Kumiai Chemical Industry raised its full-year sales forecast on September 11 but cut profit guidance sharply, a split verdict that shows patent-cliff economics apply to crop chemicals as much as to drugs. Generic copies of one of its export herbicides have undercut prices badly enough to force an inventory writedown that guts operating income even as revenue climbs.
For the nine months through July, group sales rose 5.1% year-on-year to ¥141.4bn, but operating profit fell 26.7% to ¥7.6bn. The agrochemical and agricultural-related segment, which supplies about four-fifths of group sales, saw its own operating profit drop 32.0% to ¥6.8bn even as segment revenue rose 3.5% to ¥111.9bn. The company says generic entrants pushed down the herbicide's market price, forcing it to book an inventory valuation loss. Shipments to Australia and Argentina fell; only the US business grew, and only because Kumiai stepped up promotional spending there.
The full-year forecast, revised from guidance issued on December 12, tells the same story at scale.
| Metric | Previous forecast (Dec 12) | Revised forecast (Sept 11) | Change |
|---|---|---|---|
| Sales | ¥162.0bn | ¥175.0bn | +8.0% |
| Operating profit | ¥7.2bn | ¥2.7bn | -62.5% |
| Ordinary profit | ¥10.9bn | ¥8.5bn | -22.0% |
| Net profit (parent) | ¥6.4bn | ¥4.0bn | -37.5% |
| Earnings per share | ¥53.15 | ¥33.20 | — |
Revenue guidance rose 8.0% to ¥175.0bn on stronger agrochemical and chemicals sales, but operating profit guidance was cut 62.5%, to ¥2.7bn from ¥7.2bn.
Below the operating line, the damage narrows. Ordinary profit guidance fell a comparatively modest 22.0%, to ¥8.5bn, because higher equity-method investment gains and foreign-exchange gains tied to the weaker yen offset much of the operating shortfall, the company said. Net profit guidance was cut further, by 37.5% to ¥4.0bn, a decline the company attributes mainly to fixed-asset impairment losses and structural reform costs. The nine-month accounts already carry ¥907mn of structural reform costs and a ¥514mn impairment charge, concentrated in the chemicals business.
Chemicals supplied the one clean bright spot. Segment sales rose 19.5% to ¥22.5bn and operating profit rose 31.0% to ¥1.9bn, on demand for bismaleimide electronic materials used in generative-AI servers. That growth was not large enough to offset the agrochemical decline.
Revised guidance puts earnings per share at ¥33.20, down from the ¥53.15 originally forecast and below last fiscal year's actual ¥36.38. A bigger revenue base this year will produce a smaller per-share profit than last year's. The dividend forecast is untouched: an annual ¥24 a share, split between an interim ¥10 already paid and a planned ¥14 year-end payment. On the revised profit outlook, that implies a payout ratio of 72.3%, well above the company's stated target of 30% or more.
The fiscal year runs through October 31, leaving one more quarter for the herbicide's pricing pressure, or a recovery in it, to show up in the final numbers.