Denka (4061): FY2025 Results Summary — V-Shaped Recovery in Operating Income on AI-Related Demand

This article is based on publicly available IR materials and is not a recommendation to buy or sell any specific securities.

Denka Co., Ltd (securities code: 4061) announced its results for FY2025 (fiscal year ended March 2026) on May 13, 2026. Sales declined to 384.2 billion yen (-16.0 billion yen year on year), while operating income achieved what the company describes as a V-shaped recovery to 26.2 billion yen (+11.8 billion yen year on year), driven by growing demand for semiconductors (AI-related) and power infrastructure together with the effects of fundamental measures for chloroprene rubber. Net income attributable to owners of parent returned to profit at 15.7 billion yen (+28.0 billion yen year on year), with ROE of 5.2%. For FY2026, the company forecasts operating income of 30.0 billion yen and plans to maintain the annual dividend at 100 yen per share.

Consolidated Results (Full-Year Actual)

Sales were 384.2 billion yen, down 16.0 billion yen year on year but 5.8 billion yen below the February forecast of 390 billion yen. Operating income rose to 26.2 billion yen (+11.8 billion yen year on year; +1.2 billion yen vs. the February forecast of 25.0 billion yen), lifting the operating margin from 3.6% to 6.8%. Net income attributable to owners of parent was 15.7 billion yen, a 28.0 billion yen improvement from the prior-year loss of -12.3 billion yen. According to the materials, net income increased significantly as DPE-related losses were compensated by a gain on sale of strategic cross-shareholdings and a gain on sale of land for the Ofuna Plant.

Item (¥ billions)	FY2024 Actual	FY2025 Actual	Year on Year	FY2025 February Forecast	vs. February Forecast
Sales	400.3	384.2	-16.0	390	-5.8
Operating income	14.4	26.2	+11.8	25.0	+1.2
Operating margin	3.6%	6.8%	+3.2%	6.4%	+0.4%
Ordinary income	7.6	19.3	+11.7	19.0	+0.3
Net income attributable to owners of parent	-12.3	15.7	+28.0	15.0	+0.7

Extraordinary items in FY2025 included a gain on sale of strategic cross-shareholdings of 12.6 billion yen (FY2024: 0.4 billion yen), a gain on sale of land for the Ofuna Plant of 8.2 billion yen, a loss on liquidation of business, etc. (DPE-related, etc.) of -21.1 billion yen (FY2024: -25.1 billion yen), and other extraordinary gains and losses (gain on negative goodwill, etc.) of 2.4 billion yen. Assumptions for the year were an exchange rate of 150.2 yen/$ and Japan naphtha at 65,800 yen/kl.

Segment Results

By segment, Electronics & Innovative Products posted a significant profit increase, with operating income up 4.7 billion yen to 13.9 billion yen on expanding demand for semiconductors (AI-related) and power infrastructure and a moderate demand recovery for semiconductors (general-purpose). Elastomers & Infrastructure Solutions eliminated its losses, improving 8.0 billion yen to operating income of 0.1 billion yen, helped by the impact of the DPE production suspension (+8.8 billion yen). Polymer Solutions increased profit to 3.6 billion yen, supported by revisions to appropriate prices for food wrapping sheets and containers together with the production consolidation of Toyokalon. Life Innovation declined to 6.2 billion yen as shipments of COVID-19 test kits decreased due to lower testing demand.

Segment	Sales FY2024	Sales FY2025	Change	Operating income FY2024	Operating income FY2025	Change
Electronics & Innovative Products	92.2	104.4	+12.2	9.2	13.9	+4.7
Life Innovation	43.3	40.5	-2.7	9.6	6.2	-3.4
Elastomers & Infrastructure Solutions	111.7	97.6	-14.1	-8.0	0.1	+8.0
Polymer Solutions	135.4	124.2	-11.2	1.2	3.6	+2.4
Others	17.7	17.6	-0.2	2.5	2.4	-0.0
Total (¥ billions)	400.3	384.2	-16.0	14.4	26.2	+11.8

FY2026 Forecast

For FY2026 (fiscal year ending March 2027), Denka forecasts sales of 450.0 billion yen (+65.8 billion yen year on year), operating income of 30.0 billion yen (+3.8 billion yen), ordinary income of 20.0 billion yen (+0.7 billion yen), and net income attributable to owners of parent of 16.0 billion yen (+0.3 billion yen). The company has incorporated a -5.0 billion yen impact from the situation in the Middle East into its Mission 2030 Management Plan Phase 2 targets, so the operating income forecast is 5.0 billion yen below the Phase 2 plan of 35.0 billion yen and the net income forecast is 2.0 billion yen below the plan of 18.0 billion yen. Forecast assumptions include an exchange rate of 158.0 yen/$ and Japan naphtha at 123,250 yen/KL, with material procurement disrupted during 1H and recovering to normal conditions from October. Excluding the Middle East impact, Electronics & Innovative Products was revised upward on expanding demand for AI-related products (SNECTON, spherical fused silica, spherical alumina, etc.), while Life Innovation’s sales volume of rapid antigen test kits was revised downward in response to current trends in infectious disease outbreaks.

Item (¥ billions)	FY2025 Actual	FY2026 Forecast	Year on Year
Sales	384.2	450.0	+65.8
Operating income	26.2	30.0	+3.8
Operating margin	6.8%	6.7%	-0.2%
Ordinary income	19.3	20.0	+0.7
Net income attributable to owners of parent	15.7	16.0	+0.3

By segment, operating income in Elastomers & Infrastructure Solutions is forecast to increase significantly to 7.0 billion yen (+6.9 billion yen) due to the impact of the DPE production suspension (+6.2 billion yen). Electronics & Innovative Products is forecast at 13.0 billion yen (-0.9 billion yen), as production of acetylene black and other products decreases due to raw materials procurement restrictions caused by the Middle East situation despite growing AI and power infrastructure demand. Polymer Solutions is forecast at 2.0 billion yen (-1.6 billion yen) on styrene monomer periodic maintenance costs and Middle East-related production cuts, and Life Innovation at 6.0 billion yen (-0.2 billion yen). Under the Best Practices Project, cost reductions of 3.7 billion yen were achieved in FY2025, and 6.8 billion yen has been factored into the revised FY2026 forecast.

Shareholder Returns

Denka plans to maintain the FY2026 dividend at 100 yen per share, unchanged from the previous year (a 54% total return ratio), in anticipation of improved cash flow. As its future dividend policy, the company aims to maintain or increase the dividend per share based on a total return ratio of 50% as a cumulative total for the eight years of the management plan. The FY2025 dividend was 100.0 yen per share (mid-term 50.0 yen, year-end 50.0 yen), with total dividends of 8.6 billion yen and a total return ratio of 55%.

Item	FY2025 Actual	FY2026 Forecast
Dividends per share (yen)	100.0	100.0
Dividend total (¥ billions)	8.6	8.6
Total return ratio	55%	54%
ROE	5.2%	5.1%
DOE	2.8%	2.7%

Topics: DPE Production Suspension and AI-Related Products

Regarding the production suspension at DPE (the company’s U.S. chloroprene rubber manufacturing subsidiary), the operating income impact of fundamental measures was +8.8 billion yen in FY2025 and is expected to be +15.0 billion yen in FY2026 (both vs. FY2024), in line with the plan. A certain amount of extraordinary losses is expected in FY2026 as well, which the company plans to offset by recording extraordinary gains, etc.; it will develop a plan for the anticipated closure early in the Mission 2030 Phase 2 period (FY2026-FY2028). DPE’s workforce has been reduced from approximately 250 employees at the end of March 2025 to approximately 80 at the end of April 2026. Among AI-related products, SNECTON (a low dielectric organic insulation resin) has been certified by various CCL manufacturers, with construction of a dedicated plant to be completed in mid-May, and demand for spherical alumina for thermal conductive molding compound used in GDDR7 remains firm, with adoption for multilayer packages of high-speed memory also decided.

This article is an analysis based on publicly available information and is not a recommendation to buy or sell any specific securities. Investment decisions are your own responsibility.