Earnings Call: Q4 2026

May 28, 2026

Summary

FY2025 delivered record sales and profits, with Life Science and Environmental Materials offsetting weakness in Polymer Additives and Semiconductor Materials. FY2026 forecasts further growth, but exclude Middle East impacts; annual dividends are forecast at JPY 120/share.

Good morning, everyone, and thank you for taking the time out of your busy schedules to join us today. In today's briefing, we will cover ADEKA CORPORATION's financial results for fiscal year 2025 and the progress of ADX 2026, our company's ongoing MTMP. To summarize the full-year results, net sales, operating profit, ordinary profit, and profit attributable to owners of parent all surpassed previous record highs. Within the semiconductor materials segment, however, fixed costs increased due to upfront investments. Looking at our forecasts for fiscal year 2026, the company aims to achieve growth in both sales and profit, reaching record highs for the third consecutive fiscal year. We project profit increases across all segments, but please note that the effects of the Middle East situation have not been factored into the fiscal year 2026 forecasts. On the subject of shareholder returns, we plan an JPY 8 per share YoY increase in our fiscal year 2025 year-end dividend, bringing it to JPY 60 per share. This sets the annual dividend at JPY 112 per share. For fiscal year 2026, we forecast an annual dividend of JPY 120 per share, representing a payout ratio of 40.8%. Additionally, as determined in August 2025, the company's plan to acquire a maximum of JPY 18 billion of treasury stock will be completed at the end of May 2026 as planned. Today's briefing will proceed in the order outlined here in the table of contents. Let's start with a review of the fiscal year 2025 consolidated results. We achieved JPY 416.5 billion in net sales, an increase of JPY 9.4 billion YoY, JPY 41.6 billion in operating profit, up JPY 600 million. Ordinary profit came in at JPY 42.7 billion, up JPY 3.4 billion, and profit attributable to owners of parent was JPY 27.8 billion, an increase of JPY 2.8 billion. Net profit per share increased by JPY 32.4 to JPY 278. As I noted earlier, every metric here has surpassed previous record highs. Let's now turn to the analysis of operating profit. We recorded a YoY increase of JPY 600 million in fiscal year 2025. While sales volume contributed a positive JPY 5.9 billion, fixed costs created a significant negative impact of JPY 4.2 billion. When combined with negative impacts from net pricing and exchange rates, this resulted in a net increase of JPY 600 million in operating profit. This slide shows the fiscal year 2025 consolidated results by segment. Looking first at net sales, polymer additives saw a significant YoY decrease, but our life science business largely offset this, driving overall revenue growth. In terms of operating profit, despite substantial declines in polymer additives and semiconductor materials, strong rebounds in environmental materials and in the life science segment resulted in an overall increase in profit. I would now like to detail the results for each segment, beginning with polymer additives within the chemicals segment. On the net sales front, sluggish market conditions for home appliances and EVs suppressed sales of flame retardants. Similarly, a sluggish market for plastic-related materials resulted in weak sales of antioxidants. Conversely, driven by increased data center investments in the U.S., PVC stabilizers for telecommunications infrastructure, specifically electrical wires, remained strong. Additionally, our strategic shift to high-value-added products proved highly effective. Turning to operating profit, the primary drag was a significant negative impact from lower sales volume. You will also find the precise impacts of net pricing and fixed costs on this slide. Turning to semiconductor materials within the Chemicals segment. Sales of semiconductor lithography materials for advanced photoresists were strong, driven by the increasing implementation of EUV exposure equipment and a rising demand for PFAS-free products. Additionally, a generation change in memory made progress in the market, enabling sustained growth alongside the mass production of new products. Consequently, high-k materials for advanced DRAM remained steady. On the other hand, although evaluations of our materials for next-generation advanced logic ICs moved forward, full-scale adoption has not yet begun, resulting in weak sales, particularly of ALD materials. Looking at the main factors impacting operating profit for this segment, while net pricing deteriorated, this was offset by higher sales volume. That said, fixed costs weighed heavily on the semiconductor materials business, meaning the volume increase was insufficient to fully offset the impact in FY 2025. Let's look more closely at our Semiconductor Materials business. Turning to the graph on the left, you can see that the strength of our structural earnings has improved. However, due to a delay in the change to a new generation of memory, growth stalled slightly between FY 2022 and FY 2025. Although overall marginal profit has been on a slight upward trend, it was not quite enough to cover the increase in fixed costs. We anticipate that FY 2026 will exceed these levels, generating an increase in marginal profit that outpaces the rise in fixed costs, which will ultimately flow through to our operating profit. The chart on the right illustrates the positioning of our product types in FY 2025. This matrix plots our advanced memory, advanced lithography, and logic materials based on their current investment and profitability levels. We're also fortifying the foundation through a strengthened personnel structure and expanded investment in R&D. We expect these initiatives to drive returns that outpace the associated increase in fixed costs and capital investments. Let's now move on to Environmental Materials within the Chemicals segment. In the electronic sector, which encompasses electronic components and displays, special epoxy resins saw strong sales demand, while sales of photo curing materials remained steady. Within mobility, lubricant additives for engine oil delivered strong results, driven by growing fuel efficiency needs across Asia and the U.S. Additionally, reactive emulsifiers in the architecture and infrastructure segment, primarily for paints, maintained a steady performance supported by expanded applications such as adhesives. Lastly, looking at operating profit, higher sales volume and net pricing were significant positive drivers, while foreign exchange factors posed a headwind. Within the Food Products segment, sales were supported by expanded eco-friendly products in Japan. High-performance kneading ingredients for breads and other items held steady alongside plant-based foods, specifically our Deli-PLANTS series for the cafe and breads sector. In China, however, demand for shortenings and margarines used in bread and confectionery remained weak amid the continued economic slump. Turning to operating profit, favorable net pricing offset the impact of rising fixed costs and declining sales volumes. Last is the Life Science segment, which reflects the performance of Nihon Nohyaku. The top line was primarily driven by agrochemicals, specifically in Europe. Sales of active ingredients for insecticides and herbicides for fruit trees and potato crops were strong. In North America, insecticides for fruits and nuts performed well, while in Japan, soaring rice prices led to an increase in acreage, generating strong sales for paddy rice, herbicides, and insecticides. On the operating profit side, higher sales volume and improvements to net pricing were significant positive drivers. Fixed costs did present a major headwind, but the combined positive impact of volume and pricing more than offset this, allowing us to close out FY 2025 on a positive note. Next, allow me to discuss the FY 2026 consolidated forecasts. Starting with the outlook for the market environment in FY 2026, while we expect moderate global economic growth, the overall outlook remains uncertain due to rising tensions in the Middle East. However, in specific markets like semiconductors, electronics, and agriculture, we project significant upward trends that are largely insulated from these macroeconomic uncertainties, though they are not completely immune to these broader risks. Moving to the effects of the Middle East situation on the ADEKA Group's businesses, as I noted earlier, these risks have not been factored into the FY 2026 consolidated forecasts. As we anticipate potential supply chain risks and softer demand stemming from soaring raw material and fuel prices, we will closely monitor market trends and maintain open communication with our customers and suppliers to address these risks as they arise. Should any of these factors materially impact our performance, we will update the market accordingly. Although certain raw materials are in short supply, the company is maintaining its supply systems for now. Across our Chemicals, Food Products, and Life Science segments, we will focus on minimizing the impact by passing through raw material and fuel costs to product prices. The possible supply chain risks we are monitoring include constraints on the availability of raw materials and packaging materials imposed by suppliers, increasing logistics costs due to disruptions, changing transportation routes, and increasing fuel prices, and the negative impact on our product sales volume caused by any suspension or reduction of production activities by our customers. These scenarios are all within the scope of our current risk assumptions. Next are our consolidated forecasts for FY 2026. We project JPY 453 billion in net sales, JPY 46.8 billion in operating profit, JPY 46.6 billion in ordinary profit, and JPY 28.8 billion in profit attributable to owners of parent. Net profit per share is projected at JPY 294.3. The exchange rate, Naphtha prices, and exchange rate sensitivity assumptions are detailed here on page 17. Looking at the FY 2026 consolidated forecasts by segment, we project YoY growth in both net sales and operating profit across all business segments. Let's now turn to the segment outlooks, starting with polymer additives within the Chemicals segment. We will be increasing sales of ADK TRANSPAREX™, our new clarifier, and other high-performance products, and reinforcing the revenue base. We will initially focus our ADK TRANSPAREX™ expansion in North America and Asia. While we will continue to target and focus on existing applications such as food containers, auto parts, and medical instruments, our strategy is to further expand the market for this clarifier by promoting the substitution of other resins with polypropylene, which is the primary material in which ADK TRANSPAREX™ is used. Next are high functional plasticizers and stabilizers. As I touched on earlier, we will focus on expanding sales and improving profitability in the North American data center and housing markets. Lastly, for light stabilizers, we will pursue global expansion for auto parts applications and explore new applications. Allow me to share a recent update not included in today's slide deck. Our newly developed eco-friendly flame retardant has been integrated into select models of Sony Corporation's BRAVIA televisions, which were unveiled on May 28. For more details, please refer to the press release we issued that same afternoon. I wanted to take this opportunity to highlight our role within the diverse supply chains supporting the BRAVIA models. Let's now take a look at semiconductor materials within the chemicals segment. Driven by the increase in AI investments, we are achieving growth in the area of advanced semiconductor materials and expanding the scope of these products. For advanced memory, specifically high-k and ALD materials, we are accelerating the expansion of business amid the full-scale mass production of high-bandwidth memory. For advanced photoresists and EUV exposure, we are focusing on semiconductor lithography materials, such as PAG and metallic compounds used in MOR, with the goal of capturing and defending the largest share of the global cutting-edge resist materials market. Turning to advanced logic ICs, which also involve high-k materials and film formation, we are continuing growth investments in advanced R&D activities to ensure the timely delivery of products. To prioritize and accelerate our investments in this field, we are operating a new research building, enhancing our research staff, operating new production facilities, and we have made the decision to invest in facilities for metallic compounds used in MOR. Next is the environmental materials business within the chemicals segment. We are focusing on strategic products, accelerating global expansion, and promoting selection and concentration. In the electronics sector, we are rolling out high-performance adhesives across China, Taiwan, and Europe. We will take the initiative in developing the Chinese display market, and we are significantly accelerating the development of markets for electronic components in Europe, especially as it pertains to adhesive materials. Looking at mobility, we are already expanding our lubricant additives globally, and we will now focus on developing markets for hybrid vehicles and aftermarket oil. In consumer industries, our reactive emulsifiers are already used extensively across China, India, Europe, and the U.S. Going forward, we will expand sales in the architectural paint market, develop markets for viscous adhesives, and cultivate new applications. Let's now turn to the food products segment, where we will expand global operations through the use of food tech. We will design our products around high value-added products, plant-based foods, and products that meet specific market needs, grounding our approach in a deep understanding of local food cultures. We will roll these out with a focus on East and Southeast Asia and India, extending into North America and Europe as well. We will focus on reducing food waste, increasing sales of high functionality oils and fats, and developing emulsifying ingredients that enhance flavor. Additionally, we will develop markets for products that are substitutes for milk, animal fat, and eggs, expand into the hotel, restaurant, and cafe markets, and establish sales channels. Building on this understanding of local food cultures, we will strengthen our lineup of RSPO-certified products, as well as halal and vegan products, tailoring products to local preferences. Last is the life science segment and Nihon Nohyaku in particular. Here, we will increase the number of items, particularly those developed internally, and develop markets for them, thereby driving sales growth and reinforcing the revenue base. Nihon Nohyaku will accelerate its expansion into the fruit and vegetable markets where Nihon Nohyaku is particularly strong, and we will reinforce both the revenue base and local sales networks. For fruit and vegetables, we will focus on Japan, North America, and Europe. To strengthen our local sales networks and revenue base in India and Brazil, we will concentrate resources on high value-added products and key items and focus on selecting business partners. Next is our annual dividend forecast for FY 2026. Circling back to what I said at the beginning, we have maintained a steady trajectory of dividend growth without any reductions. For FY 2026, we forecast a second-quarter-end dividend of JPY 60 and a year-end dividend of JPY 60. This will bring our annual dividend to JPY 120 per share, representing a payout ratio of 40.8%. Finally, reviewing the progress of our acquisition of own shares, we have acquired 4.42 million shares to date, representing 44% of the total number of shares to be acquired. The total acquisition price of shares amounts to JPY 16.3 billion, representing 91% progress. Detailed information regarding the August 8, 2025 Board of Directors resolution is provided on page 25 for your reference. Our overseas sales ratio has remained steady in the 54% range over the last few years. Moving forward, this trajectory will depend largely on our management of domestic general purpose product lines. Although it should be noted that our core strategy remains focused on expanding and strengthening our functional product lines overseas. Next, I will discuss the progress of MTMP ADX 2026. Page 28 reiterates the positioning of ADX 2026. We formulated ADX 2026 by backcasting from ADEKA VISION 2030, which verbalizes our aspiration to be an innovative company contributing to a sustainable future and affluent lifestyles. Specifically, ADX 2026 is defined as a three-year period for carrying out continued transformation. It serves as the second stage toward the attainment of ADEKA VISION 2030, a three-year period for increasing earnings strength with a focus on profit and efficiency, and a dedicated phase to pursue a growth strategy of promoting sustainability initiatives, ultimately allowing us to achieve continued transformation. Let's now turn to our fundamental policy and key strategies. Our fundamental policy is promoting sustainability initiatives for greater social value and continuous growth built upon earnings power, sustainability, and a resilient management foundation. Our key strategies are: transition to a high profitability structure, increase eco-friendly products, and reduce GHG emissions through business structure transformation, and establish a resilient management foundation. Here are our business goals and middle-year performance. For our FY 2025 results, as noted earlier, we recorded JPY 41.6 billion in operating profit, while both ROE and ROIC came in at 9.1%. Net sales of eco-friendly products reached JPY 92.4 billion, and GHG emissions stood at 206,000 tons of CO2 equivalent. The ratio of female managers was 5.9% on a non-consolidated basis. We carried out JPY 21.6 billion in capital investment, and the dividend payout ratio was 40.3%. Under ADX 2026, our FY 2026 targets are to raise operating profit to JPY 53 billion, ROE to 11%, and ROIC to 10.5%. We aim to grow net sales of eco-friendly products to JPY 115 billion and reduce GHG emissions to 199,000 tons of CO2 equivalent. Furthermore, we are targeting a ratio of female managers of 6% or more on a non-consolidated basis, JPY 75 billion in capital investment over the full three-year period, and a dividend payout ratio of 40% or more. While some of these targets are quite challenging, we are keeping them front and center, and we will make every effort this fiscal year to get as close as possible. Next is an overview of our strategic products. Page 31 illustrates the trend through FY 2025, alongside the plan for FY 2026, the final year of ADX 2026. We saw slower than expected progress in semiconductor materials, particularly during the middle year of ADX 2026, which weighed on our overall results. On a positive note, several products outperformed our expectations, starting with our clarifier for food packaging and medical materials within polymer additives. Our hindered amine light stabilizers, HALS, for use in automotive interiors and exteriors, as well as on agricultural films, also exceeded the plan, as did our high functional plasticizers for industrial machinery. Turning to new products, within polymer additives, we saw strong results from our composite metal liquid stabilizer for building materials and automotive interiors. On the other hand, within environmental materials, our photo curing materials for displays fell significantly short of our targets. These materials are used for bonding the optical films in displays. While our resin was selected, we did not achieve our target in the Chinese market, so we will focus heavily on accelerating adoption this year. We are targeting a ROIC of 10.5% for FY 2026. To pave the way for this, throughout FY 2025, we focused on driving operating profit growth, selling and disposing of idle assets, and enhancing ROIC management in each business. We will continue these efforts into and throughout FY 2026 to ensure we hit our target. Allow me to highlight a few products that outperformed the plan within our strategy to expand and create eco-friendly products. Within environmental materials, our lubricant additives led the way, directly contributing to improved fuel efficiency and CO2 emission reduction. In food products, we have RSPO-certified products, which promote environmental protection and ecosystem conservation. Both lubricant additives and RSPO-certified products exceeded our targets. Here is our capital investment plan. We are targeting JPY 75 billion in total investment over this three-year period, though at our current pace, we will likely fall slightly short of that mark. One final milestone I want to highlight involves the Kuki R&D Center. While we already operated a laboratory there, we recently redeveloped a large section of the site to construct a brand-new research building. We will dedicate this new facility to R&D for semiconductor materials, focusing on accelerating the creation of innovative products. Ultimately, we are committed to driving research and development efforts that benefit our top and bottom lines. That concludes my presentation. Thank you for your time today.