KYOWA LEATHER CLOTH CO., LTD.
3553・Standard Market・Chemicals
Business
Kyowa Leather Co., Ltd. was founded in 1935 as a specialized manufacturer of synthetic leather, producing and selling a diverse range of materials including PVC leather, urethane synthetic leather, and TPO. Its main applications fall into three categories: Synthetic Leather for Vehicles (approximately 86% of sales), Synthetic Leather for Housing & Housing Equipment (approximately 6%), and Synthetic Leather for Fashion & Daily Living Materials (approximately 8%). The group consists of 4 subsidiaries and 2 affiliated companies, headquartered in Hamamatsu City, Shizuoka Prefecture, with multiple domestic plants. Its major customers are centered on Toyota Group-affiliated suppliers, led by Hayashi Telempu Corporation, an automotive interior materials manufacturer (31.2% of sales). In April 2026, the company made Toho Fiber Co., Ltd., a manufacturer of vehicle interior fabrics, a subsidiary, incorporating fabric development and production functions into the group.
Business Model
A build-to-order business model in which synthetic leather is manufactured and delivered based on customer specifications. Of net sales of ¥55,816 million, Synthetic Leather for Vehicles accounts for the majority at ¥47,823 million, with ongoing transactions with automakers and their tier-one suppliers forming the earnings base. The company continues to invest in capital expenditure (¥5,178 million in FY2026 (ending March 2026)) and R&D expenses (¥1,083 million), aiming to strengthen its development and production capabilities for high-value-added products. Funding is mainly covered by internal reserves, and the company maintains a near debt-free financial structure.
Company Strengths
Sales to Hayashi Telempu Corporation reached ¥17,363 million (31.2% of net sales), with long-term continuous transactions with Toyota Group-affiliated suppliers serving as a stable pillar of earnings. The manufacturing track record spanning 90 years since the company's founding in 1935, together with deep customer relationships, has formed a competitive advantage that is difficult for new entrants to replicate in a short period.
In addition to vehicle applications, the company operates in Synthetic Leather for Housing & Housing Equipment (¥3,536 million, up 13.6% year on year) and Synthetic Leather for Fashion & Daily Living Materials (¥4,457 million, up 1.9% year on year), diversifying to a certain extent the risk of fluctuations in automotive market conditions. Both non-vehicle segments maintained revenue growth in the most recent period, partially offsetting the decline in vehicle-use sales.
Capital expenditure for FY2026 (ending March 2026) reached ¥5,178 million (construction in progress balance of ¥3,265 million), with continued replacement of aging facilities and enhancement of production capacity, including renewal of the calender equipment at the Tenryu No. 1 Plant. The company invested ¥1,083 million in research and development, promoting the development of high-quality, lightweight, and circular-economy-compatible products.
ENVALITH's Perspective
Performance Trend
Revenue growth has stalled, moving from ¥52,037 million in FY2024 (ending March 2024) to ¥56,397 million in FY2025 (ending March 2025) to ¥55,816 million in FY2026 (ending March 2026). Operating profit deteriorated rapidly, falling from ¥2,567 million in FY2024 (ending March 2024) to ¥2,140 million in FY2025 (ending March 2025) to ¥920 million in FY2026 (ending March 2026). External factors compounded this decline, including reduced orders from automakers and soaring raw material costs driven by conditions in the Middle East, while selling, general and administrative expenses also rose from ¥7,932 million to ¥8,282 million. For FY2027 (ending March 2027), the combination of large-scale spending on aging equipment renewal and DX investment along with continued raw material cost inflation is expected to result in an operating loss of ¥150 million and a net loss of ¥500 million. Operating cash flow declined from ¥1,328 million to ¥799 million, while capital expenditure on tangible fixed assets expanded to ¥4,906 million from ¥3,769 million in the prior period.
Growth Strategy
Strengthening the profit structure through completion of aging equipment renewal and DX investment based on the medium-term management plan
As the final investment year of the medium-term management plan, large-scale investment in renewal of aging equipment is being implemented. Construction in progress expanded from ¥1,740 million in the previous fiscal year to ¥3,265 million, and expenditures for acquisition of property, plant and equipment reached ¥4,906 million. Recovery in earnings through improved production efficiency after completion of the investment is expected.
Large-scale investment in DX is underway in parallel with the renewal of aging equipment. R&D expenses increased from ¥1,017 million in the previous fiscal year to ¥1,083 million, maintaining continued investment in technology development. The company aims to strengthen its management foundation and achieve sustainable growth by materializing the results of these investments.
In an effort to diversify away from dependence on Synthetic Leather for Vehicles, non-vehicle applications have expanded steadily: Synthetic Leather for Housing & Housing Equipment grew 13.6% from ¥3,112 million in the previous fiscal year to ¥3,536 million, and Synthetic Leather for Fashion & Daily Living Materials grew 1.9% from ¥4,375 million to ¥4,457 million. This has partially offset the impact of declining orders for Synthetic Leather for Vehicles.
Management has stated that by utilizing contractual terms regarding price pass-through with business partners, the impact of raw material price increases due to the situation in the Middle East on profits from next fiscal year onward can be mitigated. The effectiveness of price pass-through is an important precondition for the recovery of earnings from FY2027 (ending March 2027) onward.
Last updated: July 19, 2026