MANDOM CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥41.25B
• Operating Income: ¥2.37B
• Net Income: ¥1.79B
• EPS: ¥36.19

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: A solid rebound in profitability with strong cash generation, but capital efficiency remains weak and comprehensive income was dragged by sizable OCI losses. Revenue rose 5.3% YoY to 412.5, supported by improved operating leverage as operating income jumped 65.4% to 23.7. Gross profit reached 190.1, implying a gross margin of 46.1%. SG&A was 166.4, putting the SG&A-to-sales ratio at 40.3%, down meaningfully vs last year (implied) and enabling margin expansion. Operating margin improved to 5.75%, up roughly 210 bps YoY based on implied prior-period levels. Ordinary income increased 37.8% YoY to 28.7, aided by 5.44 in non-operating income (notably 2.26 of interest income), equivalent to a 1.32% non-operating margin. Net income rose 4.5% YoY to 16.3, for a net margin of about 4.0%; given revenue growth outpaced net profit growth, net margin compressed slightly by an estimated 3 bps YoY. Cash generation outperformed earnings: operating cash flow was 36.4, 2.23x net income, signaling high earnings quality. The balance sheet is exceptionally conservative with current ratio at 421%, quick ratio at 333%, and interest coverage at 158x, indicating negligible liquidity or solvency risk. However, ROE is just 2.1% and ROIC at 3.7% sits below the 5% warning line, highlighting continued capital efficiency challenges. Total comprehensive income was only 2.6 versus net income of 16.3, reflecting significant negative OCI (likely FX translation and/or valuation losses) that partially offsets bottom-line progress at the equity level. Inventory stands at 125 and receivables at 113, indicating working capital intensity remains high. The calculated payout ratio of 118% suggests dividend pressure if such payout persists, although strong OCF currently provides a buffer. Non-operating income (mainly interest income) boosted ordinary profit, but this is less controllable and may normalize if interest rates or cash balances change. Forward-looking, sustained operating margin improvement and better asset turnover are needed to lift ROE/ROIC to acceptable levels. Overall, Q2 shows tangible operational recovery and robust cash generation, but structural efficiency and OCI volatility are key watch points for the rest of the year.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.1% = Net Profit Margin (4.0%) × Asset Turnover (0.429) × Financial Leverage (1.26x). The largest driver of YoY change appears to be margin dynamics at the operating level (OI +65.4% vs revenue +5.3%), while financial leverage remained low and stable. Operating margin rose to 5.75% (OI 23.71 / Sales 412.51), from an implied ~3.65% last year, as gross margin of 46.1% coupled with a lower SG&A ratio (40.3%) delivered strong operating leverage. Business reasons likely include mix/pricing discipline and SG&A control after prior-year cost inflation and overseas restructuring, plus incremental non-operating interest income from large cash holdings. Sustainability assessment: improved operating margin appears partially sustainable if cost control and pricing hold; however, the small dip in net margin (estimated -3 bps) indicates below-the-line pressures (tax/OCI/other) could cap ROE improvements. Asset turnover at 0.429 remains low for a consumer company, constrained by high cash, inventory (124.96), and investment securities (81.51); asset intensity is a structural drag on ROE. Concerning trend flags: ROIC at 3.7% (<5% threshold) indicates returns below a reasonable cost of capital; also, comprehensive income weakness versus net income underscores FX/valuation sensitivity that does not contribute to ROE improvement.

Growth Assessment

Top-line grew 5.3% YoY to 412.5, a modest but broad-based recovery. Operating income surged 65.4% to 23.7, evidencing significant positive operating leverage as the SG&A ratio fell to 40.3%. Ordinary income rose 37.8% to 28.7, aided by 5.44 of non-operating income (notably 2.26 interest income), which may not be a durable growth driver. Net income increased 4.5% to 16.3, lagging operating profit growth due to a combination of non-recurring items, tax rate dynamics (effective 27%), and the absence of further below-the-line tailwinds. EBITDA was 42.5 (10.3% margin), indicating improved operating efficiency but still mid-single digit EBIT margins. Given inventories (125) and receivables (113) remain elevated relative to H1 COGS/sales, any further growth will require careful working capital management to avoid cash drag. Outlook: momentum in operating margin can continue if product mix upgrades and disciplined promotional spend persist, but the growth algorithm still relies on unlocking asset efficiency to translate into higher ROE/ROIC. External factors—FX (yen weakness on imported inputs) and raw material/packaging costs—remain swing factors for gross margin. Overall revenue growth appears sustainable at a modest pace, but profit quality will hinge on continuing SG&A efficiency and limiting reliance on non-operating income.

Financial Health

Liquidity is very strong: current ratio 420.8% and quick ratio 332.8% far exceed benchmarks; no warning on Current Ratio < 1.0. Solvency is conservative with D/E of 0.26x and interest coverage at 158x; D/E is well below the 2.0 warning threshold. Cash and deposits total 298.3, covering over 2x current liabilities (141.9), minimizing near-term refinancing risk. Maturity mismatch risk is low: current assets (597.3) comfortably exceed current liabilities (141.9); short-term loans are minimal at 0.89. Off-balance sheet obligations are not disclosed in the provided data; no explicit guarantees/commitments are available here. Equity base is large at 760.3, with owners' equity 696.5, producing low financial leverage (assets/equity 1.26x). The sizable negative OCI (comprehensive income 2.63 vs net income 16.33) could depress equity if it persists, but current capitalization provides cushion.

Cash Flow Quality

OCF of 36.37 is 2.23x net income, indicating high-quality earnings with cash conversion well above the >1.0 benchmark. With capex of 6.89, a proxy FCF (OCF - Capex) is approximately 29.5, suggesting ample internal funding capacity; full investing CF is unreported, so this excludes other investing flows. Working capital details are limited, but strong OCF alongside elevated inventories and receivables suggests either healthy collections or some inventory normalization; no clear signs of aggressive working capital release are evident from the summary. Interest paid is minimal (0.15), so cash outflows for financing costs are de minimis. Financing CF was -10.29, likely reflecting dividends and/or share-related outflows (details unreported). Overall, cash flow quality is robust this quarter, comfortably covering capex and offering room for shareholder returns or balance sheet reinforcement.

Dividend Sustainability

The calculated payout ratio is 118.2%, which is above the <60% sustainability benchmark and suggests risk if maintained; however, DPS and total dividend paid are unreported in this dataset. On a cash basis, proxy FCF of ~29.5 exceeds net income of 16.3, implying capacity to fund dividends and capex concurrently in this period. The large cash balance (298.3) provides additional flexibility to bridge short-term payout pressure, but sustained payouts above earnings would erode balance sheet optionality over time. Policy outlook cannot be inferred from disclosures here; monitor company guidance and any stated dividend policy (e.g., payout ratio or DOE targets) in upcoming materials.

Risk Assessment

Business Risks:

• Input cost inflation for fragrances, surfactants, and packaging materials impacting gross margin
• Demand volatility in key ASEAN markets where the company has strong exposure
• Brand and product cycle risk in men's grooming and cosmetics leading to potential inventory obsolescence
• Reliance on promotional intensity and channel mix that can pressure SG&A efficiency

Financial Risks:

• Low ROIC at 3.7% (<5%) indicating structural capital efficiency shortfall
• Negative OCI reducing comprehensive income (FX translation and/or securities valuation), adding equity volatility
• Working capital intensity with inventories (124.96) and receivables (112.55) tying up cash
• Dividend payout above earnings (118% calculated) could become unsustainable if earnings soften

Key Concerns:

• Sustainability of operating margin gains after a sharp YoY improvement
• Dependence on non-operating interest income (2.26) to lift ordinary income
• Asset turnover at 0.429 remains low, constraining ROE (2.1%)
• Data gaps on investing CF and DPS obscure full cash return capacity assessment

Investment Implications

Key Takeaways:

• Profit recovery is real: operating margin expanded to 5.75% (≈+210 bps YoY) on 5.3% sales growth
• Cash flow quality is strong with OCF/NI at 2.23x and proxy FCF ~29.5
• Capital efficiency remains the main overhang: ROE 2.1% and ROIC 3.7%
• Balance sheet is fortress-like with net cash and 333% quick ratio
• Comprehensive income weakness signals FX/valuation headwinds outside the P&L

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio
• Gross margin resilience amid input cost and FX moves
• Inventory and receivable turnover to lift asset turnover above 0.5x
• ROIC progression toward >5% near-term and >7% medium-term
• OCI drivers (FX translation, securities valuation) and their equity impact
• Dividend disclosures (DPS, DOE) vs cash generation

Relative Positioning: Within Japan-listed cosmetics/consumer peers, profitability and ROIC remain below leaders, but balance sheet strength and improved operating leverage provide downside protection; upside depends on sustained margin gains and better asset efficiency rather than financial 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