S.T.CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥24.16B
• Operating Income: ¥1.84B
• Net Income: ¥2.15B
• EPS: ¥64.18

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

Esté Co., Ltd. (TSE: 4951) delivered stable topline but significantly improved operating profitability in FY2026 Q2 under JGAAP (consolidated). Revenue was flat year over year at ¥24.16bn, yet operating income rose 49% YoY to ¥1.84bn, lifting the operating margin to approximately 7.6%. Ordinary income of ¥1.99bn exceeded operating income, indicating positive net non-operating contributions despite minimal interest expense (¥10m) and very strong interest coverage (184x). However, net income declined 34.4% YoY to ¥1.34bn (EPS ¥64.18), implying adverse below-ordinary items or prior-year one-offs that are not disclosed here. Gross profit of ¥9.48bn yielded a solid gross margin of about 39.2%, evidencing decent pricing/COGS discipline in a flat demand environment. EBITDA was ¥2.51bn, with a 10.4% margin, highlighting improved operating leverage and cost control. The DuPont breakdown shows a net margin of 5.54%, asset turnover of 0.507x, and financial leverage of 1.38x, combining to an ROE of 3.88%, which is modest for a consumer products company. Balance sheet strength is notable: total assets ¥47.63bn, equity ¥34.49bn (equity ratio we estimate at roughly 72%), and total liabilities ¥12.61bn, supporting a low leverage profile (liabilities-to-equity ~0.37x). Liquidity is robust with a current ratio of 226.7% and a quick ratio of 175.0%, alongside sizeable working capital of ¥13.85bn. Despite stronger operating profit, operating cash flow was negative at -¥0.78bn, resulting in an OCF/Net Income ratio of -0.58, suggesting working capital absorption during the period. Investing cash flow and cash balance were not disclosed in the provided XBRL snapshot, limiting full free cash flow assessment. Financing cash flow was -¥0.51bn, consistent with shareholder returns or debt reduction, though dividend specifics were not reported here. The effective tax burden inferred from reported tax expense is approximately 26%, despite an indicated metric of 0.0% (likely undisclosed). Overall, the company shows improved operating performance, strong liquidity and solvency, but weaker cash conversion in the half. The decline in net income YoY likely reflects non-recurring items below ordinary income or changes in minority interests that are not detailed. Outlook hinges on sustaining margin gains, normalizing working capital, and the absence of negative extraordinary items. Data limitations (notably cash and investing flows, share count, and dividends) constrain certain ratio verifications and capital allocation analysis.

Profitability Analysis

ROE of 3.88% decomposes into a 5.54% net margin, 0.507x asset turnover, and 1.38x financial leverage. Operating margin improved to approximately 7.6% (¥1.84bn operating income on ¥24.16bn sales), up materially YoY despite flat revenue, indicating meaningful operating leverage from cost control and/or mix improvement. Gross margin of 39.2% (¥9.48bn/¥24.16bn) signals solid price-cost dynamics; combined with a 10.4% EBITDA margin, the cost base appears well managed. Ordinary income margin of about 8.25% (¥1.99bn/¥24.16bn) suggests net positive non-operating items (e.g., FX gains, investment income), given negligible interest expense. Net margin at 5.54% trails ordinary margin, implying negative extraordinary items or other below-ordinary factors this period relative to last year, consistent with the YoY decline in net income. Interest coverage is very strong at 184x (operating income/interest expense), reflecting minimal financial risk from debt service. Overall profitability quality is supported by expanded operating margins but tempered by modest ROE due to conservative leverage and flat asset turnover.

Growth Assessment

Revenue was flat YoY at ¥24.16bn, indicating stable demand but limited topline momentum in the period. Operating income grew 49% YoY, demonstrating strong incremental margins and operating leverage despite stagnant sales. Ordinary income exceeded operating income, suggesting a helpful non-operating environment; however, net income dropped 34.4% YoY to ¥1.34bn, pointing to below-ordinary headwinds or the absence of prior-year gains. EBITDA of ¥2.51bn and margin of 10.4% underscore efficiency gains. Sustainability of profit growth will depend on maintaining gross margin discipline and controlling SG&A amid flat volumes. The negative operating cash flow indicates working capital investment that, if temporary (e.g., inventory build or receivables timing), may unwind; if structural, it could cap future growth conversion to cash. With leverage low and liquidity strong, the company has capacity to invest; however, investing CF was not disclosed, limiting visibility into capex or M&A-driven growth. Near-term outlook is for steady revenue with margin resilience, contingent on cost management and normalization of working capital.

Financial Health

Balance sheet strength is high: total assets ¥47.63bn and total equity ¥34.49bn imply an estimated equity ratio near 72% (equity/assets), notwithstanding the undisclosed metric shown as 0.0%. Total liabilities of ¥12.61bn yield a liabilities-to-equity ratio of roughly 0.37x, indicating conservative leverage. Liquidity is robust: current assets ¥24.78bn versus current liabilities ¥10.93bn produce a current ratio of 226.7%, and a quick ratio of 175.0% after excluding inventories of ¥5.65bn. Working capital stands at ¥13.85bn, offering ample buffer for seasonality and inventory cycles. Interest expense is minimal at ¥10m, aligning with very strong interest coverage and low financial risk. The solvency profile supports continued operations and selective investment without near-term balance sheet strain.

Cash Flow Quality

Despite higher operating profit, operating cash flow was negative at -¥0.78bn, resulting in an OCF/Net Income ratio of -0.58, which indicates weak cash conversion this half, likely due to working capital outflows (e.g., inventory or receivable build). EBITDA of ¥2.51bn contrasts with negative OCF, reinforcing the view that non-cash earnings quality is acceptable but cash realization was timing-affected. Investing cash flow was not disclosed, preventing assessment of capex intensity and true free cash flow; likewise, cash and equivalents were not reported here. Using available data, free cash flow cannot be reliably computed; the displayed FCF of 0 should be treated as undisclosed, not zero. Sustained negative OCF would be a concern if it persists; however, given the considerable working capital base and seasonality typical in consumer products, a reversion is plausible in subsequent periods. Monitoring working capital turnover (inventories and receivables) is key to judging cash flow quality.

Dividend Sustainability

Dividend data (annual DPS, payout ratio, FCF coverage) were not disclosed in this dataset, so period-specific dividend sustainability cannot be quantified. With net income of ¥1.34bn and strong liquidity, earnings capacity would generally support some level of payout; however, negative operating cash flow this half implies weak near-term cash coverage. Financing cash outflow of -¥0.51bn could reflect shareholder returns or debt repayment, but the split is unknown. Absent disclosed DPS and cash balances, we cannot calculate payout or FCF coverage ratios reliably. Policy outlook will hinge on management’s stance toward stable dividends versus reinvestment needs and the normalization of working capital cash flows.

Risk Assessment

Business Risks:

• Flat revenue growth suggests demand elasticity or competitive pricing pressure in core categories
• Margin improvement may face input cost volatility (raw materials, logistics, FX) and promotional intensity
• Potential reliance on non-operating gains to support ordinary income in some periods
• Inventory and receivables management risks affecting cash conversion
• Exposure to domestic consumption trends and channel mix shifts

Financial Risks:

• Negative operating cash flow in the period increases reliance on working capital normalization
• Potential extraordinary losses or absence of prior-year gains impacting bottom line volatility
• Limited disclosure on investing cash flows and cash balances constrains visibility on liquidity runway
• Tax rate variability (inferred ~26%) could swing net income absent hedges or structural planning

Key Concerns:

• OCF/Net Income of -0.58 highlights weak cash conversion this half
• Net income down 34.4% YoY despite a 49% YoY operating income increase indicates below-ordinary headwinds
• Sustainability of 7.6% operating margin with flat sales remains to be demonstrated

Investment Implications

Key Takeaways:

• Operating margin expanded to ~7.6% on flat sales, evidencing strong cost control
• ROE at 3.88% is modest due to low leverage and average asset turnover
• Liquidity and solvency are strong (current ratio 227%, estimated equity ratio ~72%)
• Cash conversion was weak (OCF -¥0.78bn; OCF/NI -0.58), likely from working capital build
• Net income decline YoY suggests below-ordinary pressure or one-off effects
• Interest burden is negligible (184x coverage), limiting financial risk

Metrics to Watch:

• Working capital turns: inventory and receivables days, and OCF rebound in H2
• Gross and operating margins sustainability amid input cost and FX changes
• Extraordinary items and tax rate drivers affecting the bridge from ordinary to net income
• Capex and investing cash flows once disclosed to gauge true FCF
• Revenue trajectory in core categories and any price/mix actions

Relative Positioning: Within Japanese household/consumer products peers, Esté appears conservatively financed with superior liquidity, improving operating margins, but currently exhibits weaker cash conversion and modest ROE relative to best-in-class operators.

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