Kao Corporation

Net sales increased 6.6% year on year to ¥389.9 billion, or 6% excluding currency effects. Gross margin improved 0.5 percentage points to 38%, operating income was ¥31.2 billion, net income attributable to owners of the parent was ¥22.8 billion, up 38.7% year on year, and EPS was ¥49.19, up 38.9%. Operating income exceeded ¥30 billion for the first time in four years, and ROIC improved by 1.5 points year on year. For fiscal 2025, management maintained its full-year forecast, saying tariff-related downside should be limited and that it still expects ¥160 billion in operating income, up ¥13.4 billion, with a ¥10 billion raw material headwind offset by a ¥15 billion price adjustment and other cost actions.

Masakazu Negoro framed fiscal 2025 as a year to build a foundation for global growth toward K27, using stable earnings to fund growth investments. He said the company is steadily executing its basic strategy, with Q1 showing sales growth and operating margin expansion, and that the K27-related transformation is beginning to bear fruit. His tone was constructive but cautious, acknowledging tariff risk while emphasizing measures to keep the impact small and preserve the full-year outlook.

Management highlighted that company-wide gross margin improved to 38% from 37.4%, helped by higher-value products, cost reductions, and mix improvement rather than price actions alone. The GC business improved gross profit margin by 1.7 points, while the chemicals segment saw a 1.7-point decline from price increases; operating income in GC rose ¥8.2 billion year on year to ¥22.8 billion. For the full year, they expect operating income of ¥160 billion, including over ¥14 billion of improvement from higher earning power, a ¥10 billion raw material cost burden, ¥19 billion of SG&A increase, and a revised chemicals gross profit increase of ¥3.5 billion. They also said tariffs should be capped at ¥1.5 billion or less in GC and ¥500 million or less in chemicals.

The main concerns raised in the prepared remarks were U.S. tariffs and sustained high raw material prices. Management said tariff effects should be manageable because of local sourcing and local production, and that they are reviewing procurement, production, USMCA utilization, and pricing actions to reduce the hit. On raw materials, they said fats and oils and palm kernel oil remain elevated and may stay high through the third quarter and beyond, but they still expect the overall annual impact to be ¥10 billion and believe it can be offset.