SODA NIKKA CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

In addition to higher revenue and earnings, the operating profit margin improved substantially from the previous year, making the qualitative improvement in the earnings structure the key feature of the quarter. Revenue was ¥18.46B (up +15.2% YoY), Operating Income was ¥0.82B (up +92.8%), Ordinary Income was ¥1.07B (up +75.1%), and Net Income was ¥0.79B (up +119.1%). In addition to higher revenue, lower SG&A expenses as a percentage of revenue enabled Operating Income to expand at a pace substantially exceeding revenue growth, and the Operating Income margin improved to 4.5% from the previous year.

Factors Affecting Earnings

【Revenue】Revenue increased by double digits to ¥18.46B (up +15.2% YoY). By segment, Chemicals, which accounts for 63.7% of the revenue mix, maintained stable growth with revenue of ¥11.76B (up +10.4%), while FunctionalMaterials posted strong growth of ¥5.41B (up +44.4%), serving as the main driver of revenue growth. The revenue mix was Chemicals 63.7% and FunctionalMaterials 29.3%, indicating that dependence on the Chemicals Business remains high.

【Profit and Loss】Gross profit was ¥2.59B (up +13.6%), with the gross margin at 14.0%, a slight decline from 14.2% in the previous year. Meanwhile, SG&A expenses declined to ¥1.77B (¥1.86B in the previous year), and the SG&A ratio improved to 9.6% (11.6% in the previous year), resulting in a substantial increase in Operating Income to ¥0.82B (up +92.8%). Ordinary Income was ¥1.07B (up +75.1%); of ¥0.27B in non-operating income, dividend income accounted for ¥0.26B, contributing to the increase in Ordinary Income. Net Income was ¥0.79B (up +119.1%). Extraordinary income, including a gain on the sale of fixed assets of ¥0.08B, and extraordinary losses of ¥0.02B provided a slight uplift, but their impact was limited. Segment Operating Income increased in both Chemicals, at ¥1.02B (up +21.0%, margin 8.7%), and FunctionalMaterials, at ¥0.36B (up +88.5%, margin 6.7%), indicating results characterized by higher revenue and earnings.

Segment Analysis

Chemicals secured stable growth in both revenue and earnings as the core business, with revenue of ¥11.76B (up +10.4% YoY), Operating Income of ¥1.02B (up +21.0%), and a margin of 8.7% (8.0% in the previous year). FunctionalMaterials recorded revenue of ¥5.41B (up +44.4%), Operating Income of ¥0.36B (up +88.5%), and a margin of 6.7% (5.5% in the previous year), expanding at a pace exceeding the Company-wide rates of both revenue and earnings growth, while also improving its margin. Against combined segment profit of ¥1.47B, ¥0.65B in Company-wide expenses is deducted as an adjustment (¥0.64B in the previous year), and the improvement in segment margins directly translates into an increase in the Company-wide Operating Income margin.

Key Financial Indicators

【Profitability】The Operating Income margin improved from the previous year to 4.5%, while the Net Income margin also increased to 4.3% (2.3% in the previous year). ROE was 2.2% based on quarterly results.【Cash Flow Quality】Accounts receivable and notes receivable totaled ¥41.34B, accounting for 51.8% of total assets, suggesting that the difference from accounts payable of ¥33.06B remains tied up as working capital. Inventories were limited at ¥1.58B, indicating that the amount of funds tied up in inventory is limited.【Investment Efficiency】Investment securities totaled ¥21.28B (26.7% of total assets), an increase of ¥3.57B from ¥17.71B in the previous year, primarily due to an increase of +¥2.43B in the valuation difference on other securities.【Financial Soundness】The Equity Ratio was 45.7%, improving by +2.3pt from 43.4% in the previous year. Short-term safety was favorable, with a current ratio of 137.7% and a quick ratio of 133.4%. Although all interest-bearing debt of ¥1.67B consisted of short-term borrowings, it was sufficiently covered by cash and deposits of ¥7.29B (cash/short-term borrowings of approximately 4.4x). Short-term borrowings declined by ¥0.99B (-37.3%) from the previous year, indicating a more conservative financial structure.

Cash Flow Analysis

Cash and deposits were ¥7.29B, down ¥0.83B from ¥8.12B in the previous year. However, short-term borrowings declined to ¥1.67B from ¥2.66B in the previous year, a reduction of ¥0.99B, suggesting that interest-bearing debt was reduced through the use of cash on hand. While inventories were limited at ¥1.58B and the amount of funds tied up in inventory was limited, the Company has substantial accounts receivable and notes receivable of ¥41.34B and accounts payable of ¥33.06B, creating a structure in which working capital equivalent to the difference between the two can readily become a burden on cash management. Property, plant and equipment was largely unchanged at ¥6.68B (¥6.71B in the previous year), suggesting that no major capital expenditures were undertaken. Investment securities increased by ¥3.57B to ¥21.28B; however, most of this increase resulted from the expansion of valuation differences and differs in nature from new investments involving cash outflows.

Quality of Earnings

In addition to recurring earnings power, non-operating income of ¥0.27B, including dividend income of ¥0.26B (1.5% of revenue), pushed up Ordinary Income and Net Income. Its scale, equivalent to approximately one-third of Net Income of ¥0.79B, should be noted as a feature of the earnings composition. Extraordinary income of ¥0.08B (gain on the sale of fixed assets) and extraordinary losses of ¥0.02B were both small, and their impact on Profit Before Tax of ¥1.13B was limited; they did not materially distort the quality of current-period earnings. Comprehensive Income was ¥3.24B, substantially exceeding Net Income of ¥0.79B, with the primary cause of the difference being the increase of +¥2.43B in the valuation difference on other securities. Because this valuation gain is linked to market conditions, it should be evaluated separately from the Company’s recurring operating earnings power.

Earnings Forecast and Guidance

Q1 progress against the Full-Year earnings forecast was 26.3% for Revenue (¥18.46B/¥70.10B), 31.5% for Operating Income (¥0.82B/¥2.61B), and 34.4% for Ordinary Income (¥1.07B/¥3.11B), indicating that the profit items are progressing at a pace exceeding the progress rate for Revenue. The Full-Year forecasts are Revenue +5.1%, Operating Income +5.2%, and Ordinary Income +6.0% (all YoY), while the Q1 growth rates (Revenue +15.2%, Operating Income +92.8%) substantially exceed these figures. In this quarterly earnings announcement, neither the earnings forecast nor the dividend forecast was revised, and management maintained its current Full-Year plan.

Shareholder Returns

The Full-Year dividend forecast is ¥44, implying a Payout Ratio of approximately 41.0% based on the Full-Year EPS forecast of ¥107.34. The previous year’s actual annual dividend was ¥20, indicating a planned increase in the Full-Year dividend. In addition to the net-cash financial position, with cash and deposits of ¥7.29B versus interest-bearing debt of ¥1.67B, the burden of major capital expenditures is limited, suggesting a reasonable level of capacity to secure funds for dividends. The dividend forecast was not revised in this quarterly earnings announcement.

Risk Factors

1. Delayed cash conversion due to concentration in trade receivables: Accounts receivable and notes receivable totaled ¥41.34B, accounting for 51.8% of total assets, with the difference from accounts payable of ¥33.06B remaining tied up as working capital. Depending on collection trends going forward, the working capital burden may increase during a period of revenue growth.

2. Concentration of revenue in the Chemicals Business: The Chemicals segment accounts for 63.7% of the revenue mix (¥11.76B/¥18.46B), and changes in supply-demand conditions and the competitive pricing environment in this business are likely to have a relatively significant impact on Company-wide performance.

3. Valuation fluctuation risk for investment securities: Investment securities reached ¥21.28B (26.7% of total assets), an increase of ¥3.57B from the previous year. This increase was primarily due to the expansion of valuation differences (+¥2.43B), while deferred tax liabilities also increased by ¥1.195B during the same period. The impact of market fluctuations on net assets and the tax position requires close monitoring.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (trading)

Profitability and Returns

Both the Operating Income margin and Net Income margin are slightly above the industry median.

Growth and Capital Efficiency

The Revenue growth rate substantially exceeds the industry median, indicating a high rate of growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The improvement in the Operating Income margin from the previous year, driven by discipline in SG&A expenses and an improved segment mix, is noteworthy as a change in the earnings structure. In particular, the strong growth of FunctionalMaterials (Revenue +44.4%, Operating Income +88.5%) is pushing up the Company-wide profit margin.

2. Short-term borrowings were reduced by ¥0.99B from the previous year, progressing the shift toward a net-cash position in which cash and deposits substantially exceed borrowings. From the perspective of financial soundness, the Equity Ratio also improved to 45.7%.

3. On the other hand, the working capital structure in which accounts receivable account for 51.8% of total assets is a monitoring point for capital efficiency during periods of revenue growth. The increase in deferred tax liabilities accompanying the expansion of valuation differences on investment securities should also be noted as a factor affecting fluctuations in net assets.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥1,439–¥1,522 at Cost of Equity ±1%, and ¥1,475–¥1,482 at ω ±0.1.

Notes:

• 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 from the Full-Year forecast).
• Because 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 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, consulting a professional as necessary.

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