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

Financial Highlights

• Net Sales: ¥19.93B
• Operating Income: ¥3.61B
• Net Income: ¥3.26B
• 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

Matsumoto Yushi-Seiyaku (43650) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥19.925bn, down 10.6% YoY, indicating a volume and/or pricing headwind in the period. Gross profit of ¥7.353bn implies a solid gross margin of 36.9%, suggesting product mix and cost pass-through remain resilient despite the top-line decline. Operating income fell 29.2% YoY to ¥3.606bn, compressing operating margin to 18.1%, which points to negative operating leverage as fixed costs weighed on profitability amid lower sales. Ordinary income rose above operating income to ¥4.409bn, highlighting sizeable non-operating gains (e.g., financial income, FX gains, or other non-core items). Net income increased 10.6% YoY to ¥3.533bn, an unusual divergence from operating income that underscores the materiality of non-operating factors this quarter. DuPont metrics show a net margin of 17.7%, asset turnover of 0.203x, and modest leverage (assets/equity 1.16x), yielding an ROE of 4.17%. The ROE profile is constrained primarily by low asset turnover, consistent with a capital-rich balance sheet. The company generated operating cash flow (OCF) of ¥3.33bn, which is 0.94x net income, indicating reasonable earnings-to-cash conversion in the half. Liquidity is very strong with a current ratio of 6.0x and a quick ratio of 5.7x, supported by substantial current assets of ¥66.1bn against current liabilities of ¥11.0bn. The balance sheet is conservatively capitalized: total liabilities of ¥13.8bn versus equity of ¥84.7bn (liabilities/equity ~0.16x), implying low financial risk. While the disclosed equity ratio field is 0.0%, this appears to be unreported; the implied equity ratio is approximately 86.4% (¥84.7bn/¥98.1bn). The effective tax rate, inferred from reported taxes of ¥1.274bn and estimated pre-tax income of roughly ¥4.807bn, is around 26.5% (note: the presented 0.0% effective tax rate figure appears unreported). Free cash flow cannot be assessed because investing cash flow and capex were not disclosed in the period, and cash/equivalents were also unreported. Dividend data (DPS and payout) likewise appear unreported; thus, no conclusion can be drawn on capital return trends from the provided figures. Overall, profitability remains healthy at the gross level, but operating income softness and reliance on non-operating gains are key watchpoints. With ample liquidity and low leverage, financial health is strong, though lower asset turnover tempers ROE. Data limitations (notably cash/capex/dividends) constrain depth of cash flow and shareholder return analysis.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 17.7% × Asset turnover 0.203x × Financial leverage 1.16x = ROE 4.17%. The chief drag on ROE is low asset turnover, reflecting a large equity base relative to revenue; leverage is intentionally conservative. Gross margin is robust at 36.9%, indicating solid pricing/mix and some cost discipline despite lower revenue. Operating margin of 18.1% is healthy but contracted YoY (operating income -29.2% vs. revenue -10.6%), evidencing negative operating leverage as fixed/salary/overhead costs did not flex down with sales. Ordinary income outpaced operating income by ~¥0.80bn, implying meaningful non-operating gains (e.g., FX, investment income), which also underpinned the YoY rise in net income despite weaker operations. EBITDA of ¥4.128bn (20.7% margin) shows decent operating cash generation capacity before working capital and non-cash charges. Effective tax rate is estimated at ~26.5% (tax ¥1.274bn over implied pre-tax ~¥4.807bn); the 0.0% figure listed is not representative of actual taxation. Overall profitability quality is mixed: high gross margins and EBITDA, but operating income is under pressure and net profit relies in part on non-operating items.

Growth Assessment

Top-line declined 10.6% YoY to ¥19.925bn, suggesting either softer demand, price normalization after prior inflationary pass-throughs, or product mix shifts. Operating income fell 29.2% YoY to ¥3.606bn, indicating negative operating leverage and/or cost inflation not fully offset by pricing. Net income rose 10.6% YoY to ¥3.533bn, driven by non-operating contributions (ordinary income > operating income), masking weaker core operations. The sustainability of revenue is uncertain near term without segment/geography detail; however, the company’s specialty profile and high gross margin suggest underlying product value-add remains intact. Profit quality is tilted toward core manufacturing at the gross level, but current-period earnings are partly supported by non-operating gains that may be volatile. Outlook considerations: stabilization of volumes/pricing, raw material cost trends, and FX exposure will be key to re-accelerating operating income. Absent disclosure on order backlog or demand indicators, we assume a cautious outlook with potential margin recovery if input costs ease and sales volumes recover. Monitoring whether the ordinary-to-operating income gap narrows will be important for assessing recurring earnings power.

Financial Health

Liquidity is strong: current assets ¥66.1bn vs. current liabilities ¥11.0bn yield a current ratio of 6.0x and quick ratio of 5.7x, with inventories relatively modest at ¥3.29bn. Working capital is sizeable at ¥55.1bn, offering a significant buffer against volatility. Solvency is robust: total liabilities ¥13.8bn versus equity ¥84.7bn implies a liabilities-to-equity ratio of ~0.16x; implied equity ratio is ~86.4% despite the unreported 0.0% figure. Financial leverage is low (assets/equity 1.16x), limiting interest burden and default risk. Interest expense is unreported; the 0.0x interest coverage metric is not meaningful—however, given minimal leverage, coverage is likely ample. The capital structure is conservative, positioning the company well to fund operations and potential strategic investments without balance sheet strain.

Cash Flow Quality

OCF of ¥3.33bn is 0.94x net income (¥3.533bn), indicating reasonable earnings-to-cash conversion for the half. EBITDA of ¥4.128bn provides headroom for working capital needs and maintenance capex. Investing cash flow and capex were not disclosed (reported as 0), so free cash flow cannot be reliably calculated; the listed FCF of 0 should be treated as unreported. Working capital appears ample, with low inventories relative to current assets, but without receivables/payables data we cannot assess cash conversion cycle trends. Financing cash flow of -¥1.141bn suggests cash outflows for shareholder returns and/or debt reduction, but details are not provided. Overall, cash flow quality looks decent based on OCF/NI, but a full assessment is constrained by missing capex and cash balance disclosure.

Dividend Sustainability

Dividend figures (DPS, payout ratio) are shown as 0, which likely indicates non-disclosure rather than actual zero. Financing cash outflow of -¥1.141bn could include dividends or share repurchases, but we lack split disclosure. Without capex data, free cash flow coverage of dividends cannot be assessed; the reported FCF coverage of 0.00x is not meaningful. From a capacity standpoint, strong liquidity, low leverage, and positive OCF suggest room for distributions, but policy and actual payout are unknown for the period. Key watchpoints are official DPS guidance, payout ratio targets, and the balance between growth capex and returns to shareholders.

Risk Assessment

Business Risks:

• Demand cyclicality in end-markets for specialty chemicals (e.g., personal care, industrial, pharma intermediates).
• Raw material price volatility (oils, fatty acids, petrochemical inputs) affecting margins.
• FX fluctuations impacting export competitiveness and non-operating gains/losses.
• Customer concentration risk typical of specialty formulations (limited disclosure on customer mix).
• Product mix shifts that could pressure gross margins if higher-value items soften.
• Regulatory and environmental compliance costs related to chemical manufacturing.

Financial Risks:

• Operating leverage sensitivity: revenue declines translate to outsized operating profit compression.
• Earnings volatility from non-operating items (ordinary income above operating income).
• Limited visibility into cash and capex due to non-disclosure, complicating FCF and liquidity tracking.
• Potential working capital swings if receivables or inventories rise with demand recovery.

Key Concerns:

• YoY decline in revenue (-10.6%) and sharper decline in operating income (-29.2%).
• Dependence on non-operating gains to lift net income in the period.
• Low asset turnover (0.203x) constraining ROE despite high margins.
• Insufficient disclosure on capex, cash balances, and dividends limiting cash return analysis.

Investment Implications

Key Takeaways:

• Core profitability remains solid at the gross level (36.9% margin), but operating leverage turned negative on lower sales.
• Net income growth (+10.6% YoY) was supported by non-operating gains; sustainability is uncertain.
• Balance sheet strength is a key positive with low leverage and very strong liquidity.
• ROE of 4.17% is restrained by low asset turnover; improving utilization is essential for returns.
• Cash flow conversion is reasonable (OCF/NI ~0.94), but lack of capex data impedes FCF assessment.

Metrics to Watch:

• Revenue trajectory (volume vs. price mix) and sequential growth.
• Gross and operating margins, particularly the spread between ordinary and operating income.
• Input cost indices for key raw materials and pass-through effectiveness.
• OCF/NI ratio, working capital days (DSO/DIO/DPO) when disclosed.
• Capex and investing cash flows to gauge FCF and growth reinvestment.
• Dividend policy disclosures (DPS, payout) and any buyback activity.

Relative Positioning: Relative to specialty chemical peers, the company exhibits stronger balance sheet conservatism and solid gross margins, but lower asset turnover and higher reliance on non-operating income this period, resulting in a mid-to-low ROE profile despite healthy operating margins.

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