Oji Holdings Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥914.98B
• Operating Income: ¥16.73B
• Net Income: ¥25.12B
• 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

Oji Holdings (TSE: 3861) reported FY2026 Q2 consolidated results under JGAAP showing relatively stable top-line but a sharp compression in profitability. Revenue was ¥914.984 billion, down 0.9% YoY, while operating income declined 55.0% YoY to ¥16.731 billion, indicating significant margin pressure despite largely flat sales. Gross profit was ¥178.954 billion, implying a gross margin of 19.6%, but the operating margin contracted to 1.83%, highlighting elevated operating costs and/or pricing pressure. Ordinary income of ¥8.787 billion came in below operating income, reflecting non-operating burdens, including interest expense of ¥4.324 billion and likely other non-operating items. Net income was ¥10.920 billion (EPS ¥11.85), down 55.0% YoY; the increase from ordinary to net suggests the presence of extraordinary income and/or tax effects under JGAAP. The DuPont framework indicates a low ROE of 1.03%, driven by a thin net margin (1.19%), modest asset turnover (0.355x), and financial leverage of 2.42x. Liquidity appears adequate but not ample, with a current ratio of 109.2% and quick ratio of 90.6%, supported by working capital of ¥67.686 billion. The balance sheet shows total assets of ¥2.574 trillion and equity of ¥1.065 trillion, implying an equity ratio of roughly 41.4% (the reported 0.0% is an undisclosed item), and a debt-to-equity ratio of 1.41x. Interest coverage is 3.9x (operating income/interest expense), acceptable but with reduced headroom given the sharp drop in operating income. Cash flow statements were not disclosed in the XBRL (zeros indicate unreported), limiting assessment of cash conversion and free cash flow. Inventory stands at ¥136.769 billion, about 16.9% of current assets, a manageable level for the business mix. The reported effective tax rate is shown as 0.0% due to undisclosure constraints; however, income tax expense of ¥17.239 billion suggests material tax charges and/or timing differences. Dividend information (DPS, payout, FCF coverage) was undisclosed; thus, dividend capacity cannot be inferred from this set alone. Overall, results point to negative operating leverage amid cost pressures in paper, packaging, and related businesses, with balance sheet resilience but weaker income protection. Outlook hinges on cost normalization, price pass-through, pulp and energy cost trends, and currency effects. Data limitations on cash flows and dividends are notable and temper analytical confidence.

Profitability Analysis

ROE of 1.03% reflects a low net profit margin (1.19%), asset turnover of 0.355x, and financial leverage of 2.42x. The operating margin of 1.83% (¥16.731b / ¥914.984b) is significantly compressed relative to the gross margin of 19.6%, implying elevated SG&A, logistics, and/or energy costs and limited pricing power in some segments. Ordinary income (¥8.787b) below operating income indicates net non-operating costs, including ¥4.324b in interest expense and likely other non-operating losses. The YoY operating income decline of 55.0% vs. a 0.9% revenue dip signals pronounced negative operating leverage; small top-line movement translated into large profit contraction. Interest coverage of 3.9x remains acceptable but is down materially due to lower operating income, increasing sensitivity to further earnings softness. The spread between gross and operating margins also suggests limited benefits from mix improvement in the period. Reported EBITDA is undisclosed (D&A not reported); thus, EBITDA margin cannot be assessed from this dataset. Overall, profitability is currently cyclical and cost-driven, with weak bottom-line conversion.

Growth Assessment

Revenue decreased 0.9% YoY to ¥914.984b, essentially flat, suggesting stable volumes/realizations overall amid mixed end-market conditions. Operating income fell 55.0% YoY to ¥16.731b, indicating that cost inflation (pulp, energy, logistics) and/or pricing/mix constraints outweighed any self-help or price pass-through achieved. Net income declined 55.0% YoY to ¥10.920b, with bottom-line dynamics affected by non-operating items, extraordinary items, and tax effects. The disconnect between ordinary income and net income suggests one-off factors that may not be recurring, complicating trend inference. With asset turnover at 0.355x, capital intensity remains high, and earnings growth will likely depend on margin recovery rather than asset turns. Sustainability of revenue appears moderate given the diversified portfolio; however, profit quality is currently weak due to cost headwinds and negative operating leverage. Near-term outlook hinges on pulp and energy cost normalization, timing of price revisions, foreign exchange, and demand recovery in packaging vs. secular declines in printing/writing paper. Cost controls and product mix upgrades (e.g., packaging, functional materials) are key levers to stabilize growth in earnings. Without cash flow data, visibility on reinvestment capacity and growth funding is limited. Overall, the company needs margin repair to re-establish earnings growth momentum.

Financial Health

Total assets are ¥2,574.056b and total equity ¥1,065.354b, implying an equity ratio of approximately 41.4% (reported 0.0% reflects non-disclosure). Total liabilities are ¥1,502.238b, yielding a debt-to-equity ratio of 1.41x, moderate for a capital-intensive sector. Liquidity is adequate with current assets of ¥806.504b vs. current liabilities of ¥738.818b (current ratio 1.09x) and a quick ratio of 0.91x, providing a limited but present short-term buffer. Working capital totals ¥67.686b. Interest coverage is 3.9x, acceptable but reduced, leaving less cushion if operating income weakens further. The balance sheet can support operations, but income statement weakness raises caution on future debt service coverage if margins do not normalize. Absence of cash and cash flow disclosures constrains assessment of net debt, liquidity headroom, and refinancing risk.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed in this dataset (zeros indicate undisclosed items), so OCF/Net Income and Free Cash Flow cannot be meaningfully assessed. Consequently, earnings quality triangulation via cash conversion is not possible for this period. Inventory of ¥136.769b represents about 16.9% of current assets, suggesting working capital is not unusually inventory-heavy, but changes vs. prior periods are unknown. The drop in operating income and ordinary income raises the probability that cash conversion may also be pressured, especially if price-cost timing and receivables stretching are present; this remains unverified without OCF data. Capex intensity cannot be assessed due to missing investing cash flows. Overall, visibility on free cash flow and cash earnings quality is low given disclosure gaps.

Dividend Sustainability

Dividend-related figures (DPS, payout, and FCF coverage) are shown as zero due to non-disclosure and should not be interpreted as actual zeros. With EPS at ¥11.85 and no DPS disclosed, the payout ratio cannot be determined. Lack of operating and free cash flow data prevents evaluation of dividend coverage from cash generation. Given the sharp decline in operating income and ordinary income, near-term distributable capacity would likely be constrained by earnings unless offset by extraordinary items, but this cannot be confirmed. Policy signaling is absent in this dataset; outlook on dividends remains indeterminate pending disclosure of DPS and cash flows.

Risk Assessment

Business Risks:

• Pulp price and energy cost volatility affecting input costs and margins
• Demand declines in printing/writing paper and structural shifts to digital
• Pricing power and timing lag in price pass-through to customers
• Foreign exchange fluctuations impacting exports, imports, and translation effects
• Operational execution in overseas businesses and large projects
• Logistics and supply chain disruptions affecting costs and service levels
• Environmental regulation and decarbonization capex requirements

Financial Risks:

• Reduced interest coverage (3.9x) amid lower operating income
• Potential refinancing and liquidity risk cannot be assessed due to undisclosed cash flows
• Negative operating leverage amplifying earnings volatility
• Capital intensity and possible capex needs pressuring free cash flow
• Tax and extraordinary item variability impacting bottom line predictability

Key Concerns:

• Operating income down 55.0% YoY despite only a 0.9% revenue decline
• Low ROE of 1.03% driven by thin net margin (1.19%)
• Limited liquidity headroom with current ratio of 1.09x and quick ratio of 0.91x
• Non-operating burdens (interest expense ¥4.324b) weighing on ordinary income
• Cash flow non-disclosure prevents assessment of cash conversion and dividend capacity

Investment Implications

Key Takeaways:

• Stable revenue but significant margin compression; operating margin at 1.83%
• ROE at 1.03% reflects weak profitability despite moderate leverage (2.42x)
• Interest coverage at 3.9x is acceptable but trending tighter
• Balance sheet moderate with an implied equity ratio around 41%
• Cash flow and dividend data undisclosed, limiting visibility on FCF and payouts

Metrics to Watch:

• Operating margin and gross-to-operating spread
• Pulp and energy cost trends and price pass-through timing
• Operating cash flow, free cash flow, and working capital movements
• Interest coverage and debt-to-equity/net debt metrics
• FX sensitivity (USD/JPY) and overseas earnings contribution
• Inventory days and receivables/payables turnover

Relative Positioning: Within Japan’s paper and packaging cohort, Oji’s scale and diversification provide resilience, but current-period margins are compressed versus historical norms, leaving profitability behind best-in-class packaging peers; leverage is moderate and balance sheet soundness is reasonable, yet near-term performance depends on cost normalization and effective price revisions.

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