Operating margin improved in the first half despite lower revenue; the focus is whether high profitability will continue in Q3.

Revenue for January–June 2026 declined 9.3% year on year to ¥53,299 million, while operating profit increased 24.9% to ¥7,501 million. Operating margin calculated from revenue and operating profit was approximately 14.1%, about 3.9 percentage points above the approximately 10.2% calculated from revenue of ¥58,754 million and operating profit of ¥6,005 million in the same period of the previous year. As profit increased while the scale of revenue contracted, the focus is now on determining whether changes in price pass-through and product mix, rather than a simple recovery in demand, lifted margins.

Quarterly fluctuations are substantial. In Q1, revenue was ¥25,581 million and operating profit was ¥2,094 million, resulting in an operating margin of approximately 8.2%. Simply subtracting Q1 from the interim-period cumulative figures gives standalone Q2 revenue of ¥27,718 million, operating profit of ¥5,407 million and operating margin of approximately 19.5%, but these standalone quarterly figures and the factors behind the improvement have not been disclosed separately in the materials. Accordingly, it is necessary to confirm through Q3 cumulative results and the accompanying explanation whether Q2’s high profitability reflected normal price and mix effects, a rebound from the maintenance burden, or temporary shipment factors.

Interim-period segment profit was ¥5,246 million for Functional Materials, ¥1,817 million for Electronic Materials, ¥2,296 million for Basic Chemicals and negative ¥24 million for Other, while corporate expenses were negative ¥1,833 million. The company cited increased sales of high-purity solvents and the pass-through into prices of quality improvements and supply stability in Electronic Materials, and price revisions in response to higher raw material and fuel prices in Basic Chemicals. However, the profit contribution of each factor and the breakdown of volume and unit prices were not provided.

In Q3, the key points will be whether the cumulative operating margin can remain around 14.1% and how much of the decline in Functional Materials can be absorbed by higher profit in Electronic Materials and Basic Chemicals. In particular, it will be important to confirm whether the major scheduled maintenance that depressed margins in Q1 has normalized by Q3, whether the effects of price revisions are continuing, and whether the buildup in actual results is sufficient relative to the full-year forecast, which was left unchanged because of uncertainty related to the situation in the Middle East.