Earnings Call: Q4 2025

Feb 16, 2026

Summary

FY 2025 operating income rose despite lower sales, with pigments returning to profit and high-value-added products supporting results. FY 2026 guidance targets further growth, while a new policy sets payout at 40% or more and a JPY 120 minimum dividend.

Thank you very much for attending today's briefing. I am Takashi Ikeda, the President and CEO of DIC Corporation. I will start by discussing the highlights of our FY 2025 financial results. Please turn to the next page. This page summarizes our FY 2025 financial results and our FY 2026 outlook. Regarding our actual results in FY 2025, we unfortunately experienced lower revenues than the previous year, with net sales totaling JPY 1,052.2 billion due to a slight decline in shipments of mass-market consumer-related products, such as packaging inks, pigments for coatings, and pigments for plastics. Operating income, however, was JPY 52.2 billion, up JPY 7.7 billion year-over-year. Despite lower sales, operating income still rose, supported by higher profits from strong shipments of high-value-added products and efforts to maintain selling prices, especially spreads across various conditions. In particular, the increase in profitability of the Color & Display segment, which is our pigment business, significantly contributed to the profit rise. Based on these results, net income attributable to owners of the parent was JPY 32.4 billion, up JPY 8.4 billion from the previous forecast and JPY 11 billion from the last fiscal year. As we have also promptly disclosed, a difference occurred between the previous forecast and actual results due to recording an extraordinary income of JPY 6.9 billion from the sale of artworks, which was not included in the earlier forecast. Based on these results, the annual dividend will be JPY 200 per share, composed of an ordinary dividend of JPY 120 per share, and a special dividend of JPY 80 per share. Regarding our outlook for FY 2026, although we still face significant challenges in our business environment, we are beginning to see signs of recovery in overseas demand. Additionally, sales of high-value-added products have been very strong, so by expanding their sales, we expect to increase overall sales this fiscal year. Furthermore, operating income is expected to rise by JPY 3.8 billion from the previous year to JPY 56 billion through initiatives to further enhance profitability, especially in the pigment business, which is now in the final stage of structural reforms. We are projecting net income of JPY 33 billion. Regarding the annual dividend, as I will explain in detail later, we have established a new shareholder return policy and have decided to pay an annual ordinary dividend of JPY 140 per share. Please turn to the next page. As I mentioned, we expect continued sales and profit growth in FY 2026. Since I took office in 2024, one of my management goals has been to lay the foundation in 2024 and 2025 and target record high profits in FY 2026. In light of the favorable results from 2024 and 2025, we are finally on track to achieve our highest profit to date this fiscal year. At the same time, we will launch phase 2 of DIC Vision 2030, our long-term management plan that begins in FY 2026 and continues through 2030. I will provide more details later. Please turn to the next page. Regarding our new shareholder return policy, the chart at the bottom shows our dividend history. In addition to the ordinary dividend of JPY 120 for FY 2025, we will pay a special dividend of JPY 80. Starting from FY 2026, we have set a total payout ratio of 40% or higher and a minimum dividend of JPY 120. As our past history shows, our dividend has been at JPY 100 for the past several years. We have established a certain percentage of the payout ratio as our return policy to increase dividends in line with profit growth while ensuring the minimum remains above the average. Additionally, we will take various measures, such as share buybacks, depending on our business performance and financial conditions to further boost shareholder returns. That concludes the summary. Mr. Asai will share more details on our financial results. Good morning, everyone. My name is Takeshi Asai, CFO of DIC Corporation. Following President Ikeda's presentation, I will provide a detailed explanation of our financial results for FY 2025 and our outlook for FY 2026 based on the materials displayed on the screen. What you are viewing now is our consolidated income statement for FY 2025. On the left side, we display net sales and operating income highlighted by President Ikeda. Moving to the main components under the operating income line, we see non-operating interest expenses, which decreased by about JPY 1.5 billion from FY 2024, resulting in a positive change. Interest expenses improved due to efforts to reduce interest-bearing debt and lower interest rates overseas. Meanwhile, foreign exchange gains and losses increased by about JPY 2.3 billion, from negative JPY 2.9 billion in FY 2024 to negative JPY 5.1 billion. As we have mentioned before, most of the increase or decrease is due to the impact of hyperinflation accounting in emerging countries and accounting systems. Ordinary income was JPY 44.2 billion, a 16.7% increase from the previous year, and below that line, extraordinary income and losses are shown on the right. As seen here, the first item under extraordinary income is the sale of works of art. Of the proceeds from the auction held by Christie's in November 2025, the portion that had been paid to us by the end of FY 2025 was recorded as income. The income was JPY 6.9 billion, but cash from this amounted to JPY 8 billion. Next, gains from sales of shares and investments in subsidiaries and affiliates totaled JPY 4.8 billion, mainly from the sale of surplus assets abroad, particularly in China, and from the sale of factory assets following factory closures. Meanwhile, extraordinary losses included costs from the disposal of non-current assets and severance costs related to restructuring, as well as an impairment loss of JPY 1.3 billion on some non-current assets at our U.S. subsidiary. Please go to the next page. The page illustrates the impact on our financial health. First, regarding interest-bearing debt, as shown in the top row, net interest-bearing debt decreased by JPY 33.1 billion from the previous year. In addition to our strong business performance, we generated ample free cash flow from the sale of artwork and other assets, which we used to reduce our interest-bearing debt. Meanwhile, shareholders' equity increased by JPY 69.5 billion compared to FY 2024. One of the main reasons for this increase was, of course, the higher net income in FY 2025. However, it wasn't the only factor because, as mentioned in the side comment, shareholders' equity also grew due to a JPY 29.6 billion rise in the foreign currency adjustment item on the balance sheet, also known as the foreign currency translation adjustment, which was caused by the weakening of the yen as it depreciated against currencies other than the U.S. dollar. For your reference, the closing rates at the end of FY 2024 and FY 2025 shown at the bottom indicate that the U.S. dollar and yen rates remained virtually unchanged. However, if we look at the euro-yen rates, the yen has weakened significantly from JPY 161 to JPY 183. The yen also weakened against the yuan. Additionally, the yen generally weakened against major currencies not listed here, which was a positive factor in the foreign currency translation adjustment I just mentioned. As a result, the net D/E ratio improved significantly from 1.05 times to 0.83 times in FY 2025, and the equity ratio increased to 37%. On the other hand, the ROIC increased from 3.8% in 2024 to 4.4%, while ROE rose from 5.6% in 2024 to 7.4%, both showing improvements. Please go to the next page. Next, we have a bridge chart illustrating operating income for FY 2025. The factors are already clear, but as shown on the far left, it started at JPY 44.5 billion in FY 2024 and unfortunately recorded nearly a negative JPY 9 billion due to sales volume and product mix. As President Ikeda mentioned earlier in the highlights, the main reason for this is the negative sales volume and product mix, primarily due to sluggish growth in shipments of mass-market products such as packaging inks, pigments for coatings, and pigments for plastics. Additionally, costs shown on the right side increased by about JPY 4.5 billion, mainly due to a significant rise in personnel expenses driven by inflation in Japan, Europe, and the U.S. Furthermore, in the year before last, we upgraded our core system starting in FY 2024, which caused an increase in IT-related amortization costs in FY 2025 compared to FY 2024. These negative factors were offset by the items shown in the middle, which include raw material prices and sales prices, also known as the price gap, resulting in a positive outcome of over JPY 20 billion. This is because the impact of the Trump tariffs has been reflected in both raw material and sales prices. The effect of the Trump tariffs is nearly completely offset by the negative impact on raw material prices and the positive effect on sales prices. Please go to the next page. Next, we have the results by segment. On the left are the net sales figures. All segments declined compared to the previous year. Meanwhile, looking at the operating income on the right side, in the Color & Display segment, or the pigment business, it significantly improved, returning to the black, going from an operating deficit of JPY 300 million in FY 2024 to a positive JPY 5 billion in FY 2025. This is particularly the case overseas. The overseas business in this segment recorded a substantial deficit in FY 2024, but returned to the black in FY 2025. This also became one of the major factors behind the group's overall income growth. Please go to the next page. Next, I would like to talk about each product group. First, the Packaging & Graphic segment. To reiterate, net sales declined due to a reduction in shipments of packaging inks. When it comes to operating income, though, despite the JPY 600 million drop in absolute value, the operating margin on the right side still improved to 5.7% in FY 2025 from 5.6% in FY 2024. This is because of the price gap. Our policy is to maintain product prices and reduce volumes as much as possible while maintaining margins, and by following this policy, we are raising profit margins. Please go to the next page. The next page shows the Color & Display segment, or pigments. As you can see in the overseas section, net sales declined, but income increased significantly, returning to the black, thanks to the steady implementation of structural reforms and other measures. On the next page, we have the Functional Products. Net sales fell, but one of the special factors was the JPY 1.9 billion decline in net sales of Functional Products in Japan. in April 2025, we sold DIC Decor, Inc., our company's business in Japan involving architectural interior materials, which generated approximately JPY 4.4 billion in reduced sales compared to FY 2024. If this factor is excluded, sales for the entire group would be almost on par with the previous year. On the other hand, operating income increased both in Japan and overseas. As shown in the middle of the chart illustrating the sales trend of main products at the bottom, our so-called digital-related products are epoxy resins, industrial-use adhesive tapes, and UV curable resins. These high-value-added products have grown in sales and contributed to our profits. Next, please. This shows the net sales and operating income of the Chemitronics business, which is now included in the Functional Products segment. Although both sales and income increased, unfortunately, the operating margin did not reach the level we are aiming for. With this, we will take measures from FY 2026 onward to raise the profit margin. The next page, or page 13, shows the ROIC by business segment, which has been disclosed since 2024. Years 2024 and 2025 are listed together. For Packaging & Graphic, it is down slightly from FY 2024, but for Color & Display, Pigments, it has turned positive, and for Functional Products, it has gone up from 7% to 7.9%. Overall, ROIC has risen from 3.8% in FY 2024 to 4.4% in FY 2025, and since our company's WACC is in the range of 4%-5%, the ROIC is almost equal to the WACC. Therefore, to increase the ROIC spread in the future, we plan to raise this ROIC figure by implementing the measures shown on the right side from FY 2026 onward. Please go to the next page. On page 14, we present our forecast for the current fiscal year, FY 2026. As mentioned earlier, the sale of artworks is included in the extraordinary income figures in this FY 2026 forecast. Please note that sales already clearly identified at this stage are incorporated into this income and expenditure projection. Net sales will be JPY 1,100 billion, and operating income will be JPY 56 billion, both up. Ordinary income will be JPY 48 billion, and net income attributable to the parent's owners will be JPY 33 billion. EBITDA will be JPY 111 billion, and as you can see, the exchange rate assumptions are JPY 150 to the USD and JPY 168 to the EUR, reflecting a slightly stronger yen at this point. As for the main KPIs on the right, ROIC will rise to 4.7% from FY 2025, but unfortunately, ROE will slightly decline from 7.4% in 2025 to 7.1% in 2026. We have written a note about this below, but as mentioned in the explanation of FY 2025, the increase in the foreign currency translation adjustment caused the equity, which is the denominator of ROE that is derived as the average of the beginning and the end of the fiscal year, to inevitably go up in 2026 compared to 2025. Although net income attributable to the owners of the parent will be essentially unchanged between 2025 and 2026, ROE will decline slightly. As for the net D/E ratio, we will continue to work to reduce interest-bearing debt to 0.8 times. We will bring down the ratio to this level. Regarding the annual dividend, as President Ikeda mentioned, we plan to pay JPY 140 per share with a payout ratio of 40.2%. The next page 15, presents our forecast for the first half. As shown, net sales, operating income, ordinary income, and interim net income attributable to owners of the parent will all increase year-over-year. We plan to pay an interim dividend of JPY 70 per share. Please turn to page 16. We have here a bridge chart of the factors behind the increase or decrease in operating income for FY 2026. The key points are sales volume and product mix. The question here is how we can achieve JPY 10.9 billion. As mentioned earlier, in FY 2025, operating income declined due to lower sales volume, but in FY 2026, we plan to make up for that. On the other hand, we have the costs. This represents a significant increase of JPY 11.6 billion. As in FY 2025, some increase in costs due to inflation in personnel expenses and other factors is unavoidable, but we have factored in various decline elements, including inventory-related valuations, into the costs. Therefore, although it remains uncertain how much of the negative factors will actually materialize by the end of the fiscal year, we have estimated a figure of JPY 56 billion by incorporating these considerations. Please turn to page 17. This displays the condition for each segment. Please turn to page 18. This shows the results of Chemitronics in the Functional Products segment. As I mentioned earlier, the operating margin declined slightly in FY 2025, so in FY 2026, we will work to improve that. With regard to our forecast for FY 2026, as you can see on the rightmost side, we have set the operating margin to 13.7%. In any case, we will promote improvements with this figure as the minimum level. As a supplement, I would like to ask you to take a look at page 20. This page is about our cross-shareholdings, and our company is committed to all external stakeholders. We have said that we will reduce the ratio of cross-shareholdings to net assets to 4% or less by the end of this fiscal year, FY 2026. As shown in the graph at the bottom, the number of companies in which we hold shares went down to 17 at the end of FY 2025. Market capitalization increased from the previous year to JPY 29.7 billion due to generally favorable stock prices, but the ratio to net assets stood at 6% at the end of FY 2025. By selling our cross-shareholdings within FY 2026, we intend to reduce the number of companies in which shares are cross-held to eight. If that happens, we will be able to bring down the ratio to well below 4% as we have promised. That concludes my presentation.