All six segments posted revenue growth; operating income surged +62.9% to a new all-time high, driven by NEXTGIGA school projects and a profit recovery in the Resins business that lifted the overall earnings structure

Key Positives From The Results

Revenue of JPY 117.5B (+14.0% YoY) and operating income of JPY 3.3B (+62.9% YoY) — revenue marked the sixth consecutive year of top-line growth, while all profit-line items rose for the third straight year, each setting new all-time highs. Three businesses — Information Systems, Resins & Electronics, and Chemicals — led the operating income expansion, demonstrating the strength of the company's diversified, multi-business portfolio as a composite trading house.

• Information Systems
  posted revenue of JPY 16.9B (+59.8% YoY) and operating income of JPY 1.4B (+47.6% YoY). The company won NEXTGIGA school contracts from 26 of 34 municipalities in Ishikawa and Toyama prefectures, with education DX initiatives and core system upgrades also progressing
• Resins & Electronics
  achieved record-high operating income of JPY 1.4B (+91.1% YoY). Demand recovery in automotive applications, cost reduction initiatives, and new product shipments for non-automotive customers drove the profit uplift
• Chemicals
  operating income reached JPY 945M (+104.6% YoY). Higher customer utilization rates and new client acquisition in domestic chemical products, along with improved factory utilization in pharmaceutical APIs, contributed to the increase
• Operating CF doubled
  to JPY 8.5B (+JPY 4.3B YoY), generating free cash flow of JPY 7.9B. Short-term borrowings were reduced by JPY 5.5B, improving the balance sheet, with the equity ratio rising to 55.9% (+5.2pt)
• Annual dividend raised
  to JPY 13 per share (+JPY 3 YoY), with a payout ratio of 22.1%. The company continued unwinding cross-shareholdings, booking JPY 700M in gains on sales of investment securities

Key Concerns From The Results

Next fiscal year (FY2027/3) guidance calls for revenue of JPY 113.0B (−3.9% YoY), operating income of JPY 3.0B (−11.2% YoY), and net income of JPY 2.6B (−28.3% YoY) — a top- and bottom-line decline. Geopolitical risks related to the Middle East situation and the Strait of Hormuz are expected to affect raw material procurement across multiple segments, leaving significant uncertainty. The company's initial guidance assumes the Middle East situation stabilizes in H1, with a return to normal conditions from H2.

• Residential Equipment
  operating loss widened to JPY −698M (vs. JPY −469M prior year). Upfront promotional spending (personnel and advertising) on the company's emerging brands such as Tesera, JAXSON, and HIDEO continues, and the timeline for breakeven remains unclear
• Resins & Electronics
  next fiscal year operating income is guided at JPY 800M (−41.8% YoY), a sharp decline. Rising raw material and logistics costs linked to the Middle East situation will directly impact the Vietnam manufacturing base
• Information Systems
  next fiscal year revenue is guided at −31.9% YoY. While this is a transitory pullback from the NEXTGIGA school cycle, order backlog of JPY 9.9B (−5.2% YoY) is trending lower, making it essential to identify the next growth driver
• Extraordinary losses
  included JPY 315M in investment securities write-downs, JPY 220M in write-downs on affiliated company investments, and JPY 208M in impairment losses — warranting attention to risk management of the investment portfolio
• Corporate expenses
  rose to JPY 2.78B (+JPY 269M YoY). While the SG&A ratio improved to 16.4% (vs. 17.3% prior year), personnel costs and bonuses continued to increase

Focus Areas / Items To Monitor Going Forward

• How much of the NEXTGIGA school pullback can be offset by nationwide rollout of education DX packages and expanded orders for "Virtual CxO Services." The newly established Public & Education Solutions Division (April 2026) will be put to the test
• Pace of loss reduction in Residential Equipment and the investment payback outlook for the company's emerging brands such as Tesera, JAXSON, and HIDEO. Next fiscal year guidance targets a narrower operating loss of JPY −290M, but monitoring high-end housing demand trends and pricing power is critical
• Validity of the "H1 stabilization" assumption for the Middle East situation. Key risk factors include whether petroleum product procurement for the Energy business and raw material sourcing for the Vietnam manufacturing base proceed as planned

Key Financial Highlights

Gross profit margin was essentially flat at 19.3% (+0.1pt YoY), but the SG&A ratio improved to 16.4% (−0.9pt YoY), contributing to the OPM expansion to 2.9% (+0.9pt YoY). Extraordinary losses included JPY 315M in investment securities write-downs, JPY 220M in write-downs on affiliated company investments, and JPY 208M in impairment losses, which were largely offset by extraordinary gains (JPY 791M in gains on sales of investment securities, etc.).

Performance By Business Segment

Progress Rate Versus Full-Year Guidance

The company revised its full-year guidance upward twice — on January 30, 2026 and March 24, 2026. Actual results exceeded even the revised guidance. Revenue and all profit-line items beat targets, with contributions from revenue growth across all segments confirmed.

• HVAC Engineering, Information Systems, and Residential Equipment are order-driven businesses, making quarterly results susceptible to lumpiness depending on the progress of large-scale projects

Changes To Guidance

On January 30, 2026, the company announced an upward revision to full-year guidance and a dividend increase. On March 24, 2026, a further upward revision was made following the booking of gains on securities sales. Both were mid-year revisions; the current earnings release discloses new full-year guidance for FY2027/3.

• FY2027/3 Guidance — Revenue: JPY 113,000M (−3.9% YoY)
• FY2027/3 Guidance — Operating Income: JPY 3,000M (−11.2% YoY)
• FY2027/3 Guidance — Recurring Profit: JPY 3,900M (−13.7% YoY)
• FY2027/3 Guidance — Net Income: JPY 2,600M (−28.3% YoY)
• Key factors behind the decline: NEXTGIGA school pullback in Information Systems (revenue −31.9%), and higher raw material/logistics costs from the Middle East situation in Resins & Electronics (operating income −41.8%). The policy of divesting cross-shareholdings continues but is not reflected in the earnings guidance

Commentary On Shareholder Returns

The FY2026/3 annual dividend was JPY 13 per share (JPY 5 interim, JPY 8 year-end), a JPY 3 increase from JPY 10 in the prior year. The payout ratio was 22.1%, with a dividend-on-equity ratio of 1.5%. For FY2027/3, the annual dividend is also projected at JPY 13 (JPY 5 interim, JPY 8 year-end), resulting in a payout ratio of 30.8%. The company's stated policy is to maintain stable, consistent dividends and to retain a dividend reserve fund equivalent to approximately three times the annual dividend payment. The shareholder benefit program provides Nikko ceramic products to shareholders holding 300 shares or more.

Financial Position

Short-term borrowings were reduced by JPY 5.5B, lowering interest-bearing debt and improving the equity ratio to 55.9% (+5.2pt). Operating CF generation of JPY 8.5B and free CF of JPY 7.9B drove meaningful deleveraging.

News Released Alongside The Earnings Announcement

Major Announcements During The Quarter

Large-Shareholding Filings / Material Proposals Over The Past Year

• Kimio Mitani: 5.74% (reporting obligation triggered on 2026/05/12) — Stable long-term shareholder, no material proposals or activist actions
• Mitsuru Mitani: 36.45% (amendment filing) — Due to change in material agreement (collateral arrangement)
• Mitsuru Mitani: Plans to transfer all held shares to an asset management company (Mitani Kabushiki Kaisha) (disclosed on 2026/04/28)