SHIMOJIMA (7482) FY2026 Q3 Earnings Report

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Executive Summary

In addition to revenue and profit growth, margins continued to improve, with Operating Income growth significantly outpacing revenue growth. Revenue was ¥495.3B (+6.2% YoY), Operating Income was ¥31.2B (+22.1%), Ordinary Income was ¥34.0B (+23.2%), and Net Income was ¥22.9B (+21.8%). Revenue and profit growth in the core Synthetic Resins and Packaging Materials segment drove results, while operating leverage from improved gross margins and restrained growth in SG&A expenses supported profit growth.

Factors Affecting Performance

【Revenue】Revenue was ¥495.3B, an increase of +6.2% YoY. By segment, Synthetic Resins and Packaging Materials generated ¥302.7B (61.1% of total, +7.3% YoY), serving as the main contributor to company-wide revenue growth. Paper Products generated ¥80.8B (+5.3%), while Store Supplies generated ¥112.0B (+3.7%); all segments secured revenue growth.

【Profit and Loss】Operating Income was ¥31.2B (+22.1% YoY), Ordinary Income was ¥34.0B (+23.2%), and Net Income was ¥22.9B (+21.8%), with growth in all cases exceeding the revenue growth rate. The gross margin improved to 32.6% (32.1% in the previous year), while SG&A expenses increased by +5.1%, below the +6.2% revenue growth rate, causing the SG&A ratio to decline from 26.6% to 26.4%. Non-operating income and expenses made only a net profit contribution of +¥2.9B, and the gap between Ordinary Income and Net Income was small, with extraordinary income and expenses also immaterial. The company achieved both revenue and profit growth, representing high-quality growth accompanied by improved profitability.

Segment Analysis

Synthetic Resins and Packaging Materials was the largest profit-contributing segment, with Revenue of ¥302.7B (61.1% of total) and segment profit of ¥30.2B (10.0% margin, +22.4% YoY), and led company-wide profit growth. Paper Products generated Revenue of ¥80.8B and profit of ¥9.2B (11.3% margin, +3.3% YoY), maintaining the highest profit margin among the segments. Store Supplies generated Revenue of ¥112.0B and profit of ¥5.2B (4.6% margin, +10.9% YoY); although its profit margin was relatively low, its profit growth rate was high. All segments were profitable and delivered profit growth, indicating a structure that is not excessively dependent on any specific business.

Key Financial Indicators

【Profitability】The Operating Income margin expanded to 6.3% (5.5% in the previous year), while the Net Income margin expanded to 4.6% (4.0% in the previous year), both driven by the improvement in the gross margin to 32.6%. 【Cash Quality】Accounts receivable increased to ¥96.2B (+34.8% YoY), and electronically recorded monetary claims also increased, indicating growth in working capital accompanying revenue expansion. At the same time, accounts payable increased to ¥38.9B (+32.1%), partially offsetting this effect. 【Investment Efficiency】Annualized ROE was 8.4%, consisting of a 4.6% Net Income margin × approximately 1.48x total asset turnover × approximately 1.23x financial leverage, representing capital efficiency that does not depend on high leverage. 【Financial Soundness】The Equity Ratio was 81.3%, while interest-bearing debt was a minimal ¥1.3B, with ample liquidity secured through cash and deposits of ¥73.5B.

Cash Flow Analysis

Although no cash flow statement has been disclosed, an examination of funding trends based on changes in the balance sheet shows that cash and deposits decreased by ¥7.3B from the previous year to ¥73.5B, while accounts receivable and electronically recorded monetary claims increased by ¥24.8B and ¥5.7B, respectively. This indicates that the accumulation of working capital accompanying revenue growth placed pressure on the cash balance. Accounts payable also increased by ¥9.4B, with the expansion of trade payables partially supporting liquidity. Interest-bearing debt was extremely small at ¥1.3B, and the company does not depend on debt financing. Retained earnings accumulated to ¥395.9B, demonstrating the continued strengthening of the financial base through retained earnings.

Quality of Earnings

Of the ¥3.4B in non-operating income, dividends received amounted to ¥0.1B, while other non-operating income of ¥1.6B constituted the main component. Dependence on financial income such as interest income is low, and the +23.2% growth in Ordinary Income is primarily attributable to sustainable operating profit growth. Extraordinary income and expenses were immaterial, limiting the impact of temporary factors, and the gap between Profit Before Tax of ¥34.0B and Net Income of ¥22.9B remained at a level consistent with the effective tax rate. Comprehensive Income was ¥24.4B, slightly exceeding Net Income of ¥22.9B, reflecting the impact of items such as deferred hedge gains and losses of +¥1.5B and valuation adjustments on other securities; however, the gap was small and did not materially distort earnings quality. The increases in accounts receivable and electronically recorded monetary claims correspond to revenue expansion, and no signs of earnings inflation due to a sharp expansion in accruals have been identified.

Earnings Forecasts and Guidance

The full-year company forecasts are Revenue of ¥635.0B (+4.6% YoY), Operating Income of ¥35.8B (+19.7%), and Ordinary Income of ¥38.0B (+15.0%). The progress rates through Q3 were 78.0% for Revenue, 87.2% for Operating Income, 89.5% for Ordinary Income, and 91.5% for Net Income, all exceeding the standard progress rate of 75%. The fact that profit progress is notably higher than revenue progress indicates that margin improvement to date is advancing ahead of the company’s plan. On a reverse-calculation basis, implied Q4 Operating Income is ¥4.6B, equivalent to an approximately 3.3% margin, incorporating a conservative assumption below the cumulative actual margin of 6.3%.

Shareholder Returns

The Q2 dividend was ¥27.00 per share, and the full-year forecast is ¥54.00 annually. The forecast Payout Ratio against forecast EPS of ¥107.02 is approximately 50.5%, calculated using dividends alone as the numerator. Given the financial base of cash and deposits of ¥73.5B and interest-bearing debt of ¥1.3B, the company has substantial capacity to support dividend sustainability. The accumulation of retained earnings to ¥395.9B also provides support for continued dividend payments.

Risk Factors

1. Raw material price risk: Although the gross margin improved to 32.6%, margins could come under pressure if fluctuations in the prices of paper, resins, and synthetic resin raw materials cannot be sufficiently passed through to selling prices.

2. Concentration of profit in the core segment: Synthetic Resins and Packaging Materials accounts for ¥30.2B in segment profit and is the main source of company-wide profit, creating a structure in which demand and pricing trends in this field have a significant impact on overall performance.

3. Working capital expansion: Accounts receivable increased by +34.8% YoY, and electronically recorded monetary claims also increased. Although this was partially offset by the increase in accounts payable, trends in credit management and collection efficiency will affect capital efficiency.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Income margin and Net Income margin exceed the industry median, placing the company’s profitability in the upper tier of the industry.

Growth and Capital Efficiency

The revenue growth rate is slightly above the industry median but remains below the upper bound of the IQR (8.6%).

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Operating Income growth of +22.1% versus Revenue growth of +6.2% confirms the emergence of operating leverage driven by gross margin improvement and SG&A expense control. The Operating Income margin expanded by approximately 82bp to 6.3%, above the industry median.

2. Profit progress rates against the full-year forecasts (Operating Income 87.2%, Ordinary Income 89.5%, and Net Income 91.5%) exceed the Revenue progress rate of 78.0%, highlighting that profitability improvement is preceding the company’s plan.

3. The financial structure, consisting of an Equity Ratio of 81.3% and interest-bearing debt of ¥1.3B, places the company among those with low debt dependence within the industry. Meanwhile, the increasing trend in accounts receivable and electronically recorded monetary claims warrants continued monitoring from a working capital management perspective.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,420–¥1,501 at ±1% for the cost of equity, and ¥1,457–¥1,462 at ±0.1 for ω.

Notes:

• Because Net Income progress against the full-year forecast (92%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies whose progress is ahead of schedule tend to exceed their 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).

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

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. 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 with a professional as necessary.

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