SANYO CHEMICAL INDUSTRIES,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥63.78B
• Operating Income: ¥4.29B
• Net Income: ¥1.29B
• EPS: ¥470.92

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

Sanyo Chemical Industries (4471) reported FY2026 Q2 consolidated results under JGAAP showing resilient operating performance against a sharp top-line contraction, but net income was heavily distorted by non-operating/extraordinary factors. Revenue declined 17.2% YoY to ¥63.8bn, yet operating income dipped only 3.7% to ¥4.29bn, implying effective cost controls and/or favorable mix. Based on the provided margin data, gross margin stands at 26.0% and EBITDA margin at 14.8%, supporting the view that core profitability remains solid despite demand softness. The DuPont bridge yields ROE of 6.89% with net profit margin 16.33%, asset turnover 0.343x, and financial leverage 1.23x; leverage is modest, and ROE is driven largely by margins rather than balance sheet gearing. The gap between operating margin (~6.7%) and net margin (16.3%) is unusually wide, signaling large non-operating gains or one-off items inflating bottom-line earnings. Ordinary income of ¥5.03bn sits well below net income of ¥10.42bn, reinforcing that non-recurring factors likely drove the bottom line. Liquidity is strong, with a current ratio of 280% and quick ratio of 237.3%, underpinned by ¥84.9bn of current assets and ¥30.3bn of current liabilities. The balance sheet is conservative: total liabilities are ¥38.1bn against equity of ¥151.2bn, and interest expense is minimal at ¥70m with EBIT-based interest coverage of 61.3x. Operating cash flow of ¥4.91bn is only 0.47x net income, highlighting weaker cash conversion likely due to working capital movements and/or non-cash/one-off income components. Reported effective tax rate is 0.0%, which is not typical and likely reflects specific tax effects or offsets alongside extraordinary items. Dividend figures show as zero/unreported; hence, payout and FCF coverage cannot be assessed from this dataset. Several fields (e.g., equity ratio, cash and equivalents, investing cash flow, shares outstanding) show as zero because they were not disclosed in the provided extract and should not be interpreted as actual zeros. Overall, the core business appears stable with controlled operating profit under revenue pressure, a robust balance sheet, and low financial risk, but cash conversion softness and the heavy reliance of net profit on non-operating items reduce earnings quality. Forward-looking assessment hinges on demand normalization in key end-markets, mix and pricing retention, and normalization of one-off items and tax rate. Investors should monitor working capital dynamics, capital expenditures (once disclosed), and the sustainability of the margin profile as volumes recover or remain soft. Data limitations constrain precision in some areas; the analysis below focuses on the available non-zero data points and the provided calculated metrics.

Profitability Analysis

ROE_decomposition: Reported ROE is 6.89%, driven by net profit margin 16.33%, asset turnover 0.343x, and financial leverage 1.23x. The leverage component is low, so ROE is primarily a function of margins and modest asset utilization. The relatively low turnover indicates a capital-intensive profile typical of specialty chemicals, with scope for ROE to improve via better utilization rather than higher leverage. margin_quality: Operating margin approximates 6.7% (¥4.29bn / ¥63.78bn), versus a much higher net margin of 16.3%. The wide gap implies significant non-operating or extraordinary income inflating net profit; ordinary income (¥5.03bn) supports this. Gross margin is reported at 26.0% and EBITDA margin at 14.8%, indicating healthy underlying unit economics despite revenue decline. Effective tax rate is shown as 0.0%, further suggesting bottom-line distortions this period. operating_leverage: Revenue fell 17.2% YoY while operating income declined only 3.7%, indicating favorable operating leverage from cost controls, mix improvements, and/or pricing discipline. This resilience suggests fixed costs were well managed, cushioning the volume decline. Sustainability of this leverage depends on future volume trends and raw material/energy cost behavior.

Growth Assessment

revenue_sustainability: A 17.2% YoY revenue contraction indicates demand softness, possible price normalization after prior surges, or deliberate pruning of low-margin volumes. Without segment detail, sustainability is uncertain; however, stable operating profit points to better mix and pricing that could support gradual recovery when volumes stabilize. profit_quality: Net income of ¥10.42bn exceeds ordinary income of ¥5.03bn and far exceeds operating income of ¥4.29bn, signaling reliance on non-operating gains or one-offs. OCF/NI of 0.47 further indicates the bottom line is not fully backed by cash, reducing earnings quality. outlook: Key drivers will be volume recovery in end-markets, stability in input costs, and retention of pricing/mix gains. Normalization of non-operating items and tax rate could reduce reported net income in coming periods, bringing earnings closer to operating performance. With a strong balance sheet, the company is positioned to weather softer demand and invest selectively when conditions improve.

Financial Health

liquidity: Current ratio 280% and quick ratio 237.3% reflect ample near-term coverage (Current assets ¥84.94bn vs. current liabilities ¥30.33bn). Working capital stands at ¥54.61bn, offering strong flexibility. solvency: Total liabilities are ¥38.06bn against equity of ¥151.22bn, indicating a conservative capital structure. Interest expense is ¥70m with EBIT coverage of 61.3x, implying minimal refinancing risk. capital_structure: Debt-to-equity is 0.25x (based on provided metric), consistent with low leverage for the sector. The reported equity ratio of 0.0% is an unreported value; using the balance sheet figures implies an equity ratio of roughly 81% (¥151.22bn / ¥186.16bn), underlining balance sheet strength.

Cash Flow Quality

earnings_quality: OCF/Net Income is 0.47, indicating weaker cash conversion. The discrepancy between net income and cash flow is consistent with large non-operating/extraordinary items and potential working capital investment. FCF_analysis: Investing cash flow is unreported in this dataset (shows as 0), so free cash flow cannot be reliably computed despite a placeholder of 0. Capex intensity and investment pacing are therefore unknown for the period. working_capital: With inventories at ¥12.97bn and sizable current assets, working capital management is a key driver of OCF. The revenue decline alongside positive OCF suggests some release of working capital, but the low OCF/NI ratio implies other non-cash items and one-offs affected reported earnings.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio show as 0.00% due to unreported data in this extract and should not be read as an actual zero payout. EPS is ¥470.92, but without confirmed DPS, payout cannot be assessed. FCF_coverage: FCF coverage is shown as 0.00x due to unreported investing cash flows; true FCF coverage cannot be determined from available data. policy_outlook: Given the strong balance sheet and low leverage, the company has capacity to sustain dividends over a cycle; however, bottom-line volatility driven by non-operating items and currently unreported FCF data limit visibility on near-term payout policy.

Risk Assessment

Business Risks:

• End-market demand softness reflected in a 17.2% YoY revenue decline
• Input cost volatility (raw materials/energy) affecting margins
• Pricing and mix sustainability as volumes normalize
• Potential FX fluctuations impacting exports and imported inputs
• Customer inventory adjustments in specialty chemicals value chains

Financial Risks:

• Earnings quality risk from reliance on non-operating/extraordinary items
• Cash conversion risk (OCF/NI at 0.47) and working capital volatility
• Tax rate normalization from an unusually low effective tax rate
• Limited visibility on capex and FCF due to unreported investing cash flows

Key Concerns:

• Net income substantially above operating and ordinary income, reducing quality
• Weak cash conversion relative to reported profits
• Sustainability of cost controls and mix benefits amid lower volumes

Investment Implications

Key Takeaways:

• Operating resilience despite a 17.2% revenue decline; operating income down only 3.7%
• ROE of 6.89% driven by margins, not leverage; asset turnover is modest
• Net income inflated by non-operating factors; quality of earnings is mixed
• Balance sheet is very strong with low leverage and high liquidity
• Cash conversion is weak this period; OCF/NI at 0.47

Metrics to Watch:

• Operating margin sustainability and gross margin trends
• Working capital metrics (inventory days, receivable/payable cycles)
• Investing cash flows and capex once disclosed (true FCF generation)
• Ordinary vs. net income gap and tax rate normalization
• Volume/pricing recovery in key segments and FX impacts

Relative Positioning: Versus domestic specialty chemical peers, Sanyo Chemical exhibits a stronger balance sheet and interest coverage, with comparable to solid operating margins under demand pressure; however, it shows weaker cash conversion this period and greater distortion at the net income level from non-operating items.

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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