4997.T

Core Business Context & Market Overview

• The global agrochemical market contracted 6.3% YoY to 701 billion USD in 2024 due to price declines, bad weather, and higher inventory, but is expected to grow at 2.1% CAGR to 778 billion USD by 2029 driven by long-term food demand growth.
• Regional demand trends: Domestic Japan demand is solid on higher rice prices and increased pest outbreaks; North/Central/South America see low-cost generic agrochemicals gaining share amid lower grain prices; Europe demand is weak on drought; Asia demand is weak on heavy rain in India and inventory overhang.

Mid-Term Growth Strategy (GGS Plan)

• The current mid-term plan "Growing Global for Sustainability (GGS)" targets 120 billion yen in revenue, 10.8 billion yen in operating profit, and 9% operating margin by its final year, with a new ROE target to focus on cost of capital.

Corporate Value Enhancement Initiatives:

• M&A & Strategic Partnerships: The company aims to take a leading role in industry consolidation, and recently secured exclusive domestic distribution rights for 7 of BASF's fruit tree agrochemical products, launched sales in October. This expansion is expected to bring fruit tree product sales to ~10 billion yen, giving the company a 20% share of Japan's 50 billion yen fruit agrochemical market (top-tier position), pushing the company from 4th to 3rd place in overall domestic agrochemical shipment value, close to 2nd place.
• R&D Enhancement (CBX): The new proprietary insecticide シベンゾキサスルフィル (CBX) is targeted for registration and launch by 2028, with development ongoing in Japan, India, and South Korea; registration application is already completed in Japan. CBX has a novel mode of action, is effective against pests resistant to existing products, has high systemic activity, and enables labor savings via seedling tray treatment. It targets 3 billion+ yen in peak sales across Japan/India/South Korea, with a long-term goal of 5 billion+ yen in global sales.
• Smart Agriculture: The company has launched an integrated solution connecting its AI pest/weed diagnosis app "Reimei no AI Byogaichu Zassou Shindan" with JA Zen-Noh's Z-GIS farming management system, already well-received by agricultural instructors, for improved farm data recording and visualization.

Non-Financial ESG Initiatives

• Issued the company's first integrated report in October 2025, disclosing ESG information including climate action, human resource management, and governance. Announced the NICHINO Group Safety Management Declaration to deepen safety culture, and achieved initial employee engagement score targets, with plans to expand the survey to domestic group companies.
• Contributes to climate change adaptation by expanding stink bug control products for warmer winters and Fujiwan granules to mitigate high temperature damage to rice, supporting stable rice production and quality.

• Full-year 2026 March fiscal year guidance revised upward from the prior August update: revenue is projected at 109.3 billion yen (+9.3% YoY, +9.3 billion yen from prior year), operating profit at 9.2 billion yen (+7.3% YoY, +0.7 billion yen vs prior August guidance), ordinary profit at 8.0 billion yen (+12.9% YoY, +0.7 billion yen vs prior guidance), net profit attributable to parent shareholders at 5.4 billion yen (+129.2% YoY, +0.4 billion yen vs prior guidance).
• Revenue breakdown guidance: Domestic agrochemicals 25.8 billion yen (YoY increase, driven by rice paddy product expansion and new BASF fruit tree products adding 1.4 billion yen in revenue), overseas agrochemicals 75.1 billion yen (large YoY increase, with continued growth for Europe/North America, smaller YoY growth for Central/South America after factoring in Brazil risk, and a YoY decline for Asia). All other agrochemical related and non-agro chemical segments are projected to see YoY revenue growth.
• Downward revision to overseas revenue of 1.5 billion yen to account for cost increases and lower grain prices in Brazil, offset by the 1.4 billion yen domestic revenue gain from the BASF agreement leaving overall revenue broadly unchanged from prior guidance. Operating profit is lifted 0.7 billion yen from higher-margin sales in Europe/North America and strong domestic performance.
• Following the upward profit revision, the company will increase the year-end dividend by 2 yen, resulting in a full-year dividend of 27 yen per share, in line with its mid-term dividend policy of progressive dividends targeting a 40% payout ratio.
• The H2 planned exchange rate remains unchanged from the start of the fiscal year.

1. Agricultural Chemicals (Domestic): 8.4 billion yen in revenue, +1.6 billion yen YoY, driven by strong sales of rice paddy products and Corteva products amid increased stink bug outbreaks; contributes 27.6% of total agricultural chemical revenue. 2. Agricultural Chemicals (Overseas): 34.5 billion yen in revenue, +6.2 billion yen YoY. By region: North America +2 billion yen YoY (strong herbicide and acaricide sales), Central & South America +1 billion yen YoY (inventory optimization in Brazil), Europe +4 billion yen YoY (Interagro consolidation, strong technical sales to Bayer), Asia -0.6 billion yen YoY (heavy rain reduced spraying opportunities in India despite strong intercompany sales). Overseas accounts for 72.4% of total company revenue, consistent with last year. 3. Other Agricultural Chemical Related: Know-how/royalty revenue increased 0.4 billion yen YoY. 4. Non-Agro Chemicals: Revenue saw a slight YoY increase across pharmaceuticals/animal health, termite control products, and other chemical lines.

• Adverse weather (heavy rain in India, drought in Europe, grain price declines in the Americas) has and is expected to continue pressuring demand in those regions, with Brazil-specific risk factored into the full-year guidance.
• Generic agrochemicals are gaining market share globally on cost pressure, creating competitive pressure for the company's proprietary product portfolio.
• Foreign exchange rate fluctuations impact profitability: a 1 JPY change per USD impacts full-year operating profit by 300 million yen, while a 1 BRL change per real impacts operating profit by 40 million yen.
• Higher R&D and SG&A expenses are expected to reduce profit by 2.9 billion yen full-year, partially offsetting gains from top-line growth.

Q: What impact will the recent change in Japan's agriculture minister and resulting policy shift have on next year's performance? / A: While the policy has shifted from pushing increased rice production to production aligned with demand, rice demand has grown strongly from inbound tourism and government-led export expansion. The government's target planting area is slightly lower than last year but has stabilized after years of decline, and producer planting and pest control motivation remains high due to elevated rice prices. Pest and climate-related damage risks still increase demand for agrochemicals, and the company's 70% overseas sales and new BASF domestic fruit tree line mean it will maintain its growth trajectory regardless.

Q: What is driving the strong performance of Canada-focused business, and is this growth sustainable? / A: The strength comes from years of expansion of the company's herbicide pyraflufen-ethyl distributed via partner Nufarm, which has gradually gained market share through sustained market development. It is not a one-time trend; new formulations and premixes are scheduled for launch, so Canada business will continue to expand.

Q: What is the growth outlook for CBX, and what other regions will it be launched in after Japan, India, and South Korea? / A: Registration applications are ongoing for the three target markets, with Japan's application already completed, targeting launch several years after application. The company is currently evaluating expansion to additional markets including Brazil, Southeast Asia, and Mexico, and will continue to push for as broad a global launch as possible.

Q: Why has the company updated its M&A strategy to target a leading role in industry consolidation, and what is the strategic background? / A: As domestic Japanese demand has stagnated and multinational firms have shifted focus away from direct sales in the market, the company (which already has an established domestic distribution network) is acting as a receiver for third-party product rights to fill portfolio gaps. This strategy underpinned the prior Corteva partnership and new BASF agreement, and the company will continue expanding direct sales globally while adding third-party products to deliver broader local solutions.

Q: What is the impact of the new BASF distribution agreement on inventory levels? / A: A temporary, modest increase in inventory of several hundred million yen is expected, as the company purchases products from BASF Japan for resale, but the company is targeting timely sales to limit the impact. The group is already actively working to reduce excess inventory accumulated during the COVID-19 pandemic, and will continue to prioritize inventory optimization to improve cash flow overall.