SHOWA PAXXS CORPORATION

Business Details

The mainstay products are Kraft Paper Bags for petrochemical products, cement/ceramics, chemicals, agricultural produce, fertilizers, and food. In addition to the Company itself, Kyushu Shiko Co., Ltd., Nesco Co., Ltd., San-in Seitai Kogyo Co., Ltd., and Thai Showa Pax Co., Ltd. operate this business, with domestic and overseas material industries and agriculture/fisheries as major customers. As a core segment accounting for 65.5% of consolidated sales (FY2026, ending March 2026), the Company maintains profitability while focusing on securing margins.

Recent Overview

Sales increased, but operating profit declined by ¥118 million year on year, revealing deteriorating profitability.

In FY2026 (ending March 2026), consolidated sales in the Heavy-Duty Packaging Bags segment were ¥15,431 million (up ¥136 million year on year). Meanwhile, segment operating profit was ¥1,228 million, down ¥118 million from ¥1,346 million in the prior period. While industry-wide Kraft Paper Bags shipment volume declined 1.4% year on year, the Company's sales volume also declined 1.7% year on year. Thai Showa Pax Co., Ltd. saw sales volume decline 10.2% year on year due to economic slowdown in Thailand and surrounding countries, resulting in decreased sales and profit in both local currency and yen terms. Kyushu Shiko Co., Ltd. and San-in Seitai Kogyo Co., Ltd. posted slight increases in both sales and profit. Rising personnel costs from wage increases and increased depreciation from the completion of capital investments pressured profit.

Key Products

Growth Drivers

• Increased demand in applications such as salt, sugar/sweeteners, chemicals, agricultural/fishery products, starch, and lime (some applications increased contrary to the industry trend)
• Increased sales volume at Kyushu Shiko Co., Ltd. in sugar and feed applications (up 0.4% year on year overall)
• Recovery in sales volume at San-in Seitai Kogyo Co., Ltd. toward fiscal year-end (up 0.4% year on year)
• Expanded adoption of new applications for the Polyethylene Bag for Liquid Transport "S-Cube" (1,000L) (up 22.6% year on year)
• Acquisition of new demand through the start of new deliveries of environmentally responsive products (nitrogen replacement packaging, etc.)
• Improved production efficiency and defect detection accuracy through introduction of AI and image sensor-based quality control systems
• Subsequent event: strengthening of group control through the planned increase (May 2026) of voting rights held in Thai Showa Pax Co., Ltd. from 90.0% to 99.8%

Risks

• Cost pressure from the persistently high price of Kraft paper, the main raw material (continued increases in logistics and labor costs)
• Declining trend in industry-wide Kraft Paper Bags shipment volume (down 1.4% year on year in FY2026, ending March 2026)
• Decline in sales volume at Thai Showa Pax Co., Ltd. due to economic slowdown in Thailand and surrounding countries (down 10.2% year on year)
• Profit pressure from increased depreciation and maintenance costs associated with wage increases and completion of capital investments
• Risk of non-collection or delayed collection of accounts receivable (balance of ¥382 million) at consolidated subsidiary Nesco Co., Ltd. (litigation ongoing)
• Decline in demand in major applications such as rice/wheat, synthetic resin, and other mineral products (a significant decline in line with the industry trend)
• Impact on procurement and pricing of petroleum-derived raw materials due to heightened tensions in the Middle East, and uncertainty regarding the operating status of production facilities at major customers