This article first appeared on GuruFocus .
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Sales Revenue (Q2 FY2026):JPY1,172.8 billion, up JPY77.4 billion year on year.
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Core Operating Income (Q2 FY2026):JPY144.5 billion, up JPY35.8 billion year on year; exceeded August forecast.
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Operating Income (Q2 FY2026):JPY138.1 billion, up JPY34.4 billion year on year.
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Net Income Attributable to Owners of Parent (Q2 FY2026):JPY82.9 billion, up JPY43.2 billion year on year; second highest first-half result on record.
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Non-Recurring Items:Loss of JPY6.5 billion, worsening by JPY1.4 billion year on year.
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Finance Income:Loss of JPY16.1 billion, worsening by JPY300 million year on year; includes FX loss of JPY9.4 billion.
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Income Tax Expenses:JPY16.3 billion; tax burden increased JPY19.3 billion year on year.
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Sales Revenue by Factor:Price +JPY84 billion; volume -JPY64.7 billion; FX +JPY58.1 billion.
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Core Operating Income by Factor:Price +JPY17.5 billion; cost -JPY4.5 billion; volume/equity earnings +JPY22.8 billion.
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Agro & Life Solutions Core Operating Income:JPY20.8 billion, up JPY9.6 billion year on year.
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ICT & Mobility Solutions Core Operating Income:JPY31.9 billion, down JPY1.2 billion year on year.
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Advanced Medical Solutions Core Operating Income:Loss of JPY3.7 billion, down JPY2.3 billion year on year.
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Essential & Green Materials Core Operating Income:JPY62.1 billion, up JPY80.7 billion year on year, aided by inventory valuation gains.
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Sumitomo Pharma Core Operating Income:JPY43.6 billion, down JPY53.8 billion year on year.
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Total Assets:JPY3,626.1 billion, up JPY221 billion from prior fiscal year-end.
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Interest-Bearing Liabilities:JPY1,087.4 billion, down JPY64.1 billion from prior fiscal year-end.
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Equity:JPY1,482.6 billion, up JPY246 billion from prior fiscal year-end.
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Equity Ratio:32.1%; D/E ratio 0.73x.
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Operating Cash Flow:Inflow of JPY66.6 billion, up JPY8.9 billion year on year.
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Investing Cash Flow:Outflow of JPY84.9 billion, increased outflow of JPY68.2 billion year on year.
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Free Cash Flow:Outflow of JPY18.3 billion, deterioration of JPY59.3 billion from prior-year inflow of JPY41 billion.
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Financing Cash Flow:Inflow of JPY16 billion, up JPY130.8 billion year on year.
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FY2026 Sales Revenue Forecast:JPY2,490 billion, up JPY130 billion from previous forecast.
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FY2026 Core Operating Income Forecast:JPY270 billion, upward revision of JPY55 billion; expected record high.
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FY2026 Net Income Forecast:JPY90 billion, upward revision of JPY20 billion.
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Dividend:Year-end dividend raised to JPY9 (+JPY1); annual dividend projected at JPY17 (+JPY1).
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Assumptions:Full-year exchange rate JPY157/USD; naphtha JPY99,000/kL.
Release Date: November 02, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Core operating income for Q2 FY2026 was JPY144.5 billion, up JPY35.8 billion year-on-year, and net income attributable to owners of the parent was JPY82.9 billion, both exceeding the August forecast and marking the second-highest first-half results on record.
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The company revised its full-year core operating income forecast upward by JPY55 billion to JPY270 billion, which would be a new record high, driven by strong performance in ICT and Mobility Solutions, Essential and Green Materials, and Sumitomo Pharma.
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The equity ratio improved significantly to 32.1% and the D/E ratio to 0.73 times, mainly due to net income and a capital increase at Sumitomo Pharma, strengthening the financial position.
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Semiconductor processing materials shipments increased, and demand for semiconductors remains solid, particularly driven by AI-related areas, supporting growth in the ICT and Mobility Solutions segment.
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The year-end dividend was revised upward by JPY1 to JPY9 per share, bringing the annual dividend to JPY17 per share, reflecting strong performance and a commitment to shareholder returns.
Negative Points
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Core operating income in the Sumitomo Pharma segment decreased by JPY53.8 billion year-on-year to JPY43.6 billion, due to the absence of a prior-year gain on the sale of the Asian business and lower shipments following the sale.
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The recovery of crop protection products outside Japan has been delayed, particularly in Central and South America due to credit uncertainties and El Nino impacts, and in India due to a weak monsoon, leading to underperformance in the Agro and Life Solutions segment.
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The Advanced Medical Solutions segment reported a core operating loss of JPY3.7 billion, down JPY2.3 billion year-on-year, due to a difference in sales mix and a decline in profit margin at an affiliated company.
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Free cash flow was an outflow of JPY18.3 billion, a deterioration of JPY59.3 billion compared to an inflow of JPY41 billion in the same period of the prior year, mainly due to an increase in investing activities outflow.
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The company has incorporated about JPY10 billion in risk factors for the second half, including uncertainties related to the Middle East situation and inventory valuation, and non-recurring items are expected to increase in the second half, similar to the previous fiscal year.
Q & A Highlights
Q: Could you explain the background behind the Agro & Life Solutions segment's first-half underperformance versus forecast and the expected second-half recovery, including regional crop protection trends and methionine pricing? A: Managing Executive Officer Toshihiro Yamauchi explained that overseas crop protection demand recovery has been delayed, particularly in Central and South America due to farmer credit uncertainties and concerns over a possible Super El Nino affecting Brazil. In India, monsoon arrival was delayed and rainfall volume was low, causing underachievement. North America saw a shift of shipments from first half to second half. For methionine, first-half market prices remained high amid supply confusion but are now stabilizing; the second-half assumes expected price levels, with methionine profit revised upward versus the May forecast, though crop protection chemicals overall were revised downward.
Q: In ICT & Mobility Solutions, why is the first-half/second-half core operating income difference smaller than usual, and which semiconductor products are driving growth? A: Managing Executive Officer Toshihiro Yamauchi explained that displays typically see a seasonal second-half profit decline, while semiconductors are expected to grow further in the second half, making the usual half-on-half gap milder. Front-end photoresists and semiconductor chemicals are performing strongly, and super engineering plastics remain solid, supported by Chinese economic stimulus measures boosting electronic component shipments.
Q: What drove the large upward revision in the Essential & Green Materials segment, including PetroRabigh's loss level, Singapore operations, and inventory valuation assumptions? A: Managing Executive Officer Toshihiro Yamauchi explained that first-half results benefited from inventory valuation gains and roughly JPY5 billion in business sale gains (actually more than expected) reflected in Essentials. For PetroRabigh, refining margins from October to December are steady but risk factors remain, and no positive factors are assumed for Q4. Naphtha is currently above JPY100,000 but assumed at JPY90,000 for the second half, implying some inventory valuation recovery. In Singapore, the force majeure remains unlifted and operations continue at first-quarter levels, with naphtha procurement easing but requiring customer consultation.
Q: Is the roughly JPY30 billion second-half "Others" adjustment a buffer or are there specific items? And why do non-recurring items expand in the second half? A: Managing Executive Officer Toshihiro Yamauchi stated that about JPY10 billion of risk is incorporated, similar to the May forecast, reflecting Middle East uncertainty and limited visibility on naphtha valuation, rather than specific identified risks. For non-recurring items, business conditions remain uncertain; last fiscal year saw about JPY55 billion in restructuring and other charges, and similar risk factors are factored into second-half numbers as they tend to become more prominent later in the year. He declined to comment on any potential Singapore-related items.
Q: What is the situation regarding price revisions for photoresists and semiconductor chemicals amid higher feedstock and fixed costs? A: Managing Executive Officer Toshihiro Yamauchi said the company is consulting with customers to revise prices to appropriate levels, driven not only by raw material costs but also rising fixed costs including labor. He declined to disclose the scale of revisions or spread assumptions, noting that improving spreads is part of the sales strategy.
Q: What is the thinking behind the dividend increase, and how should investors view the path toward the JPY24 per share target? A: Managing Executive Officer Toshihiro Yamauchi said the decision comprehensively considered this fiscal year's strong performance and next fiscal year's outlook, while factoring in second-half uncertainties and risk. The company aims for the past record high of JPY24 per share, but will reassess the dividend once visibility on next fiscal year onward improves.
Q: Why do first-half investing cash flows appear elevated versus the JPY150 billion full-year plan, and are there changes to the plan? A: Managing Executive Officer Toshihiro Yamauchi explained that first-half investing cash flows include accounting-related items such as surplus funds deposited for more than three months, which inflate the figure but are one-time and should reverse by year-end. No major changes to the second-half plan versus the initial assumption. He also noted that improved equity method gains and inventory valuation gains do not contribute to cash flow and should be considered when assessing performance.
Q: Regarding PetroRabigh, did geopolitical disruptions affect third-quarter results despite strong refining margins, and is there any supply confusion? A: Managing Executive Officer Toshihiro Yamauchi said the company does not believe there is a large impact on shipments. There was a slight operational impact in July related to the Middle East situation, but the numbers indicate it was not significant. He declined to share details beyond public financial results disclosure given various media reports and ongoing regional risks.
Q: How will the Takara succession affect the Advanced Medical Solutions segment in the second half and next fiscal year? A: Managing Executive Officer Toshihiro Yamauchi confirmed that the Takara business will be consolidated into the Advanced Medical Solutions segment from the third quarter. The second half also sees a concentration of profit, partly due to shipment timing under pharma solutions, which is more of a second-half business. He confirmed the pattern resembles last year, when the segment posted a first-half loss of JPY1.4 billion and a second-half profit of JPY2.4 billion, with the former Takara business also contributing.
Q: For methionine, with competitor supply constraints resolved and raw material prices still high, can margins remain in line with the start-of-year plan? A: Managing Executive Officer Toshihiro Yamauchi said the first-half supply-demand confusion has begun to settle, but raw material prices remain elevated. The company intends to thoroughly negotiate with customers to pass on costs, and asked investors to understand the margin approach in that context.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
