Sumitomo Seika Chemicals Company,Limited. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥72.70B
• Operating Income: ¥5.88B
• Net Income: ¥3.33B
• EPS: ¥249.85

Income Statement

Balance Sheet

Cash Flow Statement

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

Sumitomo Seika Chemicals (4008) delivered mixed but generally resilient FY2026 Q2 (cumulative) results under JGAAP on a consolidated basis. Revenue declined 1.7% YoY to ¥72.7bn, indicating soft topline conditions, likely reflecting volume or pricing pressure in certain segments. Despite the revenue decline, operating income rose 19.9% YoY to ¥5.88bn, evidencing meaningful cost control and/or improved product mix. Gross profit of ¥14.93bn implies a gross margin of 20.5%, providing a solid buffer for operating profitability. Operating margin expanded to approximately 8.1%, up meaningfully given the contrasting trends in sales and operating profit. Ordinary income of ¥5.58bn was slightly below operating income, suggesting modest net non-operating losses (including interest expense of ¥142m and other items). Net income came in at ¥3.28bn, down 1.6% YoY, implying that below-the-line items, including taxes, offset operating gains. The effective tax rate, calculated from disclosed figures, appears to be about 21.9% (¥1.22bn tax on ¥5.58bn pretax), despite a provided metric listing 0.0%, which should be treated as a placeholder. DuPont metrics show a net margin of 4.50%, asset turnover of 0.509x, and financial leverage of 1.47x, yielding an ROE of 3.37%. Liquidity is strong with a current ratio of 197.7% and quick ratio of 145.5%, underpinned by ¥80.1bn of current assets and ¥40.5bn of current liabilities. The capital structure remains conservative with debt-to-equity of 0.49x, and equity representing roughly 68.2% of total assets (calculated from the balance sheet despite a reported equity ratio of 0.0% placeholder). Operating cash flow was ¥3.57bn, exceeding net income (OCF/NI of 1.09x), indicating adequate earnings-to-cash conversion for the period. Interest coverage is robust at 41.4x, reflecting low financial risk from interest-bearing debt costs. Several datapoints are not disclosed (e.g., investing cash flows, cash and equivalents, dividend per share, and share data), constraining deeper assessments of FCF and per-share capital allocation. Overall, the quarter evidences operational improvement amid a soft demand backdrop, strong liquidity, moderate leverage, and acceptable cash conversion, with some drag from non-operating items and taxes.

Profitability Analysis

ROE_decomposition: ROE 3.37% = Net Profit Margin 4.50% × Asset Turnover 0.509 × Financial Leverage 1.47. This indicates modest profitability predominantly driven by operational improvements and moderate asset utilization, amplified by conservative leverage. margin_quality: Gross margin is 20.5% (¥14.93bn/¥72.70bn), and operating margin is ~8.1% (¥5.88bn/¥72.70bn). Ordinary margin is ~7.7% (¥5.58bn/¥72.70bn), and net margin is 4.50%. The step-down from operating to ordinary reflects modest non-operating losses (interest expense ¥142m and other items). EBITDA margin is 12.2% (EBITDA ¥8.89bn), implying a reasonable contribution from depreciation and amortization (¥3.00bn). operating_leverage: Revenue fell 1.7% YoY while operating income rose 19.9% YoY, indicating favorable operating leverage from cost control and/or mix shift toward higher-margin products. The expansion in operating margin despite lower sales suggests disciplined SG&A management and input cost normalization.

Growth Assessment

revenue_sustainability: The 1.7% YoY decline points to soft demand or pricing in parts of the portfolio. Sustainability will depend on end-market recovery, price pass-through, and product mix improvements. profit_quality: Operating gains amid weaker sales suggest structural cost efficiencies and mix enhancement. However, the decline in net income (-1.6% YoY) shows that non-operating items and taxes can offset operating progress. outlook: With robust liquidity and moderate leverage, the company is positioned to navigate near-term demand softness. Margin resilience and cost discipline support a cautious but constructive outlook, though continued topline softness, non-operating items, and tax rates remain key swing factors.

Financial Health

liquidity: Current assets ¥80.12bn vs. current liabilities ¥40.52bn yield a current ratio of 197.7% and quick ratio of 145.5%. Working capital stands at ¥39.60bn. These indicate strong short-term solvency. solvency: Total liabilities ¥47.22bn vs. equity ¥97.29bn results in debt-to-equity of 0.49x and an implied equity ratio around 68.2% (calculated), signifying a conservative balance sheet. Interest coverage at 41.4x underscores low interest burden risk. capital_structure: Financial leverage of 1.47x (assets/equity) is moderate. The balance sheet appears equity-rich, providing capacity for investment through cycles.

Cash Flow Quality

earnings_quality: OCF/Net Income is 1.09x (¥3.57bn/¥3.28bn), indicating acceptable earnings-to-cash conversion for the half-year period. FCF_analysis: Investing cash flow and capex are not disclosed; hence free cash flow cannot be reliably computed for the period. The provided FCF of 0 should be treated as unreported, not actual zero. working_capital: With inventories at ¥21.17bn and a high quick ratio, inventory and receivables management appear reasonable; detailed WC movements are not disclosed, limiting deeper analysis of OCF drivers.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.00, which should be treated as undisclosed. EPS is ¥249.85 for the period, but without DPS we cannot assess payout. FCF_coverage: FCF is not computable due to missing investing cash flow/capex data; therefore, cash coverage of dividends cannot be assessed. policy_outlook: Dividend policy cannot be inferred from the provided data. With a conservative balance sheet and positive OCF, capacity exists, but actual distributions depend on undisclosed policy and FCF.

Risk Assessment

Business Risks:

• End-market demand softness reflected in a 1.7% YoY revenue decline
• Potential raw material and energy cost volatility affecting gross margins
• Product mix and pricing risks in specialty and industrial chemicals
• Customer concentration or cyclical industry exposure (not disclosed but typical for the sector)
• Regulatory and environmental compliance costs for chemical operations
• FX fluctuations impacting export competitiveness and input costs

Financial Risks:

• Non-operating income volatility (ordinary income below operating income)
• Tax rate variability (calculated ~21.9% this period) affecting net profitability
• Limited visibility on cash balances and capex, constraining FCF assessment
• Potential working capital swings impacting OCF in weaker demand environments

Key Concerns:

• Sustained topline softness could cap operating leverage benefits
• Lack of disclosure on investing cash flows and cash reserves hinders FCF and liquidity depth analysis
• Non-operating losses and taxes offsetting operating improvements, limiting net income growth

Investment Implications

Key Takeaways:

• Operating margin expanded to ~8.1% despite a 1.7% revenue decline, highlighting cost/mix improvements
• ROE at 3.37% is modest; profitability gains need to translate to bottom-line growth
• Strong liquidity (current ratio ~198%, quick ratio ~146%) and moderate leverage (D/E 0.49x) reduce balance sheet risk
• OCF of ¥3.57bn exceeds net income, indicating acceptable earnings quality
• Ordinary income below operating income indicates some non-operating drag
• Effective tax rate approximates 21.9%, not 0.0% as placeholder metric suggests
• Data gaps (cash balance, capex/ICF, DPS) limit assessment of FCF and shareholder returns

Metrics to Watch:

• Revenue trajectory and pricing/mix by segment
• Operating margin sustainability and SG&A efficiency
• Ordinary income components (interest and other non-operating gains/losses)
• Capex and investing cash flows to gauge FCF and growth investments
• Working capital turns (inventory and receivables) and OCF conversion
• Tax rate evolution and its impact on net margin
• Equity ratio (calculated) and net debt once cash balances are disclosed

Relative Positioning: Within Japan’s chemical peers, Sumitomo Seika exhibits solid margin resilience and conservative leverage, but modest ROE and limited topline momentum; improved disclosure on cash/Capex and sustained margin expansion would strengthen its relative standing.

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