KURABO INDUSTRIES LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥69.25B
• Operating Income: ¥3.93B
• Net Income: ¥6.43B
• EPS: ¥384.12

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: Solid headline profit driven by one-time gains and robust non-operating income, while core operations saw mild pressure from revenue decline and slight margin compression. Revenue was 692.45, down 3.6% YoY, with operating income at 39.29 (-7.3% YoY) and ordinary income at 48.43 (-5.0% YoY). Net income surged to 64.21 (+87.5% YoY), aided by a sizable extraordinary gain implied by profit before tax of 91.48 versus ordinary income of 48.43 (c. 43 of one-off net gains). Gross profit was 145.55, yielding a gross margin of 21.0%. Operating margin was 5.7% this half, down from roughly 5.9% in the prior-year period, implying c. 23 bps compression. Non-operating income was 11.81, with dividend income of 9.88 and interest income of 0.90, highlighting continued support from financial assets. Cash generation was strong: operating cash flow reached 90.28 (OCF/NI 1.41x), comfortably outpacing net income and underscoring healthy earnings quality for the period. Liquidity and solvency are conservative, with a current ratio of 236.5%, quick ratio of 198.8%, and D/E of 0.51x. Interest coverage remains excellent at 37.8x, reflecting minimal financial stress. Capital efficiency is the key weakness: ROE is 5.1% and ROIC is only 2.4%, below the 5% warning threshold, due primarily to low asset turnover (0.364x). The profit mix leans on non-operating sources, including dividends from investment securities (616.72 on the balance sheet), and one-time gains boosted net income. SG&A was 106.25, about 15.3% of revenue; the slight OPM compression suggests limited operating leverage amid softer sales. Financing cash outflows of -87.35 included share repurchases of -29.01, signaling continued shareholder returns. Forward-looking, core profitability needs strengthening to lift ROIC, as one-time gains are not repeatable and revenue softness poses a headwind. The strong balance sheet provides flexibility, but improving asset efficiency and stabilizing core margins will be critical to sustain earnings and dividends without relying on extraordinary items.

Profitability Analysis

DuPont decomposition: ROE 5.1% = Net Profit Margin 9.3% × Asset Turnover 0.364 × Financial Leverage 1.51x. The most impactful component this half was the net profit margin, which was elevated by c. 43 of extraordinary gains and sizable non-operating income (dividends 9.88), while the operating margin compressed modestly (~23 bps YoY) due to revenue decline and stable SG&A burden. Asset turnover remains low at 0.364, reflecting a sizeable asset base (notably investment securities of 616.72) relative to sales, limiting capital efficiency. Financial leverage is modest (1.51x, equity ratio ~66%), so leverage contributed little to ROE changes. Business drivers: weaker top line (-3.6% YoY) and stable cost structure pressured operating margin; non-operating dividends and one-offs boosted bottom line. Sustainability: the elevated net margin is not fully sustainable absent repeat extraordinary gains; underlying ordinary earnings momentum is soft (ordinary income -5% YoY). Watch for SG&A discipline as SG&A growth versus revenue is not disclosed, but OPM contraction suggests limited operating leverage.

Growth Assessment

Top-line contracted 3.6% YoY to 692.45, indicative of a softer demand environment across core businesses. Operating income fell 7.3% YoY to 39.29, underperforming sales due to slight margin compression. Ordinary income declined 5.0% YoY despite higher dividend income, pointing to mixed core momentum. Net income jumped 87.5% to 64.21, driven primarily by c. 43 of extraordinary gains (PBT 91.48 vs ordinary income 48.43). EBITDA of 63.45 (9.2% margin) provides some cushion, but not enough to offset revenue softness without support from non-operating items. Revenue sustainability hinges on end-market recovery in textiles/chemicals and housing-related segments; current run-rate suggests cautious near-term growth. Profit quality is mixed: OCF is strong, but earnings composition includes non-recurring elements. Outlook: absent repeat one-time gains, bottom-line growth will depend on stabilizing sales, improving mix, and SG&A/control to rebuild OPM toward prior-year levels.

Financial Health

Liquidity is strong: current ratio 236.5% and quick ratio 198.8% indicate ample short-term coverage; no warning triggers (both well above benchmarks). Solvency is conservative with D/E 0.51x and interest coverage 37.8x; there is no leverage concern (well below the 1.5x D/E benchmark). Maturity mismatch risk appears low: current assets of 797.95 comfortably cover current liabilities of 337.40; short-term loans are modest at 40.42. Total liabilities are 644.91 versus total equity of 1,257.01, implying an equity ratio of ~66%. Off-balance sheet obligations are not disclosed in the provided data; none can be assessed.

Cash Flow Quality

OCF/Net Income is 1.41x (>1.0), indicating high-quality earnings conversion this period. With OCF at 90.28 and financing outflows of -87.35 (including share repurchases of -29.01), internal cash generation broadly covered shareholder returns; investing CF and capex are unreported, limiting full FCF assessment. Working capital appears supportive: cash and deposits are 150.03, AR 259.32, inventories 127.33, and AP 148.96; no overt signs of aggressive working capital pull-forward are evident from the limited datapoints. Potential manipulation signs are not observable given data gaps, but the strong OCF alongside declining revenue suggests underlying collection and inventory management were effective in H1.

Dividend Sustainability

The calculated payout ratio is 50.5%, within the <60% benchmark for sustainability. While DPS and total dividends paid are unreported, OCF of 90.28 indicates capacity to fund ordinary dividends and ongoing buybacks (29.01) without stressing liquidity. Caveat: net income was inflated by one-time gains; sustainable distributable earnings should be gauged against ordinary income/OCF rather than headline NI. Balance sheet strength (cash 150.03, low leverage) provides a buffer for steady dividends even if extraordinary gains normalize. Policy outlook cannot be inferred from disclosures, but the ongoing buybacks suggest continued commitment to shareholder returns while maintaining conservative leverage.

Risk Assessment

Business Risks:

• Demand softness in core textiles/chemicals/housing materials reflected in -3.6% YoY revenue decline
• Raw material price volatility (cotton, petrochemicals) impacting gross margin
• Currency fluctuation risk affecting input costs and export competitiveness
• Dependence on non-operating income (dividends 9.88) to support ordinary earnings
• Execution risk in SG&A control amid declining sales (OPM compressed ~23 bps)

Financial Risks:

• Low capital efficiency (ROIC 2.4%) may depress long-term value creation
• Large investment securities balance (616.72) exposes earnings and equity to market price volatility
• Earnings volatility from one-time gains (c. 43 of extraordinary income in H1)
• Potential dividend sustainability risk if extraordinary gains do not recur and OPM remains pressured

Key Concerns:

• Sustainability of net income given reliance on extraordinary gains in the period
• Weak asset turnover (0.364) restraining ROE and ROIC
• Top-line decline with only modest ability to flex costs
• Visibility on capex and investing cash flows is limited due to unreported items

Investment Implications

Key Takeaways:

• Core operating performance softened: revenue -3.6% and OPM down ~23 bps YoY
• Headline net income strength (+87.5% YoY) driven by one-time gains; not indicative of run-rate earnings
• Cash generation is healthy (OCF/NI 1.41x), supporting shareholder returns (buybacks -29.01) with conservative leverage
• Capital efficiency is the primary structural issue: ROE 5.1% and ROIC 2.4% driven by low asset turnover
• Non-operating income (dividends 9.88) and sizeable securities holdings (616.72) are material to earnings mix and risk

Metrics to Watch:

• Core operating income and operating margin trajectory excluding one-offs
• Gross margin versus raw material and FX trends
• SG&A as a percentage of sales and operating leverage as revenue stabilizes
• ROIC progression and asset turnover improvement initiatives
• Dividend income levels and any further asset sale gains
• Capex and investing CF once disclosed to assess true FCF

Relative Positioning: Financially conservative with strong liquidity and low leverage versus peers, but with lower capital efficiency and greater earnings mix from non-operating sources; near-term earnings resilience relies more on financial income/one-offs than on core operating momentum.

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