OSAKA SODA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥48.83B
• Operating Income: ¥8.11B
• Net Income: ¥4.86B
• 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

Osaka Soda (4046) delivered resilient FY2026 Q2 results with profitability notably improving despite a modest top-line decline. Revenue fell 2.7% YoY to ¥48.8bn, but operating income rose 16.4% to ¥8.1bn, indicating favorable price/mix and/or effective cost control. Net income climbed 38.8% YoY to ¥6.76bn, outpacing operating profit growth and implying incremental non-operating support (e.g., financial income or improved affiliates) and/or a normalized tax burden. Gross margin stood at 30.0% and operating margin at approximately 16.6%, showing solid margin resilience for a specialty chemicals profile. EBITDA reached ¥9.98bn with a 20.4% margin, underlining healthy operating leverage and disciplined expense management. DuPont decomposition shows a net margin of 13.83%, asset turnover of 0.306x, and financial leverage of 1.31x, leading to a calculated ROE of 5.55%, consistent with the reported figure. The ROE is constrained primarily by low asset turnover and a conservative capital structure rather than weak profitability. Liquidity is strong with a current ratio of 296% and quick ratio of 265%, supported by ¥92.9bn of current assets versus ¥31.4bn of current liabilities. Balance sheet leverage remains low with total liabilities of ¥38.3bn against equity of ¥121.6bn (debt-to-equity 0.32x). Operating cash flow of ¥10.1bn exceeds net income (OCF/NI of 1.50), indicating good earnings-to-cash conversion and manageable working capital movements. Interest coverage is robust at roughly 147x, reflecting minimal interest expense relative to operating earnings. While the provided “effective tax rate” metric shows 0.0%, the disclosed income tax expense of ¥2.24bn versus pre-tax ordinary income of ¥8.91bn implies a more normalized effective rate in the mid-20% range. Several data items are not disclosed in the dataset (e.g., investing cash flows, cash balance, equity ratio, dividends), limiting visibility into capital allocation and free cash flow. Consequently, free cash flow cannot be reliably assessed from the provided figures, despite strong OCF. Overall, Osaka Soda exhibits solid margin quality, strong cash generation, and a conservative balance sheet, though the decline in revenue and low asset turnover temper ROE. The sustainability of margin gains amidst softer sales and the trajectory of capex and growth investments are key to the outlook.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 13.83%
• asset_turnover: 0.306x
• financial_leverage: 1.31x
• calculated_ROE: 5.55%
• interpretation: ROE is modest, driven by strong margins but dampened by low asset turnover and low leverage. margin_quality:
• gross_margin: 30.0%
• operating_margin: 16.6%
• EBITDA_margin: 20.4%
• drivers: YoY revenue declined but operating profit rose, indicating positive price/mix and cost discipline; limited drag from SG&A and raw materials/energy given spread resilience. operating_leverage: Positive in the period: operating income growth (+16.4% YoY) outpaced revenue (-2.7% YoY), evidencing cost efficiency and fixed-cost absorption improvements.

Growth Assessment

revenue_sustainability: Revenue decreased 2.7% YoY to ¥48.8bn, suggesting demand softness or product rationalization; sustainability hinges on downstream sectors (electronics, autos, industrials) and pricing retention. profit_quality: Operating profit growth with lower sales points to higher value-added mix and/or lower input costs; OCF/NI at 1.50 supports earnings quality. outlook: Maintaining elevated margins will depend on raw material and energy cost trends, FX, and end-market recovery. With low leverage, the company has capacity to invest; clarity on capex pipeline is needed to gauge growth acceleration.

Financial Health

liquidity:

• current_ratio: 296.1%
• quick_ratio: 264.8%
• working_capital: ¥61.5bn
• commentary: Very strong short-term liquidity, with inventories at ¥9.82bn indicating limited reliance on stock to support liquidity. solvency:
• debt_to_equity: 0.32x
• interest_coverage: 147.5x
• commentary: Low leverage and ample coverage reduce refinancing and interest rate risk. capital_structure: Balance sheet is conservative (assets ¥159.4bn; equity ¥121.6bn; liabilities ¥38.3bn). Implied equity ratio is high (~76%) despite the metric not being disclosed.

Cash Flow Quality

earnings_quality: OCF/NI of 1.50 indicates healthy conversion; earnings appear backed by cash with manageable non-cash items and working capital swings. FCF_analysis: Investing CF is not disclosed; thus, true FCF cannot be calculated. EBITDA of ¥9.98bn and OCF of ¥10.12bn suggest capacity to fund maintenance capex and selective growth, but capex magnitude remains unknown. working_capital: Current assets of ¥92.9bn vs. current liabilities of ¥31.4bn provide a cushion; inventories at ¥9.82bn look reasonable relative to sales, supporting cycle resilience.

Dividend Sustainability

payout_ratio_assessment: Payout ratio shown as 0.0% and DPS as ¥0.00 are likely undisclosed mid-year figures rather than policy signals. EPS is ¥53.74 for the period, implying capacity for dividends if policy permits. FCF_coverage: Cannot assess due to missing investing cash flow/capex. OCF strength suggests potential coverage, but lack of capex data precludes a definitive view. policy_outlook: Given low leverage and solid cash generation, the balance sheet can support distributions; however, visibility is limited without disclosed dividend guidance and capex plans.

Risk Assessment

Business Risks:

• Demand volatility in key downstreams (semiconductor materials, autos, industrials).
• Raw material and energy price fluctuations impacting spreads.
• Foreign exchange movements affecting export competitiveness and input costs.
• Competitive pressures in specialty chemicals and potential pricing normalization.
• Regulatory and environmental compliance costs (emissions, chemical safety).
• Geographic exposure to China/Asia and macro slowdown risk.
• Product mix shifts that could reverse recent margin gains.

Financial Risks:

• Working capital swings affecting cash conversion despite strong OCF in the period.
• Potential increase in capex for growth or environmental investments impacting FCF.
• Impairment risk on specialized assets if end-market demand weakens.
• Pension/retirement benefit obligations (not disclosed here) could affect equity.
• Interest rate changes have limited impact now but could affect future financing.

Key Concerns:

• Revenue contraction despite profit growth raises questions on sustainability of margin outperformance.
• Limited disclosure on investing cash flows and cash balance restricts FCF and liquidity visibility.
• Effective tax rate metric reported as 0.0% conflicts with disclosed tax expense; true tax rate closer to mid-20% range.
• Low asset turnover constrains ROE despite strong margins.

Investment Implications

Key Takeaways:

• Margins strengthened: operating margin ~16.6% and EBITDA margin 20.4% despite lower revenue.
• ROE at 5.55% is margin-driven but capped by low asset turnover and low leverage.
• Balance sheet is conservative with debt-to-equity of 0.32x and ample liquidity.
• Cash conversion is strong (OCF/NI 1.50), suggesting good earnings quality.
• Visibility on capex and FCF is limited due to undisclosed investing cash flows.
• Interest burden is negligible (coverage ~147x), reducing solvency risk.

Metrics to Watch:

• Revenue trajectory and price/mix sustainability.
• Operating margin and spread versus raw material and energy costs.
• OCF/NI conversion, inventory days, and receivables/payables turnover.
• Capex disclosures and investing cash flows to assess FCF.
• Effective tax rate normalization versus historical levels.
• Asset turnover improvements via portfolio optimization or growth.

Relative Positioning: Compared with domestic chemical peers, Osaka Soda shows above-average margin resilience and a stronger balance sheet with lower leverage; however, asset turnover is low and ROE sits below peer leaders that run leaner balance sheets or higher utilization.

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