Natoco's Nine-Month Operating Profit Jumps 64.8% as an FX Swing Lifts Ordinary Profit 82.9%

Gross profit up 22.0%, operating costs up 5.8%

Natoco Co., Ltd. (TSE: 4627), the Aichi-based maker of industrial paints and coatings, fine chemicals and recycled solvents, published consolidated results for the first nine months of the fiscal year ending October 31, 2026 — the period from November 1, 2025 to July 31, 2026 — on September 4, 2026 under Japanese GAAP. Revenue rose 10.3% to ¥18,271 million, operating profit 64.8% to ¥1,650 million, ordinary profit 82.9% to ¥1,862 million and net profit attributable to owners of the parent 56.4% to ¥1,236 million, for earnings per share of ¥163.64 against ¥104.71. Comprehensive income was ¥1,707 million, up 148.9%.

The operating leverage sits in two lines. Gross profit rose 22.0% to ¥4,453 million — more than twice the pace of revenue — while selling, general and administrative expenses rose only 5.8% to ¥2,802 million. The operating margin therefore widened to 9.0% from 6.0%. The company describes a world economy in a gradual but uncertain recovery, and singles out difficulty in procuring naphtha-derived raw materials as a consequence of the situation in the Middle East — the same pressure it has been passing through into selling prices.

All three segments grew profit faster than revenue

Coatings, much the largest business, grew revenue 6.1% to ¥11,359 million and segment profit 44.0% to ¥1,179 million. In metal coatings, demand from steel furniture and landscape materials was weak, but demand from machine tools and electrical equipment was strong and orders ran well from March onward on unease about the outlook in the Middle East. In building-material coatings, revenue rose despite the drop in housing starts because higher raw-material costs were passed through into price.

Fine Chemicals grew revenue 15.6% to ¥2,139 million and segment profit 26.8% to ¥506 million, on higher demand for label-printing materials (information recording materials) used for food and pharmaceuticals and on individual projects progressing to plan. Distillation — the waste-solvent recovery and recycling business — grew revenue 19.0% to ¥4,772 million and segment profit 50.8% to ¥526 million: Sanmaru Kagaku (三丸化学株式会社) contributed through the whole of the consolidated year, demand for recycled product rose in the wake of the Middle East situation, price increases were passed through, and the recovery ratio of waste liquid improved relative to the volume of recycled product sold. Combined segment profit of ¥2,212 million was reduced by ¥562 million of unallocated head-office costs to reach the reported operating profit.

The gap to ordinary profit is entirely non-operating

Ordinary profit grew 82.9% against operating profit's 64.8%, and the whole of that eighteen-point difference sits below the operating line. Net non-operating income was ¥212 million against ¥17 million a year earlier: foreign exchange moved from a ¥65 million loss to an ¥85 million gain, interest income rose to ¥76 million from ¥48 million, and dividends received rose to ¥29 million from ¥21 million, while interest expense stayed under ¥2 million. Below that the direction reverses. Pre-tax profit rose 64.4% to ¥1,815 million rather than 82.9%, because the prior year's ¥120 million of extraordinary income included a ¥108 million gain on negative goodwill that does not repeat, while this year's ¥48 million of extraordinary losses includes ¥25 million of costs booked on the decision to cancel a planned new distribution centre.

Total assets rose 7.7% to ¥33,415 million. Current assets edged up ¥308 million to ¥21,421 million: notes and accounts receivable fell ¥1,978 million, more than offset by increases in cash and deposits (¥614 million), electronically recorded monetary claims (¥413 million), securities (¥599 million), merchandise and finished goods (¥298 million) and raw materials and supplies (¥232 million). Fixed assets rose ¥2,079 million to ¥11,993 million, chiefly on ¥1,137 million more investment securities and ¥582 million more in other property, plant and equipment. Liabilities rose ¥1,098 million to ¥7,540 million. Net assets rose 5.2% to ¥25,874 million and shareholders' equity 5.2% to ¥25,696 million, but assets grew faster than either, so the equity ratio slipped to 76.9% from 78.7%. No quarterly cash flow statement was prepared; depreciation for the nine months was ¥574 million against ¥527 million.

Guidance revised, and a dividend guided ¥1.00 lower

The company revised its full-year forecast on the day of this release and published the change in a separate notice; the tanshin carries only the revised figures, not the ones they replace. For the year to October 31, 2026 it now expects revenue of ¥24,500 million (+10.0%), operating profit of ¥2,030 million (+45.2%), ordinary profit of ¥2,230 million (+47.7%) and net profit of ¥1,460 million (+28.3%), for earnings per share of ¥193.21. Set the nine months against that and the arithmetic is stark: operating profit of ¥1,650 million is already 81% of the full-year target, ordinary profit 84% and net profit 85%, with one quarter still to run. Revenue is only 75% of the way there, so the fourth quarter is guided to hold its revenue run rate — an implied ¥6,229 million against a nine-month average of ¥6,090 million — while producing ¥380 million of operating profit against a nine-month average of ¥550 million. The filing offers no explanation for that step down beyond pointing to the separate revision notice.

The dividend moves the other way from the profit. Natoco paid an interim of ¥27.00 against ¥26.00 a year earlier, but forecasts a year-end of ¥27.00 against ¥29.00, for an annual ¥54.00 against ¥55.00 — a ¥1.00 reduction in the total in a year guided to lift net profit 28.3%. That dividend forecast is unchanged from the company's previous announcement.

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.