4619.T

Consolidated 2Q FY2026 Results

• Total consolidated revenue was 30.3 billion yen, 7% lower year-over-year and 300 million yen below the initial forecast.
• Operating profit was 1.64 billion yen, 640 million yen above the initial forecast, with a margin of 5.4%.
• Ordinary profit was 2.825 billion yen, 575 million yen above the initial forecast (margin 9.3%), with the increase driven primarily by 1.026 billion yen in equity method investment income.
• Net income attributable to parent shareholders was 2.595 billion yen, 595 million yen above the initial forecast (margin 8.6%), up 22.8% year-over-year, driven by 509 million yen in gain on fixed asset sales and 237 million yen in gain on investment securities sales. EPS reached 119.32 yen, up 29.8% from the initial forecast.

Mid-term Management Plan (FY2026 - FY2030) Progress

The 5-year plan targets 80 billion yen in revenue and ROE of 10% or higher by FY2030, under the basic slogan "Reform and Challenge: Co-create the Next 100 Years".

• Paint-related Business: Has steadily rolled out high value-added products that balance environmental compliance and high functionality. The company expanded its "Utac Complete Non-Yellowing BIO" series of biomass-based flooring coatings, adding a new thin-film trowel-applied type for general factory floors to the existing thick-film mortar type for food factories/kitchens, expanding the applicable product range. The company will continue developing environmentally friendly products, with new functional products planned for next fiscal year to drive revenue growth.
• Automotive Products Business:
  1. Structural reform for profitability: A new production line with new processing methods was implemented on schedule at the Kitakanto Factory, with full operation starting in FY2026. The initiative focuses on new methods, smaller production line footprint, labor savings, and standardization, targeting a doubling of output per unit factory area. The line has already achieved 70% of the target, reaching 1.4x traditional productivity, with an end goal of 2.4x productivity. After mass production verification and evaluation at Kitakanto, the line will be rolled out to other factories.
  2. Environmental impact reduction product development: Successfully developed a base material with 95% recycled material usage (up from the previous 40%), and cut virgin binder usage significantly by leveraging the properties of specially spun polyester fiber. Technical development is complete, and the company is conducting quality verification, with plans to submit evaluation samples to each OEM by January 2026.
• Shareholder Return and Capital Policy:
  The mid-term plan set a total payout ratio target of 70%, and committed to resolving cross-shareholdings and implementing early share buybacks.
  • An annual dividend of 110 yen per share is planned, a 20 yen increase year-over-year, with a 50 yen interim dividend already implemented.
  • A 660 million yen share buyback was completed on November 13. Including the dividend, total return to date is 1.75 billion yen, which is on track to reach a 63.5% total payout ratio (against the 70% target) based on the current full-year profit forecast.
  • The company's equity ratio reached 69.2% as of the 2Q, up 1.8 percentage points from the end of the previous fiscal year.
• ESG/Disclosure: Published its first integrated report, "Integrated Report 2025", on November 6.

• Full-year consolidated revenue: Revised down 4% (2.5 billion yen) from the initial forecast to 60.5 billion yen, due to lower-than-expected contracting project wins in the paint-related segment.
• Full-year operating profit: Revised up 13% (350 million yen) from the initial forecast to 3.05 billion yen, driven by improved raw material cost ratios and stronger-than-expected first-half results, with a margin of 5%.
• Full-year ordinary profit: Revised up 10.8% (550 million yen) from the initial forecast to 5.65 billion yen, driven by operating profit upside and increased equity method investment income. 2.15 billion yen in equity method investment income is planned for the full year.
• Full-year net income attributable to parent shareholders: Revised up 800 million yen from the initial forecast to 4.8 billion yen, bringing forecast full-year EPS to 220.62 yen, up from the initial 183.85 yen.
• The full-year forecast incorporates an assumed USD/JPY exchange rate of 150 yen per dollar.

Paint-related segment (2Q FY2026)

• Revenue: 10.05 billion yen, a 17.5% decrease year-over-year. It contributed 33.2% of total 2Q consolidated revenue. Within the segment: contracting work had a 2.1 billion yen year-over-year revenue decrease; waterproofing materials had a 220 million yen revenue decrease; flooring coatings had an 89 million yen (6% year-over-year) revenue increase, with solid performance.
• Operating profit: 344 million yen, a 436 million yen year-over-year decrease. Lower revenue driven the decline, which was partially offset by 319 million yen in cost improvements from stabilized raw material prices.

Paint-related segment (full-year FY2026 forecast)

• Revenue: 19.1 billion yen, 31.6% of total forecast full-year revenue
• Segment profit: 500 million yen, with a profit margin of 2.62%

Automotive products segment (2Q FY2026)

• Revenue: 20.243 billion yen, a 0.6% decrease year-over-year. It contributed 66.8% of total 2Q consolidated revenue. Revenue decreased by 380 million yen in sound absorption/insulation materials due to slower sales in the Chinese market, but this was partially offset by increased mold sales and royalty revenue in the "other" category, resulting in only a minor overall decline.
• Operating profit: 1.291 billion yen, a 89 million yen year-over-year decrease. Lower revenue and increased personnel costs (from base wage hikes) were partially offset by 71 million yen in reduced variable SG&A expenses and lower personnel costs at Chinese subsidiaries.

Automotive products segment (full-year FY2026 forecast)

• Revenue: 41.4 billion yen, 68.4% of total forecast full-year revenue
• Segment profit: 2.55 billion yen, with a profit margin of 6.16%

• Weaker-than-expected project wins in paint-related segment contracting work drove the full-year revenue downward revision.
• Japanese OEMs in the Chinese market are facing ongoing sluggish sales, which has negatively impacted automotive product segment revenue, particularly for sound absorption/insulation materials.
• Post-japanese political regime change, significant yen depreciation has increased the cost of imported raw materials, creating ongoing margin pressure.
• Automotive OEMs are facing difficult business conditions amid US tariff impacts and broader market uncertainty, leading to high demands for price concessions from Nihon Tokushu Toryo, with negotiations progressing slower than expected.

Q: What is the background for the recent share buyback, and what is the planned usage for the repurchased shares going forward? / A: Management will continue pursuing opportunistic, flexible share buybacks going forward. Resolving cross-held shares is one of the key drivers and options for future repurchase activity, with decisions made flexibly based on market and business conditions.

Q: What factors drove the full-year sales downward revision, and what is the outlook for the second half? / A: The revision is driven primarily by lower contracting project wins in the paint-related segment. In automotive products, while first-half performance was solid, Japanese OEMs are expected to face ongoing headwinds in the second half from US tariff impacts and broader market pressures. Yen depreciation has also pushed up imported raw material costs, creating uncertainty, and the revised forecast incorporates these headwinds.

Q: What is the company's approach to shareholder return and dividend policy, and does management prioritize stable dividends? / A: The core priority for shareholder return is stable, growing dividends, with the annual dividend already raised 20 yen year-over-year this cycle. The company maintains its stated target payout ratio aligned with annual results, and combines dividends with share buybacks to hit the 70% total return target set in the mid-term plan. Dividends remain the primary component of the return strategy.

Q: What is the current status and outlook for price cooperation requests from automotive OEM customers? / A: The company has already received formal requests for price concessions from OEMs, with specific annual percentage demands on the table, and negotiations are ongoing. OEMs are facing uncertain earnings outlooks, so their demands are currently very high, and negotiations are not progressing as management would prefer. The current full-year earnings guidance already incorporates a reasonable assumption for the outcome of these negotiations.