ASAHI PRINTING CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥22.51B
• Operating Income: ¥960M
• Net Income: ¥763M
• EPS: ¥35.27

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: FY2026 Q2 was a mixed quarter with modest topline growth but notable margin compression and earnings decline, partially cushioned by non-operating gains and strong operating cash flow. Revenue grew 3.9% YoY to 225.11, but operating income fell 25.2% to 9.60, and net income declined 30.4% to 7.48. Gross profit was 49.99, implying a gross margin of 22.2%, while EBITDA reached 24.64 (10.9% margin). Operating margin compressed to 4.3%, down from roughly 5.9% a year ago, a contraction of about 166 bps. Ordinary income declined 13.6% to 12.01, supported by non-operating income of 4.22 (dividends 0.76; interest 0.34), which offset part of the operating shortfall. Effective tax rate stood at 34.1%, adding pressure to bottom line. Cash flow quality was strong, with OCF of 18.87 running at 2.52x net income, indicating good cash conversion despite weaker earnings. Balance sheet liquidity is healthy (current ratio 211%, quick ratio 202%) and solvency is conservative-to-moderate (D/E 0.92x; interest coverage 9.6x). Total equity was 352.99 versus total assets of 679.30, implying an equity ratio of about 52%. Capital efficiency is weak: ROE is 2.1% and ROIC 1.6%, well below typical cost of capital, signaling returns dilution. Debt/EBITDA at 4.75x is elevated versus EBITDA scale, reflecting sizable long-term loans (116.20) relative to earnings capacity. Financing cash flow was an outflow of -34.81, including share repurchases of -1.09 and likely debt repayment; this indicates active balance sheet management but also reduces liquidity buffer. The calculated payout ratio of 116.3% suggests potential stress on dividend sustainability if maintained, although dividend data are otherwise unreported. Forward-looking, margin recovery (through price pass-through, mix, and productivity) is critical to lift ROIC above 5% and support shareholder returns. Overall, the company demonstrates robust liquidity and cash generation this quarter, but declining profitability and structurally low returns remain key challenges.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.1% = Net profit margin 3.3% × Asset turnover 0.331 × Financial leverage 1.92x. The most material pressure appears in net profit margin (down alongside operating margin), as revenue grew 3.9% but operating income fell 25.2%. Business drivers likely include cost inflation (materials/energy), price lag in pass-through to customers, and possibly higher fixed cost burden diluting operating leverage. Non-operating income (4.22) provided a meaningful cushion to ordinary income, but this is not a substitute for structural operating profitability. Sustainability: cost pressures may normalize, but pass-through effectiveness and mix improvements are needed for lasting margin recovery; non-operating gains are inherently more volatile. Flagged trend: SG&A (40.38) looks heavy versus gross profit (49.99), yielding a thin operating margin (4.3%); while lack of backlog detail obscures productivity trends, the drop in operating income despite higher sales indicates negative operating leverage.

Growth Assessment

Revenue grew 3.9% YoY to 225.11, indicating stable demand. However, profit quality is pressured: operating income -25.2% and net income -30.4%, pointing to margin headwinds outweighing topline gains. EBITDA margin at 10.9% and operating margin at 4.3% are modest for printing/packaging peers, suggesting limited pricing power or elevated input costs. Ordinary income decline (-13.6%) was milder than operating income due to non-operating contributions (dividend/interest and other items totaling 4.22). Without segment data, growth sustainability hinges on successful price pass-through to offset materials/energy inflation, product mix shift toward higher-value packaging (e.g., pharma/consumer), and productivity gains from automation. Near-term outlook: gradual recovery is possible if cost pass-through catches up, but ROIC at 1.6% signals that incremental growth may still destroy value unless margins lift. Watch for order trends into H2 and capex execution to enhance efficiency.

Financial Health

Liquidity is strong: current ratio 211% and quick ratio 202%, with cash and deposits of 75.11 and working capital of 144.80. No warning on current ratio (<1.0) or excessive leverage (D/E 0.92x is within a conservative-to-moderate range). Solvency: total liabilities 326.31 against total equity 352.99 implies an equity ratio ~52%, providing a reasonable buffer. Interest-bearing debt detail is partially unreported, but loans total at least 117.13 (short-term 0.93, long-term 116.20), corresponding to Debt/EBITDA ~4.75x; interest coverage at 9.6x is adequate. Maturity profile shows limited short-term debt vs ample current assets, suggesting low near-term refinancing risk. Off-balance sheet obligations are not disclosed; no specific guarantees or leases were reported in the data provided. Overall, balance sheet resilience is solid despite moderate leverage.

Cash Flow Quality

OCF of 18.87 vs net income of 7.48 yields OCF/NI of 2.52x, indicating high earnings quality in the period. FCF is not reported, so capex coverage of dividends cannot be fully assessed; given financing CF of -34.81 (including buybacks -1.09), there were likely repayments or shareholder returns that exceeded internal free cash in the quarter. Working capital details are not broken out, but the strong OCF alongside weaker earnings suggests either disciplined receivables collection, lower inventories, or favorable payables timing; absent detailed line items, we do not infer manipulation. Sustainability of cash generation will depend on maintaining EBITDA and avoiding adverse working capital swings in H2.

Dividend Sustainability

Dividend data are largely unreported; however, the calculated payout ratio of 116.3% is above the <60% benchmark, implying potential unsustainability if repeated. With OCF positive and liquidity strong, a near-term dividend is fundable, but sustaining a >100% payout would likely require drawing on cash or raising debt if profitability does not recover. FCF coverage cannot be calculated due to missing capex and dividends paid. Policy outlook depends on management’s capital allocation priorities; given ROIC at 1.6%, prioritizing margin-improving investments could take precedence over high payouts unless earnings improve.

Risk Assessment

Business Risks:

• Input cost inflation (paper, ink, films, energy) pressuring gross margins and lagging price pass-through.
• Customer pricing power and contract timing creating delays in margin recovery despite revenue growth.
• Product mix shifts toward lower-margin jobs reducing operating leverage.
• Execution risk on productivity/capex programs needed to restore margins and ROIC.
• Goodwill (11.76) and intangibles (22.53) pose integration and impairment risk if performance underwhelms.

Financial Risks:

• Debt/EBITDA ~4.75x with long-term loans of 116.20 exposes the company to interest rate and refinancing risk over the medium term.
• Dividend policy risk if payout remains above earnings (calculated payout ratio 116.3%).
• Dependence on non-operating income (4.22; non-operating income ratio 56.4%) to support ordinary income introduces volatility.
• Potential working capital swings impacting OCF despite low operating margin.

Key Concerns:

• ROIC at 1.6% (<5% benchmark) indicates returns below cost of capital and value dilution risk.
• Operating margin compression (~166 bps YoY) despite sales growth points to cost-pass-through weakness.
• Net income down 30.4% YoY; if sustained, it threatens dividend capacity and deleveraging pace.

Investment Implications

Key Takeaways:

• Topline resilient (+3.9% YoY) but profitability weakened; operating margin fell to 4.3%.
• Cash conversion robust (OCF/NI 2.52x), supporting liquidity despite earnings pressure.
• Leverage moderate (D/E 0.92x) but Debt/EBITDA 4.75x underscores need for EBITDA recovery.
• ROE 2.1% and ROIC 1.6% highlight subpar capital efficiency; margin restoration is imperative.
• Non-operating income provided a cushion; reliance on such gains is not a durable strategy.

Metrics to Watch:

• Operating margin trend and gross margin trajectory each quarter.
• Price pass-through rate vs input cost inflation (materials/energy).
• EBITDA and Debt/EBITDA movement, interest coverage resilience.
• OCF/NI and working capital days (AR and inventory turns).
• Capex intensity and ROI on productivity investments.
• Dividend payout ratio vs FCF once disclosed.

Relative Positioning: Within Japan’s printing/packaging peers, liquidity is stronger than average and leverage is manageable, but profitability and capital efficiency are on the low side, leaving the company more dependent on cost control and mix improvement to close the margin and ROIC gap.

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