Konoshima Chemical Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥13.83B
• Operating Income: ¥1.21B
• Net Income: ¥803M
• EPS: ¥88.49

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

Kojima Chemical Industry (40260) reported FY2026 Q2 (standalone, JGAAP) results showing resilient profitability despite marginal top-line softness. Revenue was 138.27 (100M JPY), down 0.6% YoY, yet operating income rose 18.8% YoY to 12.10, indicating meaningful operating leverage and/or cost discipline. Gross profit of 35.68 implies a gross margin of 25.8%, which, alongside flat sales, suggests improved mix and/or input cost relief. SG&A was 25.49, and the gap between gross profit minus SG&A (10.19) and reported operating income (12.10) implies roughly 1.9 of net other operating items, a positive factor under JGAAP classification. Ordinary income increased 17.7% YoY to 11.56, and net income rose 13.7% YoY to 8.03, delivering a net margin of 5.8%. DuPont shows ROE of 5.9% = 5.8% net margin × 0.441 asset turnover × 2.29x leverage, pointing to moderate profitability aided by balance-sheet leverage rather than high asset velocity. ROA approximates 2.6% on period-end assets, and estimated NOPAT-based ROIC is in the mid-4% range, indicating returns likely below the long-run cost of capital absent further margin or turnover gains. Liquidity is a watch point: current ratio is 87.5% and quick ratio 66.8%, with working capital of -16.87 and cash of 14.39 against short-term loans of 57.00. Solvency remains manageable: total loans of 78.04 and net debt near 63.65 yield a net D/E of ~0.47x, and interest coverage is strong at 24.2x. Operating cash flow of 13.77 outpaced net income (OCF/NI 1.71x), and estimated FCF (OCF minus capex) is positive at ~7.91, supporting reinvestment and dividends. The calculated payout ratio is 50.6%; while DPS is unreported, implied dividends are likely covered by FCF with headroom. Balance-sheet composition is asset-heavy (noncurrent assets 189.24), which can dampen asset turnover but provides capacity for scaled production. Cost of sales at 103.36 suggests improved input cost environment or productivity gains compared to prior year given the margin lift. With revenue flat, the earnings beat appears cost-led rather than demand-led; sustainability hinges on maintaining input cost discipline and SG&A efficiency. As this is standalone JGAAP with several unreported line items (e.g., DPS, investing CF details), conclusions are based on available figures and may differ from consolidated trends. Overall, the company demonstrates solid margin execution and cash conversion, but short-term liquidity tightness and reliance on short-term loans warrant monitoring.

Profitability Analysis

ROE_decomposition: ROE 5.9% = Net margin 5.8% × Asset turnover 0.441 × Financial leverage 2.29x (calculated values align with reported ROE). ROA (NI/Assets) ≈ 2.6% (8.03/313.35). Estimated ROIC ≈ 4.5% using NOPAT ~8.95 (12.10 × (1 - 26%)) and invested capital ≈ 200.4 (Equity 136.78 + Loans 78.04 - Cash 14.39). margin_quality: Gross margin 25.8% on revenue 138.27 indicates a healthy spread versus prior year’s context (sales -0.6% YoY while OI +18.8% YoY). Operating margin ≈ 8.8% (12.10/138.27). Ordinary margin ≈ 8.4%. Net margin 5.8%. The ~1.9 uplift from other operating items (implied) supported operating income; core gross-to-OP conversion still improved, implying cost control and possible input cost normalization. operating_leverage: Despite slightly lower sales, operating income grew double digits, demonstrating positive operating leverage from fixed-cost absorption and SG&A discipline. Depreciation of 9.97 (significant relative to OI) suggests a capital-intensive base; margin gains in this context indicate improved throughput and/or cost pass-through.

Growth Assessment

revenue_sustainability: Revenue declined 0.6% YoY to 138.27, indicating stable but not expanding demand. Without segment disclosure, sustainability appears neutral; future growth likely depends on product mix upgrades and pricing rather than volume acceleration. profit_quality: Operating income +18.8% YoY with modest non-operating drag (non-op income 0.24 vs expenses 0.60) points to core-driven gains. Effective tax rate is 26.0%, consistent and not artificially boosting NI. OCF/NI at 1.71x corroborates earnings quality. outlook: Near-term outlook hinges on maintaining favorable input costs, continued SG&A control, and demand resilience in core end-markets. With asset turnover at 0.441, incremental growth could materially lift ROE if margins hold; conversely, cost re-inflation would pressure earnings given capital intensity.

Financial Health

liquidity: Current ratio 87.5% and quick ratio 66.8% reflect tight near-term liquidity. Working capital is -16.87, with cash 14.39 against current liabilities 134.93 and short-term loans 57.00. Cash ratio ≈ 10.7% (14.39/134.93). solvency: Total loans 78.04 (short-term 57.00, long-term 21.04). Net debt ≈ 63.65 (78.04 - 14.39). Net D/E ≈ 0.47x and reported D/E 1.30x indicate manageable leverage. Interest coverage strong at 24.2x (OI/interest expense). capital_structure: Assets 313.35 vs equity 136.78 imply leverage 2.29x. Noncurrent assets 189.24 (60% of assets) highlight capital intensity; investment securities are modest at 4.18. Balance sheet supports operations but limits asset turnover.

Cash Flow Quality

earnings_quality: OCF 13.77 vs NI 8.03 yields OCF/NI 1.71x, signaling solid cash realization from earnings. Limited non-operating contributions and a standard tax rate underpin quality. FCF_analysis: Estimated FCF ≈ 7.91 (OCF 13.77 minus capex 5.86). This positive FCF supports debt service and dividends. Note: Investing CF detail is unreported, so FCF is approximated from available capex only. working_capital: Accounts receivable 37.52 and inventories 27.96 vs accounts payable 17.99 indicate moderate working capital intensity. With current liabilities heavy (134.93), careful management of receivables and inventory turns is important to sustain OCF.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 50.6% based on reported earnings; DPS is unreported. This is moderate for a cyclical industrial/chemical profile. FCF_coverage: Using estimated FCF of ~7.91 and implied dividends of ~4.06 (50.6% × NI 8.03), FCF coverage approximates ~1.9x for the period. Coverage is adequate, though contingent on maintaining current OCF. policy_outlook: With positive FCF, modest net leverage, and strong interest cover, maintaining the payout appears feasible. However, tight liquidity (sub-1.0 current ratio) suggests flexibility in timing of distributions may be prudent if working capital needs rise. Dividend policy clarity is limited due to unreported DPS.

Risk Assessment

Business Risks:

• End-market demand softness (revenue -0.6% YoY) and potential macro slowdown.
• Raw material and energy cost volatility impacting gross margin.
• Capital intensity leading to high fixed costs and operating leverage in downturns.
• Product/pricing mix dependence to sustain margins without volume growth.

Financial Risks:

• Sub-1.0 current ratio (87.5%) and negative working capital (-16.87).
• Reliance on short-term borrowings (57.00) exposing refinancing and interest rate risks.
• Concentration in noncurrent assets reducing balance-sheet flexibility.
• Potential cash flow timing mismatches if receivables stretch or inventory builds.

Key Concerns:

• Sustaining margin gains if input costs re-inflate.
• Managing liquidity with heavy current liabilities and short-term debt.
• Visibility on investing cash flows and dividend outflows is limited due to unreported items.

Investment Implications

Key Takeaways:

• Earnings resilience: operating income +18.8% YoY on -0.6% sales reflects effective cost control.
• Healthy cash conversion: OCF/NI 1.71x and positive estimated FCF ~7.91.
• Strong interest coverage (24.2x) but tight liquidity (current ratio 87.5%).
• ROE 5.9% supported more by leverage and margin than by asset turnover.
• Net leverage moderate (net D/E ~0.47x), providing solvency cushion.

Metrics to Watch:

• Gross and operating margins to gauge sustainability of cost improvements.
• Working capital metrics (AR, inventory, AP) and current ratio trajectory.
• Short-term loan balance and refinancing terms; interest expense trend.
• OCF vs NI and capex to validate ongoing FCF coverage of dividends.
• Revenue trajectory and asset turnover as drivers of ROE improvement.

Relative Positioning: Within Japan small/mid-cap chemicals/materials, operating margin near 9% is competitive, interest coverage is strong, and leverage is moderate; however, liquidity is weaker than many peers with current ratios above 1.0, and asset turnover is on the low side given the asset-heavy base.

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
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