TAYCA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥27.06B
• Operating Income: ¥1.41B
• Net Income: ¥1.50B
• EPS: ¥45.88

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

Teika Co., Ltd. (4027) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line pressure and a pronounced squeeze in operating profitability, offset by strong cash generation and a robust balance sheet. Revenue declined 3.2% YoY to ¥27.06bn, while operating income fell 35.6% YoY to ¥1.41bn, highlighting negative operating leverage and/or cost inflation not fully passed through to customers. Gross profit was ¥5.46bn, implying a gross margin of 20.2%, and operating margin contracted to approximately 5.2%. Ordinary income of ¥1.56bn exceeded operating income, indicating positive non-operating contributions (e.g., FX or investment income) partially cushioning weaker operations. Net income came in at ¥1.05bn, down 28.7% YoY, yielding a net margin of 3.87%. DuPont metrics show a calculated ROE of 1.71%, driven by a 3.87% net margin, asset turnover of 0.30x, and financial leverage of 1.47x. The effective tax burden based on disclosed figures is approximately 42% (¥657m tax on ¥1,561m ordinary income), even though the provided “effective tax rate” field shows 0.0% (which we treat as undisclosed). Liquidity is strong with a current ratio of 3.00x and a quick ratio of 2.38x; working capital stands at ¥33.29bn. Solvency is conservative: total equity is ¥61.25bn against total assets of ¥90.18bn, implying an equity ratio around 67.9% (the 0.0% field is undisclosed, not zero). Interest expense is modest at ¥62m with interest coverage of 22.7x, evidencing low financial risk. Operating cash flow of ¥2.94bn is 2.81x net income, indicating robust cash conversion likely aided by working capital tailwinds and non-cash charges. Investing cash flow and cash balances are undisclosed; consequently, free cash flow cannot be confirmed from the provided data, though OCF comfortably exceeds net income and D&A is sizable at ¥1.32bn. Dividend data (DPS, payout, FCF coverage) are not disclosed; thus, dividend sustainability cannot be directly assessed, but capacity appears adequate given cash generation and balance sheet strength. Overall, the quarter reflects cyclical margin pressure in an asset-intensive chemical business, partially offset by non-operating gains and strong cash conversion, with ample liquidity and low leverage supporting financial resilience. Data gaps (notably cash/investment flows and dividends) limit some conclusions, and the half-year period requires caution in extrapolating full-year outcomes.

Profitability Analysis

ROE decomposition indicates muted returns driven primarily by margin compression. DuPont: Net margin 3.87% x Asset turnover 0.30x x Financial leverage 1.47x = ROE 1.71%. Gross margin is 20.2% (¥5.46bn/¥27.06bn), operating margin is 5.2% (¥1.41bn/¥27.06bn), and ordinary margin is 5.77% (¥1.56bn/¥27.06bn). The sharp YoY decline in operating income (-35.6% vs. revenue -3.2%) indicates negative operating leverage, likely from higher input/energy costs and/or unfavorable mix and pricing lags. EBITDA is ¥2.73bn with a 10.1% margin, implying meaningful non-cash charges (D&A ¥1.32bn) typical for an asset-intensive process business. Non-operating items turned supportive (ordinary > operating), providing a partial buffer. Interest burden is minimal (62m), with EBIT/interest ≈22.7x. On balance, profitability is pressured at the operating level, while overall ROE remains low due to both subdued margins and low asset turnover.

Growth Assessment

Revenue decreased 3.2% YoY to ¥27.06bn, signaling soft demand or pricing pressure, potentially in end-markets like coatings, plastics, and paper if titanium dioxide is core. Operating income fell 35.6% YoY to ¥1.41bn, significantly outpacing the sales decline, reflecting cost inflation and/or mix shifts that were not fully offset by pricing. Net income declined 28.7% YoY to ¥1.05bn, helped by non-operating income to mitigate operating pressure. Sustainability of revenue depends on the pace of demand normalization in industrial end-markets and the company’s pricing power to recover elevated raw material and energy costs. Profit quality is mixed: accounting earnings were weak, but cash conversion was strong (OCF/NI 2.81x), suggesting underlying earnings quality benefits from non-cash charges and working capital release. Near-term outlook hinges on input cost trends, FX effects on imported raw materials, and the ability to pass through prices; moderate recovery in volumes or pricing could lift margins given the cost base. However, with asset turnover at 0.30x and EBITDA margin at 10.1%, structural improvements in efficiency and product mix would be required for sustained growth in ROIC.

Financial Health

Liquidity is robust: current assets ¥49.96bn vs. current liabilities ¥16.67bn yields a current ratio of 2.997x; quick ratio is 2.377x, with inventories of ¥10.33bn. Working capital is substantial at ¥33.29bn, providing a cushion against cyclical swings. Solvency is strong with total equity of ¥61.25bn and total assets of ¥90.18bn, implying an equity ratio around 67.9% (the disclosed 0.0% is an undisclosed item). Debt-to-equity is reported at 0.47x (assumed to reflect interest-bearing debt; specific debt composition not provided), and interest expense is low at ¥62m, indicating modest leverage. Interest coverage is 22.7x, comfortably above typical covenants. The capital structure is conservative, affording flexibility to absorb margin volatility and to fund maintenance capex. Overall, balance sheet resilience is a notable strength.

Cash Flow Quality

Operating cash flow was ¥2.94bn, 2.81x net income (¥1.05bn), indicating strong cash conversion supported by non-cash D&A (¥1.32bn) and likely favorable working capital movements. EBITDA of ¥2.73bn aligns with OCF magnitude, suggesting limited cash leakage from non-recurring items this period. Investing cash flow is undisclosed; therefore, free cash flow cannot be confirmed, and the provided FCF value of 0 should be treated as not reported. Given the asset intensity, maintenance capex is likely meaningful and could approximate or exceed D&A in some periods, but this cannot be verified here. Financing cash flow was -¥2.03bn, potentially reflecting debt repayment, dividends, or share repurchases; details are not disclosed. Cash and equivalents are not reported in this dataset. Overall, earnings quality appears solid from a cash perspective this period, but the absence of investing cash flow data limits full FCF assessment.

Dividend Sustainability

Dividend data (annual DPS, payout ratio, FCF coverage) are not disclosed in this dataset and the zeros should not be interpreted as actual zero. With net income at ¥1.05bn and OCF at ¥2.94bn, capacity to fund dividends appears reasonable, contingent on capex needs and potential working capital reversals. Without investing cash flow (capex) and actual DPS, we cannot compute payout or FCF coverage. Historically for asset-intensive chemicals, prudent payout ratios are often aligned with capex cycles; if capex tracks or exceeds D&A (¥1.32bn), excess cash may vary YoY. Policy signals (target payout or DOE) are not available here. In the interim, strong liquidity and low leverage support potential dividend capacity, but sustainability depends on restoring operating margins and managing capex.

Risk Assessment

Business Risks:

• Cyclical demand in coatings, plastics, and paper end-markets affecting TiO2 volumes and pricing.
• Raw material and energy cost inflation compressing margins if pass-through lags.
• Foreign exchange volatility impacting imported feedstocks and export competitiveness.
• Competitive pricing pressure in commodity pigments and potential substitution risks.
• Environmental and regulatory compliance costs for chemical manufacturing.
• Customer concentration risk if key accounts represent a large share of sales.
• Operational risks at manufacturing sites (outages, maintenance, safety).

Financial Risks:

• Working capital volatility (inventory and receivables) affecting OCF in down-cycles.
• Potential increase in capex requirements for maintenance/environmental upgrades, pressuring FCF.
• Interest rate and credit spread risk on any interest-bearing debt (though current burden is low).
• FX translation and transaction impacts on earnings and cash flows.
• Non-operating income volatility (ordinary > operating this period) adding earnings variability.

Key Concerns:

• Operating income down 35.6% YoY versus revenue down 3.2%, indicating negative operating leverage.
• Low asset turnover (0.30x) and compressed margins driving a low ROE of 1.71%.
• Incomplete disclosure on investing cash flows and dividends limits assessment of FCF and payout sustainability.

Investment Implications

Key Takeaways:

• Margin compression and negative operating leverage materially reduced operating income despite modest sales decline.
• Non-operating gains supported ordinary income, partially offsetting operating weakness.
• Robust liquidity and strong equity base provide resilience and financial flexibility.
• OCF significantly exceeded net income (2.81x), indicating solid cash conversion this period.
• Data gaps on investing cash flow and dividends constrain FCF and payout analysis.

Metrics to Watch:

• Operating margin progression and gross-to-operating spread (pricing vs. input costs).
• Working capital trends (inventory turnover, receivables) and OCF sustainability.
• Capex levels vs. D&A to gauge maintenance vs. growth investment and FCF.
• Non-operating items (FX gains/losses, investment income) driving ordinary income.
• Leverage and interest coverage amid potential rate and FX changes.
• Revenue mix and pricing in key end-markets (especially TiO2).

Relative Positioning: Within Japanese mid-cap chemicals, Teika exhibits conservative leverage and strong liquidity but currently faces cyclical margin pressure and low ROE relative to peers with higher value-added portfolios; improving pricing power and cost pass-through would be key to closing the profitability 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