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

Chemipro Kasei (4960) reported FY2026 Q2 standalone results under JGAAP showing a pronounced deceleration in topline and profit with signs of operating deleverage and pressure from non-operating items. Revenue fell 14.1% YoY to ¥4,357 million, while operating income declined 41.7% YoY to ¥104 million, indicating negative operating leverage as fixed costs could not be flexed down commensurately with sales. Gross profit was reported at ¥719 million, implying a gross margin of 16.5%; this is modest for specialty chemicals and vulnerable if raw material or energy costs remain elevated. Ordinary income was a loss of ¥16 million, suggesting that non-operating expenses, including interest expense of ¥35 million and possibly other items, more than offset operating profit. Despite the ordinary loss, net income was a small profit of ¥3 million (EPS ¥0.21), implying the presence of extraordinary gains or other below-ordinary items under JGAAP that offset non-operating losses and taxes. The DuPont bridge points to a very thin net profit margin of 0.07%, subdued asset turnover of 0.35x, and financial leverage of 2.60x, culminating in a very low calculated ROE of 0.06%. Liquidity appears adequate with a current ratio of 134% and quick ratio of 91.6%, underpinned by working capital of ¥2,040 million; however, the quick ratio below 100% indicates reliance on inventory monetization. Inventories of ¥2,544 million (a large share of current assets) present valuation and turnover risks if demand remains soft. Leverage is notable, with a debt-to-equity ratio of 1.78x and an equity base of ¥4,794 million against total liabilities of ¥8,521 million, which constrains financial flexibility. Interest coverage is a thin 3.0x on an operating basis, and with ordinary income negative, coverage is tighter on a comprehensive basis. Cash flow statements were not disclosed (shown as zeros), limiting assessment of earnings quality and free cash flow coverage. Dividend was not paid (DPS ¥0.00), consistent with preserving liquidity amid weak profitability and a leveraged balance sheet. The equity ratio was shown as 0.0% in the dataset but total equity is reported; this suggests the equity ratio metric was not disclosed in XBRL rather than being truly zero. Overall, the profile is of a company navigating a cyclical or mix-driven downturn with constrained profitability, pressured non-operating line items, and adequate but inventory-dependent liquidity. Near-term priorities likely include margin defense, working-capital discipline, and interest burden management. Data limitations—particularly absent cash flow disclosure and share data—warrant caution in interpreting per-share and cash-based metrics.

Profitability Analysis

ROE decomposition indicates weak profitability: Net profit margin 0.07% × Asset turnover 0.35x × Financial leverage 2.60x = ROE ~0.06%. The margin is the main drag, with ordinary income negative due to non-operating burdens, while asset intensity is high for the achieved sales level. Gross margin of 16.5% suggests limited pricing power or elevated input costs; absent reported depreciation, EBITDA metrics are not reliable, and the listed EBITDA of zero should be treated as not disclosed. Operating leverage appears unfavorable: revenue fell 14.1% YoY while operating income fell 41.7% YoY, implying a high drop-through of lost sales to operating profit. Interest expense of ¥35 million compressed ordinary income to a loss, highlighting sensitivity to financing costs. Given the slim operating margin and negative ordinary line, incremental margin improvement will likely require both gross margin expansion (through price/mix or raw material relief) and tighter SG&A control. Extraordinary items likely bridged the gap from ordinary loss to net profit, which is not repeatable by nature under JGAAP and clouds recurring earnings quality.

Growth Assessment

Topline contracted 14.1% YoY, pointing to soft demand, adverse product mix, or pricing pressure. The deterioration in operating income outpaced revenue decline, evidencing negative operating leverage. With gross margin at 16.5% and ordinary income negative, the quality of earnings is weak; net profit of ¥3 million appears supported by non-recurring items under JGAAP. Sustainability of revenue is uncertain given inventory levels and macro exposure of chemical end-markets; absent segment disclosures, breadth of weakness cannot be assessed. For outlook, stabilization hinges on demand recovery in key applications and input cost normalization. Margin recovery would be supported by improved pricing discipline, product mix shift toward higher value-added lines, and cost pass-through. Without disclosed cash flows, it is unclear whether growth is being supported by working-capital expansion or drawdown. Near-term guidance is not provided; prudence assumes continued cautious demand and a focus on preserving profitability over growth.

Financial Health

Liquidity is adequate but inventory-reliant: current ratio 134% and quick ratio 91.6%, with working capital of ¥2,040 million. Inventories are ¥2,544 million, a substantial portion of current assets, posing valuation and turnover risks if demand remains weak. Solvency metrics show leverage pressure: total liabilities ¥8,521 million vs equity ¥4,794 million, implying debt-to-equity 1.78x and financial leverage of 2.60x. Interest coverage is thin at 3.0x based on operating income versus interest expense; ordinary income is negative, indicating overall earnings do not presently cover financing costs when non-operating factors are included. Total assets are ¥12,453 million, with an implied equity ratio not provided in XBRL; reported 0.0% should not be read as actual. Capital structure flexibility is constrained; deleveraging would likely require retained earnings accumulation and working-capital optimization. Short-term liabilities of ¥6,007 million versus current assets of ¥8,048 million indicate manageable near-term liquidity, contingent on inventory conversion.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed (zeros indicate unreported), so OCF/Net Income and FCF cannot be meaningfully assessed. The reported OCF/NI ratio of 0.00 and FCF of 0 should be viewed as undisclosed rather than actual values. Earnings quality is uncertain given the reliance on extraordinary items to offset an ordinary loss. Working capital dynamics are critical: inventories of ¥2,544 million are sizable, and without turnover data we cannot judge whether cash is tied up or being released. With operating income of ¥104 million and interest expense of ¥35 million, internally generated cash flow headroom is likely thin in the absence of working-capital inflows. Capex and depreciation were not disclosed; thus, maintenance investment needs and true FCF conversion are unknown.

Dividend Sustainability

No dividend was paid (DPS ¥0.00), and the payout ratio is 0.0%, consistent with earnings preservation given weak profitability and negative ordinary income. FCF coverage is shown as 0.00x but cash flows are undisclosed, so coverage cannot be assessed. Given leverage (D/E 1.78x), thin interest coverage (3.0x), and earnings volatility, a conservative dividend stance appears aligned with maintaining liquidity. Future dividend capacity will depend on restoring ordinary profitability, stabilizing gross margins, and demonstrating positive, repeatable operating cash flow. No stated policy update is provided; near-term policy likely prioritizes balance sheet resilience over distributions.

Risk Assessment

Business Risks:

• Raw material and energy cost volatility impacting gross margin (16.5% currently)
• Demand cyclicality in end-markets for specialty/industrial chemicals leading to revenue swings (-14.1% YoY)
• Inventory valuation and obsolescence risk given ¥2,544 million inventories
• Pricing power limitations and competitive pressure compressing margins
• Product mix shifts away from higher-margin items
• Supply chain disruptions affecting input availability and costs
• Environmental, safety, and regulatory compliance costs under Japanese and international standards

Financial Risks:

• Leverage with debt-to-equity 1.78x constraining flexibility
• Thin interest coverage (3.0x) and negative ordinary income increasing sensitivity to rate changes
• Reliance on inventory monetization (quick ratio 91.6%) for liquidity
• Potential refinancing risk if credit conditions tighten
• Earnings volatility and dependence on non-recurring items to sustain net profit
• Working capital swings potentially stressing cash generation

Key Concerns:

• Negative ordinary income despite positive operating profit
• Operating deleverage as OI fell 41.7% on a 14.1% revenue decline
• High inventory levels amid declining sales
• Limited visibility on cash flows and capex due to non-disclosure
• Low ROE at 0.06% driven by razor-thin net margin

Investment Implications

Key Takeaways:

• Topline contraction and margin pressure produced negative operating leverage
• Ordinary income turned negative, highlighting non-operating burdens including interest
• Liquidity is adequate but dependent on inventory conversion; quick ratio below 100%
• Leverage is elevated (D/E 1.78x), limiting room for error
• Cash flow disclosure absent; earnings quality and FCF conversion remain unclear
• Dividend suspended, consistent with balance sheet preservation priorities

Metrics to Watch:

• Gross margin trajectory and price/cost spread
• Operating margin and SG&A ratio
• Ordinary income recovery and interest burden
• Inventory turnover days and working-capital intensity
• Operating cash flow and free cash flow once disclosed
• Debt levels, maturity profile, and interest coverage
• Extraordinary items under JGAAP affecting net profit

Relative Positioning: Compared with domestic specialty and fine chemical peers, Chemipro Kasei currently exhibits weaker profitability (thin margins, negative ordinary income), higher financial leverage, and lower earnings visibility due to absent cash flow disclosure, positioning it on the more challenged end of the sector until margins and ordinary profitability improve.

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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