Sekisui Chemical Q1 FY2027: Revenue, Profit Hit Records; H1 Outlook Raised

Sekisui Chemical's first-quarter revenue rose 9.1% year-on-year to ¥332.9 billion, operating profit increased 20.1% to ¥25.4 billion, and ordinary profit jumped 39.1% to ¥28.0 billion, all marking record highs for the April-June period. Net income attributable to owners of the parent, however, slipped 2.7% to ¥12.7 billion, depressed by a ¥6.6 billion business restructuring loss.

The strong top-line performance was driven by aggressive sales price improvements that offset surging raw material and component costs, exacerbated by heightened Middle East tensions. Robust semiconductor-related demand in the electronics segment and pull-forward purchases in pipe systems for housing also added momentum. A ¥1.5 billion foreign exchange gain further lifted ordinary profit.

Reflecting the strong start, the company raised its first-half cumulative (April-September) forecasts: revenue to ¥690.5 billion (previously ¥676.8 billion) and operating profit to ¥48.0 billion (previously ¥46.4 billion). Full-year projections remain unchanged.

All four reporting segments contributed, with High-Performance Plastics and Environment & Lifeline driving the bulk of the gains, while Housing saw a profit decline.

Housing revenue edged down on lower detached home unit sales, though renovation and residential development businesses grew. Orders remained solid, with unit orders flat and order value up 3%.

Environment & Lifeline delivered a near-doubling of operating profit as pipe product volumes surged, fueled by front-loaded housing demand amid regional tensions. Price improvements in Japan offset sluggish CPVC demand in India.

High-Performance Plastics posted record segment operating profit on continued strong semiconductor demand, recovering aviation markets, and growth in interlayer films for head-up displays. The segment successfully absorbed raw material inflation through price hikes and cost reductions.

Medical achieved a modest revenue rise but a sharp profit increase, helped by fixed-cost control following profitability measures and a tailwind from the weaker yen.

Total assets stood at ¥1,461.7 billion at quarter-end, up ¥33.7 billion from the end of FY2026, mainly due to higher inventories and cash from commercial paper issuance. The equity ratio remained robust at 58.2%.

Operating cash flow was a net outflow of ¥6.4 billion, impacted by inventory buildup and tax payments. Investing activities consumed ¥18.5 billion for capex, while financing activities generated a net inflow of ¥27.7 billion, including ¥50.0 billion from CP. Cash and cash equivalents rose ¥8.0 billion from a year earlier to ¥94.8 billion.

For shareholder returns, Sekisui Chemical plans a full-year dividend of ¥81 per share, up ¥1 from the prior year, split as ¥40 interim and ¥41 year-end. No share buybacks were executed this quarter, following a roughly ¥10 billion repurchase program in the previous fiscal year. The treasury stock balance shrank significantly from -¥58.6 billion to -¥3.2 billion, suggesting cancellation or disposal of shares.

Key risks identified by management include:

• Middle East tensions: Continued impact on raw material and component procurement, with cost spikes and supply instability posing downside risks.
• Demand volatility: The pull-forward demand in pipe systems is expected to correct in the second half, and rising interest rates may further dampen new housing starts.
• Forex risk: While a weaker yen benefits earnings, a sudden appreciation could squeeze export margins; the company's full-year assumption is ¥155 to the dollar versus a spot rate around ¥159.
• Restructuring execution: The ¥6.6 billion in business structure improvement costs signal aggressive portfolio rationalization, but additional charges and execution risks remain.

The company intends to counter these through rigorous price pass-through, expansion of high-value products, and diversification of its global supply chain.

The full-year forecasts for the fiscal year ending March 2027 are unchanged from the April 28 announcement:

Despite the unchanged full-year target, first-half progress rates are elevated: revenue at 49.0% and operating profit at 41.7%. Second-half outcomes hinge on demand trends, particularly in housing and pipe systems.

In the first quarter, the company booked a ¥6.6 billion special loss labeled business structure improvement costs. This reflects ongoing efforts to streamline low-profitability operations. Management aims for medium-term fixed-cost reductions and portfolio optimization to lift operating margins. The market views this as a steady restructuring step, though some analysts flag potential for additional expenses.