SANWAYUKA INDUSTRY CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥8.29B
• Operating Income: ¥492M
• Net Income: ¥223M
• EPS: ¥87.15

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

Sanwa Yuka Kogyo (TSE: 41250) delivered solid FY2026 Q2 consolidated results under JGAAP, with clear signs of margin expansion and operating leverage. Revenue rose 6.6% year on year to ¥8,287 million, while operating income increased 45.8% to ¥492 million, indicating improved pricing, mix, and/or cost pass-through. Ordinary income of ¥586 million exceeded operating income by ¥94 million, suggesting supportive non-operating gains (e.g., interest income, subsidies, or forex) relative to modest interest expense. Net income grew 64.6% to ¥376 million, lifting net margin to 4.54%. Gross margin was 25.8% and operating margin reached 5.94%, up roughly 160bp versus the prior-year level (estimated ~4.34%), evidencing strong operating leverage. EBITDA was ¥1,039.9 million (12.5% margin), with depreciation and amortization of ¥547.9 million exceeding operating income, characteristic of an asset-intensive model. Liquidity is comfortable: current ratio 145.6% and quick ratio 138.1%, supported by low reported inventories relative to current assets. The capital structure is conservative with total liabilities of ¥8,123 million versus equity of ¥12,796 million, implying a debt-to-equity ratio of 0.63x and an estimated equity ratio of about 57.6% based on balance sheet figures (the reported 0.0% was not disclosed via XBRL). Interest coverage is strong at 38.1x, and solvency risk appears contained. Operating cash flow was robust at ¥871 million, 2.32x net income, indicating good earnings-to-cash conversion aided by sizable non-cash D&A and likely benign working capital movements. Investing cash flow and cash & equivalents were not disclosed; therefore, free cash flow cannot be assessed reliably and the reported FCF “0” should be treated as unavailable rather than zero. Dividend per share was unreported (listed as 0.00), and payout ratio shows as 0.0% due to lack of disclosure, so dividend policy assessment relies on qualitative inference. DuPont analysis shows ROE of 2.94% for the period, driven by a 4.54% net margin, 0.373x asset turnover (based on period revenue vs. ending assets), and 1.74x financial leverage; on an annualized sales run-rate, asset turnover would be higher. The effective tax rate inferred from disclosed income tax and net income is approximately 29%, not 0%, which again reflects disclosure limitations in calculated fields. Overall, the company demonstrates improving profitability, sturdy cash generation from operations, and a prudent balance sheet. The key data gap is capex/investing cash flows, which are essential to judge free cash flow and long-term ROE trajectory. If margin gains prove durable and capex intensity is manageable, ROE could trend up from a currently modest level.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 4.54% × Asset turnover 0.373 × Financial leverage 1.74 = ROE ~2.94% for the period. Operating margin expanded to 5.94% on 6.6% revenue growth and 45.8% operating profit growth, evidencing positive operating leverage and cost discipline. Gross margin of 25.8% supports improved spread capture; the uplift from operating to ordinary income (+¥94 million) indicates supportive non-operating items. EBITDA margin of 12.5% versus operating margin of 5.9% highlights the weight of D&A (¥548 million), consistent with an asset-heavy production/recycling base. Interest expense is minimal at ¥12.9 million with coverage of 38.1x, so financing costs are not constraining margins. The implied effective tax rate is about 29% (¥154 million tax on ~¥530 million pre-tax), a normalized level for Japan. Profitability quality appears to be improving, but sustainability depends on maintaining product spreads, utilization rates, and energy/feedstock cost pass-through.

Growth Assessment

Revenue grew 6.6% YoY to ¥8.29 billion, indicating steady demand or price/mix improvements. Operating income rose 45.8% to ¥0.49 billion, pointing to strong operating leverage and/or easing input cost pressures. Ordinary income at ¥0.59 billion exceeds operating income, aided by non-operating gains; durability of this gap should not be assumed. Net income increased 64.6% to ¥0.38 billion, with net margin at 4.54%, reflecting both margin expansion and stable below-the-line items. Given D&A at ¥0.55 billion in the half, growth appears supported by an invested asset base; however, the lack of disclosed investing cash flows obscures capex trends and capacity additions. Asset turnover of 0.373x (period basis) is modest; on an annualized revenue run-rate, turnover would be closer to ~0.75x, suggesting operational throughput is reasonable for the asset base. Outlook hinges on spread stability (selling prices vs. feedstock/energy), utilization, and incremental efficiency gains; absent macro shocks, margin gains could persist into H2.

Financial Health

Liquidity is sound with a current ratio of 145.6% and quick ratio of 138.1%; inventories are ¥313 million versus current assets of ¥6,078 million, implying receivables and/or cash make up the bulk (cash itself was not disclosed). Working capital stands at ¥1,903 million, providing an operational buffer. Total assets are ¥22,207 million, liabilities ¥8,123 million, and equity ¥12,796 million, implying a conservative capital structure (debt-to-equity 0.63x) and an estimated equity ratio of ~57.6% (computed from the balance sheet). Interest burden is low with coverage of 38.1x; refinancing risk appears limited. No maturity profile is disclosed; however, the overall leverage and coverage metrics indicate low solvency risk. The absence of disclosed cash & equivalents limits precision on immediate liquidity headroom.

Cash Flow Quality

Operating cash flow was ¥871 million versus net income of ¥376 million, yielding an OCF/NI ratio of 2.32, which signals high earnings quality and strong cash conversion. The gap is explained by significant non-cash D&A (¥548 million) and likely working capital tailwinds; detailed working capital drivers were not provided. Investing cash flow was not disclosed (reported as 0), preventing assessment of capex intensity and true free cash flow; the presented FCF of 0 should be treated as unavailable, not zero. With D&A running at ¥548 million in the half, sustaining capex is likely material; without capex data, we cannot determine whether OCF fully covers maintenance and growth capex. Financing cash flow was an outflow of ¥334 million, consistent with debt repayments and/or shareholder returns, but details were not provided. Overall, cash earnings quality is strong, but free cash flow assessment is constrained by missing investing cash flow and cash balance data.

Dividend Sustainability

Dividend per share is undisclosed (listed as 0.00), and the payout ratio shows 0.0% due to lack of dividend disclosure for the period. With OCF at ¥871 million and modest leverage, the capacity to pay dividends exists in principle; however, without capex data and given the asset-intensive nature of the business (high D&A), free cash flow coverage of potential dividends cannot be confirmed. Policy signaling is absent in the data set, and share count data were not provided, limiting per-share payout analysis. Until investing cash flows and explicit dividend guidance are disclosed, sustainability and trajectory of dividends remain indeterminate.

Risk Assessment

Business Risks:

• Spread risk between selling prices and feedstock/energy costs affecting margins
• Volume/utilization variability driven by industrial activity and waste collection flows
• Exposure to commodity/chemical price cycles and potential pricing pressure
• Regulatory and environmental compliance requirements in recycling/chemicals
• Customer concentration risk and contract renewal terms
• Operational risks from asset-intensive plants (maintenance, outages)

Financial Risks:

• Capex intensity and potential FCF shortfalls if growth or maintenance capex is high
• Working capital swings impacting OCF in volatile demand environments
• Non-operating income variability that currently lifts ordinary income above operating income
• Interest rate and credit market changes (albeit current interest burden is low)
• Limited disclosed cash balance, constraining visibility on liquidity buffers

Key Concerns:

• Lack of disclosed investing cash flows and cash & equivalents impedes FCF and liquidity assessment
• High D&A versus operating income highlights dependence on EBITDA and cost control
• Sustainability of recent margin expansion amid input cost and pricing dynamics

Investment Implications

Key Takeaways:

• Strong operating leverage: operating income up 45.8% on 6.6% sales growth
• Margin expansion with operating margin at 5.94% and EBITDA margin at 12.5%
• Robust cash conversion (OCF/NI 2.32x) supported by significant non-cash D&A
• Conservative balance sheet with estimated equity ratio ~57.6% and interest coverage 38.1x
• Ordinary income exceeds operating income, adding upside but potentially volatile
• Free cash flow and dividend capacity cannot be concluded due to missing investing CF data

Metrics to Watch:

• Operating margin and gross spread trends
• Capex and investing cash flows (maintenance vs. growth)
• Working capital days (receivables, payables, inventory)
• OCF/EBITDA and OCF/NI ratios
• Asset turnover and utilization rates
• ROE progression and gap between ordinary and operating income
• Energy and feedstock cost indices relevant to input pass-through

Relative Positioning: Versus domestic mid-cap chemical/recycling peers, the company shows improving margins, strong OCF conversion, and moderate leverage, but with modest period ROE and limited visibility on capex/FCF due to disclosure gaps; asset intensity remains higher-than-average, making capex discipline a key differentiator.

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