Shionogi & Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥212.97B
• Operating Income: ¥74.77B
• Net Income: ¥83.53B
• EPS: ¥98.19

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Shionogi & Co., Ltd. (4507) reported FY2026 Q2 consolidated results under IFRS with modest topline softness and resilient profitability, supported by an exceptionally strong balance sheet. Revenue was 2,129.65 (100M JPY), down 0.5% YoY, indicating broadly stable demand despite a slight contraction. Gross profit remained very high at 1,838.32 (100M JPY), yielding an 86.3% gross margin, consistent with a portfolio and revenue mix that relies heavily on high-margin products/royalties. Operating income was 747.71 (100M JPY), declining 1.4% YoY, translating to a robust 35.1% operating margin. Net income increased 0.5% YoY to 835.42 (100M JPY), outpacing operating income due to material non-operating or below-OP contributions, as suggested by profit before tax of 983.84 (100M JPY) and a low effective tax rate of 11.1%. EBITDA came in at 850.62 (100M JPY) with a 39.9% margin, underscoring high operating efficiency and disciplined cost management. DuPont analysis indicates ROE of 5.8% driven by a very high net margin (39.2%), low asset turnover (0.132x), and conservative leverage (1.12x). The balance sheet is exceptionally strong: equity ratio is 88.6%, total equity is 14,403.58 (100M JPY), and total liabilities are only 1,728.52 (100M JPY). Liquidity appears ample with cash and equivalents of 3,747.95 (100M JPY), comfortably exceeding total liabilities, although detailed current liability data are not disclosed. Operating cash flow was solid at 787.97 (100M JPY), or 0.94x of net income, while total investing cash outflows were sizable at -1,084.79 (100M JPY), resulting in negative headline free cash flow of -296.82 (100M JPY) on an OCF + investing CF basis. Notably, maintenance capital expenditures were modest at -80.66 (100M JPY), suggesting the negative free cash flow reflects strategic investments rather than operating strain. Dividend cash outflow was -243.46 (100M JPY), and the calculated payout ratio is 125.7%, implying dividends exceeded earnings in the period; however, balance sheet strength provides near-term flexibility. Reported data gaps include non-operating detail, interest expense, current liabilities, DPS, R&D and certain asset line items; zeros should be interpreted as undisclosed rather than true zeros. Overall, Shionogi demonstrates resilient margins, conservative leverage, and strong liquidity, but growth is muted and free cash flow was negative due to investment activities. Sustainability of elevated payout relative to earnings will depend on the persistence of high-margin income streams and normalization of investing cash flows. Given the very low leverage, the company has capacity to fund shareholder returns and investments, though medium-term ROE improvement likely requires either higher asset turnover or incremental leverage—both currently constrained by the business model and conservative capital structure. Management’s ability to sustain high-margin royalties/products, advance the pipeline, and balance investment with returns will be central to the outlook. In sum, quality and stability remain the hallmarks, with a need to monitor growth drivers and cash deployment intensity.

Profitability Analysis

ROE_decomposition: ROE 5.8% = Net margin 39.2% x Asset turnover 0.132x x Financial leverage 1.12x. The primary driver is an unusually high net margin, offset by structurally low asset turnover and conservative leverage. margin_quality: Gross margin is 86.3% and operating margin is approximately 35.1% (747.71 / 2,129.65), indicating robust pricing power and a royalty/brand-weighted mix. EBITDA margin is 39.9%, consistent with low COGS and controlled SG&A (477.34). Net margin at 39.2% exceeds the operating margin, implying significant non-operating gains or income below operating line and a low tax rate (11.1%). operating_leverage: With revenue -0.5% YoY and operating income -1.4% YoY, operating leverage appears modestly negative in this quarter, but margins stayed strong, suggesting cost base flexibility. D&A of 102.91 supports EBITDA resilience. additional_notes: Profit before tax (983.84) materially above operating income signals meaningful non-operating contributions; details are undisclosed.

Growth Assessment

revenue_sustainability: Revenue declined slightly (-0.5% YoY) to 2,129.65, suggesting a stable but not expanding topline. High gross margins point to continued reliance on high-value products/royalties; sustainability depends on patent life, competitive dynamics, and pipeline execution. profit_quality: Operating income decreased -1.4% YoY, but net income grew +0.5% YoY due to non-operating tailwinds and a low effective tax rate (11.1%). Underlying operating profitability remains solid; the divergence indicates earnings quality partly depends on below-OP items. outlook: Absent disclosure of R&D spend and product/royalty mix, near-term growth visibility is limited. Maintaining high-margin contributions while offsetting patent expiries and price pressures is key. Investment outflows suggest ongoing strategic reinvestment that could support medium-term growth if returns materialize.

Financial Health

liquidity: Cash and equivalents are 3,747.95 (100M JPY), and current assets are 8,585.04 (100M JPY). Current liabilities are undisclosed, but cash exceeds total liabilities (1,728.52), indicating strong liquidity. Working capital shown equals current assets due to missing current liabilities data. solvency: Equity ratio is 88.6%, reflecting a very conservative capital structure. Debt-to-equity is reported at 0.12x, but interest-bearing debt details are undisclosed. Asset-to-equity (financial leverage) is low at 1.12x. capital_structure: Total equity stands at 14,403.58 (100M JPY) with retained earnings of 11,157.29, indicating significant accumulated profits. The company likely maintains a net cash position given large cash balances and low leverage metrics.

Cash Flow Quality

earnings_quality: OCF/Net income is 0.94x (787.97 / 835.42), slightly below 1x but broadly healthy for a period with significant non-operating contributions and tax effects. OCF/EBITDA is ~0.93x, indicating solid cash conversion from operations. FCF_analysis: Free cash flow defined as OCF + investing CF is -296.82 (100M JPY), negative due to sizable investing outflows (-1,084.79). However, maintenance capex was modest at -80.66, implying that negative FCF stems from strategic investments (e.g., financial assets, intangibles, acquisitions) rather than operating weakness. working_capital: Inventories are 654.77 (100M JPY). Receivables/payables are undisclosed, limiting granular analysis of working capital movements. Nonetheless, the strong cash position mitigates short-term working capital risk.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 125.7%, implying dividends exceeded earnings during the period (EPS 98.19 JPY; DPS not disclosed). This level is above a sustainable through-cycle range barring special items. FCF_coverage: FCF coverage is -0.28x based on OCF + investing CF, indicating dividends were not covered by free cash flow this period. Using maintenance capex only, OCF comfortably covers capex, but investing intensity drove negative headline FCF. policy_outlook: Near-term dividend capacity is supported by a very strong balance sheet and low leverage. Medium-term sustainability depends on normalization of investing cash flows and maintaining high-margin earnings; clarity on dividend policy and expected payout is important given DPS is undisclosed.

Risk Assessment

Business Risks:

• Patent expirations and product lifecycle management impacting high-margin revenue streams
• Regulatory and pricing pressures in key markets
• Pipeline execution risk and clinical/regulatory outcomes
• Competitive entrants including generics and biosimilars
• Reliance on royalty/partner income with potential variability
• Supply chain and manufacturing scale-up risks for new launches

Financial Risks:

• Earnings dependence on non-operating items given net margin above operating margin
• Negative free cash flow driven by investing outflows in the period
• Limited transparency on current liabilities and interest-bearing debt components
• FX exposure from overseas revenues and assets (not disclosed here)

Key Concerns:

• Muted topline growth (-0.5% YoY) alongside slight OP decline (-1.4% YoY)
• High payout ratio (125.7%) and negative FCF coverage (-0.28x) in the period
• Low asset turnover (0.132x) constraining ROE despite high margins

Investment Implications

Key Takeaways:

• Stable revenue with strong margins; operating efficiency remains a core strength
• ROE at 5.8% reflects high net margin but very low asset turnover and minimal leverage
• Cash-rich, lowly levered balance sheet provides resilience and flexibility
• OCF is solid, but heavy investing cash outflows led to negative headline FCF
• Dividend outlays exceeded earnings this period; coverage hinges on investment normalization and earnings durability

Metrics to Watch:

• Revenue mix and sustainability of royalty/high-margin contributions
• Operating margin trajectory and OCF/EBITDA conversion
• Investing cash flows (scale, nature, and expected returns), including intangibles/M&A
• Implied DPS and payout policy disclosures versus earnings/FCF
• Working capital trends (receivables, payables) and inventory levels
• R&D intensity and pipeline milestones (R&D expenses currently undisclosed)

Relative Positioning: Versus domestic pharma peers, Shionogi exhibits superior gross and EBITDA margins and an exceptionally strong balance sheet, but delivers modest growth and middling ROE due to low asset turnover and conservative leverage.

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