| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥883.2B | ¥821.3B | +7.5% |
| Operating Income / Operating Profit | ¥52.0B | ¥44.8B | +16.1% |
| Ordinary Income | ¥61.1B | ¥42.0B | +45.4% |
| Net Income / Net Profit | ¥66.8B | ¥29.9B | +123.6% |
| ROE | 2.4% | 1.1% | - |
FY2026 Q1 delivered significant profit growth with Revenue ¥883.2B (YoY +¥61.9B +7.5%), Operating Income ¥52.0B (YoY +¥7.2B +16.1%), Ordinary Income ¥61.1B (YoY +¥19.1B +45.4%), and Net Income attributable to owners of the parent ¥65.7B (YoY +¥36.3B +123.0%). Gross profit margin improved to 22.3% (YoY +0.9pt) and operating margin rose to 5.9% (YoY +0.4pt). The large increase in Ordinary Income was supported by higher operating profit and improved non-operating items, while the sharp rise in Net Income was mainly driven by a special gain on sale of investment securities of ¥35.6B. EPS expanded to 139.89円 (prior period 58.50円), a 2.4x increase, though much of the uplift is due to non-recurring items. By segment, Polymer & Coating-related led the company with Operating Income ¥20.1B (margin 8.9%), while Packaging-related and Printing & Information-related also contributed with double-digit revenue growth.
[Revenue] All segments maintained revenue growth, led by Packaging-related (+10.3%) and Printing & Information-related (+11.4%) with double-digit growth. Segment revenue mix was Packaging-related 26.9%, Polymer & Coating-related 25.4%, Printing & Information-related 24.4%, and Colorants & Functional Materials-related 22.6%, indicating the four major businesses are nearly balanced. Colorants & Functional Materials-related grew modestly +0.9% but saw a large improvement in Operating Income (+26.9% YoY), enhancing profitability. Other segments expanded rapidly (Revenue +34.6%) but Operating Income deteriorated substantially (-78.2%), lowering the margin to 2.7%. Overall drivers of revenue growth were demand recovery across businesses and progress in price pass-through.
[Profitability] Operating Income was ¥52.0B, up +16.1% YoY, aided by a +0.9pt improvement in gross margin. Selling, General and Administrative Expenses (SG&A) increased to ¥145.3B (+10.3%), primarily due to higher wages and allowances ¥37.9B (+11.7%) and depreciation ¥5.9B (+18.2%). SG&A ratio rose slightly to 16.5% (YoY +0.4pt), but gross margin improvement more than offset this, producing positive operating leverage. Ordinary Income grew substantially to ¥61.1B (+45.4%), supported by improved non-operating items. Interest income ¥1.2B and equity-method income ¥0.1B contributed to income, while interest expense ¥2.3B and foreign exchange resulted in a foreign exchange loss of ¥13.0B recorded in non-operating expenses versus a foreign exchange gain ¥1.2B in non-operating income — the offsetting presentation makes net FX impact difficult to read, but total non-operating expenses improved to ¥4.5B (from ¥20.5B prior year), supporting Ordinary Income growth. Profit before tax expanded to ¥95.7B, mainly due to special gains ¥35.7B (including gain on sale of investment securities ¥35.6B). Income taxes were ¥28.9B, with an effective tax rate of 30.2%, and Net Income attributable to owners of the parent was ¥65.7B (YoY +123.0%). Net profit margin was 7.4%; excluding one-off items, Operating Income margin 5.9% better reflects sustainable earning power. In conclusion, the company sustained revenue and profit growth and improved operating-stage margins, while Net Income was substantially boosted by a one-time gain from sale of investment securities.
Polymer & Coating-related: Revenue ¥224.4B (+5.8%), Operating Income ¥20.1B (+25.8%) with margin 8.9%, the highest company-wide, driven by gross margin improvement and cost control. Packaging-related: Revenue ¥237.9B (+10.3%), Operating Income ¥13.3B (+14.8%) with margin 5.6%, achieving both revenue growth and improved profitability. Printing & Information-related: Revenue ¥215.1B (+11.4%), Operating Income ¥11.8B (+16.6%) with margin 5.5%, supported by demand recovery. Colorants & Functional Materials-related: Revenue ¥199.6B (+0.9%) with slower growth, but Operating Income ¥6.3B (+26.9%) and margin 3.1%, showing material gains from price revisions and mix improvements. Other segments: Revenue ¥16.8B (+34.6%) expanded rapidly, but Operating Income ¥0.5B (-78.2%) plunged, reducing margin to 2.7%; increased costs associated with business expansion and temporary factors likely affected results.
[Profitability] Operating margin 5.9% (prior 5.5%, +0.4pt) and Net margin 7.4% (prior 3.6%, +3.8pt) improved, though Net margin overperformance is due to the one-off gain on sale of investment securities. Gross margin improved to 22.3% (prior 21.5%, +0.9pt) through raw material price pass-through and product mix improvement. SG&A ratio rose to 16.5% (prior 16.0%, +0.4pt) driven by higher personnel and depreciation costs. [Cash Quality] Non-operating items yielded net income of ¥9.2B, an improvement of ¥2.7B YoY. Foreign exchange recorded a loss of ¥13.0B in non-operating expenses and a gain of ¥1.2B in non-operating income (offsetting presentation), implying an estimated net FX cost of approximately ¥11.8B, equivalent to a negative impact of about 22.7% relative to Operating Income ¥52.0B. R&D expense was ¥11.8B, representing 1.3% of sales, remaining low and leaving room for mid-to-long-term investment. [Investment Efficiency] ROE 2.4% is at prior-year level but low. Total asset turnover annualized is approximately 0.78x (quarterly sales ¥883.2B ×4 ÷ Total Assets ¥4,510.0B), low and suppressing ROE. Financial leverage is moderate at Total Assets ¥4,510.0B ÷ Net Assets ¥2,768.3B = 1.63x. [Financial Soundness] Equity Ratio 61.4% (prior 60.0%, +1.4pt) remains strong. Interest-bearing debt totaled ¥633.9B (Short-term borrowings ¥202.9B, Long-term borrowings ¥281.0B, Bonds ¥150.0B), down ¥14.9B YoY. Cash and deposits ¥421.4B are ample, leaving Net Interest-bearing Debt at ¥212.5B. Current ratio 218% and Quick ratio 178% indicate solid short-term liquidity.
The cash flow statement is undisclosed, so cash movements are inferred from balance sheet changes. Cash and deposits decreased by ¥54.8B from ¥476.3B to ¥421.4B. Investment securities declined by ¥78.0B from ¥620.0B to ¥541.9B, implying cash-in from asset sales of roughly ¥78B accompanying the recorded gain on sale of investment securities ¥35.6B. Short-term borrowings rose by ¥59.5B from ¥143.4B to ¥202.9B, suggesting increased working capital needs. Long-term borrowings decreased by ¥60.0B from ¥341.0B to ¥281.0B, indicating repayment of interest-bearing debt. Inventories increased by ¥4.9B from ¥403.8B to ¥408.6B, and accounts receivable decreased by ¥13.5B from ¥1,067.7B to ¥1,054.2B. Accounts payable fell sharply by ¥95.5B from ¥679.1B to ¥583.6B, implying shortened payment terms or changes in purchasing scale that likely caused cash outflows from working capital. These movements suggest limited cash generation from operating activities, with proceeds from sale of investment securities likely used for working capital and debt repayment.
Recurring earnings were Operating Income ¥52.0B and Ordinary Income ¥61.1B, with net non-operating items contributing ¥9.2B. A one-off special gain of ¥35.7B (including gain on sale of investment securities ¥35.6B) was recorded, accounting for about 37.3% of Profit before Tax ¥95.7B. Of Net Income attributable to owners of the parent ¥65.7B, the estimated after-tax contribution of the one-off gain is approximately ¥25B, meaning roughly 38% of Net Income is due to one-time factors. Non-operating income ¥13.7B is limited (1.6% of Revenue), mainly comprising FX gains and dividend income. The difference between Ordinary Income ¥61.1B and Net Income ¥65.7B arises from special items (Special gains ¥35.7B − Special losses ¥1.1B = net ¥34.6B) and taxes; converting Ordinary Income to after-tax yields about ¥43B, and the ¥22B gap to Net Income ¥65.7B aligns with the net contribution of one-off gains. From a quality-of-earnings perspective, core operating strength is improving (Operating Income +16.1%), but the large increase in Net Income relies on low-repeatability one-offs; thus, future profit levels are better judged around Ordinary Income.
Full Year / FY guidance: Revenue ¥3,600.0B (+2.9%), Operating Income ¥230.0B (+10.8%), Ordinary Income ¥225.0B (+7.7%). Q1 progress rates are Revenue 24.5%, Operating Income 22.6%, Ordinary Income 27.2%. Revenue progress is standard, but Operating Income is somewhat behind plan, likely due to higher SG&A and FX impacts. Ordinary Income outperformance in progress was aided by improved non-operating items, but a conservative full-year view is warranted. Net Income is 31.3% of the full-year forecast (Q1 Net Income ¥65.7B vs. FY forecast ¥210.0B), a high ratio driven by the one-off gain from sale of investment securities ¥35.6B, with limited reproducibility over the remaining three quarters. No revisions to earnings or dividend forecasts were made this quarter.
No dividend was paid this quarter. Full-year dividend forecast is ¥60.00 per share (prior ¥50.00 per share, +¥10.00, +20.0%). The payout ratio versus full-year EPS forecast 447.69円 is 13.4%, a low level consistent with retention-oriented policy. Annualized payout ratio based on current period Net Income ¥65.7B (EPS 139.89円) would be approximately 42.9%, but given the large contribution from one-offs, core earnings-based dividend capacity is considered sufficient. Dividend funding sustainability is supported by cash ¥421.4B and a healthy financial position with Net Interest-bearing Debt ¥212.5B. No share buyback was disclosed; shareholder returns are dividend-only.
Working capital efficiency deterioration: Short-term borrowings rose ¥59.5B YoY (+41.5%), while accounts payable decreased ¥95.5B YoY (-14.1%), expanding working capital needs. Inventories at ¥408.6B remain high, and inventory days are prolonged at approximately 217 days (Inventories ¥408.6B ÷ Cost of Goods Sold ¥685.9B × 90 days). Accounts receivable ¥1,054.2B equates to roughly 3.6 months of sales, raising concerns over collection terms. Working capital expansion can delay cash generation and increase dependence on external funding.
Foreign exchange volatility risk: The company recorded a foreign exchange loss ¥13.0B in non-operating expenses and a foreign exchange gain ¥1.2B in non-operating income, implying a net FX cost of about ¥11.8B — approximately a 22.7% negative impact relative to Operating Income ¥52.0B. The currency translation adjustment swung significantly from −¥74.9B prior year to ¥23.3B this period, indicating high FX volatility. With a significant share of foreign-currency transactions and assets, exchange rate movements can materially affect earnings. Effectiveness of FX hedging and delays in price pass-through may amplify earnings volatility.
Dependence on one-off gains and earnings volatility risk: Of current period Net Income ¥65.7B, gain on sale of investment securities ¥35.6B (after tax approximately ¥25B) accounts for about 38%, while core earnings are closer to Ordinary Income ¥61.1B (after tax about ¥43B). One-off gains have low repeatability; therefore, future profit levels should be benchmarked around Ordinary Income. R&D spending is ¥11.8B, 1.3% of sales, relatively low and leaving questions about mid-to-long-term investment to sustain competitiveness. Within segments, Colorants & Functional Materials-related has thin margin at 3.1%, implying the need for portfolio optimization.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.9% | 6.8% (2.9%–9.0%) | -1.0pt |
| Net Margin | 7.6% | 5.9% (3.3%–7.7%) | +1.6pt |
Operating margin trails the industry median by 1.0pt, while Net margin exceeds the median by 1.6pt due to contribution from the gain on sale of investment securities.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 7.5% | 13.2% (2.5%–28.5%) | -5.7pt |
Revenue growth at +7.5% is solid but lags the industry median 13.2% by 5.7pt, placing growth pace around mid-to-lower range within the industry.
※ Source: Company aggregation
Confirmed improvement in core earning power: Operating Income rose +16.1% YoY and gross margin improved +0.9pt, showing the effects of price pass-through and cost management. Polymer & Coating-related led with margin 8.9%, and Colorants & Functional Materials-related, though low-margin at 3.1%, showed a large YoY improvement of +26.9%. SG&A ratio rose slightly but gross margin gains produced positive operating leverage. Operating Income progress vs. full-year guidance is somewhat behind, but core operating strength is steadily improving with room for recovery in H2.
Net Income upside is transient—caution needed for sustainability assessment: Of Q1 Net Income ¥65.7B, gain on sale of investment securities ¥35.6B (after tax ~¥25B) constitutes about 38%, while underlying earnings approximate Ordinary Income ¥61.1B (after tax ~¥43B). The high progress vs. full-year Net Income forecast (31.3%) is due to one-off items and is unlikely to be repeated over the remaining three quarters. For valuation, emphasis should be on Ordinary Income-based earning power and its sustainability.
Working capital management and financial efficiency improvement are medium-term priorities: Short-term borrowings rose ¥59.5B YoY and accounts payable fell ¥95.5B YoY, expanding working capital needs. Inventories ¥408.6B imply inventory days ~217, and accounts receivable ¥1,054.2B equate to about 3.6 months of sales; enlarged working capital delays cash generation. Total asset turnover annualized ~0.78x is low and suppresses ROE at 2.4%. Inventory reduction, accelerated receivables collection, and improved working capital efficiency are keys to enhancing capital efficiency and cash generation.
This report is an earnings analysis automatically generated by AI analyzing XBRL financial disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are company-compiled reference information based on public financial statements. Investment decisions should be made at your own responsibility, and you should consult professional advisors as needed.