8014.T

• Overall Company Strategy & Financial Position
  • Chori is a 160+ year-old trading house with textiles and chemicals as core businesses, operating a 38-company group including 19 overseas local entities. Its operating vision is to become a "company chosen by society, employees, and supply chain partners" to create a positive growth cycle.
  • The company is in the final year of its mid-term plan Chori Innovation Plan 2025 (CIP2025), prioritizing gross margin improvement to enhance business quality and corporate value. It has launched a new mid-term plan formulation project with working groups covering business strategy, financial strategy, non-financial strategy, human capital, and digital transformation (DX).
  • Financial fundamentals remain strong: equity ratio is 65.6%, ROE is 11%, ROIC is 10.3%, and the company has sufficient resilience against rising interest rates. ROE currently falls short of the 12% target KPI, and the company aims to recover this metric in the second half of the fiscal year. Operating cash flow generated a positive 5.9 billion yen cash inflow, while financing activities resulted in a negative 2.3 billion yen cash outflow from dividend payments.

• The full-year 2026 March Term revenue is projected to come in lower than the original plan, but the company maintains its full-year earnings guidance (budget left unchanged) as the first half result was broadly in line with internal expectations, and no material deviation from internal budget targets was recorded despite slower top-line progress. The company will continue to push profitability improvement to secure stable full-year profits.
• Interim dividend is set at 72 yen per share, and full-year annual dividend is projected at 144 yen per share with a 72 yen year-end dividend, consistent with the company's base dividend policy.
• The long-term VISION2030 targets 400.0 billion yen in annual revenue and 20.0 billion yen in pre-tax annual profit.

1. Textile Business: Both revenue and profit decreased year-over-year due to sluggish market conditions for car seat materials and textiles, and slowing textile sales to the Middle East and China that were strong in the prior year. Segment profit came in at 3.3 billion yen, a 1.1 billion yen decrease year-over-year. No revenue contribution percentage was provided.
2. Chemicals Business: The performance chemical segment saw a revenue decrease driven by sluggish market conditions from Chinese overcapacity, while the high-margin fine chemical segment showed recovery after market inventory adjustments concluded. Revenue was 75.3 billion yen, a 3.9 billion yen decrease year-over-year. Segment profit was 4.0 billion yen, a 0.6 billion yen decrease year-over-year; on an underlying basis excluding one-off prior year gains, the segment achieved profit growth. No revenue contribution percentage was provided.
3. Machinery Business: Reported revenue is 400 million yen, but on a pre-deduction agency transaction basis (accrual basis), revenue is approximately 12.0 billion yen. The business saw steady performance in automobile sales to Latin America, primarily selling Chinese vehicles to the region. No revenue contribution percentage was provided.

• Sluggish demand in the Chinese market and the impact of yen appreciation have driven a 9.5 billion yen year-over-year decrease in consolidated revenue, and weaker performance in Greater China negatively impacted first half results.
• Sluggish market conditions for performance chemicals due to Chinese overcapacity, and continued sluggish demand for car seat materials and general textile products have pressured segment profits in both core businesses.
• Increased selling, general and administrative expenses (up 0.7 billion yen year-over-year) from the three-year SAP new core system investment and increased personnel costs from human capital investment exceeded gross margin gains in the first half, leading to a year-over-year profit decline. Total incremental investment cost exceeded 1.0 billion yen, partially offset by cost cuts in other expense categories.

Q: What is management's estimated cost of capital for ROIC target-setting? / A: Chori management incorporates input from two professional third-party firms, and recognizes the company's cost of capital as being in the high 6% range.

Q: Why do you believe full-year guidance is achievable despite softer first half progress, and what is the outlook for each core business in the second half? / A: For textiles, higher-priced autumn/winter product deliveries were pushed to the second half (after October) due to unusually hot summer weather, and automotive materials segment is expected to recover more than initially planned, bringing expected revenue and profit gains in H2. For chemicals, the high-margin semiconductor/electronic materials functional intermediate business that performed well in H1 is expected to strengthen further in H2, and the company expects a partial recovery in Chinese-related business as its expanded China-to-other-Asian markets business starts to rebound.

Q: What are the key priorities and strengthening areas for the next mid-term management plan? / A: The core priority for the next plan is improving capital efficiency, particularly raising ROE to meet market expectations including the Tokyo Stock Exchange's PBR 1x requirement. The company will focus on leveraging its core strength of adding value to traded products: working with suppliers from the product planning stage with market-in thinking, and adding value at partner manufacturing facilities. It will strengthen profitability through differentiated products to improve capital efficiency and lift corporate value.