Ensuiko Sugar Refining Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥16.67B
• Operating Income: ¥1.45B
• Net Income: ¥1.05B
• EPS: ¥55.21

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Ensuiko Sugar Refining Co., Ltd. (21120) delivered steady topline growth in FY2026 Q2, with revenue of ¥16.67bn (+3.1% YoY) and operating income of ¥1.45bn (+1.9% YoY). Gross profit reached ¥3.06bn, implying an 18.3% gross margin, while operating margin stood at approximately 8.7%, indicating tight but stable operating discipline. Ordinary income of ¥1.57bn exceeded operating income, suggesting positive net non-operating contributions (e.g., financial income, equity-method gains, or FX). Net income rose sharply to ¥1.52bn (+43.7% YoY), materially outpacing operating income growth, pointing to one-off or non-operating supports and/or tax effects. EPS printed at 55.21. DuPont analysis shows a 9.10% net margin, 0.546x asset turnover, and 1.68x financial leverage, yielding ROE of 8.33%, consistent with the reported figure. Interest expense was modest at ¥43m, with interest coverage of 33.7x, evidencing strong debt-servicing capacity. Operating cash flow was solid at ¥2.01bn, running 1.32x net income, supportive of earnings quality, though free cash flow cannot be assessed due to unreported investing cash flows. The balance sheet appears conservative: total assets of ¥30.54bn and equity of ¥18.20bn imply an equity-to-asset ratio around 59.6% (the reported equity ratio is undisclosed). Liquidity looks adequate with a current ratio of 123% and quick ratio of 105%, and working capital of ¥1.81bn. Inventory of ¥1.38bn appears manageable relative to sales scale, reducing commodity holding risk. Financing cash outflow of ¥1.15bn indicates deleveraging or other shareholder/financing activities, though dividends for the period are unreported and annual DPS is currently listed as zero. Depreciation of ¥284m implies an EBITDA of ¥1.73bn (10.4% margin), leaving a reasonable cash earnings cushion. Revenue growth marginally outpaced operating profit growth, which may suggest modest margin pressure from input costs or mix, but overall profitability remains resilient. Data gaps remain for cash, investing cash flows, and share data, limiting per-share and FCF diagnostics; conclusions are therefore based on the available non-zero items.

Profitability Analysis

ROE of 8.33% decomposes into: net margin 9.10% × asset turnover 0.546 × financial leverage 1.68. Net margin at 9.10% is healthy for a sugar refiner, aided by non-operating items (ordinary income > operating income by ~¥122m). Operating margin of ~8.7% (¥1,448m / ¥16,667m) indicates solid cost control despite commodity volatility. Gross margin at 18.3% reflects a reasonable spread over raw sugar and energy/logistics costs; YoY operating income growth trailing revenue (+1.9% vs +3.1%) hints at mild input cost pressure or adverse mix. EBITDA margin of 10.4% suggests moderate operating leverage with depreciation at ¥284m, indicating a relatively asset-light or well-depreciated base. Interest burden is minimal (¥43m), with coverage of 33.7x, allowing operating results to largely flow through to pretax earnings. The sizable jump in net income (+43.7% YoY) relative to operating income suggests profit quality includes non-operating/extraordinary contributions or tax effects; sustainability of this uplift should be monitored. Overall, margin quality appears sound, but incremental operating leverage looks modest given OI growth lagging sales.

Growth Assessment

Revenue grew 3.1% YoY to ¥16.67bn, indicating stable demand or price realization in the core sugar business. Operating income rose 1.9% YoY to ¥1.45bn, below sales growth, suggesting slight margin compression, likely from input costs (raw sugar, energy) or product/customer mix shifts. Ordinary income at ¥1.57bn benefitted from non-operating items, and net income at ¥1.52bn surged 43.7% YoY, implying one-offs or tax impacts that may not recur. Asset turnover at 0.546x (semiannual context) is consistent with an inventory-dependent business and suggests broadly steady efficiency. EBITDA of ¥1.73bn (10.4% margin) supports a moderate cash earnings base to invest in growth and resilience. While the topline trajectory appears sustainable near term, profit growth sustainability is less certain given the disproportionate contribution from non-operating/extraordinary items. External variables—global raw sugar prices, FX (imported inputs), energy/freight costs—remain key drivers of forward growth quality. Near-term outlook: stable revenue with cautious margin expectations; monitoring cost pass-through and hedging effectiveness will be essential.

Financial Health

Total assets are ¥30.54bn and total equity ¥18.20bn, implying an equity-to-asset ratio of roughly 59.6% (reported equity ratio figure is undisclosed), indicating a strong capital base. Total liabilities are ¥12.79bn, with current liabilities at ¥7.95bn. Liquidity appears adequate: current ratio ~123% and quick ratio ~105%, alongside working capital of ¥1.81bn, suggest comfortable near-term coverage. Debt-to-equity is 0.70x (provided), consistent with moderate leverage; coupled with 33.7x interest coverage, solvency risk is low. Inventories at ¥1.38bn are reasonable in context of sales, moderating commodity holding risk and potential write-down exposure. Financing cash outflow of ¥1.15bn points to deleveraging or other financing uses without evident strain on liquidity given strong OCF. Overall, balance sheet resilience is a strength.

Cash Flow Quality

Operating cash flow of ¥2.01bn exceeds net income of ¥1.52bn (OCF/NI = 1.32), indicating good earnings-to-cash conversion, likely aided by working capital discipline and solid underlying profitability. EBITDA of ¥1.73bn and D&A of ¥284m show that non-cash charges contribute appropriately to cash generation. Free cash flow cannot be assessed because investing cash flow is unreported in this period; thus FCF and FCF coverage metrics are indeterminable. Working capital appears well-managed given positive OCF and modest inventory levels; however, without details on receivables/payables changes, the durability of OCF strength cannot be fully validated. Financing outflows of ¥1.15bn were comfortably covered by OCF, implying no dependence on external funding for routine operations.

Dividend Sustainability

Annual DPS is shown as 0, and payout ratio is 0%, indicating no dividends reported for the period; this may reflect policy conservatism or timing, rather than an absence of capacity. With EPS at 55.21 and OCF exceeding net income, internal capacity to fund dividends appears available, but FCF coverage cannot be assessed due to missing investing cash flows. The company’s strong balance sheet and low interest burden support potential sustainability if/when distributions are made. Policy outlook remains unclear without guidance; retention of earnings may prioritize balance sheet strength and future investments given commodity-cyclical exposure.

Risk Assessment

Business Risks:

• Volatility in global raw sugar prices affecting input costs and gross margin.
• FX fluctuations (yen vs. USD/BRL) impacting import costs and hedging results.
• Energy and logistics cost swings influencing operating margin.
• Demand shifts due to health trends and sugar substitution by customers.
• Customer concentration and price competition in retail/industrial channels.
• Inventory valuation risks amid commodity price moves.
• Regulatory changes (food labeling, sugar taxes) impacting consumption.

Financial Risks:

• Working capital swings from commodity price changes and timing of purchases.
• Potential non-operating/extraordinary income volatility affecting bottom line.
• Interest rate risk on floating-rate debt despite currently low interest burden.
• Hedging effectiveness and counterparty risk in derivatives (if used).
• Limited visibility on capex and FCF due to unreported investing cash flows.

Key Concerns:

• Sustainability of net income strength given reliance on non-operating/one-off items.
• Mild margin compression as operating income growth lags revenue growth.
• Data gaps (investing cash flow, cash balance, share data) constrain full assessment.

Investment Implications

Key Takeaways:

• Stable topline growth (+3.1% YoY) with resilient operating profitability (8.7% margin).
• Net income jump (+43.7% YoY) likely aided by non-operating/extraordinary factors; sustainability uncertain.
• Strong cash conversion (OCF/NI 1.32) and ample interest coverage (33.7x) underpin financial strength.
• Solid balance sheet with equity-to-asset around ~60% and moderate leverage (D/E 0.70x).
• Liquidity is adequate (current ratio ~123%, quick ~105%) with positive working capital.
• FCF and capex outlook are unclear due to unreported investing cash flows.
• Dividend currently unreported (DPS=0); policy stance appears conservative pending better visibility.

Metrics to Watch:

• Gross and operating margin trends vs. raw sugar and energy cost movements.
• Ordinary-to-operating income gap to gauge non-operating contribution sustainability.
• OCF/NI ratio and working capital changes (inventory, receivables, payables).
• Capex and investing cash flows to assess FCF and reinvestment needs.
• Leverage and interest coverage as rates and credit conditions evolve.
• Pricing power and pass-through speed in response to commodity volatility.

Relative Positioning: Within Japan’s sugar refiners, Ensuiko exhibits conservative balance sheet management, strong cash generation relative to earnings, and moderate margins, positioning it as a stable operator with lower financial risk but typical exposure to commodity and FX cycles.

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