TAKASAGO INTERNATIONAL CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥114.47B
• Operating Income: ¥6.21B
• Net Income: ¥5.15B
• EPS: ¥55.37

Income Statement

Balance Sheet

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

For FY2026 Q2 (consolidated, JGAAP), Takasago International Corporation delivered modest topline growth with revenue of ¥114.5bn, up 0.8% YoY, but experienced a notable deterioration in operating profitability. Gross profit was ¥39.1bn, translating to a gross margin of 34.2%, which is healthy for the sector, yet operating income declined 22.4% YoY to ¥6.2bn, implying margin compression at the SG&A or production cost level. Ordinary income (¥6.7bn) exceeded operating income, indicating positive non-operating contributions that more than offset interest expenses of ¥361m. Net income rose 10.2% YoY to ¥5.4bn despite the operating shortfall, suggesting support from non-operating gains and/or a normalized tax burden. Using the disclosed ordinary income and income tax, the implied effective tax rate is approximately 27% (rather than the automated 0.0% metric). The DuPont profile shows a net margin of 4.71%, asset turnover of 0.448x, and financial leverage of 1.75x, yielding an ROE of 3.69%, which is modest for the industry and indicates room to enhance capital efficiency. Balance sheet strength is a clear positive: total assets are ¥255.6bn against equity of ¥146.3bn, implying an equity ratio around 57% (the displayed 0.0% is evidently a placeholder), and total liabilities of ¥115.8bn equate to a conservative liabilities-to-equity proxy of 0.79x. Liquidity is robust with a current ratio of 192.9% and a quick ratio of 153.4%, supported by sizeable working capital of ¥74.6bn and inventories of ¥31.7bn. Interest coverage stands at a comfortable 17.2x based on operating income, underscoring low near-term refinancing risk. Cash flow statement items were not disclosed in this dataset (zeros reflect non-reporting), limiting assessment of cash conversion and capex intensity this period. Depreciation and amortization were also not disclosed (reported as zero), so EBITDA metrics are not meaningful and operating cash flow quality cannot be triangulated from P&L alone. The revenue trajectory appears stable but lacks momentum, while profit deterioration at the operating level points to cost inflation, unfavorable mix, or delayed pricing catch-up. Given the sector’s exposure to raw material price volatility and FX, non-operating items and currency could have influenced the ordinary-to-net performance bridge. Dividend data were not disclosed (DPS and payout appearing as zero should be treated as undisclosed), so distribution policy and sustainability cannot be inferred from this snapshot. Overall, the company shows solid liquidity and solvency, but subdued ROE and operating margin pressure temper the quality of earnings. Sustained improvement will likely hinge on margin restoration through pricing, mix optimization, and cost discipline, alongside stable volumes.

Profitability Analysis

ROE of 3.69% decomposes into net margin 4.71% × asset turnover 0.448 × leverage 1.75, indicating that modest profitability and slow asset turnover are the primary drags, not excessive leverage. Operating margin is approximately 5.42% (¥6.209bn/¥114.467bn), down YoY given the 22.4% decline in operating income against flat sales, pointing to cost pressure or higher SG&A. Gross margin at 34.2% remains solid, implying the principal pressure sits below gross profit (e.g., SG&A, R&D, or logistics) or in manufacturing overhead absorption. Ordinary income exceeded operating income, suggesting supportive non-operating factors (e.g., FX gains, investment income) despite ¥361m in interest expense. Interest coverage is strong at 17.2x, indicating ample headroom and low financial strain. With D&A undisclosed, EBITDA and EBITDA margin reported as zero should be treated as not available; true operating leverage cannot be precisely quantified but the sharper drop in operating income versus sales implies negative operating leverage this period. Margin quality appears mixed: gross margin resiliency is a positive, but the operating line deterioration indicates either delayed pricing power or elevated fixed-cost ratios.

Growth Assessment

Revenue growth of 0.8% YoY indicates stable but subdued demand conditions. The disconnect between modest sales growth and a 22.4% decline in operating income implies weaker contribution margins, likely due to input cost inflation, product mix shifts, or lagging price passthrough. Net income rose 10.2% YoY aided by non-operating factors, which may not be structurally repeatable, suggesting underlying profit quality weakened at the core operating level. Asset turnover of 0.448x reflects a capital-intensive footprint and/or elevated working capital, limiting ROE accretion from growth. Without disclosed cash flows, sustainability of growth through internally generated funds cannot be fully assessed, but strong liquidity provides flexibility. Near-term outlook hinges on cost normalization, procurement initiatives, and pricing/mix actions to restore operating margins. If raw material costs stabilize and price adjustments hold, operating leverage could improve even on modest top-line growth. Conversely, further cost volatility or FX headwinds could keep margins under pressure despite stable revenues.

Financial Health

Liquidity is strong: current ratio 192.9% and quick ratio 153.4% point to ample short-term coverage, supported by ¥74.6bn of working capital. Inventories at ¥31.7bn appear manageable relative to current assets, but absent turnover data, inventory efficiency cannot be judged. Solvency is sound: total liabilities of ¥115.8bn against equity of ¥146.3bn imply a liabilities-to-equity proxy of 0.79x and an equity ratio around 57%, indicating conservative capitalization. Interest coverage at 17.2x suggests limited refinancing risk and low sensitivity to rate increases in the near term. Financial leverage (assets/equity) of 1.75x is moderate and consistent with a resilient balance sheet. No cash and cash flow disclosures were provided in this dataset, so net cash/debt positioning and liquidity buffers beyond working capital cannot be verified here.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed in this dataset (zeros reflect non-reporting), preventing a direct assessment of cash conversion, capex intensity, or free cash flow. The OCF/Net Income ratio shown as 0.00 is not meaningful. With D&A not disclosed, accrual intensity and non-cash earnings components cannot be triangulated. Inventories of ¥31.7bn within current assets of ¥155.0bn hint that working capital is a significant use of funds, and changes therein can materially swing OCF, but period movements are unavailable. In the absence of OCF and capex data, FCF cannot be computed, and earnings quality must be inferred from P&L: gross margin is stable while operating margin fell, indicating weaker cash earnings capacity unless offset by working-capital release, which we cannot confirm.

Dividend Sustainability

Dividend per share and payout ratio appear as zero in the dataset and should be treated as undisclosed rather than actual zero. Without OCF and capex data, FCF coverage of dividends cannot be assessed. Given positive net income and strong liquidity, capacity for distributions may exist, but sustainability depends on recurring OCF after maintenance capex, which is not disclosed here. Policy outlook cannot be inferred from the provided data; clarity on dividend guidance, historical payout practices, and capital allocation priorities would be required.

Risk Assessment

Business Risks:

• Input cost volatility (petrochemical and natural raw materials) impacting gross and operating margins
• Pricing power and timing of passthrough relative to cost swings
• Foreign exchange fluctuations affecting non-operating gains/losses and translation of overseas earnings
• Demand variability in FMCG, beverages, cosmetics, and related end markets
• Product mix shifts reducing contribution margins
• R&D pipeline execution and new product commercialization risk
• Supply chain and logistics disruptions impacting lead times and costs
• Regulatory and compliance risks across multiple jurisdictions

Financial Risks:

• Margin compression evidenced by a 22.4% YoY decline in operating income despite flat sales
• Potential working capital build (inventory and receivables) weighing on OCF, though not disclosed here
• Exposure to interest rate movements, albeit mitigated by strong interest coverage
• FX-driven volatility in ordinary income and below-the-line items
• Capital intensity and asset turnover constraints on ROE

Key Concerns:

• Subdued ROE at 3.69% reflecting thin net margin and low asset turnover
• Operating margin pressure despite stable gross margin, pointing to SG&A or overhead issues
• Lack of disclosed cash flow and D&A data limiting visibility into earnings quality and FCF
• Dividend policy and payout capacity unclear due to undisclosed FCF

Investment Implications

Key Takeaways:

• Topline grew slightly (+0.8% YoY), but operating income fell sharply (-22.4%), highlighting margin compression
• Net income increased (+10.2% YoY) aided by non-operating items and a normalized tax burden
• ROE is modest at 3.69% due to low margin and asset turnover rather than high leverage
• Balance sheet and liquidity are strong (current ratio ~193%, equity ratio ~57%, interest coverage ~17x)
• Cash flow and D&A are undisclosed, constraining assessment of earnings quality and FCF
• Inventory and working capital are material; movements will be pivotal for cash generation
• Sustained improvement likely requires pricing/mix actions and cost control to lift operating margins

Metrics to Watch:

• Operating margin trajectory and SG&A ratio
• Gross margin vs. raw material cost indices
• Asset turnover and inventory days (working capital efficiency)
• Operating cash flow and capex to derive true FCF
• FX impacts on ordinary income and non-operating line
• Interest-bearing debt levels and average funding cost
• Effective tax rate versus guidance
• Price/mix realization and volume growth by segment/region

Relative Positioning: Relative to domestic peers in flavors and fragrances, the company exhibits stronger-than-average balance sheet resilience and liquidity but currently lags on profitability metrics, with subdued ROE and operating margin pressure offset by supportive non-operating contributions.

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