Microwave Chemical Co., Ltd.

Business Details

By replacing manufacturing processes based on fossil-resource-derived "heat and pressure" with electricity-derived "microwaves," the company aims to establish a global standard for energy-efficient, highly efficient, compact, environmentally conscious processes. It operates a Technology Platform business that provides one-stop support—from Phase 1 (Lab Development) through Phase 3 (Commercial Unit Installation) and Phase 4 (Manufacturing Support)—across a wide range of fields including carbon fiber manufacturing, mining processes, and chemical recycling. Operated as a single segment.

Recent Overview

Revenue declined 17.9% year on year and operating loss expanded significantly, causing the financial base to deteriorate rapidly

Revenue for the cumulative third quarter of FY2026 (ending June 2026) (April-December 2025) was ¥556 million (down 17.9% year on year), and operating loss expanded significantly to ¥685 million (compared with a loss of ¥149 million in the same period of the prior year). The main cause was a sharp increase in cost of sales to ¥455 million (from ¥145 million in the same period of the prior year), which caused gross profit to plunge to ¥100 million. Net assets fell to ¥395 million, and the equity ratio declined to 24.5% (from 50.1% at the end of the prior fiscal year). New project acquisitions stood at 10 against a full-year plan of 25 (40% progress rate), while contracted projects totaled 44 (against a plan of 64). In a new field, the company launched a demonstration project for horizontal recycling of solar panel glass cullet, adopted for a Ministry of the Environment subsidy, jointly with Takeei Corporation. There has been no change to the earnings forecast (announced on May 9, 2025).

Key Products

Growth Drivers

• Realizing large-scale revenue by advancing development projects in the carbon fiber manufacturing, mining process, and chemical recycling fields to Phase 3 (Commercial Unit Installation)
• Improving gross margin and shortening lead times through the promotion of technology and equipment standardization (development investment in a new standard demonstration unit for mining processes, and upgrades to existing standard bench units)
• Cost reduction and improved profit margins in partnered businesses through in-house oscillator production (initiated from FY2026 ending June 2026)
• Development of new fields through the solar panel glass cullet horizontal recycling demonstration project (adopted for a Ministry of the Environment subsidy)
• Expansion of microwave technology into other fields such as semiconductor materials, provision of new non-microwave solutions to existing customers, and creation of new businesses through small-scale M&A (targeting continuous revenue generation through 2030)
• Room for agile working capital procurement through the use of an unexecuted ¥500 million commitment line

Risks

• Rapid deterioration of the financial base: net assets of ¥395 million and an equity ratio of 24.5% (sharply down from 50.1% at the end of the prior fiscal year) as of the end of 3Q FY2026 (ending June 2026), with accumulated deficit in retained earnings expanding to ¥3,082 million
• Deterioration of the earnings structure due to a sharp rise in cost of sales: cumulative 3Q cost of sales of ¥455 million (versus ¥145 million in the same period of the prior year) and gross profit of ¥100 million (versus ¥531 million), representing a sharp decline in gross profit
• Delayed progress in acquiring new projects: only 10 projects acquired against a full-year plan of 25 as of the end of 3Q (40% progress rate)
• Uncertainty in phase transitions: if development projects fail to advance to Phase 3 (Commercial Unit Installation), large-scale revenue will not be realized
• Pressure on profits in partnered businesses due to rising oscillator costs and longer delivery times associated with the scale-up of microwave equipment
• Customer concentration risk in revenue: high dependence on specific customers leads to significant revenue fluctuation from customer turnover
• Instability in interim cash flow due to seasonal fluctuation in revenue (concentrated in the third and fourth quarters)
• Difficulty in year-on-year comparison due to the transitional 15-month fiscal period (FY2026 ending June 2026), reducing visibility in performance evaluation
• Risk of borrowing constraints arising from financial covenants attached to the commitment line agreement in the event of further financial deterioration