OSAKA SODA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥48.83B
• Operating Income: ¥8.11B
• Net Income: ¥6.76B
• EPS: ¥53.74

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

FY2026 Q2 was a solid profitability beat for Osaka Soda: operating earnings and net profit grew strongly despite a slight revenue decline. Revenue fell 2.7% YoY to 488.32, but operating income rose 16.4% YoY to 81.11 and ordinary income rose 24.0% YoY to 89.10. Net income increased 38.8% YoY to 67.55, underscoring strong bottom-line leverage. Gross margin printed at 32.7% and the operating margin was approximately 16.6% (81.11/488.32). EBITDA was 101.73, implying a 20.8% EBITDA margin and healthy cost control. Non-operating income of 8.99 (mainly dividend income of 6.18 and interest income of 0.83) provided an incremental boost, while non-operating expenses were modest at 1.00. With revenue down but operating income up, margins clearly expanded YoY; however, exact basis-point expansion cannot be quantified from the provided data. Earnings quality was good: operating cash flow of 79.88 exceeded net income (OCF/NI 1.18x), indicating that profit was backed by cash generation. Balance sheet strength is a highlight: current ratio is 316.7%, quick ratio 284.6%, and debt-to-equity 0.31x, with cash and deposits of 186.20 versus short-term loans of 71.72. Interest coverage is very strong at 108.15x, lowering financial risk amid rate volatility. ROE, however, remains modest at 5.5% per DuPont (margin 13.8%, asset turnover 0.306, leverage 1.31x), reflecting a conservative capital structure and low asset turnover. ROIC at 5.2% trails the 7–8% management target typical for high-quality chemical franchises, suggesting a continued focus on mix upgrade and disciplined capital allocation is needed. Free cash flow, inferred as OCF less capex, was approximately 46.66, comfortably funding the 10.00 of share repurchases, though dividend amounts were not disclosed. The reported payout ratio of 108.8% appears elevated and should be interpreted cautiously given unreported dividend details. Forward-looking, the company enters 2H with improved margin momentum, ample liquidity, and low leverage, but still needs to lift asset efficiency and ROIC to drive ROE structurally higher.

Profitability Analysis

ROE decomposes into Net Profit Margin × Asset Turnover × Financial Leverage = 13.8% × 0.306 × 1.31x ≈ 5.5%. The largest drag on ROE is the low asset turnover (0.306), while leverage is intentionally conservative (1.31x). The biggest YoY change appears to be margin improvement (operating income +16.4% vs revenue -2.7%), indicating operating margin expansion as the primary driver. Business-wise, this likely reflects favorable pricing/mix, lower input costs, or improved utilization/productivity, given that gross margin sits at 32.7% and non-operating support (dividend/interest) is modest relative to operating gains. Sustainability looks reasonable near term if pricing discipline and cost tailwinds (e.g., energy/raw materials normalization) persist; however, commodity/energy swings or weaker demand could reverse part of the expansion. Asset turnover remains structurally low for a specialty/industrial chemical profile; improvements would require either faster growth from higher-turnover segments or asset-light expansion. There is no evidence in the provided data of SG&A growing faster than revenue (SG&A was 78.40; YoY detail not disclosed), so we cannot flag deleveraging on that front. Net margin of 13.8% benefits slightly from non-operating income of 8.99; this portion should be monitored for volatility. Overall, ROE’s improvement pathway hinges more on sustaining higher operating margins and modestly lifting turnover than on financial leverage, which is already conservative.

Growth Assessment

Top-line declined 2.7% YoY to 488.32, but profit growth was strong: operating income +16.4% and net income +38.8%. The divergence indicates effective margin management and possibly favorable cost/pricing dynamics. Non-operating income (8.99), primarily dividends (6.18), added incremental profit but was not the core driver. EBITDA growth to 101.73 (20.8% margin) underscores operating efficiency gains. Revenue sustainability into 2H will depend on end-market demand in chemical applications and the company’s ability to hold price/mix after cost normalization. Given the low asset turnover (0.306) and moderate ROIC (5.2%), outsized profit growth from efficiency alone may be harder to repeat without incremental volume or product mix upgrades. With conservative leverage and strong liquidity, the company can continue selective growth investments (capex 33.22 in 1H) without stressing the balance sheet. Outlook: cautiously positive on margins, neutral on near-term revenue until clearer demand signals emerge; focus on sustaining pricing, controlling input costs, and executing on higher-ROIC projects.

Financial Health

Liquidity is very strong: current ratio 316.7% and quick ratio 284.6%; there is no warning threshold breach (both well above benchmarks). Solvency is conservative with debt-to-equity at 0.31x and interest coverage at 108.15x. Short-term loans are 71.72 against cash and deposits of 186.20 and current assets of 954.77, indicating limited maturity mismatch risk. Long-term loans are minimal at 3.87. Working capital is ample at 653.31, supported by sizable accounts receivable (256.97) and modest inventories (96.93). No off-balance sheet obligations are disclosed in the provided data. Equity stands at 1,216.18 with retained earnings of 816.47, reflecting substantial internal capital. There are no explicit red flags such as Current Ratio < 1.0 or D/E > 2.0.

Cash Flow Quality

OCF of 79.88 exceeds net income of 67.55 (OCF/NI 1.18x), indicating good earnings quality. Using disclosed capex (33.22), estimated free cash flow is approximately 46.66 despite the lack of full investing CF disclosure. Financing CF was -27.24, reflecting shareholder returns (share repurchases of 10.00) and potentially other items; dividends were not disclosed. The positive FCF comfortably covers the disclosed buybacks and suggests capacity to fund regular dividends, subject to actual dividend outlays. Working capital appears stable; receivables (256.97) and inventories (96.93) are not excessive relative to half-year revenue, though no prior-period comparison is provided. No clear signs of working capital manipulation are evident from available aggregates. Interest expense is low (0.75), consistent with strong coverage and cash generation.

Dividend Sustainability

The reported payout ratio is 108.8%, which is above the <60% benchmark for comfortable sustainability; however, dividend amounts are unreported, so this figure should be treated cautiously. On cash terms, estimated FCF of ~46.66 in the period and low interest burden support ongoing distributions, but sustainability depends on the actual dividend level and 2H cash flow. With net cash-like liquidity and conservative leverage, balance sheet capacity provides a buffer. Share repurchases of 10.00 were executed and are covered by FCF. Policy outlook: likely to prioritize stable dividends with opportunistic buybacks, contingent on maintaining margin gains and stable OCF. Key watchpoints are actual declared DPS and full-year FCF after growth capex.

Risk Assessment

Business Risks:

• End-market demand softness (revenue -2.7% YoY) potentially pressuring volumes in 2H.
• Raw material and energy cost volatility that could erode recent margin gains.
• Pricing/mix sustainability risk if competitive intensity rises in specialty/industrial chemicals.
• FX fluctuation risk affecting input costs and export competitiveness.
• Regulatory/environmental compliance costs impacting profitability over time.

Financial Risks:

• Low asset turnover (0.306) and modest ROIC (5.2%) limiting return uplift absent growth or mix upgrade.
• Potential dependence on non-operating income (dividends 6.18) for a portion of profit, which can be volatile.
• Receivables concentration risk (AR 256.97) if customer credit conditions weaken.
• Interest rate risk is limited but present on short-term loans (71.72).

Key Concerns:

• ROE remains modest at 5.5% despite strong earnings in the period.
• Payout ratio reported at 108.8% appears high, though dividend details are unreported.
• ROIC below 7–8% target range, pointing to need for higher-return projects or portfolio mix improvement.
• Lack of detailed SG&A and segment disclosures limits visibility on cost drivers and recurring versus one-time effects.

Investment Implications

Key Takeaways:

• Profitability inflected positively: operating income +16.4% on -2.7% revenue, signaling margin expansion.
• Cash earnings quality is strong with OCF/NI at 1.18x and robust FCF after capex.
• Balance sheet is highly liquid and conservatively levered (D/E 0.31x; interest coverage 108x).
• Returns remain the main improvement area: ROE 5.5% and ROIC 5.2% trail aspirational targets.
• Non-operating income (dividends) contributed but was not the primary driver; monitor its volatility.

Metrics to Watch:

• Operating margin trajectory and gross margin resilience in 2H.
• ROIC uplift relative to capex deployment and project pipeline.
• Working capital efficiency (AR days, inventory turns).
• Actual DPS and total shareholder return mix versus FCF.
• Input cost trends (energy/raw materials) and FX impacts on pricing.
• Asset turnover improvement via mix and utilization.

Relative Positioning: Within the Japanese chemical peer set, Osaka Soda combines strong liquidity and earnings cash conversion with improving margins, but lags top-tier peers on ROIC/ROE due to low asset turnover and conservative leverage; near-term upside hinges on sustaining margin gains and gradually lifting capital efficiency.

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