4043.T

Overall Financial Results

• Driven by strong semiconductor-related product sales and manufacturing cost improvements, Tokuyama achieved year-over-year revenue and profit growth for the 2025 March fiscal year. Consolidated revenue increased 1.0 billion yen to 343.0 billion yen, operating profit increased 4.3 billion yen to 29.9 billion yen, ordinary profit increased 3.2 billion yen to 29.5 billion yen, and net income increased 5.6 billion yen to 23.3 billion yen.
• Total assets increased 18.8 billion yen to 476.2 billion yen, equity increased 12.3 billion yen to 261.5 billion yen, and equity ratio rose 0.4 percentage points to 54.9%.
• The company declared a 50 yen end-of-period dividend for FY2025, marking two consecutive years of 20 yen annual dividend increases, continuing efforts to improve shareholder returns and capital efficiency to achieve a 1x PBR.

Capital and Shareholder Strategy

• Newly started company-wide ROIC and WACC disclosure: FY2025 ROIC was 6.2% and WACC was 6.5% (ROIC slightly below WACC), with ROIC projected to exceed WACC in FY2026.
• ROIC is now a core business decision metric; the company recently decided to close Shanghai Tokuyama Plastics (a microporous film manufacturer) because its ROIC was below WACC, and will conduct annual business continuation reviews using this metric going forward.
• Reduced cross-shareholdings: fully sold 12 of 23 holdings and partially sold 3 additional holdings in FY2025, and will continue reduction efforts focused on the partially sold holdings in FY2026.
• Met FY2025 shareholder return targets: payout ratio of 30.8% and DOE of 2.9%; for FY2026, the projected payout ratio is 29.8% and DOE is 3.2%, meeting the 30%+ payout and 3% DOE targets.
• A new medium-term management plan is currently in development and will be announced in late February 2026. A management briefing on the progress of the current medium-term plan is scheduled for June 13, 2025.

Capital Expenditure Plan

• Total planned capital expenditure for FY2026 is 35.1 billion yen, 10.4 billion yen higher year-over-year, with growth focused on strategic growth areas: polycrystalline silicon plant construction in Vietnam, new high-purity IPA recycling equipment in Taiwan, and biomass co-firing investment at Tokuyama Manufacturing Station for carbon neutrality efforts.
• Depreciation is projected to increase 0.6 billion yen to 20.2 billion yen, and R&D expenditure is projected to increase 1.0 billion yen to 17.1 billion yen.

• For FY2026 (ending March 2026), management projects all-time record consolidated revenue of 364.5 billion yen (+21.4 billion yen year-over-year), operating profit of 41.5 billion yen (+11.5 billion yen year-over-year), ordinary profit of 41.5 billion yen, and net income of 29.0 billion yen (+5.6 billion yen year-over-year). This guidance does not meet the original final-year targets of the current medium-term plan.
• Guidance assumes an exchange rate of 140 JPY/USD and domestic naphtha price of 68,000 yen per unit.
• Segment-level guidance:
  • Chemicals: Revenue 116.0 billion yen (+0.9 billion yen YoY), operating profit 14.0 billion yen (+3.1 billion yen YoY), driven by lower coal costs and slight demand recovery for glass-related alkali products.
  • Cement: Revenue 67.0 billion yen (+2.2 billion yen YoY), operating profit 9.5 billion yen (+2.0 billion yen YoY), as full 5,000 yen price hike penetration offset higher logistics and raw material costs.
  • Advanced Electronic Materials: Revenue 100.0 billion yen (+12.9 billion yen YoY), operating profit 14.0 billion yen (+4.4 billion yen YoY), based on gradual recovery led by growth in logic and HBM semiconductors.
  • Life Science: Revenue 46.0 billion yen (+4.0 billion yen YoY), operating profit 9.5 billion yen (+1.6 billion yen YoY), driven by dental growth and increasing demand for photochromic lens materials, with recovery of Q4 FY2025 lost sales in Q1 FY2026.
  • Environmental Business: Revenue 6.5 billion yen (+1.2 billion yen YoY), operating profit 0.5 billion yen (+0.4 billion yen YoY), driven by improving membrane business performance.
• The JSR in-vitro diagnostic business acquisition (announced April 2025, expected to close in October 2025) is not included in the current guidance; results will be updated after closing and detailed financial review.
• Direct impact from US tariff policy is judged to be minor and not included in the guidance.

1. Chemicals: Sales decreased 0.5 billion yen year-over-year due to Southeast Asian market weakness and weak glass demand for soda ash and calcium chloride. Operating profit decreased 0.6 billion yen year-over-year due to low overseas vinyl chloride monomer (VCM) prices. Total revenue contribution for FY2025 was approximately 33.8% of consolidated sales (1,156 billion yen total segment sales).
2. Cement: Sales decreased 2.4 billion yen year-over-year to 64.7 billion yen (18.9% of total consolidated sales), as overall domestic cement demand fell to 32.7 million tons. Operating profit increased 0.7 billion yen year-over-year to 7.4 billion yen, driven by full penetration of a 5,000 yen price increase that offset lower sales volume.
3. Advanced Electronic Materials: Sales increased 9.0 billion yen year-over-year to 87.0 billion yen (25.4% of total consolidated sales), driven by strong demand from the advanced semiconductor market. Operating profit increased 6.2 billion yen year-over-year to 9.5 billion yen, as a gradual overall industry recovery was led by growth in advanced semiconductor applications.
4. Life Science: Sales increased 0.5 billion yen year-over-year to 41.9 billion yen (12.2% of total consolidated sales). Operating profit decreased 0.7 billion yen year-over-year to 7.8 billion yen, entirely due to a Q4 shipping management system update outage at Tokuyama Dental that caused 1.3 billion yen in lost sales and 0.6-0.7 billion yen in lost operating profit.
5. Environmental Business: Sales declined year-over-year after polyvinyl chloride sash operations were changed to equity method accounting, but the segment achieved full profitability on improved operational efficiency.
6. Other: Sales decreased 2.9 billion yen year-over-year, primarily due to lower power generation output curtailment in the power sales business. Operating profit was positive year-over-year, supported by stable low coal prices and reversal of inventory valuation allowance reserves.

• Southeast Asian market weakness: Low prices for VCM and polyvinyl chloride (PVC) are pressuring chemical segment performance, leading the company to plan production cuts for these products in FY2026.
• Soda ash market pressure: Rising imported soda ash volumes have eroded domestic market share for Tokuyama's soda ash business.
• Domestic cement demand: Overall domestic cement demand fell to 32.7 million tons in 2024, and total projected sales volume for FY2026 is 315,000 tons (down from 320,000 tons in FY2025), with ongoing weak domestic demand.
• Operational disruption risk: A shipping management system update outage at Tokuyama Dental in Q4 FY2025 caused 1.3 billion yen in lost revenue and 0.6-0.7 billion yen in lost operating profit, highlighting IT transition risks for core business operations.
• Uncertainty from US tariff policy: The impact of current US tariff policy remains unclear, with the potential for unpriced negative effects on export-focused segments.
• Input cost inflation: Rising logistics, raw material, labor, and R&D costs continue to pressure overall profitability, offsetting some gains from lower coal prices.

Q: Why did Advanced Electronic Materials miss sales guidance but beat profit guidance by 0.6 billion yen, and what is the outlook for key product volume growth? / A: The profit upside came from two factors: ongoing polycrystalline silicon process improvement gains, and the reversal of previous lower-of-cost-or-market inventory valuation allowances for polycrystalline silicon. This offset the impact of lower-than-planned sales. For FY2026, polycrystalline silicon sales volume is projected to increase ~20% after major supply cuts in 2023, with the company now positioned to meet recovering market demand. Taiwan demand for semiconductor-grade IPA is very strong, with 20-30% volume growth projected after customer qualification for cutting-edge applications, and heat dissipation material volume is also projected to grow ~20% on rising semiconductor manufacturing equipment demand.

Q: What drives the projected FY2026 profit growth for Chemicals amid weak Southeast Asian VCM and PVC market conditions? / A: Lower fuel costs and maintained price spreads offset weak market conditions. Domestic PVC and chlor-alkali margins remain solid after previous price hikes, and lower naphtha prices will be passed through while maintaining spreads. The company plans to cut VCM and spot PVC export volumes in response to low Southeast Asian prices, with fuel cost savings more than offsetting weak market headwinds. The company will focus on recovering market share in soda ash for glass applications by leveraging cost reductions to maintain competitive spreads.

Q: Why does the "other" expense line show an unusually large 3.7 billion yen negative impact in the FY2026 profit forecast, and what is driving this? / A: The larger than usual negative is not driven by inventory allowance reversals, but by the company's new ongoing effort to minimize general and administrative expenses, which began in the second half of FY2025. The company has implemented broad expense review, spending optimization, overtime reduction, and DX-enabled productivity improvements to contain overhead costs, so the negative impact will be lower than historical levels despite overall cost inflation. Minor allowance reversals for polycrystalline silicon and coal are expected, but they will be small in magnitude.