TODA KOGYO CORP. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.31B
• Operating Income: ¥599M
• Net Income: ¥-854M
• EPS: ¥-18.71

Income Statement

Balance Sheet

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

Todakogyo Co., Ltd. (TSE:4100) reported FY2026 Q2 consolidated (JGAAP) results showing stable operating performance amid top-line softness, but bottom-line pressure from non-operating items and taxes resulted in a net loss. Revenue declined 1.4% year on year to ¥14.31bn, while operating income held flat at ¥0.60bn, implying resilient cost management and stable gross profitability. Gross profit was ¥2.97bn, translating to a gross margin of 20.7%, a healthy level for a specialty materials/chemicals manufacturer. Operating margin was 4.2%, indicating modest operating leverage and disciplined SG&A control. However, ordinary income fell to just ¥0.02bn, as interest expense of ¥0.23bn substantially eroded operating profit, highlighting a heavy financial burden. The company recorded a net loss of ¥0.11bn (EPS: -¥18.71), driven by below-the-line items and tax expense; the bridge from ordinary income to net loss suggests non-operating and/or extraordinary and tax charges outweighed operating gains. DuPont analysis shows ROE at -0.95%, with negative net margin (-0.75%) offsetting decent asset turnover (0.291x) and elevated financial leverage (4.31x). Liquidity appears adequate with a current ratio of 127.9% and a quick ratio of 107.4%, supported by working capital of ¥5.63bn. Leverage is high with a debt-to-equity ratio of 3.41x and total liabilities of ¥38.89bn against equity of ¥11.42bn, increasing earnings sensitivity to interest costs. Interest coverage is thin at 2.6x, leaving limited cushion for rate increases or profit shortfalls. Inventories of ¥4.13bn versus half-year COGS of ¥11.54bn imply reasonable inventory intensity, but working capital movements are not observable this quarter due to unreported cash flow details. The company paid no dividends (DPS: ¥0.00), which aligns with the current loss position and leverage considerations. Cash flow statements, depreciation, and cash balances were not disclosed in the provided XBRL, limiting assessment of earnings quality and capex needs. Overall, the business demonstrates stable core operations but faces pressure from financing costs and below-the-line items, constraining net profitability and ROE. The outlook hinges on maintaining margins amid revenue headwinds, reducing interest burden, and improving cash generation once disclosures are available.

Profitability Analysis

ROE is -0.95%, decomposed into: net profit margin -0.75%, asset turnover 0.291x, and financial leverage 4.31x. The negative margin is the primary drag on ROE; leverage amplifies the impact of small profit swings. Gross margin is 20.7% (¥2.97bn GP on ¥14.31bn revenue), evidencing sound pricing and product mix. Operating margin of 4.2% (¥0.60bn OI) indicates moderate operating leverage; the flat YoY operating income despite lower revenue signals effective cost containment. Ordinary income of ¥0.02bn versus operating income of ¥0.60bn highlights heavy non-operating costs, chiefly interest expense of ¥0.23bn, compressing ordinary margin to near breakeven (~0.1%). The earnings bridge to net loss (-¥0.11bn) reflects additional below-the-line/tax impacts (income tax expense reported ¥0.31bn), overwhelming limited ordinary profit. Interest coverage is 2.6x (OI/interest), a narrow buffer that magnifies earnings volatility. EBITDA is unreported; with zero D&A disclosed in XBRL, EBITDA cannot be reliably computed and should not be interpreted as truly 0. Margin quality appears acceptable at the gross and operating levels, but net margin is impaired by financing and non-operating items.

Growth Assessment

Revenue decreased 1.4% YoY to ¥14.31bn, suggesting soft demand or mix pressures, but not a severe contraction. Operating income was flat YoY at ¥0.60bn, implying cost actions and productivity gains largely offset the top-line dip. Ordinary and net profits did not track operating stability due to interest and tax effects, pointing to lower quality of profit growth below the operating line. With limited disclosure on segment mix and pricing, sustainability of revenue will likely depend on end-market recovery and continued pricing discipline. The relatively stable gross margin supports an assumption of resilient product economics in the near term. However, the thin ordinary margin and net loss indicate limited room for absorption of external shocks (input costs, FX, rates). Without cash flow and capex data, visibility on reinvestment capacity and medium-term growth execution is constrained. Outlook hinges on moderating interest burden, potential normalization of non-operating items, and maintaining utilization/mix. Any improvement in revenue trajectory should flow through meaningfully given stable gross margins, but financing costs will continue to cap net profit growth unless leverage is reduced.

Financial Health

Total assets are ¥49.24bn against total liabilities of ¥38.89bn and equity of ¥11.42bn, indicating a leveraged capital structure (debt-to-equity 3.41x). Liquidity is adequate: current assets ¥25.81bn vs current liabilities ¥20.18bn yield a current ratio of 127.9% and quick ratio of 107.4%. Working capital stands at ¥5.63bn, providing operational flexibility. Interest expense of ¥0.23bn relative to operating income (¥0.60bn) constrains financial flexibility, and coverage at 2.6x leaves limited headroom. Equity ratio is shown as 0.0% in the extract but should be treated as undisclosed; based on totals, equity/asset ratio approximates 23.2%, consistent with a moderately low equity buffer. The liability load and interest burden elevate solvency risk if operating profits weaken. Cash and equivalents are undisclosed in XBRL; hence, short-term liquidity quality (cash vs receivables) cannot be fully assessed.

Cash Flow Quality

Operating cash flow, investing cash flow, financing cash flow, and cash balances are not disclosed in the provided data; zeros should be read as unreported. Consequently, OCF/Net Income and free cash flow metrics shown as 0.00 are not meaningful for quality assessment. Earnings quality cannot be triangulated with cash conversion this quarter. Working capital indicators are partially observable: inventories are ¥4.13bn versus half-year COGS of ¥11.54bn, suggesting an inventory-to-COGS ratio of ~0.36 for the period (implying roughly 2.8x half-year turns), which appears reasonable. Without D&A disclosure, we cannot separate cash vs non-cash components of operating profit or infer maintenance capex needs. Key gap: absence of OCF and capex data limits judgment on the durability of operating earnings and FCF generation.

Dividend Sustainability

The company reported DPS of ¥0.00 with a payout ratio of 0.0%, consistent with a net loss in the period. Given the negative net income and elevated leverage (debt-to-equity 3.41x), maintaining a conservative dividend stance is prudent to preserve balance sheet strength. FCF coverage is shown as 0.00x due to unreported cash flows; thus, true coverage cannot be assessed. In the absence of positive, recurring net income and visible free cash flow, dividend reinstatement or increases would depend on a sustained turnaround in ordinary profit and improved cash conversion. No explicit dividend policy details are provided here; near-term policy likely prioritizes balance sheet resilience over distribution.

Risk Assessment

Business Risks:

• Demand variability in end markets for specialty materials/chemicals impacting volume and pricing
• Input cost and energy price volatility affecting gross margins
• FX fluctuations influencing both revenue and cost base
• Customer concentration or product concentration risk not visible from the data but typical for niche materials
• Potential regulatory or environmental compliance costs

Financial Risks:

• High leverage (debt-to-equity 3.41x) increasing sensitivity to earnings volatility
• Thin interest coverage of 2.6x, exposing profits to rate increases or operating softness
• Non-operating and tax impacts driving divergence between operating and net income
• Limited visibility on liquidity due to undisclosed cash balances and cash flows
• Refinancing risk if debt maturities cluster or covenant headroom is narrow

Key Concerns:

• Net loss despite positive operating income due to heavy non-operating charges and taxes
• Ordinary income near breakeven, leaving little buffer for shocks
• Absence of cash flow and D&A disclosure impeding assessment of FCF and maintenance capex
• Elevated leverage constraining financial flexibility

Investment Implications

Key Takeaways:

• Core operations are stable: operating income flat YoY on a modest revenue decline, with gross margin at 20.7%
• Net loss (-¥0.11bn) driven by interest and below-the-line/tax items, not core operations
• Leverage is high (3.41x D/E) and interest burden (¥0.23bn) compresses ordinary profit
• Liquidity is adequate (current ratio 128%, quick ratio 107%) but cash visibility is lacking
• ROE is negative (-0.95%) due to a slight net loss amplified by leverage

Metrics to Watch:

• Ordinary income trajectory versus interest expense
• Gross and operating margins to gauge pricing and cost control
• Cash flow from operations and capex once disclosed to assess FCF
• Inventory and receivables turnover as indicators of working capital discipline
• Effective tax and extraordinary items impacting net income
• Leverage and interest coverage trends, including refinancing terms

Relative Positioning: Versus domestic specialty chemicals/materials peers, Todakogyo exhibits comparable gross margin resilience but weaker ordinary and net profitability due to a heavier interest burden; leverage is higher than many peers, resulting in lower ROE and thinner coverage.

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