Business performance
Net sales for the fiscal year under review decreased by 8.8% year on year to ¥159,510 million, primarily due to a decrease in sales volume. In terms of profit, operating profit was ¥4,886 million (a decrease of 39.8% year on year), primarily due to factors including a decrease in sales volume and an increase in depreciation associated with the implementation of the new core system. Ordinary profit was ¥8,186 million (a decrease of 17.5% year on year), and loss attributable to owners of parent was ¥8,501 million (compared to profit attributable to owners of parent of ¥5,684 million during the previous fiscal year), primarily due to the recording of impairment losses at a consolidated subsidiary and losses resulting from the withdrawals from the superabsorbent polymer business, as well as the production business in China (Business restructuring expenses).
During the fiscal year ended March 31, 2024, the Japanese economy continued to normalize with the reclassification of COVID-19 as Category V Infectious Diseases under the Infectious Diseases Control Law, and saw a recovery in individual consumption and exports. However, conditions remained challenging due to factors such as a diminished capital investment appetite around the world. In the global economy, while the U.S. economy remained resilient, the European economy tended to slow down, and China’s economic recovery has lagged due to factors such as sluggish exports and deteriorating real estate market conditions. In addition, resource and energy prices remained high and inflationary due to the prolonged situation in Russia and Ukraine and deterioration of the situation in the Middle East, making the outlook uncertain.
In the chemical industry, the foreign exchange market saw a moment where the yen rallied due to factors including the slowdown in the U.S. inflation rate and heightened expectations for a normalization of monetary policy by the Bank of Japan. However, a trend of yen deprecation persisted throughout the year due to long-term fiscal tightening in the U.S. and Europe. Oil prices were trending upwards amidst growing tensions in the Middle East, despite the global economic slowdown. Additionally, sluggish domestic demand in China, coupled with an oversupply of Chinese products, intensified price competition in Japanese and other Asian markets, among others. Given these factors, the business environment remains unpredictable.
Under these circumstances, net sales for the fiscal year under review decreased by 8.8% year on year to ¥159,510 million, primarily due to a decrease in sales volume. In terms of profit, operating profit was ¥4,886 million (a decrease of 39.8% year on year), primarily due to factors including a decrease in sales volume and an increase in depreciation associated with the implementation of the new core system. Ordinary profit was ¥8,186 million (a decrease of 17.5% year on year), and loss attributable to owners of parent was ¥8,501 million (compared to profit attributable to owners of parent of ¥5,684 million during the previous fiscal year), primarily due to the recording of impairment losses at a consolidated subsidiary and losses resulting from the withdrawals from the superabsorbent polymer business, as well as the production business in China (Business restructuring expenses).
| FY2019 | FY2020 | FY2021 | FY2022 | FY2023 | |
|---|---|---|---|---|---|
| Net sales(Millions of yen) | 155,503 | 144,757 | 162,526 | 174,973 | 159,510 |
| Operating profit(Millions of yen) | 12,439 | 11,932 | 11,868 | 8,123 | 4,886 |
| Percentage of operating profit to net sales(%) | 8.0 | 8.2 | 7.3 | 4.6 | 3.1 |
| Ordinary profit(Millions of yen) | 12,704 | 11,999 | 12,771 | 9,918 | 8,186 |
| Percentage of ordinary profit to net sales(%) | 8.2 | 8.3 | 7.9 | 5.7 | 5.1 |
| Profit attributable to owners of parent(Millions of yen) | 7,668 | 7,282 | 6,699 | 5,684 | (8,501) |
| Percentage of profit attributable to owners of parent to net sales(%) | 4.9 | 5.0 | 4.1 | 3.2 | (5.3) |
| Net income per share (yen) | 347.87 | 330.34 | 303.76 | 257.57 | (384.99) |
| ROE (Return on equity)(%) | 6.0 | 5.4 | 4.7 | 3.9 | (6.0) |
| ROA (Return on assets*)(%) | 6.8 | 6.4 | 6.5 | 4.9 | 4.0 |
| Overseas sales(Millions of yen) | 60.179 | 63,567 | 69,903 | 76,378 | 70,802 |
| overseas sales ratio(%) | 38.7 | 43.9 | 43.0 | 43.7 | 44.4 |
| Cash dividends paid per share(yen) | 140.0 | 150.0 | 170.0 | 170.0 | 170.0 |
| Dividend payout ratio(%) | 40.2 | 45.4 | 56.0 | 66.0 | – |
*ROA(Return on assets) is calculated based on ordinary profit.
Financial position
Net assets as of the end of the fiscal year under review decreased by ¥7,417 million from the end of the previous fiscal year, to ¥141,577 million. Equity ratio fell by 4.6 percentage points to 67.6% from 72.2% as of the end of the previous fiscal year. Net assets per share decreased by ¥321.80 from ¥6,617.11 at the end of the previous fiscal year to ¥6,295.31.
Total assets as of the end of the fiscal year under review increased by ¥3,635 million compared with the end of the previous fiscal year, amounting to ¥205,818 million. Current assets increased by ¥8,604 million from the end of the previous fiscal year to ¥105,929 million mainly due to a ¥280 million decrease in merchandise and finished goods, and a ¥1,374 million decrease in raw materials and supplies, despite a ¥10,125 million increase in cash and deposits. Non-current assets decreased by ¥4,968 million from the end of the previous fiscal year to ¥99,889 million, mainly due to a decrease of ¥8,313 million in property, plant and equipment, despite an increase of ¥3,126 million in investment securities.
Current liabilities increased by ¥6,581 million from the end of the previous fiscal year to ¥53,519 million, mainly due to a ¥3,294 million increase in accounts payable – trade and a ¥2,663 million increase in accounts payable – other. Non-current liabilities increased by ¥4,471 million from the end of the previous fiscal year to ¥10,720 million, mainly due to the recording of ¥4,706 million in provision for business restructuring.
Net assets as of the end of the fiscal year under review decreased by ¥7,417 million from the end of the previous fiscal year, to ¥141,577 million. Equity ratio fell by 4.6 percentage points to 67.6% from 72.2% as of the end of the previous fiscal year. Net assets per share decreased by ¥321.80 from ¥6,617.11 at the end of the previous fiscal year to ¥6,295.31.
| FY2019 | FY2020 | FY2021 | FY2022 | FY2023 | |
|---|---|---|---|---|---|
| Current assets(Millions of yen) | 85,835 | 89,340 | 93,764 | 97,324 | 105,929 |
| Non-current assets(Millions of yen) | 93,038 | 106,382 | 106,429 | 104,857 | 99,889 |
| Net assets(Millions of yen) | 178,873 | 195,723 | 200,194 | 202,182 | 205,818 |
| Current liabilities(Millions of yen) | 42,766 | 46,222 | 47,904 | 46,938 | 53,519 |
| Non-current liabilities(Millions of yen) | 6,009 | 6,548 | 5,257 | 6,249 | 10,720 |
| Shareholders’ equity(Millions of yen) | 127,635 | 140,474 | 144,479 | 146,067 | 139,037 |
| Shareholder’s equity ratio(%) | 71.4 | 71.8 | 72.2 | 72.2 | 67.6 |
| Net assets per share(yen) *1 | 5,789.88 | 6,371.77 | 6,549.60 | 6,617.11 | 6,295.31 |
| Research and development cost(Millions of yen) | 5,322 | 5,384 | 5,650 | 5,691 | 5,222 |
| Investment in plant and equipment(Millions of yen) | 8,219 | 10,073 | 9,847 | 12,033 | 8,649 |
| Depreciation and amortization(Millions of yen) *2 | 9,078 | 9,569 | 9,533 | 10,083 | 10,686 |
| Number of employees | 2,060 | 2,096 | 2,106 | 2,089 | 2,042 |
Cash flow
Cash and cash equivalents (“cash”) as of the end of the fiscal year under review amounted to ¥27,188 million. This marked an increase of ¥10,145 million compared with the end of the previous fiscal year.
Net cash provided by operating activities amounted to ¥19,814 million (compared to ¥10,852 million in net cash provided during the previous fiscal year). This result was mainly due to the cash inflow from business restructuring expenses of ¥12,059 million, depreciation of ¥10,828 million, the increase in trade payables of ¥3,416 million, the decrease in trade receivables of ¥1,288 million and the decrease in inventories of ¥1,281 million due to inventory reduction efforts, which outweighed the cash outflow mainly from loss before income taxes of ¥7,346 million and income taxes paid of ¥2,668 million.
Net cash used in investing activities amounted to ¥6,264 million (compared to ¥10,172 million in net cash used during the previous fiscal year). This result was mainly due to a cash outlay of ¥7,042 million for purchase of non-current assets. The free cash flow, determined by subtracting net cash provided by (used in) investing activities from net cash provided by (used in) operating activities, experienced a significant improvement, reaching a net cash provided of ¥13,550 million (compared to ¥679 million in net cash provided during the previous year).
Net cash used in financing activities amounted to ¥4,006 million (compared to ¥2,336 million in net cash used during the previous fiscal year). This result was mainly due to the cash outflow from dividends paid of ¥3,754 million and repayments of long-term borrowings of ¥490 million.
| FY2019 | FY2020 | FY2021 | FY2022 | FY2023 | |
|---|---|---|---|---|---|
| Operating activities(Millions of yen) | 17,232 | 22,300 | 11,328 | 10,852 | 19,814 |
| Investing activities(Millions of yen) | (11,115) | (12,498) | (11,704) | (10,172) | (6,264) |
| Financing activities(Millions of yen) | (7,084) | (4,146) | (5,979) | (2,336) | (4,006) |
| Cash and cash equivalents at the end of the year (Millions of yen) | 18,009 | 23,647 | 18,171 | 17,042 | 27,188 |
Fiscal Year 2024 Forecast
During the fiscal year ended March 31, 2024, the Japanese economy saw a recovery in individual consumption and exports as restrictions on economic activities due to the impact of COVID-19 were eased.
However, overall conditions remained challenging amid continuing supply chain disruptions and supply restrictions on raw materials and parts.
While we anticipate that the economy will recover due to the normalization of social and economic activities in the fiscal year ending March 31, 2025, conditions including trends in raw material prices and foreign exchange caused by the emergence of geopolitical risk remain extremely unpredictable.
Under these circumstances, for the Group’s consolidated earnings forecasts for the fiscal year ending March 31, 2025, mainly due to an improvement in profit associated with business structural reforms and expanded sales for high-value-added products, we forecast net sales of ¥145,000 million, operating profit of ¥8,000 million, ordinary profit of ¥9,500 million, and profit attributable to owners of parent of ¥2,500 million.