Showa Chemical Industry Co., Ltd.

Business Details

The Showa Chemical Industry Group operates the Diatomaceous Earth & Perlite Business as its sole segment. It consists of four product groups: Filter Aids (61.7% of sales composition), Building Materials & Fillers (16.1%), Chemical Products (16.2%), and Other Products (6.0%). Customers span a wide range of industries including food, pharmaceuticals, chemicals, building materials, and water treatment, with sales both domestically and overseas. The structure is such that fluctuations in the performance of equity-method affiliate Obex Inc. significantly affect ordinary income.

Recent Overview

Net profit rose 51.7% year on year, driven by a sharp increase in equity-method investment gains and a reduction in extraordinary losses

In FY2026 (ending March 2026), net sales rose only slightly to ¥9,272 million (up 0.4% year on year), but equity in earnings of affiliates expanded roughly 3.8-fold to ¥163 million (from ¥43 million in the prior period), driving ordinary profit sharply higher to ¥801 million (up 40.3% year on year). The recording of ¥86 million in gain on sale of investment securities and a significant reduction in extraordinary losses (from ¥30 million in the prior period to ¥6 million in the current period) also contributed, resulting in profit attributable to owners of parent of ¥624 million (up 51.7% year on year). The equity ratio improved to 64.4%. For FY2027 (ending March 2027), net sales are forecast at ¥9,400 million and operating profit at ¥200 million, but figures below ordinary profit are undisclosed because the earnings forecast of equity-method affiliate Obex Inc. has not yet been determined. A new medium-term management plan was formulated and announced on this date.

Key Products

Growth Drivers

• The effect of boosting ordinary profit through increased investment gains from equity-method affiliate Obex Inc.
• Increased sales of Building Materials & Fillers and Chemical Products in both domestic and overseas markets (up 4.8% and 2.1% year on year, respectively)
• Strengthening of long-term profitability through capital investment (¥390 million in acquisition of tangible fixed assets) aimed at improving productivity, energy conservation, and stable supply
• Continued promotion of product usage among customers through the provision of technical support, and the development of new business activities
• Strengthening of the financial base through the expansion of unrealized gains on investment securities (an increase of ¥643 million in valuation difference on available-for-sale securities)
• Promotion of various initiatives including active sales expansion, nurturing of new businesses, company-wide cost reductions, and disaster risk reduction

Risks

• Risk from fluctuations in the performance of equity-method affiliate Obex Inc. (ordinary profit and net profit outlook undisclosed as its earnings forecast has not been determined)
• Cost increase pressure from persistently high energy and raw material prices
• Profit pressure from ongoing increases in shipping costs and labor costs
• Seasonal fluctuation risk due to concentrated summer demand for filter aids and pool chlorine agents (affected by unusual weather)
• The declining trend in overseas sales (from ¥1,815 million in the prior period to ¥1,705 million in the current period) and the impact on overseas business from trends in trade policy in various countries (tariff issues, etc.)
• Concerns over long-term contraction of domestic demand due to Japan's declining birthrate and aging population
• Growing uncertainty in the business environment due to heightened geopolitical risks, including the situations in Ukraine and the Middle East