KUREHA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥77.39B
• Operating Income: ¥8.11B
• Net Income: ¥6.40B
• EPS: ¥151.03

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

Kureha (40230) delivered resilient FY2026 Q2 consolidated results under IFRS, with operating leverage offsetting topline softness. Revenue declined 5.2% YoY to 773.87, yet operating income rose 16.5% to 81.05, signaling effective pricing, mix improvements, and/or cost discipline. Gross margin was 29.1% and operating margin expanded to roughly 10.5%, underpinning an EBITDA margin of 18.7% (EBITDA 144.71). Net income increased 11.8% to 63.18, translating to EPS (basic) of 151.03 yen and an effective tax rate of 20.2%. DuPont analysis indicates ROE of 3.5% = 8.2% net margin × 0.224 asset turnover × 1.92x leverage, consistent with the reported 3.5%. Operating cash flow was strong at 240.84, 3.81x net income, reflecting robust cash conversion and likely favorable working capital movements. Free cash flow was positive at 33.04 after -207.80 investing CF, implying significant ongoing capex or strategic investments. Financing CF was +43.97 despite dividends (-23.85) and sizeable share buybacks (-73.15), suggesting net debt inflow or other financing sources. The balance sheet is sound with an equity ratio of 51.5% and total liabilities/equity around 0.75x, implying moderate leverage for a specialty chemical profile. Inventories of 467.34 and receivables of 312.53 point to working-capital intensity, typical for the sector. Comprehensive income of 100.72 outpaced net income, indicating positive OCI (e.g., securities valuation or FX effects) enhancing equity. Book value per share is calculated at 4,704 yen, supported by retained earnings of 1,744.32. Dividend payout ratio is cited at 68.5%; cash flow data suggest dividends were covered by FCF in the period, though repurchases exceeded FCF. Liquidity ratios (current/quick) are not calculable from the disclosed items, so short-term liquidity assessment is constrained. Overall, profitability improving and cash generation is strong, but sustainability depends on maintaining margin mix and managing inventory and capex efficiently. Data gaps (e.g., interest expense, current liabilities detail, R&D, ordinary income) limit precision in certain ratios and coverage analyses.

Profitability Analysis

ROE_decomposition: ROE 3.5% = Net profit margin 8.2% × Asset turnover 0.224 × Financial leverage 1.92x. The low asset turnover reflects an asset-intensive model, while leverage is moderate and margin expansion is the key current driver. margin_quality: Gross margin 29.1% and operating margin ~10.5% (81.05/773.87) improved YoY as operating income rose despite lower revenue, implying pricing/mix benefits and cost control. EBITDA margin at 18.7% corroborates healthy operating efficiency. operating_leverage: Revenue -5.2% YoY vs operating income +16.5% indicates positive operating leverage from cost reductions and/or richer product mix. Monitoring sustainability is important given sector cyclicality.

Growth Assessment

revenue_sustainability: Topline softness (-5.2% YoY) suggests demand or pricing headwinds in certain end-markets. Given the company’s specialty portfolio, recovery hinges on mix and niche product demand rather than volume growth. profit_quality: Net income +11.8% with expanding operating margin indicates quality-driven growth. Equity method income of 5.89 also supported pretax profit. Effective tax rate at 20.2% appears stable. outlook: Assuming mix/pricing resilience and continued cost discipline, earnings can remain resilient even if volumes remain tepid. However, margin durability will depend on raw material/input cost trends, FX, and inventory normalization.

Financial Health

liquidity: Current ratio and quick ratio are not calculable due to unreported current liabilities and cash details. Current assets are 1,047.74, with inventories 467.34 and receivables 312.53, indicating material working capital tied up. solvency: Equity ratio is 51.5%; total liabilities/total equity approximates 0.75x (1,341.59/1,798.02). Interest-bearing debt is unreported, so interest coverage cannot be computed. capital_structure: Total assets 3,459.54 and total equity 1,798.02 imply moderate leverage. Financing CF was positive despite shareholder returns, indicating reliance on debt or other financing during the period.

Cash Flow Quality

earnings_quality: OCF of 240.84 is 3.81x net income (63.18), implying strong cash conversion and likely favorable working capital swings. D&A is 63.66, supporting high non-cash add-backs. FCF_analysis: FCF is positive at 33.04 (OCF 240.84 minus investing CF 207.80). Investing CF magnitude suggests continued capex or strategic investments consistent with capacity/technology upgrades. working_capital: Receivables (312.53) and inventories (467.34) are sizable; inventory management is a key determinant of cash conversion going forward. Accounts payable is 194.90, indicating moderate supplier financing. Changes by component are not disclosed.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 68.5%, a relatively high level against H1 earnings. EPS is 151.03 yen; DPS is unreported. FCF_coverage: Based on cash flow, dividends paid were 23.85 versus FCF of 33.04, implying coverage of about 1.4x on our calculation. The provided FCF coverage metric (0.76x) may use a different definition; on a cash basis, dividends alone were covered, but dividends plus buybacks (total 97.00) were not covered by FCF. policy_outlook: Given strong OCF but investment needs and buybacks, sustaining elevated total shareholder returns may require ongoing healthy cash generation or incremental financing. Clarity on full-year DPS guidance would aid assessment.

Risk Assessment

Business Risks:

• End-market demand cyclicality in specialty chemicals
• Raw material and energy cost volatility impacting margins
• FX fluctuations affecting export competitiveness and translation effects
• Inventory risk if demand weakens further
• Product concentration/mix dependence for margin resilience

Financial Risks:

• Limited disclosed detail on interest-bearing debt and current liabilities constrains coverage and liquidity assessment
• Shareholder returns (dividends and sizable buybacks) exceeding FCF in aggregate, implying reliance on financing
• Potential capex intensity sustaining negative investing CF

Key Concerns:

• Sustainability of margin expansion amid revenue decline
• Working capital intensity and inventory normalization
• Visibility on debt levels and interest costs under rising rate scenarios

Investment Implications

Key Takeaways:

• Operating leverage and mix improvements drove profit growth despite lower revenue
• ROE at 3.5% is primarily margin-driven; asset turnover remains low
• Robust cash conversion (OCF/NI 3.81x) supports balance sheet strength
• FCF positive but below combined dividends and buybacks
• Equity ratio 51.5% and liabilities/equity ~0.75x indicate moderate leverage

Metrics to Watch:

• Operating margin and EBITDA margin trajectory
• Inventory and receivables turns (working capital release/absorption)
• Capex trend and investing CF run-rate
• Debt levels and interest expense disclosure for coverage analysis
• Order intake and pricing/mix indicators in key product lines

Relative Positioning: Within Japanese specialty chemicals, Kureha exhibits stronger-than-expected margin resilience and cash conversion in H1, with moderate leverage and solid equity base; however, slower asset turnover and investment needs temper return metrics relative to best-in-class 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