TERUMO CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥534.93B
• Operating Income: ¥100.98B
• Net Income: ¥76.90B
• EPS: ¥52.13

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

Terumo (4543) delivered solid FY2026 Q2 results under IFRS, with revenue of 5,349.3 and operating income of 1,009.8, translating to YoY growth of 5.2% and 15.1%, respectively. Profit before tax was 1,012.1 and net income reached 768.97, up a robust 21.7% YoY, indicating positive operating leverage and disciplined cost control. Gross profit of 2,770.2 implies a gross margin of 51.8%, evidencing strong pricing and mix, while SG&A was 1,847.4 (34.5% of revenue), supporting mid-to-high teens operating margin. Operating margin stands at 18.9%, and EBITDA margin of 26.7% (EBITDA 1,428.3) underscores healthy profitability for a diversified medtech franchise. DuPont analysis points to a net margin of 14.4%, asset turnover of 0.282, and financial leverage of 1.32x, yielding an ROE of 5.3% for the period. Asset intensity remains notable with inventories of 2,943.9 and receivables of 1,768.5, consistent with a global manufacturing and distribution footprint. The balance sheet is conservative with total equity of 14,375.4 and an equity ratio of 75.9%, while total liabilities stand at 4,598.6. Cash generation is strong: operating cash flow of 1,008.98 exceeded net income by 31% (OCF/NI = 1.31x), and total free cash flow, defined here as OCF plus investing cash flow, was 620.6. Investing cash outflows of -388.4 include capex of 316.97 (about 5.9% of revenue), and D&A of 418.5 exceeds capex, indicating non-cash charges and potentially efficient capital deployment this period. Financing cash flow of -654.0 reflects dividends of -163.3 and modest buybacks of -22.5, alongside other financing uses; period-end cash and equivalents were 2,218.7, providing liquidity headroom. The effective tax rate was 21.7%, supportive of the uplift from operating to net income. Dividend outflows are well-covered by both OCF and FCF, implying sustainability absent adverse shocks. While several items are unreported (e.g., interest expense, R&D, ordinary income, current liabilities), the disclosed data depict a company with solid profitability, robust cash generation, and a lowly leveraged balance sheet. Positive operating leverage and margin expansion suggest effective pricing, product mix, and productivity initiatives amid moderate topline growth. Key data limitations (notably current liabilities, interest-bearing debt, and R&D) constrain deeper ratio diagnostics (current ratio, interest coverage, R&D intensity), but the overall quality of earnings and financial health appear strong within the available dataset.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 14.4%
• asset_turnover: 0.282
• financial_leverage: 1.32x (assets/equity ≈ 18,948.2 / 14,375.4)
• calculated_ROE: 5.3% (consistent with provided DuPont output) margin_quality:
• gross_margin: 51.8% (2,770.2 / 5,349.3)
• operating_margin: 18.9% (1,009.8 / 5,349.3)
• EBITDA_margin: 26.7% (1,428.3 / 5,349.3)
• net_margin: 14.4% (provided)
• commentary: Gross margin illustrates strong product economics. Operating margin expansion vs revenue growth (+15.1% OI on +5.2% sales) signals positive operating leverage and good cost containment. D&A of 418.5 supports the EBITDA uplift, consistent with capital intensity typical of medtech. operating_leverage: Revenue +5.2% YoY vs operating income +15.1% YoY indicates meaningful operating leverage and SG&A efficiency (SG&A at 34.5% of revenue). Effective tax rate of 21.7% aids conversion from operating to net income.

Growth Assessment

revenue_sustainability: Topline growth of 5.2% YoY is steady, likely reflecting balanced volume, price, and mix across diversified product lines; no segment detail was provided to parse drivers. profit_quality: Margin expansion at gross and operating levels and OCF/NI of 1.31x support high-quality earnings with limited reliance on non-operating items (ordinary income and interest effects unreported). outlook: With favorable operating leverage and mid-20s EBITDA margin, continued mix improvement and cost discipline could sustain earnings growth even on mid-single-digit sales growth; FX, procurement dynamics, and regulatory/tender environments remain watch points.

Financial Health

liquidity: Cash and equivalents of 2,218.7 provide a solid buffer. Current assets total 7,235.0; current liabilities are unreported, preventing calculation of current/quick ratios. Working capital shown equals current assets (7,235.0) due to missing current liabilities data. solvency: Equity ratio at 75.9% and liabilities/equity of ~0.32x indicate a conservatively financed balance sheet. Interest-bearing debt is unreported; thus net cash or net debt cannot be determined and interest coverage cannot be calculated. capital_structure: Total assets of 18,948.2 vs equity of 14,375.4 yields financial leverage of ~1.32x, modest for the sector. Absent debt disclosure, we reference total liabilities for leverage context only.

Cash Flow Quality

earnings_quality: OCF 1,008.98 exceeds NI 768.97 (OCF/NI = 1.31x), indicating strong conversion and limited accrual risk in the period. FCF_analysis: Free cash flow defined as OCF + investing CF equals 620.58. Capex of 316.97 is ~5.9% of revenue; D&A (418.48) exceeds capex, suggesting a period of investment discipline or timing effects. Inventory (2,943.9) and receivables (1,768.5) levels warrant monitoring for working capital intensity. working_capital: Inventories represent ~15.5% of total assets; receivables ~9.3%. The strong OCF suggests working capital did not materially detract in aggregate, but lack of current liabilities detail limits full analysis of payables dynamics.

Dividend Sustainability

payout_ratio_assessment: Reported calculated payout ratio is 50.1% (likely DPS/EPS basis), but cash dividends paid of 163.31 versus net income of 768.97 implies a cash payout of ~21.2% for the period; methodologies differ (earnings vs cash flow timing). FCF_coverage: FCF of 620.58 covers dividends of 163.31 by roughly 3.8x and dividends plus buybacks (185.79) by about 3.3x, indicating ample coverage. The provided FCF coverage metric (1.61x) appears based on a different definition or periodization. policy_outlook: Given strong cash generation, conservative leverage, and modest shareholder returns in the period, maintenance of a progressive dividend policy appears feasible, subject to investment needs and FX/regulatory conditions.

Risk Assessment

Business Risks:

• Pricing pressure from hospital procurement and tenders across key geographies
• Regulatory and quality risks, including product recalls and compliance events
• Supply chain and component availability constraints affecting delivery and costs
• Competitive intensity in interventional, hospital, and blood management product lines
• China volume-based procurement and international tender dynamics potentially pressuring margins
• Sterilization capacity and cost risks affecting product availability and COGS
• FX volatility impacting reported revenue and margins given global operations

Financial Risks:

• Working capital intensity tied to inventories and receivables could weigh on OCF if demand softens
• Unreported interest-bearing debt and interest expense obscure interest coverage and net leverage assessment
• Potential capex upcycle to support growth or regulatory upgrades could compress FCF in future periods
• Tax-rate variability across jurisdictions may affect net margin

Key Concerns:

• Low asset turnover (0.282) constrains ROE despite strong margins
• Limited visibility into current liabilities and debt profile due to unreported items
• Sustainability of margin expansion if procurement and pricing headwinds intensify

Investment Implications

Key Takeaways:

• Solid topline growth (+5.2% YoY) with pronounced operating leverage (+15.1% OI YoY)
• High gross (51.8%) and operating (18.9%) margins underpin strong profitability
• ROE of 5.3% is driven by healthy margins but capped by low asset turnover and modest leverage
• Robust cash conversion (OCF/NI 1.31x) and strong FCF (620.6) after all investing outflows
• Conservative balance sheet with equity ratio 75.9% and liabilities/equity ~0.32x
• Dividend and modest buybacks comfortably covered by FCF
• Key data gaps (debt, interest, current liabilities, R&D) limit deeper diagnostics

Metrics to Watch:

• Operating margin trajectory and SG&A ratio vs sales
• Inventory and receivables trends versus revenue growth (working capital turns)
• Capex versus D&A and its impact on future growth and margins
• FX impacts on revenue and gross margin mix
• Any updates on interest-bearing debt and interest expense (coverage, net leverage)
• Dividend policy updates and buyback cadence relative to FCF

Relative Positioning: Within Japanese medtech peers, Terumo exhibits strong margins and cash generation with a conservatively financed balance sheet; ROE is moderate given low asset turnover and limited leverage, positioning the company as a quality, resilient operator rather than a high-ROE outlier.

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