KOHSOKU CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

The first quarter of the fiscal year ending March 2027 delivered higher revenue and profit, with a structural improvement in profit margins, driven by improvements in pricing and product mix and effective cost control. Revenue was ¥33.75B (+10.5% year on year), Operating Income was ¥1.57B (+41.4%), Ordinary Income was ¥1.68B (+39.9%), and Net Income was ¥1.21B (+50.0%). The Operating Income margin improved to 4.65%, up +1.02pt from 3.63% in the same period of the previous year, with improvements in the gross profit margin (+0.58pt) and a decline in the SG&A expense ratio (-0.44pt) serving as the two key drivers. In addition, a ¥0.15B gain on the sale of fixed assets was recorded as extraordinary income, boosting Profit Before Tax; this one-time factor also contributed to the growth in Net Income.

Factors Affecting Results

【Revenue】Revenue was ¥33.75B, representing a year-on-year increase of +10.5%. The Group operates as a single segment, the manufacturing and sale of packaging materials and related products, and steady demand drove overall revenue growth. Cost of sales was ¥26.86B (+9.6%), growing at a slightly slower pace than revenue, and the gross profit margin improved by +0.58pt to 20.43% from 19.85% in the same period of the previous year.

【Profit and Loss】SG&A expenses were controlled at ¥5.32B (+7.5%), below the pace of revenue growth, and the SG&A expense ratio declined by -0.44pt to 15.78% from 16.21% in the previous year. As a result, Operating Income was ¥1.57B (+41.4%), and the Operating Income margin was 4.65% (+1.02pt). Non-operating income and expenses were positive by ¥0.11B, primarily due to ¥0.03B in dividend income, resulting in Ordinary Income of ¥1.68B (+39.9%). Furthermore, the recording of ¥0.15B in gains on the sale of fixed assets as extraordinary income (a one-time factor) boosted Profit Before Tax to ¥1.84B, while Net Income was ¥1.21B (+50.0%). The Company finished the period with higher revenue and profit, primarily due to improved core earning power, excluding extraordinary income, through improvements in both the gross profit margin and SG&A expense ratio.

Segment Analysis

The Group operates as a single segment, the “Manufacturing and Sale of Packaging Materials and Related Products Business,” and does not disclose performance by segment.

Key Financial Indicators

【Profitability】The Operating Income margin was 4.65% (3.63% in the same period of the previous year, +1.02pt), and the Net Income margin was 3.59% (2.64%, +0.95pt). Improvements in the gross profit margin to 20.43% (19.85%, +0.58pt) and control of the SG&A expense ratio at 15.78% (16.21%, -0.44pt) served as the two key drivers.【Cash Flow Quality】Comprehensive Income was ¥1.207B, almost at the same level as Net Income of ¥1.210B, indicating that the impact of valuation-related items such as valuation differences on securities was immaterial. The ¥0.153B in extraordinary income accounted for approximately 8.3% of Profit Before Tax of ¥1.835B and should be evaluated separately as a one-time factor.【Investment Efficiency】ROE improved to 2.8% (1.9% in the same period of the previous year), while Total Asset Turnover improved slightly to 0.516x (0.484x). However, the significant balances of property, plant and equipment, accounts receivable, and inventories continue to constrain asset efficiency.【Financial Soundness】The Equity Ratio was 65.2% (67.3% in the same period of the previous year, -2.1pt), with the decline attributable to total assets growing faster than net assets. The Company held ¥3.56B in cash and deposits against ¥1.50B in interest-bearing debt, resulting in net cash of approximately ¥2.06B. The Current Ratio remained at a favorable level of 155.6%, indicating sound short-term payment capacity.

Cash Flow Analysis

As the statement of cash flows has not been disclosed, funding trends are assessed based on changes in the balance sheet. Cash and deposits were ¥3.56B, down ¥1.12B (-23.9%) from ¥4.68B at the end of the same period of the previous year. Meanwhile, accounts receivable were ¥19.48B (up ¥1.45B, +8.0%), and inventories were ¥8.22B (up ¥1.20B, +17.4%), both increasing at a faster pace than the +10.5% revenue growth rate, suggesting that the accumulation of working capital has tied up funds. During this period, the Company newly raised ¥1.50B in short-term borrowings, indicating that part of the increase in working capital was financed through borrowing. Property, plant and equipment increased by ¥0.56B from the end of the same period of the previous year, indicating progress in capital investment.

Quality of Earnings

Comprehensive Income of ¥1.207B was almost at the same level as Net Income of ¥1.21B, and the effects of valuation differences on other securities and adjustments related to retirement benefits were immaterial. No significant valuation-related divergence that would impair earnings quality was observed. Nevertheless, ¥0.153B in extraordinary income from gains on the sale of fixed assets accounted for approximately 8.3% of Profit Before Tax of ¥1.835B and must be evaluated separately from recurring earning power as a one-time factor. Ordinary Income of ¥1.68B (+39.9%), representing profit at the ordinary income level excluding extraordinary income, reflects core earnings improvement driven by structural factors, namely the improved gross profit margin and controlled SG&A expenses. The Net Income growth rate (+50.0%) slightly exceeded the Ordinary Income growth rate because it includes the contribution from extraordinary income.

Earnings Forecast and Guidance

Progress in Q1 against the full-year earnings forecast (Revenue of ¥135.0B, Operating Income of ¥5.10B, Ordinary Income of ¥5.45B, and Net Income of ¥4.00B) was 25.0% for Revenue, 30.8% for Operating Income, 30.8% for Ordinary Income, and 30.3% for Net Income. Progress for each profit item exceeded the 25% benchmark for even quarterly progress, indicating a solid start relative to the initial plan. No revisions were made to the earnings forecast or dividend forecast during the quarter.

Shareholder Returns

Dividends consist of an ordinary dividend of ¥28 per share for both the interim and year-end dividends, plus a ¥30 commemorative dividend marking the 60th anniversary of the Company’s founding, resulting in a full-year dividend forecast of ¥120.00. The Payout Ratio against the full-year forecast EPS of ¥204.18 is approximately 58.8%. As the commemorative dividend is based on the one-time occasion of the Company’s 60th anniversary, it should be noted that a return to the ordinary dividend level is expected from the following fiscal year onward. No disclosure regarding share buybacks has been made to date, and dividends remain the primary form of shareholder returns.

Risk Factors

1. Accumulation of working capital: Accounts receivable were ¥19.48B (up ¥1.45B year on year, +8.0%), and inventories were ¥8.22B (up ¥1.20B, +17.4%), both increasing at a faster pace than the +10.5% revenue growth rate. The effectiveness of collection and inventory management could affect future cash generation capacity.

2. Recurrence of extraordinary income: The ¥0.153B gain on the sale of fixed assets accounted for approximately 8.3% of Profit Before Tax of ¥1.835B and was a one-time factor; there is no guarantee that extraordinary income at the same level will continue to be recorded in the following quarter or thereafter. Core earning power should be evaluated based on Ordinary Income (¥1.68B, +39.9%).

3. Changes in funding structure: The Company newly raised ¥1.50B in short-term borrowings, making all interest-bearing debt short-term. Although net cash of approximately ¥2.06B remains secured after taking into account cash of ¥3.56B, management of short-term funding will become increasingly important if working capital continues to expand.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (trading)

Profitability and Returns

The Operating Income margin is slightly above the industry median, while the Net Income margin is slightly below the median, placing profitability broadly at an average level within the industry.

Growth and Capital Efficiency

The Revenue growth rate significantly exceeds the industry median and is close to the upper bound of the IQR, indicating a high growth rate within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Report

1. The Operating Income margin improved by +1.02pt to 4.65% from 3.63% in the same period of the previous year, confirming a structural improvement in profitability driven by both the improvement in the gross profit margin (+0.58pt) and control of the SG&A expense ratio (-0.44pt).

2. Progress against the full-year plan was 25.0% for Revenue, 30.8% for Operating Income, and 30.3% for Net Income, exceeding the benchmark for even quarterly progress.

3. Accounts receivable and inventories are increasing faster than the Revenue growth rate, making working capital trends a key point to monitor in assessing future cash generation capacity.

Theoretical Stock Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly available data using a residual income model (Ohlson-type, explicit 5-year fade). It is not a forecast of the market stock price or a recommendation of any specific investment action.

Sensitivity: ¥2,123–¥2,243 at ±1% for the Cost of Equity, and ¥2,182–¥2,182 at ±0.1 for ω.

Notes:

• Net assets as of the quarter-end are used (there is a time lag relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

（Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not predict or guarantee the future stock 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 and, where necessary, after consulting with a professional advisor.

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