KODAMA CHEMICAL INDUSTRY CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥40.49B
• Operating Income: ¥861M
• Net Income: ¥-66M
• EPS: ¥1,459.82

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

Revenue surged to 40,486,000,000 yen (+420.4% YoY), indicating a structural change such as scope expansion, a large new program, or consolidation effects rather than purely organic growth. Despite the revenue spike, gross profit was 1,126,938,000 yen, yielding a slim gross margin of 2.8%, consistent with a low value-added, cost-pass-through business profile. Operating income was 861,000,000 yen, down 11.9% YoY, implying margin compression to approximately 2.1% amid cost pressures or mix shifts. Ordinary income of 634,000,000 yen trails operating income, reflecting net financial and non-operating burdens. Net income, however, jumped to 22,805,000,000 yen, driving a 56.3% net margin; this is inconsistent with operating performance and strongly suggests large one-time or extraordinary gains under JGAAP (e.g., asset disposals, revaluation, or special factors). The DuPont profile shows ROE of 80.3% (margin 56.3%, asset turnover 0.62x, leverage 2.30x), but this is not representative of recurring profitability given the likely one-off gains embedded in net income. Cash flow from operations was 745,914,000 yen, only 3% of net income, underscoring low cash conversion and the non-recurring nature of earnings this period. EBITDA was 1,409,014,000 yen with an EBITDA margin of 3.5% and interest coverage of 17.8x, indicating adequate debt service capacity from operating cash flows despite slim margins. Working capital was negative at -2,371,981,000 yen and the current ratio was 69.7%, signaling near-term liquidity pressure absent strong cash generation. Total assets were 65.3 billion yen and total liabilities were 8.62 billion yen; reported total equity was 28.4 billion yen, but balance sheet subtotals appear incomplete, so solvency conclusions rely on partial data. Financing cash flow was -550,056,000 yen, implying net debt reduction or other financing outflows; annual DPS was 0.00 with a 0% payout ratio. The effective tax rate was recorded at 0.0%, which is consistent with extraordinary income recognition and/or tax effects but is unlikely to be sustainable. The cost of sales line item appears inconsistent with gross profit and revenue; the gross margin calculation aligns with the disclosed gross profit figure and not with the cost of sales value, so margin analysis relies on gross profit. Asset turnover at 0.62x is moderate for a materials/industrial supplier; leverage at 2.30x assets/equity is not excessive, but the equity figure appears incomplete. Overall, the quarter shows transformational revenue scale-up, weak underlying operating margins, strong coverage of interest, and a headline net profit driven by non-recurring items with weak cash backing. Data gaps (equity ratio, cash, investing CF, shares) limit precision, and the quality of earnings this period is low.

Profitability Analysis

ROE_decomposition: ROE 80.3% = Net margin 56.33% × Asset turnover 0.620 × Financial leverage 2.30. The elevated ROE is primarily margin-driven due to one-off gains; operating margin (~2.1%) and EBITDA margin (3.5%) imply normalized ROE would be much lower absent extraordinary items. margin_quality: Gross margin 2.8% and operating margin ~2.1% indicate thin value-add and limited pricing power. The net margin (56.3%) is non-recurring in nature, likely reflecting extraordinary gains and a near-zero effective tax rate. Interest expense is modest (48,253,000 yen), so financing costs are not the driver of margin volatility. operating_leverage: Revenue expanded +420.4% YoY, yet operating income fell 11.9% YoY, indicating substantial negative operating leverage in the period (costs scaling more than proportionally and/or unfavorable mix). Depreciation (548,014,000 yen) suggests moderate fixed cost base; however, low gross margin constrains flow-through.

Growth Assessment

revenue_sustainability: The 420% YoY surge likely reflects scope or one-time effects rather than sustainable organic growth. Asset turnover at 0.62x aligns with the larger scale but does not evidence efficiency gains. profit_quality: Operating income of 861,000,000 yen vs net income of 22,805,000,000 yen indicates net profit is dominated by non-operating/extraordinary items under JGAAP. OCF/NI at 0.03 confirms weak cash realization. outlook: Absent continued extraordinary gains, profitability will revert toward operating levels (low-single-digit margins). Revenue stability depends on retention of new programs/contracts and the durability of the expanded scope; margin recovery hinges on cost pass-through and productivity.

Financial Health

liquidity: Current ratio 69.7% and quick ratio 65.9% indicate short-term liquidity tightness; working capital is negative at -2,371,981,000 yen. Cash and equivalents were unreported, limiting precision. solvency: Debt-to-equity ratio is 0.30x, implying moderate leverage. Interest coverage is strong at 17.8x based on operating income, supporting debt service capacity. Balance sheet subtotals (assets 65.3b, liabilities 8.62b, equity 28.4b) appear incomplete, so solvency ratios beyond these should be interpreted cautiously. capital_structure: Leverage (assets/equity) at 2.30x is reasonable. Financing cash outflow (-550,056,000 yen) suggests net debt reduction or other outflows; no dividends paid.

Cash Flow Quality

earnings_quality: OCF of 745,914,000 yen vs net income of 22,805,000,000 yen (OCF/NI 0.03) signals low earnings quality and substantial one-offs/non-cash effects. EBITDA of 1,409,014,000 yen vs OCF implies OCF/EBITDA ~0.53, suggesting working capital outflows or non-cash gains. FCF_analysis: Investing CF is unreported (0 placeholder), so capex/FCF cannot be reliably derived. On a proxy basis, operating cash generation is modest and would likely not cover sizable capex if growth continues. working_capital: Negative working capital (-2.37b yen) and sub-1.0 current ratio point to reliance on supplier credit and/or customer advances; sustaining growth may require incremental liquidity.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is 0.0% with DPS at 0.00. Given the non-recurring nature of net income and modest OCF, a conservative payout stance aligns with cash realities. FCF_coverage: FCF coverage cannot be assessed due to unreported investing cash flows. Based on OCF alone, recurring dividend capacity appears limited until cash generation improves. policy_outlook: Absent visibility on recurring earnings and cash flows, management is likely to prioritize balance sheet strength and growth investments over distributions.

Risk Assessment

Business Risks:

• Low structural gross margin (2.8%) and potential cost pass-through delays
• Customer/program concentration risk amid rapid scale-up
• Commodity and energy price volatility affecting input costs
• Execution risk integrating new business scope or capacity ramp
• Cyclical demand in end-markets (auto/industrial plastics) impacting volumes

Financial Risks:

• Negative working capital and sub-1.0 current ratio creating liquidity pressure
• Earnings volatility due to reliance on extraordinary items this period
• Potential capex needs not reflected in disclosed investing CF
• Data gaps in balance sheet (equity ratio, cash) complicating risk monitoring

Key Concerns:

• Sustainability of revenue run-rate post +420% YoY surge
• Reversion of net margin to operating levels once one-offs fade
• Cash conversion improvement from OCF/EBITDA ~0.53 and OCF/NI 0.03
• Ability to maintain interest coverage if operating margins compress further

Investment Implications

Key Takeaways:

• Headline ROE (80.3%) and net margin (56.3%) are driven by non-recurring items, not core operations
• Core profitability remains thin: gross margin 2.8%, operating margin ~2.1%, EBITDA margin 3.5%
• Liquidity is tight with current ratio 69.7% and negative working capital of 2.37b yen
• Cash generation is modest relative to scale: OCF 746m vs revenue 40.5b
• Leverage appears manageable (interest coverage 17.8x; D/E 0.30x), but balance sheet disclosures are incomplete

Metrics to Watch:

• Underlying operating margin progression and gross margin recovery
• Working capital intensity (DSO/DPO/DIO) and OCF/EBITDA conversion
• Nature and recurrence of non-operating/extraordinary gains
• Capex commitments and investing cash flows
• Customer/program concentration and order backlog visibility

Relative Positioning: Within Japan-listed chemical/plastics processors, the company currently exhibits weaker underlying margin quality but acceptable coverage metrics; the period’s exceptional net income inflates return metrics versus peers and is unlikely to be durable.

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
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