¥0.1B and immaterial, thus one-off items had negligible impact on Net Income of ¥36.5B. On the balance sheet side, cash and deposits were ¥208.1B (prior year ¥205.9B, +¥2.2B) slightly up, while short-term borrowings increased substantially to ¥111.7B (prior year ¥71.0B, +¥40.7B, +57.4%), suggesting heightened working capital needs. Accounts receivable were ¥645.0B (prior year ¥625.3B, +¥19.7B), inventories ¥193.5B (prior year ¥198.5B, -¥5.0B), indicating accumulation of receivables and slight inventory reduction. Accounts payable rose to ¥270.4B (prior year ¥254.4B, +¥16.0B), but electronic recorded obligations fell sharply to ¥76.7B (prior year ¥118.3B, -¥41.7B), implying changes in payment terms or settlement timing. Construction in progress decreased to ¥38.2B (prior year ¥51.1B, -¥12.9B), indicating progress in completing and transferring investment projects. Short-term borrowings increased to absorb working capital expansion, but cash and deposits of ¥208.1B cover short-term borrowings of ¥111.7B by 1.86x, so liquidity buffer is ample and maturity mismatch risk is limited.
The difference between Ordinary Income ¥48.0B and Net Income ¥36.5B is mainly corporate taxes ¥11.6B (effective tax rate 24.1%), a standard tax burden with an acceptable divergence. Non-operating income ¥9.1B represents 1.3% of revenue ¥681.2B, well below 5%, and comprises mainly recurring items such as equity-method investment income ¥5.3B, foreign exchange gains ¥1.7B, and interest received ¥0.7B, indicating very low dependence on one-offs. Extraordinary items were net +¥0.1B (disposal gains ¥0.1B − valuation losses ¥0.0B), under 0.3% of Net Income ¥36.5B and immaterial. From an accrual perspective, accounts receivable increased +3.2% YoY while inventories declined −2.5%, but the sharp reduction in electronic recorded obligations has weighed on working capital, suggesting potential lengthening of the cash conversion cycle. To improve cash realization of profits, accelerating receivables collection and maintaining/improving inventory turnover are key.
Full Year plan: Revenue ¥2,760.0B (YoY +7.1%), Operating Income ¥170.0B (+11.6%), Ordinary Income ¥178.0B (+15.8%), Net Income attributable to owners of the parent ¥118.0B, EPS forecast ¥241.84, Dividend forecast ¥50.00. Q1 progress ratios: Revenue 24.7% (¥681.2B ÷ ¥2,760.0B), Operating Income 24.5% (¥41.7B ÷ ¥170.0B), Ordinary Income 27.0% (¥48.0B ÷ ¥178.0B), Net Income attributable to owners of the parent 28.1% (¥33.1B ÷ ¥118.0B), broadly consistent with a standard quarterly run-rate of 25%. Slight outperformance in Ordinary Income and Net Income is mainly due to gross margin improvement and contributions from equity-method investment income and foreign exchange gains. High growth in Functional Materials (+15.3%) and substantial profit increase in Europe (+167.1%) suggest upside to the full-year outlook, while margin deterioration in Americas (-16.9%) remains a downside risk. If working capital normalizes, cash generation is expected to improve in the latter half of the fiscal year.
Company guidance for annual dividend is ¥50.00 (prior year ¥45.00, +¥5.00), representing a payout ratio of 20.7% against full-year EPS forecast ¥241.84, a conservative level. Q1 realized EPS was ¥67.65 (prior year ¥62.09, +9.0%), consistent with the dividend plan. With Interest Coverage 19.1x, Current Ratio 202.9%, and cash/deposits ¥208.1B, financial capacity is strong and current dividends appear sustainable. Goodwill ¥12.8B and intangible assets ¥71.3B are small, limiting dividend impairment risk from impairments. If working capital efficiency improves, free cash flow coverage of dividends could further strengthen.
Risk of working capital expansion and rising short-term borrowing dependence: Short-term borrowings rose sharply to ¥111.7B (YoY +57.4%), with accounts receivable ¥645.0B (+3.2%) and electronic recorded obligations ¥76.7B (-35.2%) showing a contraction on the payable side, driving up working capital demand. Although cash and deposits ¥208.1B cover short-term borrowings by 1.86x and liquidity buffer is ample, prolonged delays in receivables collection or inventory stagnation could pressure cash flows. Shortening the CCC and improving working capital efficiency are urgent priorities.
Risk of profitability deterioration in the Americas segment: Printing Inks Americas secured revenue ¥276.6B (+8.2%) but Operating Income fell to ¥12.9B (from ¥15.5B, -16.9%), with margin deteriorating to 4.7% (from 6.1%, -1.4pt). Upfront burdens from raw materials and logistics are the main cause; if price pass-through lags or competitive pressure persists, this could weigh on company-wide margins. Recovery of Americas profitability is critical to achieving full-year targets.
Risk of subdued capital efficiency: ROE at 2.8% and asset turnover 1.19x indicate low capital efficiency and the possibility of returns falling below the cost of capital. Working capital expansion suppresses asset turnover, and with only modest improvement in Net Income margin, shareholder value creation is limited. Even if Functional Materials achieves high growth and Japan/Europe improve profitability, sustained ROE improvement will be difficult without working capital efficiency gains.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.1% | 6.8% (2.9%–9.0%) | -0.7pt |
| Net Income Margin | 5.4% | 5.9% (3.3%–7.7%) | Delta |
Profitability is slightly below the industry median, with rising SG&A ratio pressuring margins.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 6.3% | 13.2% (2.5%–28.5%) | -6.9pt |
Growth is below the industry median, though Functional Materials’ double-digit growth is lifting company average and the business is in a structural transition.
※Source: Company aggregation
Gross margin improvement and high growth in Functional Materials underpin quality of earnings: Gross margin improved to 25.4% (YoY +0.7pt), driven by stabilization in raw material costs and price revisions. Functional Materials reported revenue ¥75.2B (+15.3%) and margin 8.1%, outperforming the company average and leaving room for further mix improvement. Printing Inks Japan Operating Income doubled to ¥5.6B (from ¥2.7B, +105.8%), reflecting cost efficiencies and profit-focused sales measures. Europe also expanded Operating Income to ¥2.3B (from ¥0.9B, +167.1%), showing progress in regional portfolio improvement.
Normalizing working capital efficiency and CCC is a medium-term focus: Short-term borrowings surged to ¥111.7B (YoY +57.4%) and electronic recorded obligations fell to ¥76.7B (−35.2%), highlighting working capital expansion. Accounts receivable increased to ¥645.0B (+3.2%), trailing revenue growth, leaving collection period extension as a risk. Cash and deposits ¥208.1B cover short-term borrowings 1.86x, providing a solid liquidity buffer, but shortening the CCC and improving inventory/receivables turnover are key to enhancing capital efficiency. With ROE at 2.8% and low positioning, optimizing working capital is directly linked to improving shareholder value creation.
This report was automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information aggregated by the Company from public financial statements. Investment decisions should be made at your own responsibility and, if necessary, after consulting a professional.