ASAHIPEN CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥8.02B
• Operating Income: ¥319M
• Net Income: ¥384M
• EPS: ¥98.52

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

Verdict: Soft quarter with earnings pressure, but cash generation and liquidity remained solid. Revenue declined 11.9% YoY to 80.15, indicating continued demand softness in DIY/paint channels and/or slower sell-in to distributors. Gross profit was 25.55 with a gross margin of 31.9%, suggesting pricing and mix offset some input cost pressure but not enough to protect operating leverage. SG&A of 22.36 kept rising relative to sales or failed to flex enough, resulting in operating income of 3.19, down 36.2% YoY. Operating margin compressed to about 4.0% from roughly 5.5% a year ago, a compression of about 150 bps. Ordinary income fell 33.2% YoY to 3.54, with ordinary margin compressing by roughly 140 bps to 4.4%. Net income declined 13.2% YoY to 3.83, with net margin of 4.8%; the net margin compression was modest (~7 bps) due to non-operating contributions and a higher comprehensive income line. Non-operating income of 0.62 (notably 0.38 dividends) provided some cushion; non-operating income ratio was 16.1%, a meaningful share of profits this quarter. EBITDA was 4.73 (EBITDA margin 5.9%), highlighting thinner profitability versus prior year levels. ROE calculated at 2.6% is subdued; ROIC at 1.4% is below 5% warning threshold, underscoring weak capital efficiency. Earnings quality was acceptable: OCF of 5.34 exceeded net income (OCF/NI 1.39x), implying no immediate quality red flags. Balance sheet strength is a positive offset: current ratio 256.9%, quick ratio 196.1%, D/E 0.52x, and interest coverage of 17.9x. Capex of 3.90 led to an estimated positive but modest FCF (~1.44), which is below the implied dividend outflow if the 70.5% payout ratio holds. Forward-looking, cost control and price/mix discipline will be essential to stabilize margins given volume weakness. Priority should be on lifting ROIC above the company’s cost of capital via tighter working capital, targeted capex, and improved asset turnover.

Profitability Analysis

ROE decomposition: ROE 2.6% = Net Profit Margin 4.8% × Asset Turnover 0.354 × Financial Leverage 1.52x. The biggest negative driver vs last year is Asset Turnover, given a double-digit revenue decline on a presumably stable asset base, while leverage remained low and largely unchanged. Net margin also compressed (operating margin down ~150 bps YoY; ordinary margin down ~140 bps), reflecting under-absorption of SG&A and softer operating leverage. Business reasons: weaker sales volumes in DIY/consumer paint channels and possible promotional intensity pressured operating margin; non-operating dividends partially offset at the net level. Sustainability: non-operating income (dividends) is recurring but not controllable; operating margin recovery depends on volume, pricing, and cost actions—thus near-term visibility is limited. Concerning trends include SG&A not flexing with revenue (operating profit down 36.2% vs revenue down 11.9%), indicating negative operating leverage and potential fixed-cost rigidity.

Growth Assessment

Top line contracted 11.9% YoY to 80.15, pointing to weak end-demand or inventory normalization at retailers. Operating income fell 36.2% YoY to 3.19, magnifying the revenue decline due to deleverage. Ordinary income decreased 33.2% to 3.54, while net income declined a milder 13.2% to 3.83 thanks to non-operating support. Gross margin at 31.9% suggests pricing/mix are holding, but insufficient to offset fixed cost absorption. EBITDA margin 5.9% indicates constrained earnings power vs historical levels. Outlook hinges on demand normalization in home improvement/DIY, cost pass-through, and procurement tailwinds (if raw material costs ease). Near term, expect cautious growth with a focus on margin stabilization via cost control, SKU mix optimization, and disciplined promotions. Any recovery in channel volumes would provide outsized profit leverage given current cost base.

Financial Health

Liquidity is strong: current ratio 256.9% and quick ratio 196.1% well above benchmarks; no warning on current ratio (<1.0) is necessary. Solvency conservative: D/E 0.52x and interest coverage 17.9x provide ample headroom. Maturity profile manageable: short-term loans 15.95 are comfortably covered by cash and deposits of 37.35 and current assets of 102.42. Total liabilities 77.93 vs total equity 148.67 indicate a solid equity buffer. No explicit off-balance sheet obligations were disclosed in the provided data. Working capital remains healthy with 62.55 of positive working capital; payables (8.70) appear modest relative to inventories (24.25) and receivables (22.07), implying limited supplier financing risk.

Cash Flow Quality

OCF/Net Income at 1.39x signals acceptable earnings quality with cash conversion above the 1.0x benchmark. Estimated FCF is positive at roughly 1.44 (OCF 5.34 minus capex 3.90), sufficient to fund a portion of shareholder returns and maintenance projects but not generous. With financing CF of +0.92, there may have been incremental borrowing or reduced repayments to support cash needs; details are not disclosed. No clear signs of working capital manipulation can be inferred from the limited data; however, the absence of period-over-period inventory/receivable changes constrains diagnostics. Cash balance of 37.35 provides ample buffer for seasonal needs.

Dividend Sustainability

The calculated payout ratio is 70.5%, above the <60% benchmark for comfort, indicating a tighter margin of safety amid profit pressure. Implied dividend outflow would be approximately 2.70 (70.5% of net income 3.83). Estimated FCF of 1.44 would not fully cover this level, implying reliance on cash on hand or incremental financing if maintained. Given strong liquidity and low leverage, the dividend appears fundable near term, but medium-term sustainability requires either earnings recovery or a recalibration of payout. Policy outlook should prioritize ROIC improvement and balance between capex, working capital discipline, and distributions.

Risk Assessment

Business Risks:

• Demand softness in DIY/home improvement channels leading to lower volumes
• Price competition and promotion intensity compressing margins
• Raw material cost volatility (resins, solvents, packaging) impacting gross margin
• Product mix shifts toward lower-margin SKUs
• Inventory obsolescence risk in seasonal/consumer paint lines

Financial Risks:

• Dividend payout above 60% benchmark amid weaker profits
• FCF below implied dividend outflow if earnings remain depressed
• Exposure to interest rate changes on short-term loans (15.95)
• FX risk on imported materials (if applicable) affecting cost base

Key Concerns:

• ROIC at 1.4% well below 5% warning threshold, signaling weak capital efficiency
• Operating margin compression (~150 bps YoY) and negative operating leverage
• Dependence on non-operating income (dividends 0.38) to support net profits in a weak quarter
• Limited disclosure granularity (SG&A breakdown, investing CF) restricting deeper diagnostics

Investment Implications

Key Takeaways:

• Revenue -11.9% YoY with pronounced operating deleverage; operating income -36.2%
• Operating margin compressed to ~4.0% (~150 bps YoY), ordinary margin to ~4.4%
• OCF/NI 1.39x supports earnings quality; estimated FCF ~1.44 is modest
• Balance sheet resilient: current ratio 257%, D/E 0.52x, interest cover 17.9x
• ROE 2.6% and ROIC 1.4% highlight need for efficiency and profit recovery
• Payout ratio 70.5% appears stretched versus FCF; sustainability hinges on earnings rebound

Metrics to Watch:

• Gross and operating margin progression (bps change)
• Asset turnover and inventory days (sell-through recovery)
• SG&A-to-sales ratio and fixed cost flexibility
• OCF/Net income and FCF generation
• Payout ratio and actual dividend cash outflow
• ROIC trajectory and capex discipline

Relative Positioning: Within Japan’s coatings/DIY niche, the company exhibits strong liquidity and low leverage but weaker profitability and capital efficiency versus best-in-class peers; improvement depends on restoring volumes and tightening cost structure.

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
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