CHEMIPRO KASEI KAISHA,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.36B
• Operating Income: ¥104M
• Net Income: ¥3M
• EPS: ¥0.21

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

Verdict: Soft quarter with revenue contraction, margin compression, and earnings weighed down by sizable non-operating losses, leading to a near-breakeven bottom line. Revenue fell 14.1% YoY to 43.57, while operating income declined 41.7% YoY to 1.04, implying weaker operating leverage. Gross profit was 7.19, yielding a gross margin of 16.5%; operating margin was approximately 2.4%. Ordinary income deteriorated to a loss of -0.16 due to non-operating expenses of 1.48 far exceeding non-operating income of 0.16. Despite a positive operating result, profit before tax was 0.48, implying the presence of extraordinary items offsetting the ordinary loss (extraordinary gain/loss breakdown unreported). Net income landed at 0.03, down 91.2% YoY, resulting in a razor-thin net margin of roughly 0.1%. Operating margin compressed by an estimated 112 bps YoY (from ~3.5% to ~2.4%) as revenue contraction and cost pressures outweighed SG&A control. Interest expense of 0.35 drove an interest coverage ratio of 2.96x, highlighting thinner headroom against financing costs. Balance sheet liquidity is mixed: current ratio of 134% is adequate but the quick ratio at 91.6% sits below the 100% comfort threshold. Leverage is elevated with a D/E of 1.78x and short-term loans of 25.50, increasing refinancing sensitivity. ROIC is 1.2%, well below a 5% warning threshold, indicating weak capital efficiency. Cash flow data are unreported, preventing a quality check of earnings conversion (OCF/NI) and FCF coverage for dividends or capex. The reported payout ratio of 1,939% is mechanically distorted by the very low net income and cannot be used to judge dividend policy this quarter. Inventory at 25.44 against H1 sales looks elevated, suggesting potential working capital drag if demand softness persists. Forward-looking, normalization of non-operating and extraordinary items is essential for earnings stability, while restoring operating margin toward historical levels and improving ROIC are critical to re-rate fundamentals.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (~0.1%) × Asset Turnover (0.350x) × Financial Leverage (2.60x) ≈ ROE of ~0.1%. The largest driver of deterioration is Net Profit Margin, given the plunge in net income to 0.03 amid non-operating losses and likely extraordinary item swings. Asset turnover at 0.35 reflects lower sales on a relatively fixed asset base, contributing negatively versus last year’s higher revenue run-rate. Financial leverage at 2.60x remains high and provides only limited ROE support when profitability is near zero. Business reason: revenue declined 14.1% YoY, while non-operating expenses (1.48) including interest (0.35) and other items (likely FX/valuation) erased operating gains, moving ordinary income to a loss. Sustainability: margin pressure from revenue headwinds and financing costs could persist near term; the implied extraordinary gains/losses that bridge ordinary loss to positive PBT appear one-off and not a reliable profit source. Concerning trends: operating income fell faster than revenue, indicating adverse operating leverage; interest coverage at 2.96x is thin; non-operating loss intensity is elevated; ROIC at 1.2% signals structurally weak returns.

Growth Assessment

Revenue declined 14.1% YoY to 43.57, indicating demand softness or pricing pressure in key product lines. Operating income fell 41.7% YoY to 1.04, showing negative operating leverage as fixed costs and/or gross margin pressures outweighed SG&A containment. Gross margin of 16.5% suggests limited pricing power or higher input costs; no YoY gross margin disclosed to confirm mix effects. The estimated operating margin compressed from ~3.5% to ~2.4% YoY (-112 bps), with the gap to ordinary income turning negative due to non-operating losses. Profit quality is weak: ordinary loss (−0.16) and reliance on extraordinary items to reach PBT (0.48) undermine recurring earnings visibility. Without OCF data, sustainability of any recovery is uncertain; inventory appears high relative to H1 sales, which could cap near-term growth if de-stocking is needed. Outlook hinges on demand normalization and reducing non-operating drag (interest/FX/valuation). Near-term growth catalysts are limited in the disclosed data; stabilizing volumes, improving mix, and cost pass-through are needed to restore operating margins.

Financial Health

Liquidity: current ratio 134% (adequate) but quick ratio 91.6% (below 100%) indicates reliance on inventories to meet short-term obligations. Solvency: D/E 1.78x is elevated (above the 1.5x conservative benchmark) but below the 2.0x warning threshold; monitor leverage trend. Maturity profile: short-term loans of 25.50 are substantial relative to cash of 21.49, creating refinancing/liquidity sensitivity despite total current assets of 80.48 versus current liabilities of 60.07. Interest coverage at 2.96x is thin, leaving limited cushion if operating income weakens further or rates rise. Total assets 124.53 and equity 47.94 imply financial leverage of 2.60x. No off-balance sheet obligations disclosed; data limitations prevent assessment of guarantees or contingent liabilities.

Cash Flow Quality

Operating cash flow, capex, and free cash flow are unreported, so OCF/NI and FCF coverage cannot be assessed. Given net income of 0.03 and ordinary loss, earnings quality appears weak and likely vulnerable to non-cash and non-recurring items (FX, valuation, extraordinary). Working capital: inventories at 25.44 versus H1 revenue of 43.57 may signal potential cash tie-up if turnover slows, though actual days-on-hand cannot be computed without COGS timing detail and cash flow data. No signs of deliberate working capital pull-forward or deferral can be confirmed due to missing cash flow statements. Overall, cash conversion and FCF sustainability remain unclear this quarter.

Dividend Sustainability

Dividend data are largely unreported; the calculated payout ratio of 1,939.4% is distorted by very low net income and should not be interpreted as policy. With OCF/FCF unreported and ROIC at 1.2%, near-term coverage of dividends from organic cash generation is uncertain. Leverage (D/E 1.78x) and modest interest coverage (2.96x) constrain flexibility if profits remain depressed. Until recurring earnings (ordinary income) turn positive and operating cash flow visibility improves, dividend sustainability cannot be robustly assessed. Policy outlook is indeterminate from disclosed data.

Risk Assessment

Business Risks:

• Demand softness and/or pricing pressure evidenced by -14.1% YoY revenue decline
• Margin compression with operating margin down ~112 bps YoY
• Elevated inventories relative to H1 sales, risking de-stocking and discounting
• Dependence on extraordinary items to lift PBT despite an ordinary loss

Financial Risks:

• Interest coverage of 2.96x leaves limited buffer against rate or earnings shocks
• Elevated leverage (D/E 1.78x) and sizable short-term loans (25.50) increase refinancing risk
• Non-operating losses (1.48) beyond interest expense suggest FX/valuation volatility
• ROIC at 1.2% (<5%) indicates weak capital efficiency and potential value erosion

Key Concerns:

• Ordinary loss (-0.16) despite positive operating income points to recurring financial/non-operating drag
• Net income (0.03) far below PBT minus tax implies additional items not detailed in disclosures
• Liquidity quality mixed: quick ratio below 1.0 and short-term debt near cash balance

Investment Implications

Key Takeaways:

• Core operations weakened: revenue -14.1% YoY, operating income -41.7% YoY, operating margin ~2.4%
• Ordinary loss driven by sizable non-operating expenses; earnings reliant on extraordinary items
• ROIC 1.2% highlights sub-par returns and pressure on capital efficiency
• Liquidity acceptable on a current basis, but quick ratio <1.0 and heavy short-term debt elevate risk
• Interest coverage of 2.96x underscores sensitivity to further profit compression

Metrics to Watch:

• Operating margin recovery toward >3.0%
• Ordinary income normalization and reduction of non-operating losses
• Inventory levels and turnover versus sales trajectory
• Short-term loan dependence and refinancing profile
• ROIC trend toward >5% as a minimum and ideally >7%
• Interest coverage moving sustainably above 5x

Relative Positioning: Within Japanese specialty chemicals, the company currently sits in the lower quartile on profitability and capital efficiency, with higher-than-ideal leverage and weaker earnings quality due to non-operating volatility.

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