MATSUMOTO YUSHI-SEIYAKU CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.93B
• Operating Income: ¥3.61B
• Net Income: ¥3.56B
• EPS: ¥1,217.85

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

Verdict: A mixed FY2026 Q2—top-line contraction and operating margin pressure, but ordinary profit resilience from sizable non-operating income lifted net income YoY. Revenue declined 10.6% YoY to 199.25, while operating income fell 29.2% to 36.06, evidencing operating leverage and/or pricing pressure. Despite this, ordinary income was relatively stable at 44.09 (-1.7% YoY), supported by 8.22 in non-operating gains, and net income improved 10.6% to 35.33 as tax and non-operating effects offset operating weakness. Gross profit was 57.09, implying a gross margin of 28.7%, and operating margin stood at 18.1% (36.06/199.25). Net margin was a robust 17.7%, aided by dividend (2.69) and interest income (1.64), which together equaled 12% of operating profit. We cannot quantify YoY basis-point changes in gross, operating, or net margins due to lack of prior-period margin disclosure, but the sharper decline in operating income vs revenue implies margin compression. Earnings quality softened: operating cash flow of 24.22 covered only 69% of net income (OCF/NI 0.69x), triggering a quality flag. Free cash flow (OCF less capex) was positive at approximately 22.13, supporting distributions and balance sheet strength. Liquidity remains extremely strong (current ratio 674%, quick ratio 642%), with net cash-like positioning given large cash (337.29) and minimal reported interest-bearing debt. The balance sheet is conservative: total equity of 846.95 equals roughly 86.4% of assets, and D/E is a low 0.16x. ROE is modest at 4.2% on DuPont math (17.7% margin × 0.203 asset turnover × 1.16x leverage), with low asset turnover the primary constraint. ROIC of 5.0% trails common cost-of-capital benchmarks and sector best practices (>7–8%), signaling room for capital efficiency improvement. Non-operating income ratio is high at 23.3%, suggesting profit composition is skewed toward financial income; sustainability will depend on interest rate dynamics and dividend flows from securities. Forward-looking, stabilization of raw material costs, recovery in volumes, and tighter working capital management are key to restoring operating leverage and lifting ROIC/ROE. The large investment securities balance (221.07) and strong cash provide strategic optionality but add market valuation volatility to equity and comprehensive income. Overall, the quarter underscores resilient bottom-line optics despite operating softness and sub-1.0 cash conversion, with balance sheet strength providing a cushion.

Profitability Analysis

DuPont decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 17.7% × 0.203 × 1.16 = 4.2%. The binding constraint is low asset turnover (0.203), typical of cash- and securities-rich balance sheets, which dilutes returns despite solid margins. Financial leverage is very conservative at 1.16x, offering little ROE amplification—appropriate for risk but limiting return on equity. Net margin is elevated (17.7%) relative to historical norms for specialty chemicals, but composition is skewed by 8.22 in non-operating income (notably dividend and interest income totaling 4.33). The largest effective driver of ROE limitation is asset turnover, not margin. Business rationale: weaker demand/pricing (revenue -10.6% YoY) and fixed-cost absorption likely pressured operating profits (-29.2% YoY), while sizable financial assets generated income that supported ordinary and net profits. Sustainability: operating margin recovery hinges on volume/pricing normalization and cost control; non-operating income is partly rate/market dependent and may not be consistently repeatable. SG&A was 21.02 (10.6% of sales); lacking YoY SG&A data we cannot confirm whether SG&A growth exceeded revenue, but operating deleverage suggests fixed-cost pressure.

Growth Assessment

Top-line contracted 10.6% YoY to 199.25, indicating softer demand and/or price normalization. Operating income fell 29.2% to 36.06, implying negative operating leverage as volumes declined. Ordinary income held up (-1.7% YoY) due to an 8.22 boost from non-operating sources, offsetting operating weakness. Net income increased 10.6% to 35.33 aided by non-operating items and a 28.6% effective tax rate. EBITDA was 41.21 (20.7% margin), buffered by depreciation of 5.15. Revenue sustainability near term depends on end-market demand for surfactants/specialty chemicals and raw material price pass-through. Profit quality is mixed: core operations weakened, but financial income supported results; reliance on non-operating income is a risk if rates or dividend flows change. Outlook: margin recovery requires better volume/pricing, continued cost discipline, and working capital normalization to lift cash conversion.

Financial Health

Liquidity is exceptionally strong: current assets 678.92 vs current liabilities 100.71 (current ratio 674%, quick ratio 642%). No warning on current ratio (<1.0) or leverage (D/E 0.16x); balance sheet is highly conservative. Equity/asset ratio is about 86.4% (846.95/980.68), indicating substantial solvency headroom. Cash and deposits of 337.29 and investment securities of 221.07 provide ample liquidity. Maturity mismatch risk is low given large current assets relative to short-term obligations. Interest-bearing debt is unreported; given low D/E and financing cash outflows dominated by shareholder returns, leverage appears minimal. No off-balance-sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF/Net Income is 0.69x (<0.8), a cautionary signal that accrual earnings outpaced cash generation this half. OCF of 24.22 versus NI of 35.33 suggests working capital absorption or timing effects; receivables (93.50) and payables (75.16) levels indicate potential collection timing differences, but detailed drivers are not disclosed. Free cash flow (defined here as OCF - Capex) was approximately 22.13, positive and sufficient to fund modest shareholder returns and maintain cash reserves. No clear signs of deliberate working capital manipulation are visible, but the sub-1.0 cash conversion merits monitoring for inventory/receivables normalization in H2. Financing CF was -11.55, including negligible buybacks (-0.01) and likely dividends; detailed dividend cash outflows are unreported.

Dividend Sustainability

The calculated payout ratio is 51.1%, within a generally sustainable range (<60%). Using this ratio as a proxy, implied dividend outflow would be about 18.0 (0.511 × 35.33), which is covered by estimated FCF of ~22.13 (coverage ~1.2x). This inference depends on the assumption that payout ratio applies to consolidated NI for the period; actual cash dividends paid were unreported. The strong net-cash balance and positive FCF support near-term dividend capacity, though sustainability longer term hinges on restoring operating cash conversion and maintaining earnings without reliance on non-operating income.

Risk Assessment

Business Risks:

• Raw material and energy cost volatility affecting gross margin and pricing power
• Demand softness in end-markets for surfactants/specialty chemicals leading to operating deleverage
• Product mix shifts potentially compressing margins
• Operational fixed-cost absorption risk during volume downturns

Financial Risks:

• Earnings quality risk: OCF/NI at 0.69x indicates weaker cash conversion
• Profit composition risk: High non-operating income ratio (23.3%) exposes earnings to financial market and rate changes
• Market valuation risk from large investment securities balance (221.07) impacting OCI and equity
• FX exposure if raw materials or sales are denominated in foreign currencies

Key Concerns:

• ROIC at 5.0% below common management targets (7–8%), suggesting capital efficiency headroom
• Operating income down 29.2% on a 10.6% revenue decline, indicating negative operating leverage
• Visibility on SG&A dynamics and cost base is limited due to unreported breakdowns
• Interest-bearing debt data is unreported (though balance sheet suggests low leverage)

Investment Implications

Key Takeaways:

• Core operations weakened with operating margin pressure, but bottom line was supported by sizable financial income
• Cash conversion below par (OCF/NI 0.69x) warrants scrutiny despite positive FCF
• Balance sheet strength (equity ratio ~86%, large cash/securities) provides resilience and optionality
• ROE constrained by low asset turnover and minimal leverage; ROIC below target range
• Non-operating income dependence raises sustainability questions if financial income normalizes

Metrics to Watch:

• Volume/pricing trends and gross/operating margin trajectory in H2
• OCF/NI and working capital turns (receivables and inventory days)
• ROIC progression and asset turnover improvement initiatives
• Non-operating income run-rate (dividends/interest) and market valuation changes in securities
• Capex discipline versus growth returns and any updates to shareholder return policy

Relative Positioning: Within Japanese specialty chemicals, the company exhibits superior balance sheet strength and net-cash liquidity but lags on capital efficiency (ROIC ~5%) and cash conversion this half. Earnings resilience benefited from financial income rather than core operational momentum.

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