| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1365.7B | ¥1356.9B | +0.6% |
| Operating Income / Operating Profit | ¥104.6B | ¥105.5B | -0.9% |
| Ordinary Income | ¥111.0B | ¥111.9B | -0.9% |
| Net Income / Net Profit | ¥59.0B | ¥57.8B | +2.0% |
| ROE | 6.6% | 6.7% | - |
For the fiscal year ended March 2026, Revenue totaled ¥1365.7B (YoY +¥8.8B +0.6%), Operating Income was ¥104.6B (YoY -¥0.9B -0.9%), Ordinary Income was ¥111.0B (YoY -¥0.9B -0.9%), and Net Income attributable to owners of the parent was ¥59.0B (YoY +¥1.2B +2.0%). While Revenue was broadly flat, Net Income edged up due to the recording of Special Gains of ¥8.9B (gain on sale of investment securities ¥8.8B). Gross margin improved by +0.2pt to 20.5%, but SG&A ratio rose by +0.4pt to 12.9%, compressing the operating margin by -0.1pt to 7.7% (prior year 7.8%). By segment, the core Bond segment (Revenue ¥746.2B +0.6%, Operating Income ¥67.6B -2.1%) remained steady though profitability declined; Chemicals (Revenue ¥394.8B +6.0%, Operating Income ¥14.3B +5.4%) benefited from volume recovery and pricing measures; CivilEngineeringConstruction (Revenue ¥234.0B -8.3%, Operating Income ¥23.6B +4.1%) saw revenue decline due to selective order intake but improved profitability. Operating Cash Flow (OCF) was ¥137.3B (YoY +91.4%), 2.3x Net Income, indicating high cash quality; Free Cash Flow was ¥77.5B and stable. Dividends were ¥38 per year (payout ratio 31.4%), and share buybacks of ¥57.3B were executed, resulting in a Total Return Ratio exceeding 140% (vs. Net Income).
Revenue: Revenue of ¥1365.7B (+0.6% YoY) was supported by volume recovery in the Chemicals segment (+6.0%) and stable performance in Bond (+0.6%), while selective order intake in CivilEngineeringConstruction (-8.3%) kept consolidated Revenue roughly flat. Bond experienced demand slowdown for industrial and construction adhesives in the latter half, but partial pass-through from price revisions led to a slight increase. Chemicals saw recovery in sales volumes of industrial chemicals and resin products and benefited from price measures, resulting in +6.0% revenue growth. CivilEngineeringConstruction reduced revenue due to selective pursuit of large projects, prioritizing margin improvement. Segment composition was Bond 54.6%, Chemicals 28.9%, CivilEngineeringConstruction 17.1%, indicating high dependence on Bond.
Profitability: Gross margin improved to 20.5% (prior year 20.3%, +0.2pt), but SG&A increased to ¥175.8B (SG&A ratio 12.9%, prior year 12.5%), up ¥6.3B (+3.7%), raising the SG&A ratio by +0.4pt. As a result, Operating Income was ¥104.6B (-0.9%), and Operating Margin compressed slightly to 7.7% (-0.1pt). Non-operating items included dividend income ¥3.1B, interest income ¥0.8B, and equity in earnings of affiliates ¥0.5B, yielding Ordinary Income of ¥111.0B (-0.9%). Special Gains totaled ¥8.9B (gain on sale of investment securities ¥8.8B), bringing Profit before Tax to ¥119.5B (+3.9%). After income taxes of ¥39.2B (effective tax rate 32.8%), Net Income attributable to owners of the parent was ¥59.0B (+2.0%). One-off gains supported the final line, while on an ordinary basis profits were slightly down. Segment-level: Bond operating margin 9.1% (prior year 9.3%, -0.2pt), Chemicals 3.6% (prior year 3.6%, flat), CivilEngineeringConstruction 10.1% (prior year 8.9%, +1.2pt). Overall, marginally higher Revenue and slightly lower ordinary profits, but one-off gains led to final profit increase.
Bond: Revenue ¥746.2B (+0.6% YoY), Operating Income ¥67.6B (-2.1% YoY), Operating Margin 9.1% (prior year 9.3%). Demand for industrial and construction adhesives slowed in the second half, and price revision effects have largely cycled through. Increased promotion and personnel costs pressured margins.
Chemicals: Revenue ¥394.8B (+6.0% YoY), Operating Income ¥14.3B (+5.4% YoY), Operating Margin 3.6% (prior year 3.6%). Sales volumes of industrial chemicals and resin products recovered, and pricing measures took hold, resulting in revenue and profit growth. Margin remained flat, but absolute profit increased due to higher revenue.
CivilEngineeringConstruction: Revenue ¥234.0B (-8.3% YoY), Operating Income ¥23.6B (+4.1% YoY), Operating Margin 10.1% (prior year 8.9%). Selective bidding on large projects reduced revenue, but strict cost control improved margins by +1.2pt.
Profitability: Operating Margin 7.7% (prior year 7.8%), Net Profit Margin 4.3% (prior year 4.3%, on parent-company-basis) remained roughly stable. Gross Margin 20.5% improved +0.2pt from 20.3%, but SG&A ratio rose to 12.9% (prior year 12.5%, +0.4pt), compressing Operating Margin. ROE 6.6% (company calculation: Net Income attributable to owners of the parent ÷ average shareholders' equity) is decomposed as Net Profit Margin 4.3% × Total Asset Turnover 0.98x × Financial Leverage 1.57x.
Cash Quality: OCF ¥137.3B is 2.3x Net Income ¥59.0B; OCF/EBITDA (Operating Income ¥104.6B + D&A ¥29.6B = ¥134.2B) is 1.02x, indicating high quality. Free Cash Flow ¥77.5B = OCF ¥137.3B less Investing CF ¥59.9B, largely covering dividends + share buybacks (approx. ¥82.8B).
Investment Efficiency: Total Asset Turnover 0.98x (prior year 0.99x) essentially flat. Capital Expenditure ¥28.5B is below Depreciation ¥29.6B, consistent with maintenance-level investment. Intangible assets increased to ¥47.4B from ¥31.1B prior year (+52.6%), indicating progress in software and related investments.
Financial Soundness: Equity Ratio 63.6% (prior year 63.1%), Interest-bearing debt ¥0.28B (prior year ¥0.89B), effectively debt-free. Current Ratio 195%, Quick Ratio (current assets - inventories ÷ current liabilities) 174%—both high— and most short-term liabilities of ¥427.3B are accounts payable ¥327.5B, implying minimal interest burden.
OCF was ¥137.3B (YoY +91.4%), driven by Profit before Tax ¥119.5B, Depreciation ¥29.6B, and decreases in trade receivables ¥32.3B (collection progress). After payment of corporate taxes ¥34.8B, cash generation remained strong. Inventories increased ¥5.8B and trade payables decreased ¥4.3B, causing minor working capital deterioration, but aggregate OCF before working capital changes was ¥168.5B, reflecting high-quality cash generation. Investing CF was -¥59.9B, mainly for CapEx ¥28.5B (CapEx/Depreciation = 0.96x, maintenance level), intangible investments ¥24.5B, acquisition of subsidiary shares ¥13.9B, and net purchases of securities ¥9.7B. Free Cash Flow was ¥77.5B, which covered dividends ¥25.5B and share buybacks ¥57.3B (total return ¥82.8B), and cash & deposits rose slightly to ¥212.9B (prior year ¥211.2B). Financing CF was -¥84.1B, including dividends paid ¥26.0B (including ¥0.0B to non-controlling interests), share buybacks net ¥57.3B, and net decrease in borrowings ¥0.6B.
Core recurring earnings are Operating Income ¥104.6B, while non-operating income ¥8.2B (dividends received ¥3.1B, interest received ¥0.8B, equity in earnings of affiliates ¥0.5B, etc.) represent a minor 0.6% of Revenue. One-off items include Special Gains ¥8.9B (gain on sale of investment securities ¥8.8B), contributing approximately 15.1% of Net Income ¥59.0B— a moderate impact. Non-operating income is centered on stable dividend and interest income. Accrual ratio ((Net Income - OCF) ÷ Total Assets) is -5.6%, indicating OCF substantially exceeds Net Income and high earnings quality. The gap between Ordinary Income ¥111.0B and Net Income ¥59.0B is explained by income taxes ¥39.2B and special net items ¥8.5B (Special Gains ¥8.9B - Special Losses ¥0.4B); effective tax rate 32.8% is standard. Comprehensive Income ¥99.4B greatly exceeds Net Income ¥59.0B, primarily due to actuarial adjustments related to retirement benefits ¥14.3B and valuation differences on available-for-sale securities ¥4.5B; other comprehensive income ¥1.9B equals 32.3% of Net Income, indicating an increase in stock value.
Full-year guidance: Revenue ¥1500.0B (+9.8% YoY), Operating Income ¥115.0B (+9.9% YoY), Ordinary Income ¥119.0B (+7.2% YoY), Net Income attributable to owners of the parent approximately ¥82.0B (EPS forecast ¥131.21). Progress rates are Revenue 91.0%, Operating Income 91.0%, Ordinary Income 93.3%, implying expected upside in H2. Assumptions include continued volume recovery in Chemicals, maintained profitability in CivilEngineeringConstruction (margin >10%), and stabilization of Bond price and mix. Controlling SG&A growth (managing elasticity below 1 relative to revenue growth) and stable raw material prices are key to achieving the plan. Dividend guidance is ¥19.00 per period (stated on a year-end basis, roughly ¥38 annualized), signaling continued stable dividends.
Dividends: ¥38 per year (¥19 interim + ¥19 year-end), payout ratio 31.4% (based on Net Income attributable to owners of the parent ¥59.0B), within sustainable range. Total dividend amount approx. ¥25.5B, covering 32.9% of Free Cash Flow ¥77.5B. Share buybacks executed ¥57.3B (acquisition basis), and total shareholder returns (dividends ¥25.5B + buybacks ¥57.3B = approx. ¥82.8B) represent 140.3% of Net Income ¥59.0B—a high level. Total Return Ratio (dividends + buybacks ÷ Net Income) exceeds 140%; relative to Free Cash Flow ¥77.5B the coverage is 106.8%, roughly aligned. Treasury stock at period-end was ¥96.6B (book value, up +114.4% from ¥45.1B at period start); of 70,415 thousand shares outstanding, 7,995 thousand shares (11.4%) are held as treasury stock. Policy suggests dividends will be maintained and buybacks implemented flexibly.
Segment Concentration Risk: Bond accounts for 54.6% of Revenue and approximately 64.6% of Operating Income, making performance sensitive to housing/construction cycles and DIY demand. The Bond demand slowdown in H2 highlights vulnerability to economic cycles.
SG&A Inflation: SG&A ¥175.8B (+3.7% YoY) outpaced Revenue growth 0.6%, causing negative operating leverage. Increases in personnel and promotion expenses are pressuring margins, necessitating stronger cost control.
Raw Material Price Volatility: Upside in petrochemical feedstock and solvent prices could compress spreads. Although gross margin improved +0.2pt, a renewed rise in material costs with delayed pass-through could erode margins.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.7% | 7.8% (4.6%–12.3%) | -0.1pt |
| Net Profit Margin | 4.3% | 5.2% (2.3%–8.2%) | -0.9pt |
Profitability slightly lags the manufacturing median. Operating Margin is roughly in line with industry median, but Net Profit Margin is -0.9pt lower versus the median due to tax burden and one-off items.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 0.6% | 3.7% (-0.4%–9.3%) | -3.1pt |
Growth lags the manufacturing median. Bond demand slowdown and selective ordering in CivilEngineeringConstruction constrained company-wide growth.
※Source: Company aggregation
Cash generation and financial soundness: OCF ¥137.3B is 2.3x Net Income; Free Cash Flow ¥77.5B nearly covers dividends + buybacks. Effectively debt-free with Equity Ratio 63.6%, providing strong downside resilience and room for additional shareholder returns.
Drivers for profitability improvement: SG&A ratio rose to 12.9% from 12.5% (+0.4pt), reversing operating leverage. Controlling SG&A growth (keeping elasticity <1 relative to revenue) and sustained gross margin expansion through Bond price/mix improvement are key drivers for ROE enhancement.
Balancing growth and margin: The full-year plan assumes Revenue +9.8% and Operating Income +9.9%; achieving this requires continued volume recovery in Chemicals, maintenance of high profitability in CivilEngineeringConstruction (margin >10%), and effective rollout of Bond pricing measures. Special Gain (gain on sale of investment securities ¥8.8B) is non-recurring, so sustainable ordinary profit growth is critical.
This report is an AI-generated financial analysis document created by analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from publicly disclosed financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.