KANSAI PAINT CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥289.22B
• Operating Income: ¥24.33B
• Net Income: ¥18.30B
• EPS: ¥91.88

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

Kansai Paint Co., Ltd. (4613) reported FY2026 Q2 consolidated results under JGAAP showing modest topline contraction but resilient bottom-line performance supported by non-operating contributions. Revenue was ¥289.2bn, down 1.6% YoY, while operating income declined 7.6% YoY to ¥24.3bn, indicating some operating deleverage and cost persistence. Net income, however, increased 3.2% YoY to ¥16.2bn, aided by ordinary income of ¥28.6bn that exceeded operating income by ¥4.3bn, suggesting positive non-operating items offsetting higher interest costs. Gross margin remained robust at 32.2%, reflecting ongoing pricing and mix discipline against a backdrop of raw material normalisation and competitive pressures. Operating margin stood at 8.4%, down versus the prior year, implying that savings and price actions did not fully offset volume softness and overhead inflation. EBITDA reached ¥34.0bn, an 11.7% margin, providing ample interest coverage, with EBIT/interest of 16.6x. DuPont analysis shows ROE of 4.66% (net margin 5.60%, asset turnover 0.385x, financial leverage 2.16x), underscoring moderate profitability on a relatively efficient balance sheet. The current ratio is 200.8% and the quick ratio 167.5%, signaling strong near-term liquidity based on reported working capital. Total assets were ¥750.9bn and equity ¥347.0bn, with liabilities at ¥400.7bn; debt-to-equity of 1.15x is manageable given coverage metrics. Operating cash flow was ¥3.4bn, only 0.21x net income and roughly 10% of EBITDA, pointing to weak cash conversion in the period, likely driven by working capital build. Free cash flow and investing cash flows were not disclosed (zeros indicate unreported), limiting assessment of reinvestment intensity and shareholder return capacity this quarter. Dividend data were not disclosed; payout-related ratios shown as zero are placeholders, not actuals. The effective tax rate shown as 0.0% is not representative; reported income tax expense of ¥9.9bn versus ordinary income implies a tax rate in the mid-30% range. Overall, the company delivered stable gross profitability, experienced operating margin compression, and relied on non-operating gains to sustain net profit growth. Balance sheet strength and interest coverage mitigate financial risk, but cash flow softness warrants monitoring. Given several unreported items (cash, capex, dividends, share count), conclusions focus on the disclosed non-zero data.

Profitability Analysis

ROE of 4.66% is driven by a 5.60% net margin, asset turnover of 0.385x, and financial leverage of 2.16x. Operating margin is 8.4% (¥24.3bn EBIT on ¥289.2bn sales), down YoY, indicating operating deleverage as a 1.6% revenue decline translated into a 7.6% EBIT decline. Gross margin at 32.2% remains strong, implying pricing/mix discipline; however, SG&A and overhead inflation compressed operating margin. EBITDA margin is 11.7% (¥34.0bn), providing cushion over financing costs. Interest coverage is robust at 16.6x (EBIT/interest of ¥24.3bn/¥1.46bn), though ordinary income (¥28.6bn) outpaced operating income by ¥4.3bn, pointing to net non-operating gains that improved pre-tax earnings despite interest expense. Tax burden based on disclosed values suggests an implied effective tax rate around 34–35% (¥9.9bn tax on ordinary income), while the displayed 0.0% is not representative. Profit quality is mixed: solid gross economics but reduced operating leverage and reliance on non-operating items to support bottom line. Overall profitability is moderate for a global coatings company, with scope for margin recovery if volume stabilizes and costs normalize.

Growth Assessment

Revenue decreased 1.6% YoY to ¥289.2bn, reflecting softer demand in select end-markets or regional mix shifts. Operating income fell 7.6% YoY, outpacing the revenue decline, indicating negative operating leverage and/or delayed pass-through of cost savings. Net income increased 3.2% YoY to ¥16.2bn due to positive non-operating contributions (ordinary income exceeded operating income by ¥4.3bn), which may include FX gains, equity-method income, or other financial items. The sustainability of net profit growth therefore hinges on repeatability of these non-operating items and stabilization of the operating margin. Gross margin resilience (32.2%) suggests pricing power remains intact, a positive indicator for medium-term earnings normalization if volumes improve. The near-term outlook depends on demand in construction and automotive coatings, raw material price trends, and currency movements. With OCF at ¥3.4bn (0.21x net income), working capital dynamics currently weigh on cash conversion, which could normalize if inventory and receivables unwind. Given data limitations on capex and regional/segment breakdowns, visibility on organic growth drivers is constrained. Near-term growth quality is mixed: core operations softened, but bottom line held via non-operating support; sustained recovery requires improvement at the operating level.

Financial Health

Liquidity is strong on reported metrics: current ratio 200.8% (¥355.5bn CA / ¥177.0bn CL), quick ratio 167.5% (reflecting inventories of ¥59.1bn), and working capital of ¥178.5bn. Solvency appears sound with debt-to-equity of 1.15x and financial leverage of 2.16x (assets ¥750.9bn vs equity ¥347.0bn). Interest coverage is high at 16.6x, indicating manageable financing costs relative to operating earnings. Total liabilities of ¥400.7bn are balanced by substantial equity; the equity ratio shown as 0.0% is unreported and not indicative of capital adequacy. Cash and equivalents were not disclosed, which limits assessment of immediate liquidity buffers; however, the strong quick ratio suggests sufficient near-term resources in receivables and other liquid assets. Absent details on debt maturity profiles and cash balances, refinancing and covenant assessments are limited, but current earnings power and coverage metrics are supportive.

Cash Flow Quality

Operating cash flow was ¥3.38bn versus net income of ¥16.19bn (OCF/NI 0.21), indicating weak cash conversion in the period, likely due to a working capital build (receivables/inventories) or timing of payables. OCF was also only ~10% of EBITDA (¥3.38bn/¥33.97bn), reinforcing near-term cash generation pressure. Investing cash flow, capex, and free cash flow were not disclosed (zeros represent unreported values), so true FCF cannot be assessed from the provided data. The gap between EBIT and OCF suggests earnings quality was affected by non-cash or timing items; normalization is possible if working capital unwinds in subsequent quarters. Without capex data, we cannot judge maintenance vs growth investment intensity or the sustainability of cash generation relative to asset base.

Dividend Sustainability

Dividend per share, payout ratio, and FCF coverage were not disclosed (zeros indicate unreported values). With net income of ¥16.19bn and unknown capex/FCF, comprehensive dividend coverage analysis is not possible. From a balance sheet standpoint, liquidity and coverage metrics are supportive; however, near-term OCF weakness suggests that consistent cash distributions would benefit from working capital normalization. Policy outlook cannot be inferred from the provided data; assessment should be revisited once DPS and cash flow details are disclosed.

Risk Assessment

Business Risks:

• Demand cyclicality in architectural and automotive coatings impacting volumes and mix
• Raw material and petrochemical price volatility affecting gross margins
• Foreign exchange fluctuations influencing revenues, costs, and non-operating income
• Competitive pricing pressure in key markets
• Regulatory and environmental compliance costs across regions
• Execution risks in emerging markets and potential geopolitical disruptions

Financial Risks:

• Weak cash conversion this period (OCF/NI 0.21) driven by working capital swings
• Potential reliance on non-operating items to sustain net income
• Interest rate and refinancing risk given leverage (D/E 1.15x), though coverage currently strong
• Limited visibility on capex and cash balances due to unreported items
• Tax rate volatility versus accounting earnings affecting net margins

Key Concerns:

• Operating margin compression despite solid gross margin
• Sustainability of non-operating gains that lifted ordinary income over operating income
• Working capital build weighing on OCF and cash conversion

Investment Implications

Key Takeaways:

• Topline contracted 1.6% YoY; operating income fell 7.6% YoY, indicating operating deleverage
• Net income rose 3.2% YoY aided by non-operating gains (ordinary income > operating income by ¥4.3bn)
• Gross margin resilient at 32.2%; operating margin at 8.4% under pressure
• ROE at 4.66% reflects moderate profitability with low asset turnover (0.385x) and moderate leverage (2.16x)
• Interest coverage strong at 16.6x; solvency and liquidity appear solid
• OCF of ¥3.38bn (0.21x NI) signals weak cash conversion; FCF not disclosed

Metrics to Watch:

• Operating margin trajectory and SG&A efficiency
• Working capital intensity (inventories and receivables) and OCF/EBITDA conversion
• Non-operating income components driving ordinary income
• Raw material cost trends and pricing/mix sustainability
• Capex and FCF disclosure for assessing reinvestment and shareholder returns
• FX sensitivity and regional/segment volume trends

Relative Positioning: On disclosed metrics, Kansai Paint exhibits solid gross profitability and strong interest coverage versus typical coatings peers, but shows weaker cash conversion this period and lower asset turnover, with net income supported by non-operating items; visibility on capital allocation is constrained by unreported cash, capex, and dividend data.

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