TOYOBO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥204.02B
• Operating Income: ¥11.79B
• Net Income: ¥2.15B
• 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

Toyobo Co., Ltd. (3101) FY2026 Q2 results show resilient underlying operations despite top-line softness and unusual movements below operating income. Revenue declined 2.5% year over year to ¥204.0bn, yet operating income rose 70.1% to ¥11.8bn, indicating strong cost control, improved product mix, and/or normalization of prior cost pressures. Gross margin was 23.2% and EBITDA margin 11.3%, evidencing a clear recovery in profitability versus the topline trend. Ordinary income of ¥10.1bn sits below operating income due to net non-operating expenses, including interest expense of ¥0.92bn. Net income of ¥5.73bn fell 94.3% YoY despite the operating recovery, implying sizeable extraordinary factors in the prior year and/or this year; the provided effective tax rate of 0.0% also suggests non-recurring items or timing effects under JGAAP. DuPont analysis points to a low ROE of 2.44%, driven mainly by a thin net margin (2.81%) and modest asset turnover (0.335), partially offset by moderate financial leverage (2.60x). Liquidity is solid with a current ratio of 166.9% and a quick ratio of 126.3%, and working capital of ¥107.2bn supports operational stability. Capital structure is geared but manageable, with a reported debt-to-equity ratio of 1.64x and interest coverage at 12.9x on an EBIT basis. Cash flow quality appears strong: operating cash flow of ¥17.1bn is 2.98x net income, indicating robust cash conversion from earnings. However, several disclosures are missing or zero-reported in XBRL (investing cash flows, cash and equivalents, equity ratio, share data), limiting full assessment of free cash flow, per-share metrics, and capital allocation. Dividend per share and payout ratio are shown as zero, which we interpret as not disclosed for the period rather than actual zero distribution. Overall, the quarter reflects improved core profitability and disciplined cost management amid a softer demand environment. The gap between operating and bottom-line trends raises the importance of monitoring non-operating and extraordinary items under JGAAP. Inventory levels at ¥65.1bn look manageable relative to sales, but working capital dynamics remain a key lever for cash generation. Looking ahead, sustaining margin gains while stabilizing revenue will be critical to lift ROE toward sector norms. We view the operating momentum as a positive signal, tempered by data limitations and uncertainty around one-off items impacting net income and taxes.

Profitability Analysis

ROE is 2.44% from DuPont factors: net profit margin 2.81%, asset turnover 0.335, and financial leverage 2.60x. Gross margin of 23.2% and EBITDA margin of 11.3% indicate improved cost pass-through and mix resilience despite a 2.5% revenue decline. Operating margin is 5.8% (¥11.79bn/¥204.02bn), up materially YoY given operating income growth of +70.1%, evidencing operating leverage from fixed-cost absorption and expense discipline. The spread between operating and ordinary income reflects net non-operating costs, notably interest expense of ¥0.92bn; however, interest coverage at 12.9x (EBIT/interest) remains comfortable. Net margin of 2.81% is subdued relative to operating margin, consistent with non-operating or extraordinary impacts under JGAAP. The margin structure implies quality improvement at the operating level, but bottom-line volatility persists. Given the revenue contraction, positive operating income growth confirms favorable operating leverage; sustaining this requires maintaining pricing/mix and controlling raw material and energy costs. Depreciation and amortization of ¥11.18bn imply capital intensity consistent with films/functional materials; EBITDA of ¥22.97bn provides cushion for reinvestment. Overall profitability is recovering in the core, but ROE remains low due to thin net margins and modest turnover.

Growth Assessment

Revenue declined 2.5% YoY to ¥204.0bn, signaling softer demand or portfolio pruning; however, significant operating income growth (+70.1% YoY) suggests underlying improvement from mix, pricing, and cost normalization. Ordinary income (¥10.06bn) trails operating income (¥11.79bn), muting the translation of operating gains into pre-tax profit growth. Net income dropped 94.3% YoY to ¥5.73bn, likely reflecting extraordinary items or prior-year one-offs; this distorts comparability and clouds trend analysis at the bottom line. Margin expansion (gross 23.2%, EBITDA 11.3%, operating 5.8%) points to structural actions gaining traction. Asset turnover at 0.335 is modest and implies room to enhance capital efficiency or optimize portfolio assets. Given strong OCF relative to net income, profit quality at the operating level appears sound. Outlook hinges on sustaining pricing/mix in functional materials, managing input costs, and stabilizing end-market demand (packaging films, industrial materials, life science-related). In the near term, revenue growth may be constrained by macro softness; medium term, mix upgrades and productivity should support operating profit sustainability. Extraordinary and non-operating items will be key to translating operating gains into consistent EPS growth.

Financial Health

Total assets are ¥609.57bn and total equity ¥234.77bn, implying financial leverage of ~2.60x (assets/equity) and an implied equity ratio around 38.5% (vs. the reported 0.0% which is undisclosed). Total liabilities are ¥385.76bn. Liquidity is robust: current assets ¥267.50bn vs. current liabilities ¥160.32bn, yielding a current ratio of 166.9% and quick ratio of 126.3%. Working capital stands at ¥107.18bn, providing operational flexibility. Debt-to-equity is reported at 1.64x; with EBIT interest coverage at 12.9x and EBITDA coverage significantly higher, solvency risk is moderate but manageable. Inventories are ¥65.06bn; relative to sales, inventory levels look reasonable, but turnover should be monitored given the revenue decline. The small ordinary-income-to-operating-income gap and limited interest burden suggest no immediate refinancing stress. Overall balance sheet strength supports ongoing operations and investment needs, though capital intensity necessitates disciplined capex and working capital management.

Cash Flow Quality

Operating cash flow of ¥17.1bn is 2.98x net income, indicating strong cash conversion and limited accrual reliance in the period. EBITDA of ¥22.97bn supports the OCF level, consistent with improved operating margins. Working capital appears supportive; despite inventories of ¥65.06bn, the company generated positive OCF, implying effective collection and payables management. Investing cash flow is shown as zero (undisclosed), so capex and acquisition/disposal activity cannot be assessed; consequently, free cash flow is not determinable from the dataset (the listed FCF of 0 should be treated as unavailable, not actual zero). Financing cash flow of ¥1.28bn suggests modest net inflow, but the components (debt drawdown/repayment, dividends, buybacks) are not disclosed. Earnings quality on a cash basis is favorable at the operating level, but full FCF quality and sustainability cannot be concluded without capex detail. Monitoring the alignment between EBITDA, OCF, and capex will be essential to judge true free cash generation.

Dividend Sustainability

Annual DPS and payout ratio are shown as 0.00, which we interpret as not disclosed for the period rather than an actual zero distribution. Without investing cash flow and capex data, free cash flow coverage of dividends cannot be evaluated; the provided FCF coverage of 0.00x is not meaningful in this context. EPS is ¥64.98 for the period, but outstanding shares and BVPS are undisclosed, limiting per-share capital return assessment. From a capacity standpoint, operating cash flow of ¥17.1bn and healthy interest coverage suggest room for shareholder returns, subject to reinvestment needs and leverage considerations. Dividend policy visibility remains low in this dataset; clarity on full-year guidance, capex plans, and any extraordinary gains/losses will determine payout sustainability.

Risk Assessment

Business Risks:

• Demand softness in end-markets (packaging films, industrial materials) pressuring revenue growth
• Raw material and energy price volatility affecting gross margins
• FX fluctuations (yen volatility) impacting import costs and export competitiveness
• Customer inventory adjustments and order volatility in cyclical segments
• Product mix and pricing execution risk as the company shifts to higher-value offerings
• Supply chain disruptions affecting procurement and delivery lead times
• Regulatory and environmental compliance costs in chemicals/materials

Financial Risks:

• Moderate leverage (D/E 1.64x) amid capital-intensive operations
• Exposure to non-operating/extraordinary items creating bottom-line volatility under JGAAP
• Interest rate risk on floating-rate debt, though current coverage is adequate
• Working capital swings affecting cash generation in downturns
• Limited visibility on capex and investing cash flows impeding FCF assessment

Key Concerns:

• Sharp YoY decline in net income (−94.3%) despite operating recovery, implying significant one-offs
• Undisclosed investing cash flows and cash balance, limiting FCF and liquidity analysis
• Effective tax rate shown as 0.0%, suggesting timing or extraordinary impacts that may not be recurring

Investment Implications

Key Takeaways:

• Core operating performance improved materially (operating income +70.1% YoY) despite a 2.5% revenue decline
• ROE at 2.44% remains below typical sector targets due to low net margin and modest asset turnover
• Liquidity is strong with a 167% current ratio and 126% quick ratio; interest coverage is comfortable at 12.9x
• OCF robustness (OCF/NI 2.98x) indicates solid earnings quality, but capex disclosure is needed to confirm FCF
• Bottom-line volatility from non-operating/extraordinary items is the key swing factor for EPS

Metrics to Watch:

• Operating margin progression and EBITDA margin sustainability
• Capex and investing cash flows to determine true free cash flow
• Inventory turnover and receivables collection to sustain OCF
• Non-operating and extraordinary items under JGAAP impacting net income and taxes
• Leverage (net debt/EBITDA) and interest coverage, especially if rates rise
• FX sensitivity and raw material cost pass-through

Relative Positioning: Within Japanese functional materials/chemicals peers, Toyobo shows improving operating execution and cash conversion but lags on ROE due to thin net margins and modest asset turnover; balance sheet liquidity is comparatively strong, while disclosure gaps on capex/FCF constrain visibility versus best-in-class peers.

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