TOYOBO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥204.02B
• Operating Income: ¥11.79B
• Net Income: ¥6.60B
• EPS: ¥64.98

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

Verdict: A mixed quarter—operating recovery and strong cash generation, but headline net income is depressed versus a one-off-inflated prior-year base, keeping ROE and ROIC weak. Revenue declined 2.5% YoY to 2,040.2, while operating income surged 70.1% YoY to 117.9, indicating solid cost discipline and improved spreads. Ordinary income rose 216.3% YoY to 100.6 despite a net non-operating loss (non-op: +14.6, non-op expenses: -31.9). Profit before tax was 70.3 and net income was 57.3, down 94.3% YoY, implying the prior-year quarter contained large one-time gains that inflated the base (extraordinary items not disclosed this period but implied by the large gap from ordinary income to PBT). Gross margin printed 24.8%, and operating margin improved to 5.8%. Based on revenue down 2.5% and OP up 70.1%, operating margin expanded approximately 247 bps YoY (from ~3.3% to 5.8%). OCF was robust at 275.3 (4.8x net income), supported by non-cash D&A of 118.4 and likely working capital tailwinds. Liquidity is healthy with a current ratio of 181% and quick ratio of 134%, and interest coverage of 8.5x safeguards near-term solvency despite a moderately elevated liabilities-to-equity profile (D/E 1.60x, total equity ratio ~38.5%). Capital efficiency remains a key weakness: ROE is only 2.4% and ROIC is 3.0% (below the 5% warning threshold). Non-operating drag and implied extraordinary losses continue to distort bottom line quality relative to operating recovery. The effective tax rate is 6.2%, unusually low and likely influenced by temporary items or tax credits; sustainability is uncertain. Dividend data are sparse, but the calculated payout ratio of 62.1% sits slightly above a conservative comfort zone (<60%), making cash coverage and future FCF critical watchpoints. Balance sheet composition (short-term loans 507 vs ample current assets 2,557) indicates manageable maturity risk. Forward-looking, the priority is to convert the improved operating momentum and OCF into durable ROIC uplift, deleveraging, and consistent EPS growth devoid of one-off volatility. Key sensitivities remain raw material/feedstock pricing, FX, and demand normalization in core end-markets (automotive, industrial materials, films). Overall, fundamentals are stabilizing at the operating line, but structural returns remain subpar, and optical performance at the net level is still clouded by non-recurring factors.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.4% = Net Profit Margin 2.8% × Asset Turnover 0.335 × Financial Leverage 2.60x. The most material change this quarter was in net operating profitability—operating income rose 70.1% YoY despite a 2.5% revenue decline, lifting operating margin from ~3.3% to 5.8% (+247 bps) and driving the NPM component higher. Business drivers likely include better price-cost spread (lower input costs or improved pricing), product mix enhancement, and tight SG&A control (SG&A at 389.1, flat to modestly lower versus revenue contraction). Asset turnover (0.335) remains low, reflecting a capital-intensive base and slower top-line environment; no evidence of material asset base shrinkage. Financial leverage at 2.60x is sizable and stable, providing only modest ROE lift given thin margins. Sustainability: margin gains appear partially sustainable if spread and cost discipline persist; however, non-operating drag and implied extraordinary impacts can continue to dilute NPM at the bottom line. Watch for adverse trends: any re-acceleration of SG&A ahead of revenue, or inventory build pressuring gross margin, would erode the recent operating leverage.

Growth Assessment

Top line contracted 2.5% YoY, suggesting a soft demand backdrop or strategic pruning. Despite this, operating profit growth of 70.1% YoY indicates efficiency gains and better spreads are the current growth engine. Ordinary income growth (+216% YoY) was strong, but a large gap to PBT implies extraordinary losses or non-recurring charges this period (details unreported), limiting translation to bottom-line EPS. EBITDA of 236.3 (11.6% margin) reflects improved operating cash earnings. Revenue sustainability near term hinges on end-market recovery (automotive, industrial materials, films) and pricing resilience; absent volume recovery, growth will rely on mix, pricing, and cost actions. Profit quality is better at the operating level than at the net level due to non-operating and extraordinary noise. Outlook: gradual margin normalization is plausible, but headline earnings could remain volatile if extraordinary items recur and if FX/raw materials move unfavorably.

Financial Health

Liquidity is solid: current ratio 181% and quick ratio 134% (both healthy). No warning for current ratio (<1.0) or D/E (>2.0); liabilities-to-equity of 1.60x is elevated but not extreme. Total assets 6,095.7; equity 2,347.7 implies an equity ratio of ~38.5%, a comfortable buffer. Short-term loans total 507.3 vs cash 260.4 and receivables 793.4, mitigating near-term maturity risk; working capital stands at 1,147.1. Long-term loans of 1,127.5 support the capital structure; interest coverage at 8.5x indicates good service capacity. No explicit off-balance sheet obligations were disclosed in the provided data. Overall solvency is adequate, though deleveraging would improve resilience and ROE.

Cash Flow Quality

OCF of 275.3 vs net income of 57.3 yields an OCF/NI ratio of 4.80x, signaling high earnings quality this quarter. D&A of 118.4 provides a substantial non-cash cushion, and OCF likely benefited from working capital release; exact components are unreported, so persistence is uncertain. Free cash flow could not be calculated due to unreported investing cash flows and capex; therefore, dividend and capex coverage cannot be fully assessed. No clear signs of working capital manipulation are observable from static balances alone; inventory (668.2) and receivables (793.4) look proportionate to sales, but without period-to-period deltas we cannot confirm turns improvement.

Dividend Sustainability

Annual DPS is unreported, but the calculated payout ratio of 62.1% sits slightly above a conservative threshold (<60%). With OCF robust, near-term cash coverage appears adequate; however, absent FCF data (capex and investing CF unreported), sustainability assessment is incomplete. Given low ROE (2.4%) and ROIC (3.0%), maintaining high payouts could constrain reinvestment and deleveraging. Policy outlook: expect management to balance shareholder returns with the need to lift ROIC and reduce leverage; watch for alignment with mid-term plan metrics.

Risk Assessment

Business Risks:

• Raw material and energy price volatility impacting spread and gross margins
• End-market demand softness in automotive, industrial materials, and films
• Product mix shifts potentially diluting margins if volume-led recovery dominates
• Operational execution risk in cost reduction and productivity initiatives

Financial Risks:

• Earnings volatility from non-operating and extraordinary items
• Moderately elevated leverage (liabilities/equity 1.60x) constraining flexibility
• Low ROIC (3.0%) relative to cost of capital, risking value dilution
• FX sensitivity (JPY fluctuations) impacting import costs and translated earnings

Key Concerns:

• Headline net income down 94.3% YoY despite operating recovery, implying heavy one-off distortions
• ROE at 2.4% and ROIC at 3.0% remain structurally weak
• Limited disclosure on capex and investing cash flows obscures FCF and dividend coverage
• Implied extraordinary losses between ordinary income and PBT reduce earnings visibility

Investment Implications

Key Takeaways:

• Strong operating margin recovery (+247 bps YoY) despite top-line contraction
• High-quality cash generation (OCF/NI 4.8x) provides balance-sheet support
• Net income volatility and low structural returns (ROE 2.4%, ROIC 3.0%) temper the improvement
• Leverage manageable but further deleveraging would enhance resilience and ROE
• Future performance hinges on sustaining price-cost spreads and avoiding extraordinary charges

Metrics to Watch:

• Operating margin trajectory and gross spread versus feedstock/energy costs
• Extraordinary gains/losses and other below-OP items affecting PBT and NI
• Capex and investing CF disclosures to assess FCF and dividend capacity
• ROIC progression toward >5% (warning line) and ideally toward 7–8%
• Working capital turns (inventory and receivables) and OCF consistency
• Interest coverage and liabilities/equity trend (deleveraging pace)
• FX sensitivity and hedging effectiveness

Relative Positioning: Within Japan’s diversified materials and industrial fibers/films peers, the company shows credible operating recovery and cash generation but lags on structural returns and capital efficiency. Balance-sheet liquidity is sound, yet ROIC below 5% and net income volatility place it in the lower-to-middle tier on quality until sustained ROIC uplift is demonstrated.

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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