Nagase (8012) Q2 2025 earnings summary

Executive summary

• Achieved record-high gross profit and operating income for the cumulative second quarter, with improved margins across all segments despite higher SG&A expenses, mainly from logistics and personnel costs.

• Net sales rose 6.8% year-over-year to ¥480,976 million for the six months ended September 30, 2024, with all profit stages increasing, driven by yen depreciation and higher gross profit.

• Profit attributable to owners of the parent surged 55.9% year-over-year to ¥15,977 million, aided by gains on sales of investment securities and improved operating income.

• Manufacturing business faced challenges, particularly in the Prinova Group, due to weak manufacturing conditions and allowance for doubtful accounts.

• Strategic withdrawal from the loss-making color formers business in the U.S. contributed to narrowing operating losses.

Financial highlights

• Sales for 2Q FY2024 were ¥4,809 hundred million, up 6.8% year-over-year; gross profit reached ¥921 hundred million, up 17.0% YoY, with a gross profit margin of 19.2%.

• Operating income was ¥210 hundred million, up 45% YoY, with an operating margin of 4.4%.

• Profit attributable to owners of the parent was ¥159 hundred million, up 56% YoY.

• Ordinary income grew 42.5% to ¥20,297 million, and earnings per share reached ¥142.08, up from ¥88.48 a year earlier.

• Operating cash flow for 2Q FY2024 was ¥11.9 billion, driven by increased profit.

Outlook and guidance

• Full-year forecast remains unchanged: sales ¥9,400 hundred million, gross profit ¥1,800 hundred million, operating income ¥365 hundred million, and profit attributable to owners of the parent ¥280 hundred million.

• Gross profit margin expected to rise from 17.5% to 19.2% YoY.

• Segment forecasts revised: upward for Functional Materials, Advanced Materials & Processing, Electronics & Energy, and Mobility; downward for Life & Healthcare due to Prinova Group challenges.

• Anticipate continued strong demand for formulated epoxy resins for high-end server semiconductors in the generative AI market.

• No full-year recovery expected in food-related businesses, mainly due to Prinova Group performance.