KUMIAI CHEMICAL INDUSTRY (4996) FY2026 Q1 Earnings Report

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Executive Summary

For Q1 of the fiscal year ending March 2026, the Company posted higher revenue and earnings, driven by revenue growth and improved profitability centered on the Agrochemicals and Agricultural-Related Business. Revenue was ¥467.1B (+7.7% YoY), Operating Income was ¥49.9B (+24.5%), and Ordinary Income was ¥62.3B (+23.4%), with each exceeding the rate of revenue growth. Meanwhile, Net Income attributable to owners of the parent declined to ¥39.6B (-3.2%), mainly due to an increase in income taxes and other taxes. The Operating Income margin improved to 10.7% from 9.2% in the same period of the previous year, reflecting operating leverage from higher revenue and SG&A expense control.

Factors Affecting Business Performance

【Revenue】Revenue was ¥467.1B (+7.7% YoY). The core Agrochemicals and Agricultural-Related Business accounted for ¥377.9B (+9.1%), representing 80.9% of total revenue and driving growth. Chemicals also expanded to ¥66.7B (+12.0%), while Other Businesses contracted to ¥31.9B (-16.4%), with the decline in non-core businesses slightly restraining overall growth.

【Profit and Loss】Operating Income was ¥49.9B (+24.5% YoY), supported by an improvement in the gross profit margin to 22.4% (22.0% in the previous year) and a 1.8% decrease in SG&A expenses to ¥54.5B (YoY). Ordinary Income of ¥62.3B (+23.4%) was boosted by ¥13.7B in equity in net earnings of affiliates. Meanwhile, income taxes and other taxes surged to ¥22.5B from ¥9.4B in the previous year, raising the effective tax rate and resulting in a decline in Net Income attributable to owners of the parent to ¥39.6B (-3.2%). In summary, the Company achieved higher revenue and earnings at the Operating Income and Ordinary Income levels, but Net Income declined due to the increased tax burden.

Segment Analysis

The Agrochemicals and Agricultural-Related Business led company-wide earnings growth, with Revenue of ¥377.9B (+9.1%), Segment Profit of ¥46.0B (+27.7%), and a profit margin of 12.2% (improving from approximately 10.4% in the previous year). Chemicals recorded Revenue of ¥66.7B (+12.0%), Segment Profit of ¥6.7B (+20.4%), and a profit margin of 10.1%, reflecting improved profitability. Other Businesses (leasing, power generation, construction, etc.) recorded Revenue of ¥31.9B (-16.4%), Segment Profit of ¥2.0B (-24.8%), and a profit margin of 6.2%, remaining at a low level relative to the other segments and making only a limited contribution to company-wide earnings.

Key Financial Metrics

【Profitability】The Operating Income margin was 10.7%, improving by 1.5pt from 9.2% in the same period of the previous year, while the gross profit margin also improved slightly to 22.4% (22.0% in the previous year). The Net Income margin was 8.5%, and did not increase to the same extent as profitability at the Operating Income and Ordinary Income levels due to the impact of the increased tax burden.【Cash Flow Quality】Equity in net earnings of affiliates of ¥13.7B accounted for the majority of non-operating income of ¥15.4B, and the factor boosting Ordinary Income differs in nature from profits generated by the core business.【Investment Efficiency】Annualized ROE was 10.3%; together with an Equity Ratio of 59.1%, this indicates that a certain level of capital efficiency is being maintained even with a high Equity Ratio.【Financial Soundness】The Equity Ratio declined slightly to 59.1% (59.8% in the previous year), while short-term borrowings increased to ¥502.5B (+36.6% YoY). At the same time, cash and deposits also increased to ¥300.0B (+36.5%), indicating increased liquidity on hand.

Cash Flow Analysis

Although detailed disclosure of the statement of cash flows is not available, changes in the balance sheet provide insight into fund movements. Cash and deposits increased from the end of the previous fiscal year to ¥300.0B, while short-term borrowings also increased substantially to ¥502.5B, suggesting that the Company built up liquidity on hand through debt financing. Accounts receivable of ¥462.1B and inventories of ¥580.7B both increased, indicating that the expansion of working capital accompanying revenue growth may have increased funding needs. Accounts payable also increased to ¥261.4B, contributing in part to the financing required to support the expansion of procurement and production activities. Overall, the accumulation of working capital during a period of revenue growth is reflected in the Company’s funding position through its increased reliance on short-term borrowings.

Quality of Earnings

Of the ¥12.4B increase from Operating Income to Ordinary Income, the majority was attributable to ¥13.7B in equity in net earnings of affiliates, which should be evaluated separately from the operating activities of the core business. Extraordinary items consisted solely of an extraordinary loss of ¥0.1B, and the impact on Net Income was not largely attributable to temporary factors. The primary reason for the -3.2% YoY decline in Net Income was the sharp increase in income taxes and other taxes to ¥22.5B from ¥9.4B in the previous year; as a non-recurring factor involving an increase in the effective tax rate, this prevented the earnings growth at the Operating Income and Ordinary Income levels from being fully reflected in final profit. Comprehensive income was ¥48.8B, and the difference from Net Income of ¥39.7B was mainly attributable to the share of OCI of equity-method affiliates (+¥5.9B) and valuation difference on available-for-sale securities (+¥3.9B), including valuation-related fluctuations that diverge from the underlying business conditions.

Earnings Forecast and Guidance

The full-year Company forecast is a conservative plan projecting lower revenue and earnings, with Revenue of ¥1,620.0B (-5.0% YoY), Operating Income of ¥72.0B (-31.9%), and Ordinary Income of ¥109.0B (-18.4%). As of Q1, progress rates were 28.8% for Revenue, 69.3% for Operating Income, and 57.1% for Ordinary Income, indicating particularly high progress on the earnings front. As of the current quarter, there has been no revision to the earnings forecast or dividend forecast. Given the seasonality of the Agrochemicals Business, whether the strong first-half progress will be reflected in full-year results will depend on sales trends going forward.

Shareholder Returns

The Company’s full-year dividend forecast is ¥24.00 per share, and the Payout Ratio based on forecast EPS of ¥53.15 is 45.2%, within the generally sustainable guideline of less than 60%. No share buyback has been disclosed; therefore, the Company is evaluated based on its Payout Ratio rather than its Total Return Ratio. There has been no revision to the dividend forecast for the current quarter.

Risk Factors

1. Concentration risk in the core business: The Agrochemicals and Agricultural-Related Business accounts for 80.9% of external revenue and 84.1% of Segment Profit, creating a structure in which fluctuations in agricultural demand, weather conditions, and sales timing can have a significant impact on consolidated results.

2. Reliance on short-term financing: Short-term borrowings increased to ¥502.5B, up +36.6% YoY, and the short-term liabilities ratio remains high. Interest rate trends and the lending stance of financial institutions could affect financial costs.

3. Reliance on equity in net earnings of affiliates: Equity in net earnings of affiliates, which boosts Ordinary Income, amounted to ¥13.7B, representing 22.1% of Ordinary Income. Fluctuations in the performance of investees may therefore cause volatility in Ordinary Income.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s profitability exceeds the industry median and is positioned in the upper range.

Growth and Capital Efficiency

The Revenue growth rate also exceeds the industry median, but remains at a middle-to-upper level without reaching the upper bound of the IQR.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The Operating Income margin improved by 1.5pt YoY to 10.7%, reflecting operating leverage from SG&A expense control in addition to revenue growth. Improvement in the Segment Profit margin of the Agrochemicals and Agricultural-Related Business was the primary driver of higher company-wide profitability.

2. Growth in Ordinary Income is highly dependent on equity in net earnings of affiliates, while Net Income declined YoY due to the increase in the effective tax rate. Improvement at the Operating Income and Ordinary Income levels has not necessarily translated directly into final profit.

3. The Q1 progress rate for Operating Income against the full-year Company forecast was high at 69.3%. After taking into account the seasonality of the Agrochemicals Business, trends in subsequent quarters will be a key factor in assessing achievement of the full-year plan.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,071–¥1,132 at ±1% for the cost of equity, and ¥1,095–¥1,105 at ±0.1 for ω.

Notes:

• Because the progress of Net Income against the full-year forecast (62%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with leading progress tend to exceed forecasts; adjustments may be excessive for businesses with strong seasonality).
• Because forecast ROE is below the cost of equity, the theoretical value is below Book Value per Share.
• Net assets as of the end of the quarter are used (there is a time lag relative to the full-year forecast).
• Because Net Assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; it is not a prediction of the market share price or a recommendation of any specific investment action, and does not predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings flash report data. It does not recommend investment in any specific securities. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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