Sumitomo Bakelite Company,Limited FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥156.53B
• Operating Income: ¥16.46B
• Net Income: ¥12.86B
• EPS: ¥151.65

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

Sumitomo Bakelite (4203) delivered solid FY2026 Q2 (cumulative) results with revenue of 1,565.28 and operating income of 164.62, up 2.2% and 5.1% YoY respectively, indicating modest top-line growth and slight margin expansion. Gross profit rose to 470.01, producing a gross margin of 30.0%, while SG&A was 311.77, reflecting controlled operating costs relative to sales. Operating margin is approximately 10.5%, supported by EBITDA of 233.64 and an EBITDA margin of 14.9%, evidencing healthy cash earnings capacity. Net income reached 132.91 (+4.3% YoY), with an effective tax rate of 24.6%, broadly in line with statutory norms. DuPont analysis shows a net margin of 8.5%, asset turnover of 0.354, and financial leverage of 1.42x, yielding a calculated ROE of 4.3% (in line with reported ROE), which is respectable but below typical mid- to high-single-digit cost of equity benchmarks. Profit before tax (181.09) exceeded operating income by 16.47, implying positive non-operating contributions despite line-item non-disclosure. Cash generation was strong: operating cash flow was 245.26, 1.85x net income, indicating good earnings quality and conversion. Free cash flow of 147.81 provided ample coverage for dividends (dividends paid: 37.25) and minimal buybacks, while financing cash outflows (-192.95) suggest net debt reduction or shareholder returns as key uses of cash. The balance sheet is conservative with total assets of 4,422.39, equity of 3,116.75, and an equity ratio of 69.8%, underpinning resilience through cycles. Interest-bearing debt disclosed as short-term loans of 174.07 and long-term loans of 132.73 remains manageable versus equity, corroborated by a reported debt-to-equity ratio of 0.40x. Liquidity appears robust with cash and equivalents of 1,035.33, though current liability details are not disclosed, limiting precise ratio analysis. Working capital figures are sizable with accounts receivable of 597.22 and inventories of 622.31, balanced by accounts payable of 566.69. Dividend sustainability appears sound with a calculated payout ratio of 67.0% and FCF coverage of 1.66x, although full-year trajectory will depend on H2 demand and raw material dynamics. Overall, the company demonstrates steady profitability, solid cash flow, and a strong capital structure, albeit with a still-modest ROE constrained by low leverage and asset intensity. Data limitations (e.g., non-operating breakdown, current liabilities, DPS) constrain certain granular assessments, but the core picture is of disciplined operations and robust balance sheet strength.

Profitability Analysis

roe_decomposition: ROE 4.3% = Net margin 8.5% x Asset turnover 0.354 x Financial leverage 1.42x. The margin is decent, asset turnover is modest (asset-intensive profile), and leverage is conservative, keeping ROE moderate. margin_quality: Gross margin 30.0% (470.01/1,565.28) reflects stable value-add in high-performance materials. Operating margin ~10.5% (164.62/1,565.28) improved vs revenue growth (+5.1% OI vs +2.2% sales), suggesting favorable mix and SG&A discipline. EBITDA margin 14.9% indicates healthy contribution from cash earnings; D&A is 69.02 (~4.4% of sales), consistent with a capital-intensive base. operating_leverage: Operating income growth (+5.1% YoY) outpaced sales (+2.2% YoY), implying positive operating leverage from cost control and/or improved product mix. The delta between PBT (181.09) and OI (164.62) also indicates a small positive non-operating tailwind.

Growth Assessment

revenue_sustainability: Top-line growth of 2.2% YoY is modest; sustainability will depend on downstream demand in autos, semiconductors, and healthcare where the company is exposed. The 30% gross margin suggests resilience, but inventory and receivables levels warrant monitoring for demand normalization. profit_quality: Net margin of 8.5% and effective tax rate of 24.6% appear clean; strong OCF/NI at 1.85x supports earnings quality. EBITDA margin at 14.9% is consistent with improved operating efficiency. outlook: With conservative leverage and strong cash generation, the company is positioned to navigate cyclical demand. Near-term growth hinges on H2 order trends and raw material cost stability; incremental margin gains are plausible if mix improvements persist. Non-operating gains supporting PBT may not be structural absent disclosure.

Financial Health

liquidity: Cash & equivalents of 1,035.33 provide substantial liquidity. Current assets are 2,318.56, but current liabilities are not disclosed, so current and quick ratios are not calculable. Accounts receivable (597.22) and inventories (622.31) are sizeable; payables (566.69) partially offset. Reported working capital of 2,318.56 likely reflects disclosure constraints rather than netted figures. solvency: Total equity is 3,116.75 with an equity ratio of 69.8%, indicating a strong capitalization. Short-term loans are 174.07 and long-term loans are 132.73; overall leverage is low. Reported debt-to-equity ratio is 0.40x, and total liabilities of 1,242.10 imply modest balance-sheet risk. capital_structure: Low financial leverage (DuPont leverage 1.42x) restrains ROE but provides resilience. Financing cash flow of -192.95 suggests net repayments and dividends outweigh any new borrowing.

Cash Flow Quality

earnings_quality: OCF of 245.26 is 1.85x net income (132.91), indicating strong cash conversion and limited accrual reliance. EBITDA of 233.64 equals operating income plus D&A, aligning with reported figures. fcf_analysis: Free cash flow is 147.81 as provided. This is lower than a simple OCF minus capex calculation (245.26 - 83.84 = 161.42), implying other investing cash outflows beyond capex are included in FCF here; nevertheless FCF comfortably covers dividends. working_capital: Receivables (597.22) and inventories (622.31) are material relative to sales; without period-specific turnover days, the direction of working capital change cannot be fully assessed, but OCF strength suggests working capital was not a drag in the period.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 67.0%, consistent with a moderate distribution policy relative to earnings. EPS is 151.65 JPY on average shares of 87.64 million, aligning with net income of 132.91. fcf_coverage: FCF coverage of dividends is 1.66x, indicating current dividends are funded from internally generated cash. Dividends paid during the period were 37.25 against FCF of 147.81. policy_outlook: Given low leverage and strong cash generation, the current payout appears maintainable. However, absence of reported DPS and full-year guidance introduces uncertainty on the trajectory; policy may balance stable base dividends with opportunistic investment needs.

Risk Assessment

Business Risks:

• End-market cyclicality in autos, semiconductors, and electronics impacting volumes and mix
• Raw material price volatility (e.g., phenol, formaldehyde derivatives) affecting margins
• Currency fluctuations influencing export competitiveness and translation effects
• Competitive pressures in high-performance resins and molded products
• Environmental and regulatory compliance costs for chemical processes

Financial Risks:

• Potential working capital swings given large receivables and inventories
• Interest rate risk on floating-rate borrowings (interest expense not disclosed)
• Concentration risk if specific segments or customers drive a large revenue share
• Non-operating income variability, given limited disclosure

Key Concerns:

• ROE at 4.3% remains modest relative to expected cost of equity
• Limited disclosure on current liabilities constrains liquidity ratio assessment
• Non-operating income/expense details unreported, reducing visibility into recurring earnings power

Investment Implications

Key Takeaways:

• Moderate top-line growth (+2.2% YoY) with stronger operating profit growth (+5.1% YoY) indicates improving operating leverage
• Stable gross margin at 30.0% and EBITDA margin at 14.9% underpin earnings resilience
• Strong cash conversion (OCF/NI 1.85x) and positive FCF (147.81) support balance sheet strength
• Conservative capital structure (equity ratio 69.8%, low loans outstanding) enhances downside protection
• ROE at 4.3% is constrained by low leverage and modest asset turnover

Metrics to Watch:

• H2 sales growth and order momentum across key end-markets
• Gross and operating margin trends versus raw material cost movements
• Working capital intensity (receivables and inventory levels) and OCF conversion
• Capex pace versus depreciation and its impact on future growth and FCF
• Any changes in dividend policy or payout ratio as earnings evolve

Relative Positioning: Relative to domestic specialty chemical peers, Sumitomo Bakelite exhibits a stronger-than-average balance sheet and healthy cash generation, with mid-pack margins but below-peer ROE due to conservative leverage and asset intensity.

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
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