Kao H1 Operating Profit Jumps 39% to ¥95.8 Billion as Cosmetics Swings to Profit; Full-Year Guidance Raised

Kao Corporation (TSE: 4452), the maker of Attack detergent, Merries nappies, Bioré skincare and the Kanebo and Curél cosmetics brands, reported consolidated first-half results for the year to December 2026 under IFRS. Revenue rose 7.8% to ¥871,934 million, operating profit jumped 38.5% to ¥95,831 million, profit before tax climbed 35.6% to ¥97,319 million, and profit attributable to owners of the parent rose 32.3% to ¥65,662 million. Basic earnings per share were ¥72.58, against a split-adjusted ¥53.42 a year earlier.

Margin recovery drives the profit surge

The operating margin widened to 11.0% from 8.6%, an increase of ¥26.6 billion in absolute operating profit. Of the 7.8% top-line gain, 4.4 points came from a weaker yen and 3.4 points was real growth — volume and mix contributing 1.3 points and pricing 2.1 points. A ¥11.5 billion gain on a land disposal booked in the first quarter, part of a logistics-network optimisation, flattered the operating line. Selling, general and administrative expenses rose to ¥263,972 million from ¥243,292 million, with advertising at ¥46,005 million and sales promotion at ¥29,518 million. Total comprehensive income multiplied more than fourfold to ¥90,606 million from ¥19,316 million, as foreign-currency translation differences swung to a positive ¥22.6 billion from a negative ¥29.9 billion. Operating cash flow was ¥55,250 million, up from ¥42,852 million. Total assets stood at ¥1,898,353 million, equity attributable to owners of the parent at ¥1,119,449 million and the equity ratio at 59.0%, up from 56.7% at the December 2025 year-end; book value per share was ¥1,237.29.

Cosmetics swings to profit as Chemical margins recover

The Global Consumer Care business — Hygiene & Living Care, Health & Beauty Care, Cosmetics and Business Connected combined — grew revenue 7.2% to ¥649.5 billion with operating profit up ¥11.1 billion to ¥65.7 billion. Hygiene & Living Care revenue rose 5.0% to ¥270.7 billion and operating profit ¥3.6 billion to ¥39.2 billion, with Fabric & Home Care up 6.1% to ¥189.0 billion on detergent price revisions and new home-care launches, while Sanitary edged up 2.6% to ¥81.7 billion as Laurier sanitary products sold well in China but Merries nappies lost ground in Japan. Health & Beauty Care revenue grew 8.1% to ¥228.6 billion and operating profit ¥1.7 billion to ¥19.9 billion, led by Bioré UV care and a recovery at Bondi Sands in the Americas; premium haircare brand THE ANSWER and Oribe's e-commerce expansion offset softness at Goldwell in Europe. Cosmetics was the standout: revenue up 10.5% to ¥131.0 billion and operating profit up ¥5.4 billion to ¥5.8 billion from just ¥0.3 billion, with margin recovering to 4.4% from 0.3% as Curél and KATE outgrew a soft Japanese market and China and Thailand drove Asia. Business Connected added 6.4% to ¥19.2 billion. Outside the consumer business, Chemical revenue rose 9.4% to ¥247.2 billion and operating profit ¥3.7 billion to ¥18.1 billion on wider oleochemical spreads and stronger demand for semiconductor and hard-disk materials. By region, Japan revenue rose 5.4% to ¥476.1 billion, Asia 12.2% to ¥180.7 billion, the Americas 9.9% to ¥114.5 billion and Europe 9.3% to ¥100.6 billion — though Europe fell 3.6% in real terms. Overseas sales reached 45.4% of the total, up from 44.2%.

IFRS 18 early adoption clouds the year-on-year comparison

Kao early-adopted IFRS 18, "Presentation and Disclosure in Financial Statements," from the first quarter of FY12/2026 and applied it retrospectively, so prior-year first-half operating profit and profit before tax have been restated. Under the old IAS 1 presentation, H1 FY12/2025 operating profit was ¥69,469 million; restated under IFRS 18 it is ¥69,184 million, with equity-method income and other investment gains reclassified out of the financing section into a new investing category. Because the comparative figures were restated, the company does not publish year-on-year percentage changes for those two prior-year lines — the 38.5% and 35.6% growth rates above are measured against restated numbers. The new standard also introduces a "profit before financing and income taxes" subtotal, which came in at ¥100,179 million. Kao separately discloses NOPAT as a management-defined performance measure: ¥66,625 million, up from ¥49,663 million.

A 2-for-1 split complicates the dividend arithmetic

Kao carried out a 2-for-1 split of its common shares effective July 1, 2026. Per-share figures — basic EPS and book value per share — are computed as if the split had taken place at the start of the prior fiscal year, which is why the year-earlier EPS reads ¥53.42 rather than the originally reported figure. The dividend, however, straddles the split: the FY12/2026 interim dividend of ¥78.00 is the actual, pre-split amount, while the forecast year-end dividend of ¥39.00 is stated on a post-split basis. Because the two payments sit on different share bases, the company does not publish a simple annual total for FY12/2026. Without the split, the year-end dividend would be ¥78.00 and the annual total ¥156.00 — against ¥154.00 for FY12/2025, which comprised ¥77.00 at the interim and ¥77.00 at the year-end. The dividend forecast is unchanged from the company's previous announcement.

Full-year guidance raised across every line

Management revised its full-year forecast upward from the guidance issued on May 12, 2026. Kao now expects FY12/2026 revenue of ¥1,800,000 million (+6.6% year on year), up ¥50.0 billion or 2.9% from the prior forecast; operating profit of ¥190,000 million (+16.2%), up ¥8.0 billion or 4.4%; profit before tax of ¥193,000 million (+13.6%), up 4.3%; and profit attributable to owners of the parent of ¥135,000 million (+12.4%), up ¥5.0 billion or 3.8%. Forecast basic EPS is ¥149.21 post-split, or ¥298.42 on a pre-split basis. The guidance assumes exchange rates of ¥157 to the U.S. dollar, ¥182 to the euro and ¥22.8 to the Chinese yuan. Management said the interim period ran ahead of plan and that global procurement, cost reductions and price pass-through should contain the impact of higher raw-material and supply-chain costs.

JapanStockPulse provides informational content only and does not constitute investment advice. Figures are taken from the company's published earnings short report and may be subject to subsequent revision.