KANEKA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥397.43B
• Operating Income: ¥14.96B
• Net Income: ¥10.91B
• EPS: ¥176.51

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Kaneka (4118) reported FY2026 Q2 (cumulative) consolidated results showing modest topline growth with profitability pressure at the operating level but resilient bottom-line and solid cash generation. Revenue was ¥397.4bn, up 0.4% YoY, indicating broadly flat demand/pricing across key segments. Gross profit reached ¥110.1bn, implying a gross margin of 27.7%, which is healthy for a diversified chemical/materials portfolio. Operating income declined 21.7% YoY to ¥15.0bn, compressing the operating margin to roughly 3.8%, suggesting cost inflation, mix effects, or limited pricing power in certain categories. Ordinary income was ¥11.8bn, below operating income due to non-operating expense headwinds (e.g., interest expense of ¥2.1bn and potentially other non-operating items). Despite weaker operating profit, net income improved 8.7% YoY to ¥11.0bn, implying supportive below-ordinary line items and/or tax effects. The reported net profit margin was 2.78%, with EBITDA of ¥36.4bn and an EBITDA margin of 9.2%, highlighting reasonable operating cash earnings capacity despite margin pressures. DuPont analysis points to low ROE of 2.23% driven by a modest net margin (2.78%), low asset turnover (0.430x), and moderate financial leverage (assets/equity of 1.86x). Liquidity remains comfortable with a current ratio of 150.7% and a quick ratio of 115.4%, underpinned by working capital of ¥149.6bn. Balance sheet strength looks solid: while the “Equity Ratio” is reported as 0.0% in the dataset (unreported), the implied equity ratio based on totals is approximately 53.7% (¥496.1bn equity / ¥924.5bn assets). Operating cash flow was strong at ¥23.0bn, more than 2x net income, indicating high earnings quality for the period. Free cash flow could not be assessed due to unreported investing cash flows; financing cash flow was a small net inflow of ¥1.6bn. Dividend and share data were not disclosed in the dataset (DPS and payout shown as 0.00 indicate non-disclosure, not actual zero), limiting assessment of shareholder returns. Overall, Kaneka delivered stable sales and solid cash generation but faced operating margin compression, resulting in subdued ROE. The outlook hinges on the company’s ability to pass through costs, optimize product mix, and manage energy/raw material volatility while maintaining working capital discipline.

Profitability Analysis

ROE (DuPont) is 2.23% = Net margin (2.78%) × Asset turnover (0.430x) × Financial leverage (1.86x), indicating profitability is constrained primarily by low margin and slow asset turnover rather than leverage. Gross margin of 27.7% is healthy, but the translation to operating margin of ~3.8% shows elevated SG&A/other operating costs and/or poor mix in the quarter. EBITDA margin of 9.2% provides a cushion, suggesting depreciation intensity is meaningful (D&A ¥21.4bn) and fixed-cost absorption is a key factor. Operating income fell 21.7% YoY against flat revenue (+0.4% YoY), pointing to negative operating leverage in the period. Ordinary income of ¥11.8bn is below operating income, reflecting non-operating cost pressure (interest expense ¥2.1bn and potentially other losses), though not large enough to drive a YoY decline in net income. The improvement in net income (+8.7% YoY) despite weaker operating profit implies supportive below-the-line items (e.g., tax rate dynamics or extraordinary items not disclosed). Interest coverage is adequate at 7.2x (EBIT/interest), supporting ongoing debt service capacity. Overall profitability is mixed: solid gross economics and EBITDA, but compressed EBIT and low ROE point to margin headwinds and limited throughput on assets.

Growth Assessment

Revenue growth was +0.4% YoY to ¥397.4bn, indicating stable demand but limited pricing/mix tailwinds. Operating income fell 21.7% YoY to ¥15.0bn, suggesting cost inflation or unfavorable mix not fully offset by pricing. Net income rose 8.7% YoY to ¥11.0bn, likely aided by non-operating/tax items; the sustainability of this improvement is less certain without a recovery in core operating profit. Asset turnover at 0.430x is modest, implying capital intensity and/or inventory build relative to sales volumes; accelerating turnover would support growth in returns. EBITDA at ¥36.4bn indicates stable underlying cash earnings capacity, which, if maintained, can fund selective growth investments. Outlook depends on cost pass-through, stabilization of energy/raw materials, and product mix improvements in higher-margin segments; with revenue flat, margin restoration is the key lever. Given limited disclosure on segment trends in this dataset, we assume growth will be driven more by margin actions and efficiency than by volume expansion in the near term.

Financial Health

Total assets were ¥924.5bn vs. total equity of ¥496.1bn and total liabilities of ¥427.7bn, implying an equity ratio of ~53.7% (despite the dataset flagging 0.0% as unreported). Debt-to-equity is 0.86x (using total liabilities as a proxy for debt under data limitations), indicating moderate leverage. Liquidity is comfortable: current ratio 150.7%, quick ratio 115.4%, and working capital ¥149.6bn, supported by inventories of ¥104.2bn. Interest expense was ¥2.1bn with interest coverage at 7.2x, suggesting solid debt service ability. The capital structure appears conservative relative to asset base, providing balance sheet flexibility even amid margin pressures. Absent reported cash and investing flows, we cannot quantify net cash/debt or capex, but the implied equity cushion is substantial.

Cash Flow Quality

Operating cash flow was ¥23.0bn versus net income of ¥11.0bn, yielding an OCF/NI ratio of 2.08, which supports strong earnings quality and indicates positive working capital dynamics or non-cash charges (D&A ¥21.4bn) underpinning cash generation. EBITDA of ¥36.4bn comfortably covers interest expense (¥2.1bn), reinforcing operating cash strength. Free cash flow cannot be determined because investing cash flow is unreported (shown as 0 per data note). Working capital appears well-managed given the liquidity metrics; however, without period-over-period changes in receivables, payables, and inventories, we cannot isolate the specific drivers. Overall, cash conversion looks robust this period, but sustainability will depend on maintaining EBITDA and disciplined working capital.

Dividend Sustainability

Dividend data in this dataset are unreported (DPS and payout shown as 0.00 indicate non-disclosure). As such, payout ratio and FCF coverage cannot be assessed. From a capacity standpoint, OCF of ¥23.0bn and moderate leverage (debt-to-equity 0.86x; implied equity ratio ~53.7%) suggest headroom for shareholder returns, but actual policy and distributions are unknown based on the provided data. Future sustainability will hinge on operating margin recovery, capital expenditure requirements (unreported), and working capital needs.

Risk Assessment

Business Risks:

• Raw material and energy cost volatility compressing spreads and operating margins
• Pricing power and pass-through risk across diversified chemical/materials portfolio
• Product mix shifts away from higher-margin applications
• Cyclicality in end-markets (electronics, automotive, construction, healthcare materials)
• Foreign exchange fluctuations affecting revenue and costs
• Environmental and regulatory compliance costs impacting profitability

Financial Risks:

• Operating leverage leading to outsized EBIT swings on small revenue changes
• Potential increases in interest expense affecting ordinary income and coverage
• Working capital swings (inventory and receivables) impacting OCF
• Capex intensity (unreported) potentially absorbing operating cash flow
• Exposure to impairment risk if profitability remains subdued in certain businesses

Key Concerns:

• Operating income down 21.7% YoY despite flat sales (+0.4% YoY)
• Low ROE at 2.23% driven by thin net margin (2.78%) and low asset turnover (0.430x)
• Reliance on below-ordinary line items/taxes to support net income growth
• Limited visibility on capex and free cash flow due to unreported investing cash flows
• Dividend policy and distribution level not disclosed in the dataset

Investment Implications

Key Takeaways:

• Topline stable (+0.4% YoY) but operating margin compressed to ~3.8%, driving a 21.7% YoY decline in operating income
• Net income up 8.7% YoY to ¥11.0bn, aided by below-ordinary line items/taxes
• EBITDA margin at 9.2% and OCF/NI at 2.08 indicate solid cash conversion
• Balance sheet strength with implied equity ratio ~53.7% and current ratio 150.7%
• Interest coverage of 7.2x supports debt service capacity
• ROE remains low at 2.23%, constrained by thin margin and low asset turnover
• Dividend metrics not disclosed; FCF unassessable due to missing investing CF

Metrics to Watch:

• Operating margin and EBITDA margin (cost pass-through and mix improvement)
• Raw material and energy cost trends versus selling price adjustments (spread)
• Working capital turnover (inventory days and receivables/payables dynamics)
• Ordinary income components, especially interest and FX impacts
• Capex and investing cash flows to gauge FCF and future capacity
• Asset turnover and utilization rates to enhance ROE
• Effective tax rate and any extraordinary items affecting net income

Relative Positioning: Within TSE-listed chemicals/materials peers, Kaneka’s liquidity and equity buffer appear solid, but current-period ROE and operating margins are on the lower side, implying a need for margin restoration and asset efficiency improvements to close 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