SHIMOJIMA Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

Shimojima’s FY2027 Q1 results showed increases in both revenue and earnings, with a significant improvement in profit margins being the key highlight. Revenue was ¥184.5B (¥151.7B in the previous year, +21.6%), operating income was ¥16.4B (¥6.6B in the previous year, +149.2%), ordinary income was ¥17.2B (¥7.7B in the previous year, +121.9%), and net income was ¥11.5B (¥5.2B in the previous year, +120.8%). Improvements in both the gross margin, at 33.6% (+approximately 1.1pt YoY), and the SG&A expense ratio, at 24.7% (approximately -3.5pt YoY), expanded the operating margin to 8.9% (4.3% in the previous year). Revenue growth in the core Chemical Products and Packaging Materials Business, together with company-wide cost efficiencies, drove the earnings increase.

Factors Affecting Performance

【Revenue】Revenue increased 21.6% YoY to ¥184.5B, representing double-digit growth. By segment, Chemical Products and Packaging Materials recorded the largest increase at ¥117.4B (63.6% composition ratio, +26.0%), followed by Store Supplies at ¥40.0B (21.7% composition ratio, +17.1%) and Paper Products at ¥27.1B (14.7% composition ratio, +11.4%). All segments posted double-digit revenue growth, indicating that demand expansion is broad-based across the business.

【Profit and Loss】Operating income increased 149.2% to ¥16.4B (¥6.6B in the previous year), substantially exceeding the revenue growth rate. The improvement in the gross margin due to a lower cost-of-sales ratio (33.6%, +approximately 1.1pt YoY) coincided with a decline in the SG&A expense ratio (24.7%, -approximately 3.5pt YoY), making operating leverage evident. Ordinary income was ¥17.2B (+121.9%), with the effects of non-operating income of ¥1.0B and non-operating expenses of ¥0.2B being limited. Net income was ¥11.5B (+120.8%), with the primary reason for the gap from ordinary income being corporate income taxes and other taxes of ¥5.8B. Extraordinary income and losses were limited, at income of ¥0.2B and loss of ¥0.1B, respectively, and the impact of temporary factors was minimal. With increases in both revenue and earnings, profitability and growth clearly improved from the previous year.

Segment Analysis

Chemical Products and Packaging Materials, representing 63.6% of revenue, led company-wide profitability with segment profit of ¥16.0B (+108.6%) and a profit margin of 13.6%. Store Supplies grew strongly, with revenue of ¥40.0B (+17.1%), profit of ¥2.5B (+130.9%), and a profit margin of 6.3%; although its growth rate was high, its profit margin was relatively low. Paper Products delivered stable growth, with revenue of ¥27.1B (+11.4%), profit of ¥2.9B (+28.7%), and a profit margin of 10.6%. Other Businesses were small in scale but posted a substantial earnings increase, with profit of ¥0.3B (+575.0%). Segment profit totaled ¥21.7B, and after deducting company-wide expenses of ¥5.3B, operating income was ¥16.4B. The high degree of dependence on Chemical Products and Packaging Materials is a structural characteristic of the business mix.

Key Financial Indicators

【Profitability】The operating margin improved by +4.6pt to 8.9%, compared with 4.3% in the previous year, while the net profit margin also improved to 6.2%, compared with 3.4% in the previous year. Improvements in both the gross margin of 33.6% and the SG&A expense ratio of 24.7% contributed to the result.【Cash Flow Quality】Cash and deposits were ¥67.7B, down from ¥92.7B in the previous year, while inventory of ¥57.8B and notes and accounts receivable of ¥79.6B may have placed pressure on working capital.【Investment Efficiency】ROE was 3.1% and the equity ratio was 82.4%, both representing high levels, indicating a conservative capital structure. With total asset turnover remaining low, ROE is determined more by low financial leverage than by capital efficiency.【Financial Soundness】With an equity ratio of 82.4% and long-term borrowings of ¥0.5B, the company is effectively close to debt-free. Liquidity is exceptionally strong, with current assets of ¥244.5B compared with current liabilities of ¥68.3B.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is not available, an analysis of funding trends based on changes in the balance sheet indicates that cash and deposits were ¥67.7B, down approximately ¥25B from ¥92.7B in the same period of the previous year. Meanwhile, inventory increased to ¥57.8B (¥54.3B in the previous year), notes and accounts receivable increased to ¥79.6B (¥78.2B in the previous year), and property, plant and equipment expanded to ¥152.4B (¥142.5B in the previous year). The accumulation of working capital and the allocation of funds to investment activities appear to have been behind the decline in cash. Accounts payable also increased to ¥36.5B (¥32.3B in the previous year), indicating progress in adjusting the payment side as well. Given the equity ratio of 82.4% and the extremely limited interest-bearing debt, there is little concern regarding the safety of the company’s funding position itself.

Earnings Quality

Current-period earnings were primarily generated by recurring income from the core business. Extraordinary income of ¥0.2B and extraordinary losses of ¥0.1B resulted in a net amount of approximately +¥0.05B, which was immaterial and did not materially affect earnings quality. Non-operating income was ¥1.0B (0.5% of revenue), and the proportion of non-core income, such as dividend income and rental income, was low, indicating limited reliance on such sources. Net income of ¥11.5B compared with ordinary income of ¥17.2B represents a gap of approximately 33%, attributable to the burden of corporate income taxes and other taxes of ¥5.8B rather than a temporary accounting factor. Comprehensive income was ¥11.3B, broadly in line with net income of ¥11.5B, indicating that the divergence arising from valuation factors such as valuation differences on other securities was small and that earnings quality was generally stable.

Earnings Forecast and Guidance

Progress against the full-year plan was 28.0% for revenue (¥184.5B/¥660.0B), 44.3% for operating income (¥16.4B/¥37.0B), 42.9% for ordinary income (¥17.2B/¥40.0B), and 44.1% for net income (¥11.5B/¥26.0B). Compared with the standard quarterly progress rate of 25%, the company was tracking 17–19pt ahead, particularly on the earnings front, against a backdrop of operating leverage emerging from gross margin improvement and SG&A efficiency. The company has not revised either its earnings forecast or dividend forecast.

Shareholder Returns

Based on the company’s plan, EPS is ¥111.16 and the annual dividend forecast is ¥59.00, implying a payout ratio of approximately 53%. There was no revision to the dividend forecast for Q1. Given the equity ratio of 82.4% and a financial structure effectively close to debt-free, the company is considered to have strong cash resilience against the dividend burden if the plan is achieved.

Risk Factors

1. Segment concentration risk: Chemical Products and Packaging Materials account for 63.6% of revenue and the majority of segment profit. Accordingly, changes in raw-material market conditions and environmental regulations, including trends toward plastic reduction, could have a significant impact on overall performance.

2. Working capital accumulation risk: Both inventory of ¥57.8B and notes and accounts receivable of ¥79.6B increased from the previous year, while cash and deposits declined by approximately ¥25B YoY. Inventory and receivables turnover efficiency will influence future cash-generating capacity.

3. Low capital efficiency: ROE of 3.1% is constrained by the conservative capital structure represented by an equity ratio of 82.4%, leaving room for improvement from a capital-efficiency perspective. The trade-off with financial soundness needs to be monitored.

Industry Benchmark (Reference, Company Analysis)

Industry Benchmark (trading)

Profitability and Returns

The company’s operating margin and net profit margin both exceed the industry median, placing its profitability among the top tier of the industry.

Growth and Capital Efficiency

The revenue growth rate substantially exceeds the industry median, positioning the company as a high-growth player within the industry.

※Source: Company analysis

Key Points from the Financial Results

1. Operating income increased +149.2% against revenue growth of +21.6%, creating a substantial divergence in growth rates. The emergence of operating leverage from gross margin improvement (+approximately 1.1pt) and a decline in the SG&A expense ratio (-approximately 3.5pt) has been confirmed.

2. Progress against the full-year plan was 44.3% for operating income and 44.1% for net income, substantially exceeding the standard quarterly progress rate of 25%. Although the earnings forecast remains unchanged, future progress trends warrant attention.

3. While financial soundness is high, with an equity ratio of 82.4%, cash and deposits declined YoY due to increases in inventory and notes and accounts receivable. Balancing improved profitability with working capital efficiency will be an important structural focus going forward.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

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 against the full-year forecast (44%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies running ahead of plan 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 timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not predict or guarantee the future share price)

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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 a professional as necessary.

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