ADEKA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥195.71B
• Operating Income: ¥19.77B
• Net Income: ¥11.97B
• EPS: ¥122.39

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

ADEKA reported resilient FY2026 Q2 consolidated results under JGAAP, with revenue of ¥195.7bn (+0.3% YoY) and operating income of ¥19.8bn (+8.0% YoY), indicating margin-led earnings growth despite flat topline. Gross profit reached ¥53.9bn, translating to a 27.6% gross margin, while operating margin improved to roughly 10.1%, evidencing effective cost control and/or a more favorable product mix. Net income was ¥12.4bn (+8.1% YoY), yielding a 6.35% net margin, broadly consistent with the degree of operating leverage observed. EBITDA was ¥28.5bn (14.6% margin), providing healthy coverage over interest expense of ¥1.68bn (interest coverage ~11.8x), pointing to solid debt-servicing capacity. DuPont analysis shows ROE of 3.45%, decomposed into a 6.35% net margin, 0.361x asset turnover, and 1.51x financial leverage, suggesting subdued returns are mainly a function of modest asset turnover and conservative leverage rather than weak profitability. The current ratio (286%) and quick ratio (236%) underscore very strong short-term liquidity; working capital stands at a robust ¥227.6bn. Operating cash flow of ¥33.0bn represents 2.66x net income, indicating strong earnings cash conversion at mid-year. However, investing cash flow, cash and equivalents, and free cash flow figures are not disclosed (zeros indicate not reported), limiting visibility into capex intensity and net cash position. The equity ratio is also shown as 0.0% (unreported), so solvency conclusions rely on available line items; total liabilities equal ¥191.3bn versus equity of ¥359.6bn, implying moderate leverage (0.53x liabilities-to-equity). Dividend data (DPS, payout, FCF coverage) are not disclosed in this dataset, so dividend capacity must be inferred from earnings and OCF quality rather than stated policy. The effective tax rate metric shows 0.0% in the summary but is not reliable given a reported tax expense of ¥4.75bn; pre-tax income is not provided to calculate the true rate. Overall, ADEKA’s mid-year performance reflects stable demand with cost discipline, resulting in improved operating profit and sound cash generation. The key positives are margin resilience, cash flow strength, and a solid balance sheet. The main constraints are limited reported growth momentum at the topline and incomplete disclosures around investing cash flows and dividends. Outlook-wise, sustaining current margin levels will be pivotal to achieving full-year earnings targets given modest revenue growth so far. Monitoring working capital efficiency and capital allocation (capex, M&A, buybacks/dividends) will be important given the strong OCF and conservative leverage.

Profitability Analysis

ROE (3.45%) is driven by: net margin 6.35% x asset turnover 0.361x x financial leverage 1.51x. The main drag on ROE is low asset turnover, with leverage also conservative, while margins are decent for a diversified chemicals profile. Gross margin stands at 27.6%, and operating margin at ~10.1%, indicating improved operating efficiency YoY given operating income growth (+8.0%) versus flat revenue (+0.3%). EBITDA margin of 14.6% provides a healthy buffer for fixed costs and interest. Interest coverage at ~11.8x reflects ample headroom and suggests that operating earnings quality supports financial obligations comfortably. Margin quality appears supported by cost controls and possibly mix improvements; sustaining gross-to-operating spread near 17.5pp indicates disciplined SG&A. Operating leverage is positive: small revenue growth translated into disproportionately higher operating profit, implying some fixed cost dilution. Ordinary income (¥20.0bn) slightly exceeds operating income, indicating limited non-operating drag net of interest expense. Effective tax rate shown as 0.0% is not reliable; tax expense of ¥4.75bn suggests a normalizing tax burden not captured by the summary metric.

Growth Assessment

Topline growth is modest at +0.3% YoY to ¥195.7bn, suggesting stable but not expansionary demand conditions at mid-year. Profit growth outpaced sales, with operating income +8.0% and net income +8.1% YoY, indicating margin-led earnings momentum. The improvement likely stems from cost optimization, pricing discipline, and/or mix shifts rather than volume-driven growth. Asset turnover at 0.361x remains subdued, implying limited throughput relative to the asset base and constraining ROE. With EBITDA up and interest expense well covered, internally generated funds support continued investment; however, the lack of disclosed investing cash flows prevents assessment of growth capex versus maintenance. Revenue sustainability into H2 will hinge on sustaining current pricing/mix and avoiding adverse input cost or FX swings. Profit quality appears solid given OCF/NI at 2.66x, but the durability depends on working capital behavior in H2 (inventory and receivables not fully detailed here). Outlook is cautiously constructive on margins; incremental topline acceleration would be needed to materially lift ROE from current levels.

Financial Health

Liquidity is strong: current ratio 286% and quick ratio 236%, supported by current assets of ¥349.9bn against current liabilities of ¥122.2bn; working capital totals ¥227.6bn. Inventories at ¥61.5bn represent roughly 17.6% of current assets, suggesting a balanced stock position. Solvency appears sound with total liabilities of ¥191.3bn versus equity of ¥359.6bn (liabilities-to-equity 0.53x), consistent with conservative capital structure. Financial leverage per DuPont is 1.51x (assets/equity), reinforcing a low-to-moderate leverage stance. Interest coverage of ~11.8x implies comfortable debt service capacity. The reported equity ratio of 0.0% is unreported and should not be used; based on available figures, the implied equity ratio (equity/assets) is approximately 66.3%. Cash and equivalents are not disclosed in this dataset, so net cash/debt cannot be determined from the provided information.

Cash Flow Quality

Operating cash flow of ¥33.0bn versus net income of ¥12.4bn (OCF/NI 2.66x) indicates strong earnings quality and favorable non-cash or working capital movements in the half. Depreciation and amortization of ¥8.78bn (about 44% of operating income) provide a material non-cash component to earnings, supporting recurring cash generation. Free cash flow cannot be reliably assessed because investing cash flow is not disclosed (shown as zero, which indicates unreported). As such, FCF listed as zero in the summary is not interpretable; true FCF could be positive or negative depending on capex timing. Working capital appears ample (¥227.6bn), and liquidity ratios are strong, but detailed drivers (AR/AP/inventory changes) are not provided, limiting visibility on the sustainability of OCF strength. The high interest coverage and modest leverage reduce cash flow volatility risk from financing costs.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed in this dataset (zeros indicate unreported). With EPS of ¥122.39 and strong OCF/NI, capacity to pay dividends appears supported by earnings and cash generation, contingent on capex needs and policy. Without investing cash flow and cash balance disclosures, free cash flow coverage of dividends cannot be assessed. Historically, payout decisions in chemicals are sensitive to capex cycles; absent capex data, we assume maintenance and strategic investments could absorb a portion of OCF. Near-term sustainability would hinge on maintaining operating margins and working capital discipline. Policy outlook cannot be inferred from the provided data; investors should refer to company guidance and prior dividend track record.

Risk Assessment

Business Risks:

• Limited topline growth (+0.3% YoY) increases reliance on margin management to drive earnings.
• Potential input cost volatility and pricing pressure typical in chemicals could compress margins.
• Foreign exchange and global demand fluctuations may affect revenues and costs (export/import exposure).
• Product mix shifts could influence gross-to-operating spread and EBITDA margins.
• Execution risk around capital allocation (capex intensity vs. returns) not assessable due to missing investing CF.

Financial Risks:

• Incomplete disclosure of cash and equivalents and investing cash flows limits visibility on net cash/debt and FCF.
• Interest rate and refinancing risks appear contained currently (11.8x coverage) but could rise if earnings soften.
• Low asset turnover constrains ROE; pressure to enhance returns could lead to higher leverage or aggressive investments.
• Working capital swings could impact OCF in H2 despite strong H1 conversion.

Key Concerns:

• Dependence on margin expansion rather than revenue growth to sustain profit momentum.
• Lack of disclosed capex and cash balances impairs assessment of investment capacity and dividend coverage.
• Subdued ROE (3.45%) relative to balance sheet strength indicates underutilized assets.

Investment Implications

Key Takeaways:

• Earnings growth (+8% operating, +8.1% net) achieved on flat sales, demonstrating margin resilience.
• Strong liquidity and moderate leverage provide financial flexibility.
• OCF/NI of 2.66x evidences high earnings quality at mid-year.
• ROE at 3.45% is constrained by low asset turnover and conservative leverage.
• Critical data gaps (investing CF, cash, dividend data) limit visibility on FCF and capital returns.

Metrics to Watch:

• Gross and operating margins (ability to sustain ~27.6%/~10.1% levels).
• Asset turnover improvement and revenue growth trajectory in H2.
• Capex and investing cash flows (maintenance vs. growth split).
• Working capital trends (inventory, receivables, payables) and OCF conversion.
• Leverage and interest coverage as rates and credit conditions evolve.
• Dividend announcements/policy updates and capital allocation priorities.

Relative Positioning: Based on available data, ADEKA exhibits solid margins, strong liquidity, and moderate leverage versus what is commonly observed in diversified chemical peers, but demonstrates limited topline momentum and ROE constrained by asset turnover; assessment is subject to the noted disclosure gaps.

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