KAWAKAMI PAINT MFG.CO.,LTD.

Business Details

The Group consists of a single segment covering the paint manufacturing and sales business. Products are manufactured and color-mixed in-house and sold mainly through distributors to domestic manufacturers (primarily in the machinery and metal-related industries). The Group structure includes subsidiary Diasu Kasei Co., Ltd. and affiliate Yushin Shokai Co., Ltd. Based on the medium-term management plan (final year: FY2027, ending November 2027), the Company is promoting five key initiatives: expanding the customer base, strengthening the earnings base, increasing production capacity, strengthening technological capabilities, and reinforcing investment.

Recent Overview

Cumulative 2Q net sales increased 12.1% year on year, while ordinary profit improved significantly to ¥210 million from a loss in the same period of the prior year.

Cumulative net sales for the second quarter (interim period) of FY2026 (ending November 2026) were ¥3,138 million (up 12.1% year on year). This was driven by a recovery in demand, partial correction of selling prices, and a temporary pass-through of costs related to the Middle East situation. In addition, a time lag arose in which the manufacturing cost of shipped products still reflected raw material costs from before the price surge, leading to a substantial improvement in gross profit margin to 21.4% (versus 15.6% in the same period of the prior year). Ordinary profit turned positive at ¥210 million (versus an ordinary loss of ¥19 million in the same period of the prior year). The full-year earnings forecast remains unchanged from the figures announced on January 14, 2026 (net sales of ¥6,334 million, ordinary profit of ¥238 million). No revision to the forecast has been made due to the fluidity of the Middle East situation.

Key Products

Growth Drivers

• Continued realization of selling price corrections and improved profit margins from the temporary pass-through effect of costs related to the Middle East situation
• Product development and expansion of the customer base through deepened collaboration with core customers (a key initiative of the medium-term management plan)
• Continued investment in the maintenance, renewal, and expansion of production facilities (¥129 million in acquisition of property, plant and equipment and ¥87 million in construction in progress recorded in the current interim period)
• Responding to growing demand for environmentally friendly paints (low-temperature baking type, powder coatings, paints with reduced content of substances subject to special regulations)
• Strengthening of the earnings base through reduction of various expenses (SG&A expenses increased only slightly year on year, and the SG&A ratio declined as sales increased)
• Significant improvement in operating cash flow (¥593 million) through accelerated collection of trade receivables

Risks

• Restricted supply and price increases in raw materials such as crude oil and naphtha due to escalating tensions in the Middle East (risk of margin decline once the time lag from temporary price pass-through is resolved)
• Increased costs due to persistently high raw material and energy prices (pressure on profitability if price pass-through is insufficient)
• Risk of declining demand due to reduced production among major customers in machinery, metal-related, and other industries
• Spillover effects on domestic manufacturers' production plans from uncertainty in the international situation, including the impact of U.S. tariff policy
• Pressure on profitability from increases in various expenses such as logistics costs and personnel expenses
• Risk of rising interest rates due to an increase in short-term borrowings (from ¥1,021 million to ¥1,148 million) and persistently high interest-bearing debt balances