4631.T

• 2025 Fiscal Year Full-Year Results

  • Consolidated net sales reached 1.052 trillion yen, a year-over-year decrease driven by lower shipment volumes of mass-market products close to consumer goods including packaging ink, paint pigments, and plastic pigments.
  • Consolidated operating profit reached 52.2 billion yen, a 7.7 billion yen year-over-year increase. Even amid lower sales, profitability improved due to steady shipments of high-value-added products and strict margin-focused policies that maintained selling prices. The profitability improvement at Color & Display (which handles the pigment business) was the largest contributor to profit growth.
  • Net income attributable to parent shareholders was 32.4 billion yen, an 11.0 billion yen year-over-year increase and an 8.4 billion yen upward revision from the previous forecast, driven by the inclusion of 6.9 billion yen in extraordinary profit from the previously unbudgeted sale of artwork.
  • The annual dividend was set to 200 yen per share, consisting of a planned ordinary dividend of 120 yen per share plus a special dividend of 80 yen per share.
  • Net interest-bearing debt decreased by 33.1 billion yen year-over-year, equity increased by 69.5 billion yen, the net D/E ratio improved from 1.05x to 0.83x, and the equity ratio rose to 37.0%. ROIC improved from 3.8% to 4.4% and ROE improved from 5.6% to 7.4% year-over-year.
  • The company is on track to reduce the ratio of strategically held shares to 4% or less of net assets by the end of 2026. As of the end of 2025, the number of strategically held share issues has been reduced to 17, and after completing planned sales in 2026, the number is expected to fall to around 8, bringing the ratio well below the 4% target.

• DIC Vision 2030 Phase 1 Review

  • Phase 1 (2022-2025) focused on reviewing the business foundation to establish profitability, and successfully achieved its base-building goals: 2025 operating income far exceeded the revised Phase 1 target of 40.0 billion yen.
  • Structural reforms were completed for the core pigment business, including consolidation of production bases and workforce rationalization, which steadily strengthened its earnings base.
  • Growth opportunities were narrowed down, and semiconductor and battery materials were consolidated into a single Chemtronics organization. Capital expenditure has been approved for epoxy resin for semiconductor substrates and encapsulants, a high-growth priority area, completing base-building for growth.
  • Exit from unprofitable and non-core businesses including星光PMC, liquid crystal materials, housing materials, and alkylphenol was completed, creating a leaner, more focused organizational structure.

• DIC Vision 2030 Phase 2 Core Strategy (2026-2030)

  • The company's basic strategy combines two business categories: core businesses that are globally positioned, stably generate cash, and form the company's foundation, and growth businesses that leverage the existing business base to expand into new high-growth areas. Core businesses generate stable cash that funds growth investment in growth businesses, creating a balanced capital allocation structure.
  • The four core priorities of Phase 2 are: 1) Achieve qualitative transformation of core businesses and accelerate expansion of growth businesses; 2) Manage risk via dual-track strategy: prioritize organic growth of core businesses while also pursuing inorganic growth via M&A and CVC to create fallback options and synergy; 3) Maximize cash generation via improved capital efficiency; 4) Build a system to deliver adequate returns to shareholders and other stakeholders. Preparations have been made for additional restructuring, portfolio rebalancing, and cost-cutting measures that can be deployed if core strategies face implementation challenges, to ensure target achievement amid rapid external changes.

• Segment-Specific Phase 2 Strategies

  • Packaging & Graphic: Pursue structural reform and qualitative transformation, develop high-functional, cross-product solutions and environmentally friendly products, secure customer-preferred position, pursue demand growth in emerging regions (Asia, Middle East, Latin America, Africa), and right-size the declining publishing ink business.
  • Color & Display: Continue improving production efficiency and capital efficiency, further integrate the supply chain and review the overall production footprint, improve working capital and cash management, expand high-margin growth products (display, digital, specialty products), comply with evolving global regulations, and leverage US production to respond to Buy American policies.
  • Functional Products (Core: Performance Materials, Specialty Compounds): Capture demand growth in Asia (China, India) by expanding environmental and high-value-added products, optimize production structure across growth and mature regions, and roll out proven European environmental product solutions globally.
  • Functional Products (Growth: Chemtronics, Composite/Device, etc.): Focus growth on three key areas: semiconductors, batteries, and Physical AI. For semiconductors, enhance solutions across front-end to back-end processes, leverage high-speed communication low transmission loss strengths for back-end/implementation expansion, and leverage high purity/quality control strengths for front-end product growth. For batteries, combine existing products and develop device-integrated products to meet evolving battery specification requirements. For Physical AI, position the company as an essential supplier of materials and modules, use a Direct to Society approach to engage directly in implementation to capture opportunities, and pursue startup investment to accelerate expansion. Growth investment for Phase 2 is set at 90.0 billion yen plus alpha from additional asset sale proceeds.

• Fiscal 2026 Guidance:

  • DIC expects net sales of 1.100 trillion yen, operating profit of 56.0 billion yen (a 3.8 billion yen year-over-year increase), ordinary profit of 48.0 billion yen, net income attributable to parent shareholders of 33.0 billion yen, and EBITDA of 111.0 billion yen.
  • The forecast already includes all already confirmed artwork sale extraordinary gains. Assumed exchange rates are 150 JPY per USD and 168 JPY per EUR (a moderately stronger JPY assumption). ROIC is expected to rise to 4.7%, while ROE is expected to dip slightly to 7.1% due to a higher average equity base from 2025 foreign currency translation adjustment gains. The net D/E ratio is targeted to fall further to 0.8x.
  • The full-year ordinary dividend is planned at 140 yen per share, with an interim dividend of 70 yen per share, and total payout ratio is planned at 40.2%. All first-half 2026 metrics are expected to increase year-over-year.
  • The key driver of 2026 operating profit growth is a 10.9 billion yen positive contribution from volume/product mix, as the company recovers the volume declines seen in 2025. A 11.6 billion yen negative cost impact is factored in, driven by persistent inflation-driven increases in personnel costs and temporary inventory valuation-related costs.

• Long-Term Guidance for 2030:

  • The 2030 commitments are: consolidated operating profit of 80.0 billion yen or more, ROE of at least 10.0% or more, and total shareholder payout ratio of 40% or more. Net sales are targeted at 1.240 trillion yen or more, total company ROIC at 6.0% or more, and net D/E ratio at 0.8x or lower.
  • The 80.0 billion yen operating profit target is split between core and growth businesses, with additional upside possible from inorganic growth and further restructuring. The company prioritizes achieving the 80.0 billion yen base target first before pursuing upside.
  • Cash allocation for 2026-2030 combines cash from operating cash flow and further asset sales, allocated to ordinary investment, strategic investment, shareholder returns, and interest-bearing debt reduction. Shareholder returns follow a 40%+ total payout ratio with a 120 yen per share minimum dividend, with additional flexible returns if excess cash is generated.

• New Shareholder Return Policy (Effective 2026):

  • A 40% or higher total payout ratio and a 120 yen per share minimum ordinary dividend have been set. Additional return measures including share buybacks will be deployed depending on business results and financial condition.

1. Packaging & Graphic: Revenue decreased year-over-year due to lower shipment volumes of packaging ink. Operating income decreased by 0.6 billion yen in absolute terms, but operating margin improved from 5.6% in 2024 to 5.7% in 2025, driven by price gap management and margin retention policies. 2. Color & Display: Revenue decreased year-over-year, but operating income turned around dramatically from a -0.3 billion yen operating deficit in 2024 to +5.0 billion yen operating profit in 2025, achieved through steady implementation of structural reforms, with overseas operations moving into the black. This improvement was the main driver of the group's overall profit growth. 2030 target for the segment is operating income of over 16.0 billion yen. 3. Functional Products: Revenue decreased year-over-year, but this includes a 4.4 billion yen negative impact from the sale of domestic subsidiary DIC Decor (which operated the architectural interior materials business) in April 2024; excluding this special factor, group-wide revenue was flat year-over-year. Operating income grew in both Japan and overseas, with high-value-added digital products including epoxy resin, industrial tape, and UV-curable resin growing in revenue and contributing to profit. The Chemtronics division within Functional Products achieved revenue and profit growth, but its operating margin has not yet reached the target level, and the 2026 minimum target is to lift the margin to 13.7%. For 2025 segment ROIC, Packaging & Graphic fell slightly from 2024, Color & Display turned positive, and Functional Products rose from 7.0% in 2024 to 7.9% in 2025.

• Persistent weak demand in mature regions, especially Europe, for pigments and packaging products creates pressure on revenue and profitability.
  • Downward price pressure is increasing for packaging and pigment products as raw material prices stabilize, with large customers already requesting price adjustments, and this pressure is partially factored into the 2026 forecast.
  • Global geopolitical risks and trade policy changes (including tariffs and potential FTAs such as the EU-India FTA) could change the competitive landscape with Indian and Chinese manufacturers, creating additional margin pressure.
  • External macroeconomic volatility could lead to weaker-than-expected volume recovery in 2026, though the company has already pre-planned cost compression measures to offset shortfalls and balance results.
  • Uncertainty around the timing and pace of pigment market recovery: short-term inventory adjustments by customers create volatile quarterly results, even amid a longer-term gradual recovery trend.
  • Phase 2 strategy implementation carries uncertainty around the growth trajectory of new areas such as Physical AI, where market development is still at an early stage.

Q: In the 2026 forecast, volume/product mix contributes a positive 10.9 billion yen, compared to a negative 9.0 billion yen in 2025 (and a negative 3.0 billion yen in Q4 2025 alone). What are the specific drivers of this large expected volume increase, and how much can the 11.6 billion yen negative cost impact be reduced if volume does not meet expectations?

A: Expected demand recovery is concentrated overseas, but varies by product rather than being region-specific. For pigments, general paint pigments have not recovered much, but specialty pigments have seen significant recovery. Display pigment recovery was delayed from 2025, but has shown early signs of recovery in 2026, and electronics-related products have already seen clear volume growth from Q1 2026. The plan weights higher-growth segments more heavily. For pigments, the full-year forecast calls for approximately 3% year-over-year recovery. If volume misses this target, the company has already prepared contingency measures: cost increases, including variable costs tied to volume, will automatically decline partially, and discretionary cost increases will be compressed to balance the impact, so results can be managed within a reasonable range.

Q: With raw material prices stabilizing, is it correct to assume there is no significant downward price pressure on packaging and pigment products?

A: There is considerable downward price pressure. In 2024 and 2025, the price-cost gap was favorable, but now that raw material prices have stabilized, large customers with contracts tied to raw material prices are requesting price adjustments. Downward price pressure is increasing, and some of this pressure is already factored into the 2026 forecast.

Q: What is the background for the current recovery of the pigment business, which was severely impacted by the Russia-Ukraine conflict after the acquisition of BASF's pigment business, and when will it return to pre-crisis profit levels? What synergies have been achieved with DIC?

A: The company does not expect to return to the same pre-acquisition situation, because the overall economic environment in Europe has changed dramatically, and demand has shifted to Asia (led by China), so the profit and asset balance is now in a different phase than before. The company has been adjusting the asset base over the past two years to adapt to the new environment, and this adjustment will continue going forward. Numerically, DIC targets operating profit of over 16.0 billion yen for the Color & Display segment by 2030. While it has not yet reached the original acquisition target, the product mix has already shifted from volume products to higher-value-added segments: specialty pigments in Europe and the US, and display-related pigments in Asia (led by China). The company is also developing new products that position pigments as functional materials (not just color materials), which will contribute incremental profit after market launch over the next five years, with additional growth expected after 2030.

Q: Does the 2026 forecast only include artwork sale gains from 2025 sales that settled in 2026, and can we expect additional gains from new 2026 sales?

A: The 2026 forecast already includes all sale gains from 2025 auctions that will settle in 2026, and also includes all reasonably estimable gains from planned Christie's auctions scheduled for 2026. Sales outside of Christie's are still in process and are not confirmed, so they are not included in the current forecast. However, nearly all high-book-value artwork has been or will be sold via Christie's auctions, so non-Christie's sales are expected to involve only low-book-value, low-market-value pieces, so no large additional gains are expected in 2026.

Q: The Phase 2 plan calls for growth business operating profit to increase from 9.5 billion yen in 2025 to 17.0 billion yen in 2030, split across semiconductors, batteries, and Physical AI. What is the expected contribution of each segment?

A: While DIC will not disclose detailed breakdowns, Chemtronics (which includes epoxy resin and industrial tape) is expected to account for more than half of growth business profit both now and in the future. The 2026 Chemtronics operating profit plan is 9.3 billion yen, and this growth will form the core of overall growth business expansion, with Chemtronics expected to account for roughly 70% of total growth business profit by 2030. Beyond that, high-margin products such as photoresin and hollow fiber membrane modules are expected to become the next largest contributors once they reach scale growth.

Q: What is the outlook for overseas pigment shipment recovery, and how is competition from Indian and Chinese manufacturers changing amid trade policies such as tariffs?

A: The pigment market has many uncertainties, but overall it is in a recovery phase: after peaking in 2018, demand is expected to recover gradually through around 2028. Short-term volatility is driven by customer inventory timing: in 2025, customers built large inventories in Q1, which created a headwind in the second half, so it is necessary to separate short-term and long-term trends. For 2026, DIC expects pigment shipments to turn positive year-over-year starting in Q2. Regionally, Asia is leading the recovery, the US is holding up relatively well (though growth is slow amid tariff impacts), and Europe is also seeing a gradual recovery across most products. The closure of a former DIC US factory after sale has created some partial tailwinds, and display pigments are expected to recover clearly starting in Q2 2026. For competitive impacts, potential future changes such as an EU-India FTA could change the competitive landscape with Indian and Chinese manufacturers, and DIC will continue to monitor this closely. For US tariffs, DIC already passes through the cost via surcharges, so there is no material negative impact on profit.