KAMEI CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

The Company reported higher revenue and earnings, primarily due to improved profitability in the Energy Business, with earnings growth substantially outpacing revenue growth. Revenue was ¥1506.2B (+6.7% YoY), Operating Income was ¥60.6B (+50.6%), Ordinary Income was ¥66.6B (+49.1%), and Net Income (net income attributable to owners of the parent; the same definition is used below) was ¥45.7B (+55.8%). The Operating Margin improved to 4.0% from 2.9% in the previous year, reflecting higher revenue and earnings accompanied by improvements in both the gross margin and the SG&A expense ratio.

Factors Affecting Performance

【Revenue】Revenue was ¥1506.2B, up +6.7% YoY. By segment, the core Energy Business, which accounted for 48.7% of the total, was the largest contributor to revenue growth, increasing +12.7% (¥734.1B). Automotive-Related Business increased +7.6% (¥223.2B), while Overseas and Trading increased +7.0% (¥241.1B), also contributing to revenue growth. Meanwhile, declining-revenue segments included Construction-Related Business, down -15.9% (¥103.7B), Food, down -3.9% (¥99.7B), and Pharmacy, down -2.4% (¥48.3B), resulting in divergent performance across businesses.

【Profit and Loss】Operating Income was ¥60.6B (+50.6%), Ordinary Income was ¥66.6B (+49.1%), and Net Income was ¥45.7B (+55.8%). The Operating Margin improved by +1.2pt to 4.0% from 2.9% in the previous year, supported by both the gross margin of 18.1% (+1.0pt) and the SG&A expense ratio of 14.0% (-0.2pt). Operating Income in the Energy Business expanded sharply to ¥41.0B (+305.7%), becoming the largest contributor to earnings growth and accounting for approximately 68% of consolidated Operating Income. In contrast, Overseas and Trading (-32.6%) and Pet (-36.6%) recorded lower earnings, while Food and Pharmacy remained in the red. Ordinary Income included ¥8.5B in non-operating income, including ¥3.5B in dividend income, but this amounted to only approximately 0.6% of revenue, indicating that earnings growth was led by the core business (Operating Income). Extraordinary gains and losses were almost fully offset, with extraordinary gains of ¥0.1B and extraordinary losses of ¥0.1B, and the impact of temporary factors was limited. In conclusion, the Company achieved higher revenue and earnings.

Segment Analysis

The Energy Business led the Company in both scale and quality, with revenue of ¥734.1B (48.7% composition ratio, YoY +12.7%) and Operating Income of ¥41.0B (YoY +305.7%, margin 5.6%), accounting for approximately 68% of total Operating Income. Automotive-Related Business recorded higher revenue of ¥223.2B (+7.6%), but Operating Income declined to ¥14.7B (-4.6%), suggesting pressure from costs and expenses. Overseas and Trading posted higher revenue of ¥241.1B (+7.0%), but Operating Income fell sharply to ¥9.2B (-32.6%), with its margin declining to 3.8%. Construction-Related Business recorded lower revenue of ¥103.7B (-15.9%) and Operating Income of ¥2.3B (-22.6%), resulting in lower revenue and earnings. Food recorded revenue of ¥99.7B (-3.9%) and slipped into the red with Operating Income of -¥0.7B, while Pharmacy recorded revenue of ¥48.3B (-2.4%) and an expanded Operating Loss of -¥1.5B. Pet achieved higher revenue of ¥45.5B (+4.6%), but Operating Income declined to ¥0.8B (-36.6%). Overall, the improved profitability of the Energy Business has widened the earnings disparity among segments, while the profitability of Food and Pharmacy continues to weigh on the Company-wide margin.

Key Financial Indicators

【Profitability】The Operating Margin improved by +1.2pt to 4.0% from 2.9% in the same period of the previous year, while the Net Profit Margin (based on net income attributable to owners of the parent) also improved to 3.0% from 2.1%. Both the gross margin of 18.1% (previous year: 17.1%, +1.0pt) and the SG&A expense ratio of 14.0% (previous year: 14.2%, -0.2pt) contributed, confirming an improvement in the earnings structure that enabled earnings growth above revenue growth.【Cash Flow Quality】Cash and deposits increased by ¥77.8B YoY to ¥763.5B, while accounts receivable declined to ¥618.4B (-¥84.5B, -12.0%) and inventories declined to ¥319.8B (-¥13.8B, -4.1%), indicating progress in reducing working capital.【Investment Efficiency】ROE was 2.6%, improving from approximately 1.7% in the comparable period of the previous year. Turnover based on total assets (NetSales/TotalAssets) was approximately 45.7% on a quarterly basis, indicating that the primary driver of improved profitability was margin expansion rather than increased asset efficiency.【Financial Soundness】The Equity Ratio improved to 55.3% from approximately 52.4% in the previous year. Against total interest-bearing debt of ¥322.7B (short-term: ¥280.0B; long-term: ¥42.7B), cash of ¥763.5B exceeded debt, placing the Company in a net cash position and indicating a stable financial foundation.

Cash Flow Analysis

Cash and deposits increased by ¥77.8B (+11.4%) YoY to ¥763.5B. This increase appears to have been supported by the reduction in working capital, including decreases in accounts receivable of -¥84.5B (-12.0%) and inventories of -¥13.8B (-4.1%). Meanwhile, short-term borrowings declined by ¥46.1B (-14.1%) to ¥280.0B, and accounts payable declined by ¥30.8B (-5.6%) to ¥516.6B, indicating that the financing side was also compressed simultaneously. The Company maintained a net cash position, with cash of ¥763.5B exceeding total interest-bearing debt of ¥322.7B, and its financial flexibility expanded compared with the same period of the previous year.

Earnings Quality

Non-operating income of ¥8.5B (dividend income: ¥3.5B; other: ¥3.2B) was limited to approximately 0.6% of revenue, and its contribution to Ordinary Income of ¥66.6B was limited. Accordingly, the improvement in the core business, reflected in Operating Income of ¥60.6B, was the primary driver of performance. Extraordinary gains and losses were almost fully offset, with extraordinary gains of ¥0.1B and extraordinary losses of ¥0.1B, and the impact of temporary factors was limited. The Company recorded income taxes of ¥19.8B against Profit Before Tax of ¥66.7B, resulting in an effective tax rate of approximately 29.6%, a normal level. Comprehensive Income was ¥61.3B, exceeding Net Income of ¥45.7B. The difference primarily reflected other comprehensive income items, including foreign currency translation adjustments of +¥9.4B and valuation difference on available-for-sale securities of +¥5.3B; these are valuation-related changes that should be distinguished from the profit and loss of the core business.

Earnings Forecast and Guidance

Progress against the Company’s full-year forecast was 24.1% for revenue, 33.9% for Operating Income, 34.0% for Ordinary Income, and 37.9% for Net Income (attributable to owners of the parent). Compared with the standard Q1 progress benchmark of 25%, revenue was slightly below the benchmark, while all earnings indicators exceeded it, indicating that earnings are progressing at a faster pace than revenue. This is believed to reflect an improved segment mix resulting from enhanced profitability in the Energy Business. The Company has disclosed revisions to both its earnings forecast and dividend forecast during the current quarter.

Shareholder Returns

The full-year dividend forecast is ¥136 per share. Based on forecast EPS of ¥393.8, the forecast Payout Ratio is approximately 34.5% (¥136/¥393.8). As the progress rate for Net Income is 37.9%, ahead of the full-year forecast pace, no concerns are evident regarding the Company’s dividend-paying capacity as of the current quarter. The Company has disclosed a revision to its dividend forecast during the current quarter.

Risk Factors

1. Commodity and Spread Volatility Risk: The Energy Business is the largest contributing segment, with revenue of ¥734.1B and Operating Income of ¥41.0B (margin 5.6%), accounting for approximately 68% of total Operating Income. Accordingly, fluctuations in market conditions and spreads have a relatively significant impact on Company-wide earnings.

2. Working Capital Turnover Efficiency: Although accounts receivable of ¥618.4B and inventories of ¥319.8B have decreased by -12.0% and -4.1%, respectively, YoY, their levels relative to revenue remain high, and the effectiveness of collection and inventory management could affect capital efficiency.

3. Variability in Segment Profitability: Food (Operating Income: -¥0.7B) and Pharmacy (same: -¥1.5B) were loss-making, while Overseas and Trading (same: -32.6%) and Pet (same: -36.6%) also recorded lower earnings. The profitability of segments other than Energy continues to weigh on the Company-wide average.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company’s profitability is slightly below the industry median, with both the Operating Margin and Net Profit Margin positioned below the industry average.

Growth and Capital Efficiency

The Company’s revenue growth rate exceeds the industry median, securing a relatively high rate of revenue growth within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Improved profitability in the Energy Business drove the Company-wide earnings growth rate (Operating Income +50.6%). The Operating Margin improved to 4.0% (previous year: 2.9%), the gross margin to 18.1% (+1.0pt), and the SG&A expense ratio to 14.0% (-0.2pt). The fact that the improvement in profitability originated from the core business is a positive factor from the perspective of earnings quality.

2. Full-year progress was ahead for earnings (Operating Income 33.9%, Ordinary Income 34.0%, Net Income 37.9%) compared with revenue at 24.1%, and the structure of earnings growth exceeding revenue growth continued throughout the current quarter. Whether this trend persists will be a key point to monitor going forward.

3. Although cash of ¥763.5B exceeds interest-bearing debt of ¥322.7B, resulting in a net cash financial structure, accounts receivable and inventories, while trending downward, remain substantial. Working capital turnover efficiency will therefore continue to require monitoring.

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 five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥5,337–¥5,646 at ±1% for the cost of equity, and ¥5,475–¥5,497 at ±0.1 for ω.

Notes:

• Because the progress of Net Income against the full-year forecast (38%) exceeds the standard benchmark (25%), forecast EPS has been adjusted upward within a maximum range of +10% (as companies progressing ahead of forecast tend to exceed their forecasts; the adjustment 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 quarter-end have been 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 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. 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 a professional as necessary.

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