Taiyo Kagaku Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥26.02B
• Operating Income: ¥3.61B
• Net Income: ¥2.35B
• EPS: ¥141.72

Income Statement

Balance Sheet

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

Taiyo Kagaku (consolidated, JGAAP) delivered a solid FY2026 Q2, with topline growth translating into materially stronger operating profits. Revenue rose 4.2% YoY to ¥26.0bn, while operating income increased 21.7% to ¥3.61bn, evidencing operating leverage and effective cost control. Gross profit reached ¥7.07bn, implying a gross margin of 27.2%, and operating margin expanded to about 13.9%. Ordinary income was ¥3.88bn and net income was ¥2.39bn, yielding a net margin of 9.19%. Interest expense remained de minimis at ¥7.4m, supporting an exceptional interest coverage of roughly 485x. The effective tax burden calculated from disclosed figures is approximately 23.5% (¥909m tax on ¥3.88bn pre-tax), consistent with Japan’s statutory range. On balance sheet strength, total assets were ¥65.1bn and total equity ¥53.6bn, implying a high equity ratio of roughly 82.4% and low financial leverage of 1.21x. Liquidity appears robust with a current ratio of 392% and quick ratio of 321%, underpinned by working capital of ¥24.4bn. Inventory of ¥5.95bn equates to roughly two months of COGS (based on half-year COGS), suggesting healthy inventory intensity for a specialty food ingredients manufacturer. DuPont decomposition indicates ROE of 4.46%, driven by a 9.19% net margin, 0.40x asset turnover (half-year basis), and 1.21x leverage; the low leverage and modest turnover cap ROE despite solid profitability. EBITDA and cash flow metrics are not assessable from the provided data because depreciation and cash flow statements are undisclosed in this period. Dividend data are not available (DPS and payout show as zero placeholders), so distribution capacity cannot be concluded from this release alone. Overall, earnings quality appears reasonable given the alignment of operating, ordinary, and net results and a normal tax rate, while the balance sheet remains conservatively positioned. The main data limitation is the lack of cash flow and depreciation disclosure, which constrains assessment of free cash flow and capital intensity. Near-term outlook hinges on sustaining price/mix, managing input cost volatility, and maintaining discipline in SG&A to preserve margin gains.

Profitability Analysis

ROE_decomposition: ROE 4.46% = Net Margin 9.19% × Asset Turnover 0.40× × Financial Leverage 1.21× (all based on half-year revenue/assets; leverage based on period-end balance sheet). The low leverage and modest turnover limit ROE despite healthy margins. margin_quality: - Gross margin: 27.2% (¥7,067m/¥26,023m). - Operating margin: 13.9% (¥3,608m/¥26,023m), up YoY given operating income +21.7% vs revenue +4.2%, indicating improved mix/cost control. - Ordinary margin: 14.9% (¥3,876m/¥26,023m), aided by minimal interest burden. - Net margin: 9.19% (¥2,391m/¥26,023m). The tax expense implies an effective tax rate of ~23.5%, consistent with statutory norms, supporting earnings quality. operating_leverage: Revenue growth of +4.2% coupled with operating income growth of +21.7% indicates positive operating leverage from fixed-cost absorption and/or SG&A efficiency. The spread between gross margin and operating margin (13.3pp) suggests controlled operating costs. Continued leverage will depend on sustaining volume/price while managing input costs.

Growth Assessment

revenue_sustainability: Topline grew 4.2% YoY to ¥26.0bn. For a food ingredients portfolio, this likely reflects pricing/mix and steady demand across core applications; sustainability depends on contract renewals, customer demand in processed foods/health ingredients, and FX/raw material pass-through. profit_quality: Operating and ordinary profits scale sensibly with revenue, and the tax charge aligns with pre-tax income. Minimal interest expense indicates core operations, not financial items, drive profit. Absence of depreciation disclosure limits visibility on non-cash components, but there is no sign of unusual gains within ordinary income. outlook: If input cost inflation stabilizes and price pass-through remains effective, margins can be sustained near current levels. Continued SG&A discipline should maintain positive operating leverage at low-to-mid single digit sales growth. Key sensitivities: raw material prices (oils/oleochemicals, specialty inputs), energy costs, and FX on imported inputs.

Financial Health

liquidity: Current ratio 392% and quick ratio 321% indicate ample near-term liquidity. Working capital totals ¥24.44bn. Inventories at ¥5.95bn equate to roughly two months of half-year COGS, suggesting balanced stocking. solvency: Total liabilities ¥9.90bn vs equity ¥53.64bn implies a debt-to-equity of ~0.18x. Based on assets and equity, the equity ratio is approximately 82.4% (despite a reported placeholder 0.0%). Interest coverage is ~485x (operating income/interest), reflecting very low financial risk. capital_structure: Leverage is structurally conservative (financial leverage 1.21x). The company retains significant balance sheet flexibility to fund capex or absorb shocks without resorting to material borrowing.

Cash Flow Quality

earnings_quality: Tax expense to pre-tax income (~23.5%) and minimal interest costs support the credibility of earnings. However, absence of depreciation disclosure prevents assessment of non-cash earnings contribution. FCF_analysis: Operating, investing, and financing cash flows are not disclosed in this period (zeros are placeholders). Consequently, free cash flow cannot be computed, and FCF-based payout or leverage assessments cannot be performed. working_capital: With current assets ¥32.80bn and current liabilities ¥8.36bn, liquidity headroom is strong. Inventory of ¥5.95bn approximates ~60 days on half-year COGS, which appears reasonable; receivables/payables details are not provided, limiting full cash conversion analysis.

Dividend Sustainability

payout_ratio_assessment: DPS and payout are not disclosed (zeros are placeholders). EPS for the period is ¥141.72, but without dividend data, payout cannot be assessed. FCF_coverage: Unavailable due to non-disclosure of operating and investing cash flows. No conclusion can be drawn on FCF coverage of dividends. policy_outlook: Given the conservative balance sheet (high equity ratio, low debt), the company appears to have capacity for stable distributions, but actual policy (interim vs year-end, payout target) is not discernible from this dataset.

Risk Assessment

Business Risks:

• Raw material price volatility (oils, specialty chemical inputs, energy) impacting gross margins
• Price pass-through risk and competitive pricing pressure from peers and private labels
• Customer concentration and contract renewal risk in food manufacturers
• Demand variability in processed foods and health ingredients amid macro shifts
• Regulatory and food safety compliance requirements across regions
• FX fluctuations affecting imported inputs and export competitiveness

Financial Risks:

• Potential working capital swings (inventory and receivables) affecting cash conversion
• Input cost spikes compressing margins before pricing adjustments
• Capex needs for capacity/quality upgrades impacting free cash flow (D&A not disclosed)
• Limited visibility on cash flows in the period due to non-disclosure

Key Concerns:

• Lack of cash flow disclosure prevents assessment of cash generation and FCF
• D&A not disclosed, obscuring EBITDA and capital intensity analysis
• Reported equity ratio metric shows 0.0% despite a strong balance sheet, indicating metric non-disclosure

Investment Implications

Key Takeaways:

• Solid operating performance with revenue +4.2% YoY and operating income +21.7% YoY
• Margins healthy: gross 27.2%, operating ~13.9%, net 9.19%
• ROE 4.46% constrained by low leverage (1.21x) and modest asset turnover (0.40x, half-year basis)
• Balance sheet conservatism: equity ratio ~82%, D/E ~0.18x, interest coverage ~485x
• Cash flow and D&A undisclosed; FCF and EBITDA not assessable this period

Metrics to Watch:

• Operating cash flow and free cash flow (cash conversion from earnings)
• Depreciation and capex (to gauge capital intensity and maintenance vs growth spend)
• Gross margin progression and price/mix vs input cost indices
• Inventory turns and receivables days (working capital discipline)
• FX sensitivity and raw material cost pass-through effectiveness
• ROE trajectory (via asset turnover improvements and capital allocation)

Relative Positioning: Within Japanese food ingredient peers, Taiyo Kagaku exhibits above-average balance sheet strength and strong interest coverage, with mid-teens operating margin. ROE trails asset-light peers due to conservative leverage and moderate asset turnover, implying quality earnings but modest capital efficiency.

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
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