Kuraray (3405): FY2025 Results Summary — Profit Decline on Inventory Valuation Differences and Isoprene Impairment

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Kuraray Co., Ltd. (TSE Prime: 3405), a specialty chemicals maker, announced its FY2025 results (fiscal year ended December 31, 2025) on February 10, 2026. Net sales came to 808.4 billion yen, down 18.4 billion yen from FY2024, and operating income fell 26.2 billion yen to 58.9 billion yen, as inventory valuation differences and a decrease in sales volume weighed on profit. Net income attributable to owners of the parent dropped to 7.5 billion yen, primarily reflecting the recognition of impairment losses in the Isoprene segment. For FY2026, the company guides for net sales of 850.0 billion yen and operating income of 70.0 billion yen, and plans an annual dividend of 64 yen per share including a 10 yen commemorative dividend for its 100th anniversary, alongside a share buyback of up to 10.0 billion yen.

Consolidated Results (Full-Year Actual)

All amounts below are in billions of yen as presented in the company’s materials. Operating income declined due to negative impacts from inventory valuation differences and a decrease in sales volume. Net income decreased, primarily reflecting the recognition of impairment losses in the Isoprene segment. Against the previous forecast announced on November 12, 2025 (net sales 810.0, operating income 60.0, ordinary income 53.0, net income 23.0), results fell short by 1.6, 1.1, 1.5, and 15.5 billion yen, respectively.

Item (Billion yen)	FY2025	FY2024	Difference
Net Sales	808.4	826.9	(18.4)
Operating Income	58.9	85.1	(26.2)
Ordinary Income	51.5	81.5	(30.0)
Net Income Attributable to Owners of the Parent	7.5	31.7	(24.3)

Average exchange rates were 150 yen to the U.S. dollar (FY2024: 152) and 169 yen to the euro (FY2024: 164). Domestic naphtha averaged 68 thousand yen per kiloliter versus 75 in FY2024, while U.S. natural gas rose to 3.6 USD/MMBtu from 2.4. On the cash flow side, operating cash flow was 98.6 billion yen (FY2024: 138.3) and free cash flow was 0.5 billion yen (FY2024: 62.3), with CAPEX on an acceptance basis of 106.8 billion yen. Total assets stood at 1,303.5 billion yen as of December 31, 2025, with an equity ratio of 57.0% (59.2% a year earlier).

Segment Results

In the mainstay Vinyl Acetate segment, sales volume did not increase due to the European economic stagnation and other factors, and segment income decreased on the negative impact of inventory valuation differences and higher raw material and fuel prices. The Isoprene segment narrowed its operating loss to (4.9) billion yen thanks to the stabilization of operations at the Thai base, which also contributed to sales expansion. Functional Materials income decreased due in part to the negative effects of a cold wave in the U.S. and production difficulties, while Fibers & Textiles income increased on improvements in sales composition despite the European economic slowdown and EV production adjustments.

Segment (Billion yen)	Net Sales FY2025	Net Sales FY2024	Operating Income FY2025	Operating Income FY2024
Vinyl Acetate	404.5	414.9	62.5	87.6
Isoprene	80.4	76.4	(4.9)	(9.5)
Functional Materials	206.9	208.0	10.8	12.9
Fibers & Textiles	60.7	62.7	2.6	1.2
Trading	68.8	67.6	6.0	5.9
Others	40.8	50.9	1.8	2.3
Elimination & Corporate	(53.7)	(53.5)	(20.1)	(15.4)
Total	808.4	826.9	58.9	85.1

FY2026 Forecast

For FY2026 (ending December 31, 2026), Kuraray forecasts net sales of 850.0 billion yen, operating income of 70.0 billion yen, ordinary income of 64.0 billion yen, and net income attributable to owners of the parent of 40.0 billion yen. Assumed average exchange rates are 150 yen to the U.S. dollar and 175 yen to the euro. Compared with the previous FY2026 forecast announced on February 12, 2025 (net sales 900.0, operating income 110.0, net income 66.0), the new guidance is lower by 50.0, 40.0, and 26.0 billion yen, respectively. From FY2026, the segment classification of the Electronics Materials Promotion Division is changed from Others to Functional Materials, and FY2025 comparison figures on the forecast slides reflect this change.

Item (Billion yen)	FY2026 Forecast	FY2025 (Actual)	Variance
Net Sales	850.0	808.4	41.6
Operating Income	70.0	58.9	11.1
Ordinary Income	64.0	51.5	12.5
Net Income Attributable to Owners of the Parent	40.0	7.5	32.5
CAPEX (acceptance basis)	119.0	106.8	12.2
Depreciation and Amortization (incl. amortization of goodwill)	85.0	84.7	0.3
R&D Expenses	27.0	28.4	(1.4)

Shareholder Returns

Kuraray’s shareholder return policy is to maintain and increase dividends per share, to aim for continuous share buybacks, and to target a total return ratio of 50% or more. The FY2025 annual dividend is planned at 54 yen per share (interim 27 yen, year-end 27 yen). For FY2026, the company plans to pay a commemorative dividend of 10 yen for the year to celebrate Kuraray’s 100th anniversary, bringing the planned annual dividend to 64 yen per share (normal dividend of 27 yen plus commemorative dividend of 5 yen at both the interim and year-end). The company also decided to conduct a share buyback of up to 8.0 million shares (approximately 2.61% of total outstanding shares, excluding treasury stock) and up to 10.0 billion yen, with a buyback period from February 12, 2026 to May 31, 2026.

Medium-Term Plan / Topics

Under the Medium-Term Management Plan “PASSION 2026,” which extends to the company’s 100th anniversary in 2026, Kuraray is focusing resource allocation on core businesses while downsizing or withdrawing from noncore businesses. Progress items for FY2025 include optimization of production capacity in the methacrylate business, transfer of noncore businesses (Okayama Rinkoh Co., Ltd. and Takarazuka Nakayamadai Newtown), expansion of the optical-use poval film production line, restructuring of the polyester business, the end of production of KURARITY and VECSTAR FCCL, and the transfer of a methacrylic resin sheet manufacturing subsidiary in China and the stamper business. For FY2026, the company plans execution of construction work for the new EVAL plant in Singapore, further growth of the genestar and dental material businesses, and a decision to increase reactivated carbon production capacity in Europe and the U.S.

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.