Central Glass Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥66.43B
• Operating Income: ¥2.50B
• Net Income: ¥3.15B
• EPS: ¥86.17

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

Central Glass Co., Ltd. (4044) reported FY2026 Q2 consolidated results under JGAAP marked by sharp profit compression despite only a modest decline in revenue. Sales were ¥66.43bn, down 2.4% YoY, while operating income fell 47.3% YoY to ¥2.50bn, indicating meaningful margin pressure and adverse operating leverage. Gross profit was ¥18.90bn for a gross margin of 28.4%, but the operating margin slid to roughly 3.8%, highlighting increased SG&A burden and/or weaker pricing in core businesses. Ordinary income of ¥3.41bn exceeded operating income, implying material non-operating gains (e.g., FX, dividends, equity-method, or interest income) that cushioned earnings. Net income declined 23.2% YoY to ¥2.14bn (EPS ¥86.17), a milder drop than operating income due to the above non-operating support. DuPont decomposition shows ROE at 1.76%, driven by a modest net margin of 3.21%, low asset turnover of 0.333 (capital-intensive profile), and moderate financial leverage of 1.65x. The balance sheet remains strong: total assets are ¥199.72bn, equity is ¥121.17bn, and liabilities are ¥83.77bn, implying an equity ratio around 60.7% (recomputed), despite the reported equity ratio field showing 0.0% (unreported). Liquidity is solid with a current ratio of 234% and quick ratio of 176%, supported by working capital of ¥65.79bn and inventories of ¥28.66bn. Cash generation was robust: operating cash flow reached ¥13.17bn, about 6.2x net income and an estimated OCF margin near 19.8%, indicating strong cash conversion from operations. Financing cash outflow was ¥10.52bn, suggesting debt repayment and/or distributions; investing cash flow and cash balance were not disclosed in this dataset (zeros indicate non-reporting). EBITDA was ¥6.93bn (10.4% margin), and interest coverage remained comfortable at 16.1x on an EBIT basis; leverage measured by liabilities-to-equity is a modest 0.69x. The provided “effective tax rate: 0.0%” appears to be a data artifact; based on income tax of ¥1.37bn and net income of ¥2.14bn, the implied pre-tax income is ~¥3.50bn, yielding an estimated effective tax rate near 39%. Dividend fields are shown as zero (DPS and payout), likely not disclosed here; thus, dividend conclusions require caution. Overall, fundamentals show a resilient balance sheet and strong operating cash flow, but profitability has weakened materially, and ROE is subdued. The outlook hinges on margin stabilization through pricing discipline, cost normalization, and mix improvement, as well as the persistence of non-operating gains. Data limitations (notably investing CF, cash, shares outstanding, and dividend disclosure) constrain precision in FCF and per-share assessments.

Profitability Analysis

ROE is 1.76%, decomposed as Net Margin 3.21% x Asset Turnover 0.333 x Financial Leverage 1.65. The low asset turnover reflects a capital-intensive footprint, while leverage is moderate, limiting ROE amplification. Gross margin of 28.4% is decent, but the operating margin of ~3.8% is weak and down sharply YoY, evidencing adverse operating leverage: a 2.4% revenue decline translated into a 47.3% drop in operating income. EBITDA margin of 10.4% suggests non-cash charges (D&A ¥4.42bn) are meaningful; nevertheless, cash earnings are stronger than accounting profit. Ordinary income outpacing operating income indicates reliance on non-operating items (e.g., FX gains, investment income), which are inherently less stable; core margin quality has deteriorated. Interest expense is low at ¥155m, and EBIT/interest coverage at 16.1x remains healthy. The implied effective tax rate is ~39% (recomputed), not 0.0% as shown in the derived metrics, suggesting taxes were a material drag. Overall, profitability pressure stems primarily from operating cost headwinds and/or pricing/mix, not from financing costs.

Growth Assessment

Revenue declined 2.4% YoY to ¥66.43bn, indicating mild top-line softness amid a likely mixed demand environment. Operating income fell 47.3% YoY to ¥2.50bn, signaling a disproportionate impact from cost inflation, price competition, or weaker utilization. Net income decreased 23.2% YoY to ¥2.14bn, aided by non-operating gains that mitigated core profit weakness. The EBITDA margin at 10.4% and strong OCF suggest underlying cash generation remains intact despite profit compression. Sustainability of revenue depends on stabilization in key end markets and pricing power; with low asset turnover (0.333), incremental volume recovery could lift operating margins via utilization. Outlook hinges on cost normalization (energy/raw materials), product mix improvements, and continued cost control; otherwise, operating leverage could remain negative. Non-operating contributions (difference between ordinary and operating income) are supportive but volatile, and should not be extrapolated as structural growth. Without disclosure of segment trends in this dataset, our growth view is cautious near term with potential improvement contingent on margin recovery rather than pure volume growth.

Financial Health

Balance sheet strength is solid: total equity of ¥121.17bn vs total liabilities of ¥83.77bn implies an equity ratio near 60.7% (recomputed from available balances). The reported equity ratio of 0.0% appears to be a non-disclosure artifact. Liquidity is robust with a current ratio of 234% and quick ratio of 175.6%, supported by ¥114.89bn of current assets and ¥49.10bn of current liabilities. Working capital is sizeable at ¥65.79bn, and inventories are ¥28.66bn (inventory intensity is notable, consistent with a manufacturing profile). Solvency is comfortable: liabilities-to-equity (a proxy for D/E) is 0.69x, and interest expense is only ¥155m with strong coverage. Ordinary income exceeding operating income suggests some financial income/FX gains, which do not impair solvency but add volatility. Overall, the company appears conservatively capitalized with ample liquidity to absorb cyclical swings.

Cash Flow Quality

Operating cash flow was ¥13.17bn versus net income of ¥2.14bn, yielding an OCF/NI of 6.17x, indicative of strong cash earnings and favorable working capital dynamics. The implied OCF margin is about 19.8% against revenue of ¥66.43bn. Depreciation and amortization of ¥4.42bn supports cash conversion by bridging from EBIT to cash. Investing cash flow and cash & equivalents were not disclosed in this dataset (displayed as zero per data limitation), preventing a precise free cash flow calculation; similarly, capital expenditures are not provided. The reported “Free Cash Flow: 0” should be treated as not available rather than zero. Financing cash flow was an outflow of ¥10.52bn, suggesting debt repayment and/or shareholder returns; OCF appears sufficient to cover these outflows within the period. Working capital appears to have contributed positively to cash generation, but without the breakdown (AR/AP/inventory changes), the sustainability of this benefit is uncertain. Overall, earnings quality is strong on a cash basis, but confirmation requires visibility into capex and recurring working capital needs.

Dividend Sustainability

Dividend data in this feed show DPS and payout as 0.00, which we treat as not disclosed rather than an actual zero dividend. Without confirmed DPS and capex, we cannot compute payout or FCF coverage conclusively. From a capacity standpoint, OCF of ¥13.17bn and a strong balance sheet imply headroom for distributions, but profit compression and reliance on non-operating gains argue for prudence. If the company targets a stable or progressive dividend policy, sustainability will hinge on restoring operating margins and maintaining strong cash conversion. Until DPS is confirmed and capex is known, we cannot assess coverage with precision.

Risk Assessment

Business Risks:

• Margin pressure from energy and raw material cost volatility affecting glass and chemical operations
• Pricing competition and oversupply risk in commodity-linked product lines
• Demand cyclicality in construction, automotive, and industrial end markets
• FX volatility (e.g., JPY swings) impacting both ordinary income and cost base
• Operational leverage risk given low operating margin and fixed cost intensity
• Inventory valuation risk in a cyclical pricing environment
• Execution risk on cost control and product mix upgrades

Financial Risks:

• Earnings reliance on non-operating gains (ordinary income > operating income) increasing volatility
• Potential capex requirements not visible in this dataset, affecting future FCF
• Working capital reversal risk if current period cash inflows were driven by temporary factors
• Tax rate variability (implied ~39%), which could pressure net margins

Key Concerns:

• Sharp YoY decline in operating income (-47.3%) despite modest revenue decline
• Low ROE at 1.76% due to thin margins and low asset turnover
• Data gaps on investing cash flow, cash balance, DPS, and capex hindering FCF analysis

Investment Implications

Key Takeaways:

• Core profitability weakened materially; operating margin around 3.8% with significant negative operating leverage
• Balance sheet and liquidity are strong (equity ratio ~60.7%, current ratio 234%)
• Cash generation is robust (OCF ¥13.17bn; OCF/NI 6.17x), but FCF cannot be validated without capex
• Ordinary income outperformed operating income, indicating non-operating support that may not be recurring
• ROE is subdued at 1.76%, constrained by low asset turnover and thin net margins

Metrics to Watch:

• Operating margin recovery and SG&A/COGS trends
• Price/mix vs input costs (energy, raw materials) and utilization rates
• Segment contribution to ordinary income and sensitivity to FX
• Working capital movements (inventory, receivables, payables) and sustainability of OCF
• Capex levels and project returns to assess future FCF
• Confirmed DPS and payout policy to gauge capital allocation discipline

Relative Positioning: Within domestic glass and chemical peers, Central Glass exhibits a stronger-than-average balance sheet and liquidity, but profitability and ROE currently lag due to margin compression; cash generation appears comparatively resilient, pending confirmation of capex intensity.

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