Okura Industrial FY2026 Q2 Earnings Analysis: Upward Revision to Record-High Full-Year Profits and Progress in Growth Strategy

Okura Industrial Co., Ltd. (Securities Code: 4221) has released its financial results for the second quarter (interim period) of the fiscal year ending December 31, 2026. Driven by successful efforts to capture demand in its core Synthetic Resin and New Materials businesses, effective price revisions, and the consolidation of a new subsidiary, the company achieved significant year-on-year growth in both sales and profits . Furthermore, the company announced an upward revision to its full-year earnings and dividend forecasts, with operating profit, ordinary profit, and net profit all projected to reach record highs .

This report provides a comprehensive analysis of the financial results, covering performance highlights, segment-specific trends, factors behind profit fluctuations, the rationale for the upward revision, and the progress of the medium-term management plan.

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1. Overview of Q2 (Interim) Financial Results and Highlights

The consolidated financial results for the first half of FY2026 showed substantial growth compared to the same period last year.

• Net Sales : ¥52.49 billion (+20.5% YoY, +¥8.94 billion)
• Operating Profit : ¥5.31 billion (+50.8% YoY, +¥1.79 billion)
• Ordinary Profit : ¥5.44 billion (+55.9% YoY, +¥1.95 billion)
• Net Income Attributable to Owners of Parent : ¥3.73 billion (+46.3% YoY, +¥1.18 billion)
• EBITDA : ¥8.08 billion (up from ¥5.88 billion in the same period last year)

The [Q2 Consolidated Financial Highlights] slide above clearly illustrates the company's strong performance momentum during the interim period. Beyond the 20% growth in sales, the over 50% surge in operating profit is particularly impressive. This profit growth was supported by price revisions in existing businesses, a shift toward high-value-added products, and the contribution of Fujiko Co., Ltd. , which was consolidated in January 2026. While capital expenditure decreased to ¥3.29 billion compared to the previous year, the company continues to invest in long-term growth, including the introduction of new manufacturing equipment and factory renovations.

Regarding progress against the initial full-year forecasts, the company reached high levels by the interim stage: 53.6% for net sales , 81.8% for operating profit , 81.3% for ordinary profit , and 86.8% for net income . This high rate of progress paved the way for the subsequent upward revision of the full-year forecast.

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2. Quarterly Trends and Analysis of Operating Profit Factors

Looking at the quarterly progression, the improvement in profitability in Q2 2026 (April–June) is particularly notable.

• 2026 Q1 : Net Sales ¥24.02 billion, Operating Profit ¥2.24 billion (Operating Margin 9.3% )
• 2026 Q2 : Net Sales ¥28.47 billion , Operating Profit ¥3.07 billion (Operating Margin 10.8% )

While the annual operating margin for the previous year (2025) was 7.1%, the average operating margin for the first half of 2026 reached 10.1% . The factors behind the ¥1.79 billion year-on-year increase in operating profit are as follows:

1. Selling Price/Product Mix (+¥3.64 billion) : Price revisions to reflect rising raw material costs and an increased ratio of high-value-added products significantly boosted profits.
2. Electricity/Other Variable Costs (+¥0.21 billion) : Benefits from energy conservation and operational efficiency.
3. Sales Volume (-¥0.29 billion) : Impacted by demand adjustments in certain product lines.
4. Raw Material Prices/Yield (-¥0.40 billion) : Impacted by rising Naphtha and Dubai crude oil prices due to the deteriorating situation in the Middle East, though largely offset by price pass-throughs.
5. Fixed Costs (-¥1.37 billion) : Driven by expenses related to the consolidation of Fujiko and the start of operations at the Takase Plant.

In summary, the ¥3.64 billion profit boost from price revisions and product mix optimization significantly outweighed the negative impacts of rising fixed costs and raw material prices.

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3. Segment-Specific Trends

Performance by business segment is as follows:

① Synthetic Resin Business (The Group's Primary Profit Driver)

• Net Sales : ¥35.25 billion (+33.5% YoY)
• Operating Profit : ¥4.91 billion (+71.2% YoY)

All sub-segments saw revenue growth, including the Life & Package BU (shrink films, ¥10.14 billion, +8.5%), the Basic Material BU (retail/industrial materials, ¥11.48 billion, +14.7%), and the Agri-Material BU (agricultural films, ¥3.73 billion, +20.0%). Growth was bolstered by temporary demand due to supply concerns in the Middle East, the penetration of price revisions, and the consolidation of Fujiko.

② New Materials Business (Advanced High-Function Film Field)

• Net Sales : ¥9.89 billion (+1.7% YoY)
• Operating Profit : ¥1.59 billion (+19.2% YoY)

Despite sluggish performance in functional materials for automotive applications, the segment benefited from increased processing volumes in precision coating for high-function automotive films (Electronic Materials BU) and steady performance in optical films for large LCD displays (Optical Materials BU: ¥7.20 billion, +6.3%). Productivity improvements from the stable operation of the G2 line also contributed to profit growth.

③ Building Materials Business (Undergoing Structural Reform)

• Net Sales : ¥6.37 billion (-2.2% YoY)
• Operating Profit : ¥0.05 billion (-87.3% YoY)

While renovation-related demand remained steady, sales of building materials declined due to a decrease in new housing starts, and the review of the particle board product mix weighed on results. Additionally, increased fixed costs associated with the full-scale operation of the Takase Plant led to a significant decline in profit. The challenge for the second half and beyond is to stabilize earnings as a core business following the acquisition of JAS certification.

④ Other Related Businesses

• Net Sales : ¥0.98 billion (+9.6% YoY), Operating Profit : ¥0.28 billion (+19.5% YoY) Growth was driven by increased hotel guests due to the recovery in inbound tourism and higher sales of systems for pharmacies (Information Processing business).

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4. Upward Revision of Full-Year Earnings and Dividend Forecasts

Following the strong performance through the second quarter, Okura Industrial has significantly revised its full-year earnings and dividend forecasts for FY2026.

The [Upward Revision of Annual Earnings and Dividend Forecasts] slide above is a key highlight of this earnings announcement.

Revised full-year forecasts:

• Net Sales : Initial ¥98.0 billion → Revised ¥103.0 billion (+18.9% YoY, +¥5.0 billion revision)
• Operating Profit : Initial ¥6.5 billion → Revised ¥8.5 billion (+37.4% YoY, +¥2.0 billion revision)
• Operating Margin : Initial 6.6% → Revised 8.3% (+1.7 percentage points)
• Ordinary Profit : Initial ¥6.7 billion → Revised ¥8.7 billion (+35.3% YoY, +¥2.0 billion revision)
• Net Income : Initial ¥4.3 billion → Revised ¥5.75 billion (+50.7% YoY, +¥1.45 billion revision)
• Annual Dividend per Share : Initial ¥220 → Revised ¥240 (a ¥20 increase , +¥45 from the previous year's ¥195)

With these revisions, the company is projected to reach record highs in operating, ordinary, and net profits . The company has also clearly stated its policy to increase the annual dividend to ¥240, supported by robust performance.

To address external risks such as rising Naphtha/Dubai crude prices and exchange rate fluctuations, the company plans to maintain appropriate gross margins by combining "securing multiple supply sources," "proposing alternatives leveraging technical expertise," and "agile price revisions."

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5. Progress of Medium-Term Management Plan (2027) and Growth Strategy

The company is currently in the "Stage 3: Business Domain Expansion" phase of its Medium-Term Management Plan (2027). While the initial target for FY2027 was ¥93 billion in sales and ¥7 billion in operating profit, the revised FY2026 forecast (¥8.5 billion in operating profit) indicates that the profit target will be achieved and exceeded one year ahead of schedule . This sets the stage for the long-term vision "Next10" (2030) of ¥120 billion in sales and ¥10 billion in operating profit.

Two key qualitative developments are:

① Acquisition of All Shares of Fujiko Co., Ltd. (Consolidation)

The [Acquisition of Fujiko Co., Ltd. Shares] slide marks a milestone in the company's portfolio reform. In January 2026, Okura acquired Fujiko , which possesses advanced film processing technology (e.g., gravure coating) for the automotive, electronics, and semiconductor sectors. Vertical integration of Okura's "film forming technology" and Fujiko's "film processing technology" is creating synergies:

• Procurement/Sales : Optimization of raw material costs and enhanced brand utilization.
• Manufacturing : Cost competitiveness through the integration of production bases in Kagawa Prefecture.
• Development : Joint development of high-market-value products through an integrated material-to-processing system.
• Accelerated Investment : ¥1.16 billion in capital investment for Fujiko (gravure coating machine, scheduled for 2028) is expected to generate an additional ¥250 million in operating profit.

Due to these synergies, the 2030 operating profit target for Fujiko has been revised upward from ¥1 billion to ¥1.5 billion .

② Global Expansion of Optical Films via Joint Venture with BOE

In March 2026, the company signed a joint venture agreement with BOE Technology Group , a world-leading display manufacturer, to establish "Hefei Jingcang New Material Technology Co., Ltd." (Ownership: BOE 66%, Okura 34%). By strengthening the supply chain for BOE's high-end displays, the company aims to expand its global market share and establish its products as the de facto standard .

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6. Future Outlook and Summary

Okura Industrial's Q2 FY2026 results underscore a period of rapid growth and structural reform. Key points for investors to watch include:

1. Responsiveness to Raw Material/Currency Trends : Ability to continue timely price revisions in response to Naphtha and crude oil price fluctuations.
2. Realization of Vertical Integration Synergies with Fujiko : Whether profit-boosting effects from joint development and production optimization materialize as planned.
3. Profitability of the Building Materials Business : Whether the wood-based structural materials business becomes a stable revenue source following JAS certification at the Takase Plant.
4. JV Preparations with BOE : Progress toward the 2028 line launch and expansion of optical film market share.

With the strengthening of the core Synthetic Resin business and the pursuit of high-value-added products through M&A and global partnerships, the company is clearly transitioning to its next stage of growth.