SHOWA PAXXS CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥11.97B
• Operating Income: ¥819M
• Net Income: ¥831M
• EPS: ¥148.33

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

Showa Pax Co., Ltd. (TSE:3954) delivered solid operating performance for FY2026 Q2 (cumulative), with revenue of ¥11.972bn (+3.2% YoY) and operating income of ¥0.819bn (+20.3% YoY), indicating effective cost control and operating leverage. Gross profit reached ¥2.007bn, translating to a gross margin of 16.8%, and the operating margin improved to 6.8%. Ordinary income of ¥0.931bn exceeded operating income, implying net positive non-operating contributions of roughly ¥0.11bn. Despite better operating trends, net income decreased 15.7% YoY to ¥0.651bn, likely reflecting year-on-year differences below the operating line (e.g., extraordinary items or minority interests) rather than deterioration in core operations. Cash generation was strong with operating cash flow (OCF) of ¥1.180bn, equating to 1.81x net income—supportive of earnings quality. Liquidity is robust: current ratio 272% and quick ratio 253%, backed by ample working capital of ¥12.19bn. The balance sheet is conservative with low leverage; debt-to-equity is 0.36x and financial leverage 1.38x, implying equity finances the majority of assets. DuPont metrics show a net margin of 5.44%, asset turnover of 0.346x, and leverage of 1.38x, combining to an ROE of 2.59% for the period. Interest burden is minimal (interest expense ¥5.4m) with interest coverage at 151x. The effective tax rate implied by reported taxes is roughly 27%, despite a placeholder “0.0%” in the summary metrics. EBITDA was ¥1.134bn (9.5% margin), with D&A of ¥0.315bn (about 2.6% of sales), indicating a moderate capital intensity profile. Inventories stand at ¥1.347bn, a modest portion of current assets, which should support working-capital flexibility. The reported Equity Ratio of 0.0% and several cash/FCF/dividend fields at zero appear unreported rather than actual values; conclusions are drawn from available non-zero items only. EPS was ¥148.33; this implies an average share count of roughly 4.4 million shares during the period (indicative, given potential rounding and treasury shares). Overall, the company demonstrates improving profitability and strong cash conversion, underpinned by a healthy balance sheet. The key watchpoint is reconciling the decline in net income vs. operating strength, which likely stems from non-recurring or below-operating line factors.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 5.44% × Asset Turnover 0.346 × Financial Leverage 1.38 = ROE 2.59% for the period. Margins: Gross margin 16.8%; Operating margin 6.8% (¥819m on ¥11,972m); Ordinary margin 7.8%; Net margin 5.44%. Operating leverage appears favorable: +3.2% revenue growth drove +20.3% operating income growth, indicating fixed-cost absorption and/or improved pricing/mix. Non-operating line contributed positively (ordinary income > operating income by ~¥112m), partially offset at the net level by taxes and possibly extraordinary items. EBITDA margin of 9.5% shows headroom vs. operating margin, with D&A at ~2.6% of sales, consistent with moderate asset intensity. Interest burden is negligible (151x coverage), so profitability is driven mainly by operations rather than financial engineering.

Growth Assessment

Top-line growth of 3.2% YoY suggests steady demand conditions in core end-markets. The 20.3% YoY increase in operating income indicates improved cost structure, better product mix, or price pass-through effectiveness. The decline in net income (-15.7% YoY) despite stronger operations points to below-operating variances (e.g., absence of prior-year extraordinary gains, higher minority interests, or other one-offs), rather than core weakness. Sustainability: Gross and operating margins improved, which, along with strong OCF/NI (1.81x), supports the quality of earnings. Outlook: With low financial leverage and ample liquidity, the company is well positioned to sustain operating initiatives; however, continued margin resilience likely depends on input cost trends (resins, films, energy) and pricing discipline. Monitoring order trends, backlog (if disclosed), and mix shifts in higher value-added packaging will help assess trajectory. Given the limited disclosed detail on segment mix and external demand drivers this quarter, growth visibility is moderate, not high.

Financial Health

Liquidity is strong with a current ratio of 272% and a quick ratio of 253%, underpinned by ¥12.19bn of working capital. Inventories of ¥1.35bn appear well-managed relative to current assets, reducing obsolescence risk. Solvency: Debt-to-equity ratio is 0.36x and financial leverage is 1.38x, indicating a conservative capital structure and resilience to rate changes. Total assets are ¥34.58bn against total liabilities of ¥9.11bn, consistent with an equity-heavy balance sheet. Interest expense is minimal (¥5.4m), further supporting solvency. The reported Equity Ratio of 0.0% is a non-disclosure placeholder; based on liabilities vs. assets, the effective equity ratio is high in substance.

Cash Flow Quality

OCF of ¥1.180bn versus net income of ¥651m (OCF/NI = 1.81x) indicates strong earnings conversion, likely aided by working capital inflows and non-cash D&A (¥315m). EBITDA of ¥1.134bn provides additional cushion for maintenance capex, though actual capex is undisclosed this quarter. Free Cash Flow is reported as 0 in the summary but appears unreported; without investing cash flows or capex detail, FCF cannot be reliably calculated. Working capital looks ample and appears to be a net source rather than a drag this period, but the absence of a detailed CF breakdown (receivables/inventories/payables changes) limits granularity. Overall, cash flow quality is solid, but full FCF assessment awaits capex disclosure.

Dividend Sustainability

Dividend per share (DPS) and payout ratio are shown as 0.00 and 0.0%, which we treat as undisclosed placeholders rather than actual zeros. With EPS of ¥148.33 for the half-year and OCF exceeding net income, the company would have capacity for distributions if policy permits, subject to capex and strategic uses of cash. However, without FCF (capex) and explicit dividend policy disclosure for the period, sustainability cannot be precisely assessed. Key considerations: maintenance vs. growth capex needs (given D&A ¥315m), cash balance (undisclosed), and any target payout ratio historically communicated by management. FCF coverage of dividends cannot be computed this quarter due to missing investing cash flow data.

Risk Assessment

Business Risks:

• Raw material price volatility (resins/films, steel, energy) affecting gross margins and price pass-through timing.
• Demand cyclicality in end-markets such as chemicals, industrials, and consumer goods packaging.
• Competitive pricing pressure and commoditization risk in standard packaging formats.
• Operational risks from capacity utilization, yield, and quality control in manufacturing.
• Supply chain and logistics cost fluctuations impacting delivery reliability and costs.
• Regulatory and environmental compliance related to packaging materials and recycling.
• Customer concentration risk if large accounts represent meaningful revenue share.

Financial Risks:

• Limited disclosure on cash and investing cash flows makes FCF and liquidity runway assessment less precise.
• Potential extraordinary items impacting net income volatility versus steady operating trends.
• FX exposure on imported raw materials if not fully hedged.
• Interest rate risk is low currently but could rise if leverage increases to fund capex.

Key Concerns:

• Discrepancy between strong operating growth and declining net income, requiring clarity on below-operating items.
• Unreported investing cash flows impede assessment of FCF and capital allocation capacity.
• Dividend policy and cash balance not disclosed this quarter, limiting payout visibility.

Investment Implications

Key Takeaways:

• Core operations strengthened: +3.2% sales with +20.3% operating income indicates improving operating leverage.
• Margins expanded to 16.8% gross and 6.8% operating; ordinary income exceeded operating by ~¥112m.
• Cash conversion is strong (OCF/NI 1.81x), supporting earnings quality.
• Balance sheet is conservative (D/E 0.36x, leverage 1.38x) with ample liquidity (current ratio 272%).
• Net income decline (-15.7% YoY) likely reflects below-operating factors rather than core weakness.
• Several key items are undisclosed (equity ratio, cash, investing CF, dividends), tempering visibility.

Metrics to Watch:

• Operating margin trend and gross spread versus raw material indices (resins/energy).
• OCF/NI ratio and working capital movements (receivable/inventory days).
• Capex and investing cash flows to derive true FCF and assess capital intensity.
• Extraordinary gains/losses and minority interests to reconcile NI volatility.
• Pricing/mix and value-added product penetration sustaining margin resilience.
• Interest coverage and leverage trajectory amid any growth investments.
• Dividend policy announcements and payout guidance.

Relative Positioning: Within Japanese industrial packaging peers, Showa Pax exhibits stronger-than-average balance sheet conservatism and healthy cash conversion, with margins in a mid-single-digit operating range and improving. Visibility on capital allocation (capex/FCF/dividends) is currently lower than best-in-class peers due to limited disclosure this quarter.

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