SHIMOJIMA Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

In addition to higher revenue, operating income increased 149.2% YoY, with profitability improving at a pace exceeding revenue growth—a key feature of the quarter. Revenue was ¥184.5B (+21.6% YoY), operating income was ¥16.4B (+149.2%), ordinary income was ¥17.2B (+121.9%), and net income was ¥11.5B (+120.8%). SG&A expenses increased by only +6.5% relative to revenue growth, and operating leverage substantially boosted profit growth.

Factors Affecting Results

【Revenue】Revenue was ¥184.5B, representing a +21.6% increase YoY. The mainstay Chemicals and Packaging Materials segment generated ¥117.4B (+26.0%), accounting for 63.6% of total revenue and driving growth. Store Supplies generated ¥40.0B (+17.1%), while Paper Products generated ¥27.1B (+11.4%), resulting in higher revenue across all three segments.

【Profit and Loss】Operating income was ¥16.4B (+149.2%), with the gross margin improving to 33.6% (32.5% in the same period last year) and the SG&A ratio declining to 24.7% (28.2% in the same period last year). Ordinary income was ¥17.2B (+121.9%), and net income was ¥11.5B (+120.8%). The difference between extraordinary gains and losses was ¥0.05B, resulting in a limited impact on net income. Profit growth exceeding revenue growth represents higher revenue and higher profit, and can be characterized as high-quality earnings growth accompanied by gross margin improvement and more efficient SG&A management.

Segment Analysis

Chemicals and Packaging Materials generated revenue of ¥117.4B (+26.0%) and operating income of ¥16.0B (+108.6%), with a profit margin of 13.6% (8.2% in the same period last year), making it the core contributor to company-wide profit. Store Supplies generated revenue of ¥40.0B (+17.1%) and operating income of ¥2.5B (+130.9%), with a profit margin of 6.3% (3.2% in the same period last year), representing the largest improvement. Paper Products generated revenue of ¥27.1B (+11.4%) and operating income of ¥2.9B (+28.7%), with a profit margin of 10.6% (9.2% in the same period last year), delivering steady profit growth. Other Operations (Logistics Business) recorded internal revenue of ¥4.2B and operating income of ¥0.3B, improving from the previous year. All three core businesses achieved higher revenue and higher profit, with improved profitability in Chemicals and Packaging Materials leading the expansion of the company-wide margin.

Key Financial Indicators

【Profitability】The operating margin of 8.9% improved by +4.5pt from 4.3% in the same period last year, while the net profit margin of 6.2% increased by +2.8pt from 3.4% in the same period last year. In addition to the improvement in the gross margin of 33.6% (32.5% in the same period last year), the decline in the SG&A ratio to 24.7% (28.2% in the same period last year) supported the improvement in profitability.【Cash Flow Quality】Comprehensive income of ¥11.3B was slightly below net income of ¥11.5B, but the difference was small at ¥0.2B, indicating a limited impact on net assets from changes in valuation differences on available-for-sale securities and other items.【Investment Efficiency】Annualized ROE was 12.3%, supported by a net profit margin of 6.2% and efficient asset turnover, indicating a structure with limited reliance on financial leverage.【Financial Soundness】The equity ratio was extremely high at 82.4%, while interest-bearing debt was limited to ¥0.5B. Cash and deposits were ¥67.7B, down 26.9% from the previous year.

Cash Flow Analysis

As individual data from the cash flow statement have not been disclosed, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥67.7B, a decrease of ¥24.96B from ¥92.7B in the same period last year. Meanwhile, inventories were ¥57.8B (¥54.3B in the previous year) and accounts receivable were ¥79.6B (¥78.2B in the previous year), both showing modest increases. The buildup of working capital associated with business expansion is considered one factor behind the decline in cash. Property, plant and equipment increased to ¥152.4B (¥142.5B in the previous year), suggesting that investments, mainly in land, also represented a use of funds. Current liabilities were ¥68.3B, substantially below current assets of ¥244.5B. As the current ratio remained at a high level, no short-term liquidity issues are apparent even after the decline in cash.

Earnings Quality

The increase in profit for the quarter was attributable to recurring operating factors rather than reliance on extraordinary gains and losses. The difference between extraordinary income of ¥0.2B and extraordinary losses of ¥0.1B was only ¥0.05B. The conversion from ordinary income of ¥17.2B to net income of ¥11.5B primarily reflects the ordinary tax burden of ¥5.8B (effective tax rate: 33.4%) from income taxes and other taxes. The difference between non-operating income of ¥1.0B and non-operating expenses of ¥0.2B was a net gain of ¥0.8B. The increase in ordinary income was primarily attributable to the growth in operating income (+149.2%), with a limited contribution from non-operating factors. Comprehensive income of ¥11.3B was broadly in line with net income of ¥11.5B, with no significant divergence attributable to accrual factors. Earnings for the period can therefore be assessed as high quality.

Earnings Forecast and Guidance

Progress toward the full-year plan in Q1 was 27.9% for revenue, 44.3% for operating income, 43.0% for ordinary income, and 44.1% for net income, all substantially exceeding the standard quarterly progress rate of 25%. The full-year plan assumes conservative figures of revenue of ¥660.0B (+1.8% YoY) and operating income of ¥37.0B (+7.0% YoY), creating a significant gap with Q1’s high growth and profit margins. There were no revisions to either the earnings forecast or dividend forecast. The key issue going forward will be whether the high full-year profit margin can be sustained in the second half.

Shareholder Returns

The full-year forecast dividend per share is ¥59.00, and the full-year forecast EPS is ¥111.16, implying an expected payout ratio of 53.1%. This represents an increase from the previous year’s actual dividend of ¥27, while the financial base of an equity ratio of 82.4% and interest-bearing debt of ¥0.5B supports flexibility in dividend payments. There was no revision to the dividend forecast, and the achievement of the full-year net income plan of ¥26.0B will serve as a basis for assessing future dividend sustainability.

Risk Factors

1. Business concentration risk: Chemicals and Packaging Materials accounts for 63.6% of revenue and 73.7% of adjusted segment profit, creating a structure in which changes in demand and pricing conditions in this business can significantly affect company-wide profit.

2. Cost pass-through risk: If raw material and logistics costs rise, delays in passing these increases on to selling prices could make it difficult to maintain a gross margin of 33.6% and an operating margin of 8.9%.

3. Gap between progress and the full-year plan: Operating income progress toward the full-year plan is high at 44.3%, creating a significant gap with the full-year profit growth target of +7.0%. The key issue is whether Q1’s high profit margin can be reproduced in the second half.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (trading)

Profitability and Returns

The company’s operating margin and net profit margin exceed the industry median, indicating relatively high profitability within the industry.

Growth and Capital Efficiency

The revenue growth rate substantially exceeds the industry median, indicating high growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Report

1. Strong operating leverage was confirmed, with operating income increasing +149.2% against revenue growth of +21.6%. The simultaneous improvement in the gross margin and decline in the SG&A ratio are notable as qualitative changes in the earnings structure.

2. The segment profit margin of Chemicals and Packaging Materials improved to 13.6% (8.2% in the same period last year), serving as the primary driver of the company-wide margin expansion. Given the business’s high degree of dependence, the sustainability of this improvement will determine the future direction of performance.

3. Operating income progress toward the full-year plan was high at 44.3%, while the full-year plan itself assumes conservative profit growth of +7.0% YoY. Future earnings reports should confirm whether Q1’s high profit margin normalizes over the full year or remains sustainable as an upside factor.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,461–¥1,544 at ±1% for the cost of equity, and ¥1,499–¥1,504 at ±0.1 for ω.

Notes:

• Because net income progress toward the full-year forecast (44%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of schedule tend to outperform 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 timing difference 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 predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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 discretion and responsibility, after consulting with a professional as necessary.

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