Oji Holdings Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥914.98B
• Operating Income: ¥16.73B
• Net Income: ¥11.51B
• EPS: ¥11.85

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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: FY2026 Q2 was weak, with sharp profit compression on largely flat revenue and significant pressure from non-operating items and other comprehensive losses. Revenue declined slightly to 9,149.8 (−0.9% YoY), but operating income fell to 167.3 (−55.0% YoY), and net income dropped to 109.2 (−55.0% YoY). Gross profit was 1,579.6, implying a gross margin of 17.3%, but high SG&A at 1,412.3 kept operating margin low at 1.83%. Non-operating income of 71.5 was outweighed by non-operating expenses of 150.9 (notably interest expense of 51.6), resulting in weak ordinary income of 87.9 (−77.7% YoY). Net margin compressed to 1.19%, down from an estimated ~2.63% a year ago. Operating margin compressed to ~1.83% from ~4.03% YoY (−220 bps), and ordinary margin fell to ~0.96% from ~4.27% (−331 bps). The effective tax rate was elevated at 42.3%, further dampening after-tax earnings. Total comprehensive income was deeply negative at −418.4 despite positive net income, signaling large OCI losses (likely securities valuation/FX/hedge reserve swings). Liquidity is tight with a current ratio of 1.13 and quick ratio of 0.94; leverage is relatively high with D/E at 1.42x, though the equity ratio is a moderate ~41%. Interest coverage is modest at 3.24x, leaving earnings sensitive to further interest rate or profit shocks. DuPont shows ROE at 1.0% (NPM 1.2% × AT 0.355 × leverage 2.42x), with margin as the primary drag; ROIC printed a very low 0.6%. Cash flow data are unreported, preventing validation of earnings quality and dividend coverage; the indicated payout ratio of 222.9% appears unsustainably high if accurate. Forward-looking, margin recovery hinges on pricing power versus input costs (pulp, energy), cost discipline, and stabilization of non-operating/OCI items. With ordinary income down more than operating income, controlling financial costs and non-operating losses is key to re-rating. Absent clearer OCF and capex visibility, capital efficiency and dividend sustainability remain concerns.

Profitability Analysis

ROE decomposition: Net Profit Margin (NPM) 1.2% × Asset Turnover (AT) 0.355 × Financial Leverage 2.42x = ROE ~1.0%. The component that changed the most versus last year is NPM, inferred from operating income −55% on revenue −0.9%, and ordinary income −77.7% YoY, pointing to sharp margin compression. Business drivers include elevated SG&A burden relative to gross profit, higher non-operating expenses (notably interest expense at 51.6) exceeding non-operating income (71.5 vs 150.9), and a high effective tax rate (42.3%). The compression appears cyclical/market-driven (input cost/price mix and financial cost headwinds) rather than a discrete one-time restructuring, though part of the tax rate spike could be one-off. Sustainability: margin should recover if input prices normalize and pricing sticks, but near-term visibility is limited; financial leverage keeps ROE sensitive to margin swings. Concerning trends: SG&A at 1,412.3 nearly absorbed gross profit (GP 1,579.6), leaving thin operating margin; revenue contracted while indirect costs stayed high, indicating negative operating leverage.

Growth Assessment

Top-line was essentially flat to slightly down (−0.9% YoY), suggesting weak demand or price declines in certain paper/packaging categories. Profit contraction was severe: operating income −55% and ordinary income −77.7%, indicating that cost inflation and financial costs outpaced any pricing actions. Net income −55% implies broad-based pressure, compounded by a high tax rate. Non-operating drag (expenses > income by ~79.4) and negative OCI (−418.4 total comprehensive) cloud underlying performance and equity value. Revenue sustainability hinges on packaging and specialty segments offsetting structural declines in printing/publishing paper and on FX support for overseas operations. Profit quality appears weak this quarter given the reliance on thin operating margin and negative ordinary spread; absence of OCF data limits validation. Near-term outlook: focus on cost pass-through, product mix upgrade, and debt cost management; any easing in pulp/energy costs would be a tailwind. Medium term, efficiency gains and portfolio shift toward higher-value packaging/functional materials are necessary to lift ROIC above the cost of capital.

Financial Health

Liquidity: Current ratio 1.13 (below the >1.5 comfort threshold, but above the 1.0 warning); quick ratio 0.94 (below 1.0, caution). Working capital is 913.9, but short-term loans are high at 2,392.6 versus cash of 498.7, indicating reliance on short-term funding. Solvency: D/E is 1.42x (within the <1.5 benchmark but on the high side); long-term loans total 4,940.4. Equity/asset ratio is ~41.4% (10,653.5/25,740.6), which is solid for the sector. Maturity mismatch risk: moderate, given substantial short-term debt relative to liquid assets (cash + receivables 4,295.7 vs current liabilities 7,025.8). Interest coverage of 3.24x is adequate but not robust; further profit declines or rate increases could pressure coverage. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

Operating cash flow is unreported, preventing calculation of OCF/Net Income and FCF. As such, we cannot validate accrual quality or assess working capital releases/uses. Given thin operating margin and interest burden, internal cash generation may be constrained unless working capital improves. Dividend and capex coverage cannot be assessed due to missing OCF/FCF; prudence suggests monitoring cash conversion closely. No clear signs of working capital manipulation can be identified without cash flow and period-on-period inventory/receivable trends.

Dividend Sustainability

The calculated payout ratio is 222.9%, which would be unsustainably high if accurate; however, DPS is unreported, and the figure may reflect timing or interim/annual methodology—interpret with caution. Without OCF/FCF and capex data, coverage cannot be confirmed. With ROE at 1.0% and ROIC at 0.6%, internal returns are currently below typical cost of capital, arguing for cautious capital returns until profitability rebounds. Policy outlook likely emphasizes maintaining stability but could require adjustment if earnings and cash flow remain depressed.

Risk Assessment

Business Risks:

• Commodity/input cost volatility (pulp, energy) compressing margins
• Structural demand decline in printing/writing paper
• Pricing power limitations versus cost inflation
• Execution risk in cost reduction and product mix upgrade
• Overseas exposure to FX and country risk through operations and investments

Financial Risks:

• Tight liquidity with quick ratio below 1.0
• Interest rate and refinancing risk with short-term loans of 2,392.6 and interest coverage at 3.24x
• High effective tax rate (42.3%) depressing net income
• Large negative OCI (−418.4) impacting equity and potentially covenants
• Leverage at D/E 1.42x limiting flexibility if earnings weaken further

Key Concerns:

• Sharp margin compression (operating margin ~1.83% vs ~4.03% YoY)
• Ordinary income down 77.7% YoY due to non-operating drag
• ROIC at 0.6% below 5% warning threshold
• Absence of OCF/FCF data obscures earnings quality and dividend coverage
• Potential sustained high financing costs given interest expense of 51.6

Investment Implications

Key Takeaways:

• Earnings deterioration driven by margin compression and non-operating losses
• Liquidity tightness and moderate leverage warrant caution in capital allocation
• Very low ROIC signals capital efficiency challenges
• Large negative OCI highlights valuation/FX sensitivities beyond P/L
• Recovery depends on cost pass-through, input cost normalization, and mix shift

Metrics to Watch:

• Operating margin and gross-to-SG&A spread
• OCF/Net income and FCF (once disclosed)
• Interest coverage and short-term debt rollover profile
• Pulp and energy price indices vs selling price adjustments
• OCI components (securities valuation, FX translation, hedge reserves)
• ROIC trajectory and capex discipline

Relative Positioning: Within the Japanese paper and packaging universe, the company currently screens weaker on profitability (low operating margin, ROE 1.0%, ROIC 0.6%) and only moderate on balance sheet strength (D/E 1.42x, quick ratio 0.94). Near-term positioning depends on the pace of cost relief and pricing in packaging/specialty segments versus 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