MANAC Chemical Partners Co.,Ltd FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.80B
• Operating Income: ¥452M
• Net Income: ¥-137M
• EPS: ¥57.27

Income Statement

Balance Sheet

Cash Flow Statement

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

For FY2026 Q2 (cumulative), Manac Chemical Partners delivered solid topline expansion with revenue of ¥5,804 million, up 29.2% YoY, but operating income held flat at ¥452 million, indicating margin compression and limited operating leverage. Gross profit was ¥693 million, implying a gross margin of 11.9%, while the operating margin was 7.8%; the gap suggests SG&A of roughly ¥241 million (about 4.2% of sales). Ordinary income exceeded operating income at ¥503 million, pointing to positive non-operating contributions in the period. Net income reached ¥465 million, supported by a net margin of 8.0% and a negative tax expense (tax credit) of ¥58 million, which boosted after-tax profitability. DuPont decomposition yields a net margin of 8.01%, asset turnover of 0.401x, and financial leverage of 1.33x, translating to an ROE of 4.28%. The ROE profile is modest for the sector, with returns constrained more by low asset turnover than by margin or leverage. Liquidity appears very strong: current assets of ¥9,045 million versus current liabilities of ¥2,190 million produce a current ratio of 413% and a quick ratio of 313%. The balance sheet is conservative with total liabilities of ¥2,340 million against equity of ¥10,856 million (implying an equity ratio of ~75% based on totals), and a debt-to-equity ratio of 0.22x. Operating cash flow was ¥94 million, only 0.2x net income, indicating a material working capital drag despite positive earnings. EBITDA was ¥688 million (11.9% margin), with depreciation and amortization of ¥236 million, highlighting the capital-intensive nature of the business. The OCF margin of about 1.6% contrasts with the 7.8% operating margin, underscoring near-term cash conversion challenges. Inventories stood at ¥2,193 million; combined with the sizable working capital of ¥6,855 million, this helps explain the weak cash conversion. Dividend data were not disclosed for the period (DPS shown as 0.00), and share data were not provided; therefore, per-share and payout comparisons are limited. Overall, the company demonstrates robust growth and a fortress-like balance sheet but exhibits limited operating leverage and weak cash conversion in the half-year, warranting close monitoring of working capital trends and the sustainability of non-operating and tax benefits.

Profitability Analysis

ROE_decomposition: DuPont indicates ROE of 4.28% = Net margin (8.01%) x Asset turnover (0.401x) x Financial leverage (1.33x). Return profile is driven primarily by margins and restrained by low asset turnover; leverage contributes modestly given a strong equity base. margin_quality: Gross margin 11.9% and operating margin 7.8% indicate reasonable value capture but with modest manufacturing spread. The uplift from operating to ordinary income (8.7% ordinary margin) and a negative tax expense drove net margin to 8.0%, suggesting non-operating gains and tax effects supported bottom-line results. Sustainability of tax credits and non-operating items should be assessed for recurrence. operating_leverage: Revenue grew 29.2% YoY while operating income was flat, implying negative operating leverage in the period. Cost of sales rose faster than sales or mix shifted unfavorably, and SG&A did not deleverage sufficiently versus the higher revenue base.

Growth Assessment

revenue_sustainability: Topline growth of 29.2% YoY is strong, likely reflecting volume recovery and/or pricing. Given asset turnover of 0.401x and elevated working capital, sustaining this pace may require continued demand strength and efficient capacity utilization. profit_quality: Flat operating income despite strong sales suggests margin pressure and limited incremental profitability. The net result benefited from non-operating contributions and a tax credit, which may not be structural. EBITDA margin of 11.9% is healthy, but the gap to OCF (1.6% OCF margin) indicates weaker cash earnings conversion. outlook: Short-term outlook hinges on normalization of working capital and stabilization of gross margins. If mix and input costs improve, operating leverage could re-emerge. Conversely, if the tax credit and non-operating gains fade, net margin could revert toward the operating margin.

Financial Health

liquidity: Current assets ¥9,045m vs current liabilities ¥2,190m yield a current ratio of 413% and quick ratio of 313%, indicating ample short-term liquidity. Working capital of ¥6,855m provides a substantial cushion. solvency: Total liabilities ¥2,340m versus equity ¥10,856m imply an equity ratio of roughly 75% and a debt-to-equity ratio of 0.22x, indicating low leverage and strong solvency. Interest expense was reported as zero, consistent with minimal financial debt, though the zero may reflect non-disclosure. capital_structure: Financial leverage at 1.33x aligns with a balance sheet funded predominantly by equity. The company retains capacity to add leverage if needed without straining solvency metrics.

Cash Flow Quality

earnings_quality: Operating cash flow of ¥94m versus net income of ¥465m (OCF/NI = 0.20x) indicates low cash conversion in the half-year, likely due to working capital build (e.g., inventories and receivables). Depreciation of ¥236m supports the non-cash component of EBITDA, but this did not translate into OCF due to timing effects. FCF_analysis: Free cash flow was not disclosed (FCF shown as 0). Investing cash flow was unreported (0), so capex is unknown. Based on OCF alone, internal funding is positive but modest relative to earnings, limiting financial flexibility if capex needs are elevated. working_capital: Inventories of ¥2,193m and total working capital of ¥6,855m are significant relative to half-year sales (working capital/sales ≈ 1.18x), consistent with a capital- and inventory-intensive specialty chemicals model. Normalization of inventory and receivables is the key lever to improve cash conversion.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio were not disclosed for the period (both shown as 0). With ROE at 4.28% and modest OCF, a high payout would be difficult to sustain without clearer cash generation; however, balance sheet strength provides optionality. FCF_coverage: FCF was not reported; therefore, coverage metrics cannot be calculated. OCF of ¥94m in the period would not comfortably cover a meaningful dividend absent stable FCF. policy_outlook: Dividend policy details were not provided. Given the conservative balance sheet, the company has capacity to maintain or consider distributions if cash conversion improves, but current data do not evidence recurring FCF support.

Risk Assessment

Business Risks:

• Raw material price volatility affecting gross margins
• Demand cyclicality in end-markets for specialty chemicals
• Product mix shifts reducing operating leverage despite sales growth
• Regulatory and environmental compliance costs for chemical manufacturing
• Customer concentration risk typical in specialty intermediates

Financial Risks:

• Weak cash conversion (OCF/NI 0.20x) driven by working capital build
• Potential normalization of non-operating gains and tax credits lowering net margin
• Capital intensity requiring ongoing maintenance capex (capex not disclosed)
• Inventory valuation risk if market conditions weaken

Key Concerns:

• Operating leverage absent despite 29.2% YoY revenue growth
• Dependence of net margin on non-operating and tax effects in the period
• Low asset turnover (0.401x) constraining ROE to 4.28%

Investment Implications

Key Takeaways:

• Topline growth was strong at +29.2% YoY, but operating profit was flat, signaling margin and leverage challenges.
• ROE of 4.28% is constrained by low asset turnover and modest leverage despite a solid net margin.
• Liquidity and solvency are very strong with an implied equity ratio around 75% and D/E of 0.22x.
• Cash conversion was weak (OCF/NI 0.20x) due to working capital build; FCF not disclosed.
• Ordinary income exceeded operating income and taxes were negative, supporting net results but potentially non-recurring.

Metrics to Watch:

• Gross margin and input cost trends
• Operating margin versus ordinary income gap (non-operating reliance)
• OCF/NI ratio and working capital days (inventory and receivables)
• Capex and investing cash flows once disclosed
• Tax rate normalization and effective tax rate trajectory
• Asset turnover and utilization rates

Relative Positioning: Within domestic specialty chemicals peers, the company exhibits above-peer revenue growth and very strong balance sheet conservatism, but trails on operating leverage and cash conversion, resulting in a below-sector ROE profile.

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