YAMATO CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥26.40B
• Operating Income: ¥2.42B
• Net Income: ¥1.36B
• EPS: ¥90.94

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: Strong Q2 performance with double-digit profit growth, margin expansion, and high-quality cash generation. Revenue rose 7.8% YoY to 264.01, while operating income surged 40.9% YoY to 24.19, demonstrating meaningful operating leverage. Net income increased 62.0% YoY to 21.88, aided by non-operating gains and despite a higher effective tax rate of 32.5%. Operating margin improved to 9.2% (approx.) from about 7.0% a year ago, a roughly 216 bps expansion driven by cost discipline and scale benefits. Net margin stepped up to 8.3% from approximately 5.5% YoY, a roughly 277 bps expansion, supported by non-operating income (3.24) including dividend income (1.79) and interest income (0.34). Gross margin stands at 12.0%, and EBITDA margin at 10.1%, indicating improved profitability through the cost stack. Ordinary income was 27.60, but profit before tax was 20.18, implying net extraordinary losses of roughly 7.4 (inferred, details unreported). Cash generation was robust with operating CF of 52.68, equivalent to 2.41x net income, signaling strong earnings quality. The balance sheet is conservative: current ratio at 201% and D/E at 0.49x, with net cash of roughly 66.9 (cash 116.26 vs. total loans 49.39). Equity ratio (calculated owners’ equity/total assets) is about 67%, underscoring ample solvency headroom. ROE is 5.6% on low financial leverage (1.49x) and modest asset turnover (0.455), pointing to scope for efficiency gains. ROIC is 5.0%, below a typical 7–8% target, suggesting returns are improving but not yet at best-in-class levels. Dividend sustainability appears solid with a calculated payout ratio of 49.6% and strong OCF coverage, even alongside share repurchases of 4.50 and modest capex of 2.67. Non-operating income accounts for roughly 15% of profit contribution, so recurring operating performance remains the main driver this quarter. Forward-looking, the improved margins and strong cash flow provide flexibility for disciplined growth investment and shareholder returns, though sustaining margin gains will depend on cost control and demand resilience. Data gaps (segment details, working capital components, and dividend cash payments) limit granularity, but available evidence points to a healthy trajectory.

Profitability Analysis

ROE decomposition: ROE 5.6% = Net Profit Margin (8.3%) × Asset Turnover (0.455) × Financial Leverage (1.49x). The largest driver of YoY improvement is the net profit margin, which expanded materially as operating income grew much faster than revenue (+40.9% vs. +7.8%). Operating margin improved from an estimated ~7.0% to 9.2% (+216 bps) on better operating leverage; EBITDA margin reached 10.1%. Non-operating income (3.24), notably dividend income (1.79), provided a secondary lift to ordinary income, though an inferred extraordinary loss narrowed PBT to 20.18, tempering some gains. Asset turnover at 0.455 remains modest, indicating underutilized assets or a capital-heavy base; this limits ROE despite margin expansion. Financial leverage is low at 1.49x, which supports balance sheet strength but caps ROE magnification. Sustainability: margin gains appear driven by core execution (cost control/scale) and look partly sustainable if revenue momentum holds; however, the contribution from dividends/interest is less controllable. Watch for any SG&A growth outpacing revenue; SG&A is 14.51 but YoY detail is unreported, so we cannot confirm operating expense trends. Overall, improved operating leverage is the key positive, with asset efficiency the main constraint.

Growth Assessment

Top-line growth of 7.8% YoY to 264.01 indicates steady demand. Operating profit growth of 40.9% outpaced sales, evidencing healthy operating leverage. Net income rose 62.0%, aided by non-operating income and despite a 32.5% effective tax rate. The mix of operating vs. non-operating contributions remains balanced, with operating profit the primary engine and dividends/interest a supportive tailwind. Revenue sustainability appears reasonable given broad-based profitability improvements, but segment/backlog details are unreported, limiting visibility. The inferred extraordinary loss this quarter suggests some one-off headwinds; absent detail, we treat it as non-recurring until disclosed otherwise. ROIC at 5.0% trails typical targets (7–8%), implying further scope for portfolio/asset efficiency optimization to sustain growth in economic profit. Near-term outlook: if cost discipline holds and pricing/mix remain favorable, operating margins could stay near the current ~9% zone; key swing factors will be input costs and demand elasticity. Medium term, improving asset turnover (e.g., via better capital deployment or divestment of low-yield assets) would be pivotal for lifting ROE/ROIC.

Financial Health

Liquidity is strong: current ratio 201% and quick ratio 201% (limited inventory/AR disclosure). No warning (current ratio well above 1.0). Solvency is solid with D/E 0.49x and an estimated equity ratio around 67% (owners’ equity/total assets). Interest coverage is very strong at 185.85x, indicating minimal near-term financing risk. Short-term loans of 44.50 are well covered by cash and deposits of 116.26, suggesting low maturity mismatch risk. Long-term loans are modest at 4.89. Net cash position is approximately 66.9, providing optionality for investment and shareholder returns. Off-balance sheet obligations are not disclosed; no specific commitments reported in the data. Overall capital structure appears conservative and resilient.

Cash Flow Quality

Earnings quality is high with OCF/Net Income at 2.41x, indicating strong cash conversion. Estimated FCF (OCF minus capex) is about 50.01, comfortably covering likely shareholder returns (repurchases of 4.50 and an estimated dividend outlay implied by a 49.6% payout on NI). Working capital details (AR, inventories, AP) are unreported, limiting the assessment of any timing effects; however, the magnitude of OCF vs. NI suggests no obvious manipulation. Financing CF of -11.43 likely reflects a mix of debt service and shareholder returns; precise breakdown is unreported. Given cash on hand (116.26) and low debt, current FCF levels look sustainable barring a sharp downturn in earnings.

Dividend Sustainability

The calculated payout ratio is 49.6%, below the 60% threshold commonly viewed as sustainable. With OCF at 52.68 and estimated FCF of ~50.01, cash generation comfortably supports dividends alongside modest buybacks (4.50) and capex (2.67). Total dividends paid are unreported, but applying the payout ratio to net income (21.88) implies dividend cash out near ~10.9, leaving ample residual cash flow. Balance sheet strength (net cash position and high equity ratio) further underpins dividend capacity. Policy outlook is not disclosed; however, current metrics support stable to moderately rising dividends if earnings trajectory holds and capital needs remain modest.

Risk Assessment

Business Risks:

• Margin sustainability risk if input costs rise or competitive pricing intensifies, potentially reversing the ~216 bps operating margin expansion.
• Demand sensitivity: revenue growth of 7.8% may moderate with macro slowdown or sector-specific cyclicality.
• Execution risk on cost control; SG&A details are not disclosed, limiting visibility on fixed-cost trends.
• Reliance on non-operating income (dividends/interest totaling 3.24) introduces variability if market yields or investee payouts change.

Financial Risks:

• Extraordinary loss impact: ordinary income exceeds PBT by ~7.4 (inferred), suggesting exposure to one-off items that could recur.
• Interest rate risk on short-term loans (44.50), though mitigated by large cash balance (116.26).
• Limited disclosure of working capital components constrains visibility into receivables/inventory risk.
• ROIC at 5.0% below typical 7–8% targets, indicating potential return dilution if capital deployment is not disciplined.

Key Concerns:

• Data gaps (segment profit, SG&A breakdown, WC composition, dividend cash payments) may mask emerging pressures.
• Sustained improvement in asset turnover (0.455) is needed to lift ROE beyond mid-single digits.
• Tax rate at 32.5% could remain a drag if no structural relief is achieved.

Investment Implications

Key Takeaways:

• Strong quarter with revenue +7.8% and operating income +40.9%, delivering notable operating leverage.
• Operating margin expanded roughly 216 bps YoY to ~9.2%; net margin up ~277 bps to 8.3%.
• High-quality earnings with OCF/NI at 2.41x and estimated FCF ~50.0.
• Balance sheet strength: net cash ~66.9 and equity ratio ~67% (calculated).
• ROE at 5.6% and ROIC at 5.0% indicate room for improvement via asset efficiency and disciplined capital allocation.
• Non-operating income supportive but not dominant; watch variability in dividend/interest income.
• Inferred extraordinary losses (~7.4) warrant monitoring for recurrence.

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio (when disclosed) to confirm ongoing operating leverage.
• Asset turnover and ROIC progression toward 7–8%.
• Composition of non-operating items, especially dividend income trends vs. investment securities (133.90).
• Working capital metrics (AR days, inventory days, AP days) once disclosed to validate cash conversion.
• Extraordinary gains/losses detail to assess recurring vs. one-time effects.
• Dividend policy disclosures (DPS, payout, timing) and buyback cadence relative to FCF.

Relative Positioning: Relative to peers with similar scale, the company exhibits stronger liquidity, low leverage, and superior interest coverage, with improving but still mid-tier returns (ROE/ROIC). The quarter’s margin expansion and cash generation position it favorably near-term, but structural efficiency (asset turnover, ROIC uplift) remains the key delta to best-in-class performers.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis