C.Uyemura & Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥41.70B
• Operating Income: ¥9.57B
• Net Income: ¥6.86B
• EPS: ¥425.10

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 Q2 with modest top-line growth, operating margin expansion, and healthy cash generation; ordinary income dipped YoY due to non-operating swings, but core operations remain strong. Revenue grew 2.3% YoY to 417.0, while operating income rose 4.9% YoY to 95.8, outpacing sales growth. Gross profit was 166.0, implying a robust gross margin of 39.8%. Operating margin improved to roughly 23.0%, up about 55 bps YoY by our estimate. Ordinary income declined 1.7% YoY to 96.4, implying an ordinary margin compression of about 96 bps YoY, likely reflecting less favorable non-operating items versus the prior year. Net income increased 2.0% YoY to 68.6, with net margin at 16.4%. Non-operating income (4.27) and expenses (3.60) netted to a small positive 0.67, but this was weaker versus the prior-year non-operating tailwind implied by the ordinary income decline. Cash generation was solid: operating cash flow of 62.9 equates to 0.92x of net income, slightly below 1.0 but above the 0.8 quality threshold. The balance sheet is exceptionally strong with cash and deposits of 515.3 and a current ratio of 518%, eliminating near-term liquidity risk. Leverage remains minimal; interest coverage is an extraordinary 798x. ROE stands at 6.4%, muted by low financial leverage and large cash holdings, while reported ROIC of 12.1% indicates strong underlying capital efficiency in the operating business. SG&A was 70.3 (16.9% of sales), consistent with disciplined overhead relative to sales growth. Financing cash outflows of -47.3 suggest sizable shareholder returns (dividends and/or buybacks) that appear covered by OCF this period. The implied payout ratio is high at 73.9%, which is sustainable near term given cash reserves but stretches the long-term cushion if capex or M&A needs rise. Forward-looking, the company is well-positioned to fund growth and shareholder returns from internal cash, though non-operating volatility and any normalization of cash conversion should be monitored.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (16.4%) × Asset Turnover (0.319) × Financial Leverage (1.22x) = ROE of 6.4% (matches reported). The flattest component is financial leverage (very low at 1.22x), while the most impactful component this quarter was margin performance (net margin 16.4% with operating margin ~23.0%). Operating margin expanded by ~55 bps YoY as operating income grew faster than sales, suggesting positive mix and/or SG&A discipline; however, ordinary margin compressed by ~96 bps due to less favorable non-operating items versus last year. Asset turnover remains structurally low (0.319) due to a large cash balance and conservative balance sheet, which depresses ROE despite strong operating profitability. Business reason: high cash and deposits (515.3) and investment securities (174.8) create a sizable asset base relative to sales; at the same time, core operations demonstrate strong margins from specialty chemistry/process solutions. Sustainability: operating margin resilience appears sustainable near term given scale and cost control; non-operating outcomes are inherently volatile and may normalize. Watchpoints: SG&A of 16.9% of sales looks controlled; no evidence SG&A growth exceeded revenue growth this quarter. Overall, ROE could improve via better asset turnover (deploying excess cash) rather than additional leverage, given already robust operating margins.

Growth Assessment

Top-line growth of 2.3% YoY to 417.0 indicates steady demand. Operating income grew 4.9% YoY to 95.8, evidencing operating leverage and/or favorable mix. Ordinary income fell 1.7% YoY, implying non-operating normalization versus a stronger prior-year backdrop. Net income rose 2.0% YoY to 68.6; effective tax rate was 28.8%, in line with domestic norms. Gross margin of 39.8% and EBITDA margin of 25.8% underscore sustained pricing power and cost efficiency. Non-operating income of 4.27 (driven largely by interest income of 2.25 and dividends of 0.93) was offset by non-operating expenses of 3.60, leaving a small net contribution; year-over-year non-op volatility remains a swing factor for ordinary profit. The reported ROIC of 12.1% points to healthy investment returns versus typical 7–8% targets in industrials, supporting the quality of growth. Near-term outlook appears stable given cash-backed balance sheet and solid OCF; key to sustaining growth will be continued price/mix management and end-market demand in key applications. With large liquidity, the company has capacity for strategic investment or incremental shareholder return without jeopardizing resilience.

Financial Health

Liquidity is exceptionally strong: current ratio 518% and quick ratio 494%. No warning on current ratio (<1.0) or leverage (D/E > 2.0); reported D/E is a conservative 0.22x. Cash and deposits of 515.3 cover current liabilities (167.4) by roughly 3.1x, eliminating maturity mismatch risk; short-term loans are minimal at 3.5. Total liabilities are only 232.2 against equity of 1,075.7, yielding a comfortable capital structure. Interest coverage is 797.9x, reflecting negligible financial risk. We do not see evidence of off-balance sheet obligations in the provided data. Investment securities are material at 174.8, which adds market risk but also liquidity. Overall solvency and liquidity positions are best-in-class for an industrial chemical company.

Cash Flow Quality

OCF/Net Income is 0.92x, above the 0.8 threshold—no immediate quality concern, though slightly below 1.0 suggests modest working capital build or timing effects. Operating CF of 62.9 largely covers financing outflows of 47.3 (dividends/buybacks), leaving a small surplus; investing CF and capex were unreported, limiting a full FCF assessment. With depreciation of 11.64 and EBITDA of 107.39, cash earnings capacity is strong relative to net income. We do not see signs of aggressive working capital manipulation in the limited data (inventories and receivables appear modest relative to sales and cash); however, the absence of a detailed cash flow breakdown constrains deeper diagnostics. Near-term, cash reserves provide a substantial buffer to support shareholder returns and reinvestment even if OCF fluctuates.

Dividend Sustainability

The calculated payout ratio of 73.9% appears elevated versus a typical <60% benchmark; actual DPS and total dividends were unreported, making this an approximation. Financing CF of -47.3 likely reflects dividends and/or buybacks; this is covered by OCF of 62.9 this period, implying short-term affordability. Massive cash holdings (515.3) further underpin near-term sustainability. Medium-term sustainability hinges on capex/M&A needs (unreported) and maintaining OCF at or above current levels. Given ROIC of 12.1%, reinvestment opportunities may compete with distributions; maintaining a payout near 70–75% could constrain flexibility if growth investments rise. Policy outlook: without disclosed guidance, we assume a stable-to-cautious stance; the balance sheet supports continued returns, but a prudent payout closer to cash earnings and capex visibility would be preferable for long-term balance.

Risk Assessment

Business Risks:

• End-market cyclicality in key applications (e.g., electronics, automotive plating, industrial components) potentially affecting volume and mix
• Raw material price volatility impacting gross margin if pass-through lags
• Customer concentration risk typical for specialty chemicals/process suppliers
• Regulatory and environmental compliance costs in chemicals/surface treatment
• Supply chain disruptions affecting inputs and delivery schedules

Financial Risks:

• Non-operating volatility (FX, market-related gains/losses on securities) impacting ordinary income
• Market risk on investment securities holdings (174.8)
• Potential dilution of ROE from persistent excess cash if not redeployed
• Interest rate shifts reducing interest income on large cash balances

Key Concerns:

• Ordinary income down 1.7% YoY despite higher operating income, signaling less favorable non-operating contributions
• High implied payout ratio (~74%) relative to benchmark may limit reinvestment flexibility if capex needs increase
• OCF slightly below net income (0.92x); acceptable but worth monitoring if it trends lower
• Limited disclosure on investing cash flows and capex impedes assessment of long-term FCF coverage

Investment Implications

Key Takeaways:

• Core operations healthy: operating income +4.9% on revenue +2.3%, with ~55 bps operating margin expansion
• Ordinary income -1.7% YoY due to weaker non-operating contribution versus prior year
• Exceptional balance sheet strength: current ratio 518%, interest coverage ~798x, minimal debt
• ROE 6.4% held back by low leverage and large cash; underlying ROIC strong at 12.1%
• Cash generation solid (OCF/NI 0.92x), financing outflows of 47.3 covered by OCF
• Implied payout looks high (~74%); near-term affordable, longer-term depends on capex and growth pipeline

Metrics to Watch:

• Operating margin trend versus SG&A ratio and gross margin
• Ordinary income bridge (FX, interest income, securities-related items)
• OCF/Net income ratio and working capital movements (AR and inventory days)
• Capex level and investing CF once disclosed; ROIC by project/segment
• Cash deployment plans (M&A, capex, buybacks/dividends) and payout policy
• End-market indicators in electronics/auto plating and raw material pass-through
• FX sensitivity (USD/JPY, EUR/JPY) given non-op income components

Relative Positioning: Relative to Japanese specialty chemical/process peers, the company exhibits superior balance sheet strength, top-tier operating margins, and strong ROIC, but a mid-tier ROE due to excess cash and low leverage; earnings volatility on the non-operating line introduces some noise to ordinary income comparisons.

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