TAKARA BIO INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥18.79B
• Operating Income: ¥-2.34B
• Net Income: ¥-6.89B
• EPS: ¥-57.40

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

Verdict: FY2026 Q2 was weak with deep losses at every profit line, partially offset by solid liquidity and positive operating cash flow. Revenue fell 4.9% YoY to 187.94, while gross profit of 105.64 implies a still-high gross margin of 56.2%, but operating income deteriorated to -23.42 and ordinary income to -24.85. Net income landed at -69.11 (EPS -57.40 yen), and total comprehensive income was -110.83, highlighting additional OCI headwinds. Operating margin was approximately -12.5% and net margin -36.8%, both firmly in loss territory. Directionally, margins compressed YoY given revenue contraction and larger losses; precise bps changes cannot be computed due to missing prior-period margin data. Below the line, profit before tax of -63.23 versus ordinary income of -24.85 suggests sizable special losses or one-off charges (~-38.4) in the quarter-to-date. Despite accounting losses, operating cash flow was positive at 30.44, aided by non-cash D&A of 20.74 and working capital movements, though OCF/NI is -0.44x, triggering an earnings quality flag. Liquidity is ample with a current ratio of 550% and quick ratio of 462%, underpinned by cash and deposits of 210.41. Leverage is modest (D/E 0.28x) with 100.00 of long-term loans and total liabilities of 292.04 against equity of 1,026.49. Asset efficiency remains weak (asset turnover 0.143), and ROE is negative at -6.7% on a DuPont basis with ROIC at -2.6%. Intangibles are sizable (goodwill 121.24 and other intangibles 239.23), elevating future impairment risk amid ongoing losses. Interest coverage is deeply negative (-9.64x) on EBITDA, underscoring earnings weakness despite low absolute debt. Dividends are unreported; given losses and OCF uncertainty, visibility on shareholder returns is low near term. Forward-looking, recovery hinges on restoring operating leverage through revenue re-acceleration and SG&A control, and avoiding further one-off losses. With robust cash and low leverage, the company has time to execute, but ROIC must lift above the 5% threshold to clear capital efficiency concerns.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (-36.8%) × Asset Turnover (0.143) × Financial Leverage (1.28x) = ROE (-6.7%). The largest negative driver is the net profit margin, reflecting operating losses and significant below-the-line charges (profit before tax -63.23 vs ordinary -24.85). Asset turnover is structurally low, consistent with a capital-intensive biotech tools/biologics platform with large intangible assets. Financial leverage is modest (1.28x), contributing little to ROE movement. Business drivers: revenue fell 4.9% YoY while SG&A remained elevated at 129.07, overwhelming gross profit despite a solid 56.2% gross margin, indicating negative operating leverage. The step-down from ordinary income to PBT indicates one-time or non-recurring costs (e.g., impairment, restructuring, litigation, or valuation losses), worsening bottom-line margin. Sustainability: gross margin looks defensible given mix, but the current operating loss is not sustainable; margin recovery depends on revenue growth and SG&A discipline. Watch for SG&A growth vs revenue growth—current SG&A (129.07) exceeds gross profit run-rate sensitivity. Overall, margin pressure and low asset turnover drive the weak ROE; leverage remains a minor factor.

Growth Assessment

Top line declined 4.9% YoY to 187.94, suggesting demand softness or normalization in certain product lines. Operating income fell to -23.42 (-70.4% YoY per disclosure), implying negative operating leverage as SG&A did not fall in tandem with revenue. Ordinary income deteriorated to -24.85 (-65.6% YoY) and net income to -69.11 (-52.7% YoY), indicating worsening profitability including non-operating/extraordinary factors. With EBITDA at -2.68 and D&A at 20.74, the cash earnings base is thin. Without segment detail or order/backlog data, revenue sustainability is uncertain; recovery will likely require new product launches, improved utilization, and stabilization in any post-pandemic normalization areas. Near-term outlook: focus on cost containment and mix improvement to rebuild operating margin. Medium term: restoring ROIC above 5% is essential; current -2.6% indicates value dilution.

Financial Health

Liquidity is very strong: current assets 439.86 vs current liabilities 79.96 yields a current ratio of 550.1% and a quick ratio of 461.6%. No warning on current ratio (<1.0) or D/E (>2.0); actual D/E is 0.28x. Cash and deposits of 210.41 cover 2.6x current liabilities, implying low near-term refinancing risk. Maturity profile: long-term loans are 100.00; short-term borrowings are unreported. Working capital is ample at 359.90, and accounts payable are low at 9.42, reducing supplier pressure. Equity is robust at 1,026.49 with owners' equity 1,023.78, supporting solvency. However, intangibles are large (goodwill 121.24, other intangibles 239.23), concentrating impairment risk if profitability does not improve. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF was positive at 30.44 despite a net loss of -69.11, driven by non-cash D&A (20.74) and likely working capital inflows; however, OCF/Net Income is -0.44x, below the 0.8 threshold, flagging earnings quality concerns (cash flow not commensurate with accounting loss). Free cash flow cannot be assessed due to unreported investing cash flows and capex. Interest coverage on an EBITDA basis is -9.64x, indicating that core earnings do not cover interest expense (2.43), though cash on hand mitigates immediate service risk. Watch for potential working capital reversals in subsequent quarters; a one-off inventory drawdown or receivables collection can temporarily inflate OCF.

Dividend Sustainability

Dividend data are unreported; the calculated payout ratio (-29.6%) is not meaningful due to negative earnings. With positive OCF this period but negative EBITDA and net loss, sustainable dividends would require consistent positive FCF, which is unassessable without investing CF and capex data. Balance sheet capacity (low D/E, strong cash) provides flexibility, but prudent capital allocation likely prioritizes turnaround investments over distributions until profitability normalizes. Policy outlook: expect caution on dividends until ROIC and operating margin recover.

Risk Assessment

Business Risks:

• Revenue softness (-4.9% YoY) and negative operating leverage pressuring margins
• High SG&A (129.07) relative to gross profit, limiting operating profitability
• Potential one-off losses (~-38.4 between ordinary income and PBT) indicating impairment or restructuring exposure
• Large intangibles (goodwill 121.24, other intangibles 239.23) increasing impairment risk
• Biotech/tools industry demand normalization risk post-pandemic

Financial Risks:

• Negative EBITDA (-2.68) and interest coverage (-9.64x), indicating earnings-based debt service weakness
• Cash flow quality flag (OCF/NI -0.44x), risk of working capital reversal
• Low asset turnover (0.143) depressing returns (ROE -6.7%, ROIC -2.6%)

Key Concerns:

• Sustained net losses (net margin -36.8%)
• Margin compression risk if revenue declines continue
• Visibility on capex and investing CF is limited, obscuring FCF sustainability
• Possible further extraordinary losses if impairments are recognized

Investment Implications

Key Takeaways:

• Top line down 4.9% YoY; operating margin around -12.5% with deeper losses through net income
• Positive OCF (30.44) despite net loss, but quality flagged (OCF/NI -0.44x)
• Balance sheet strength with cash 210.41 and D/E 0.28x provides runway
• Capital efficiency weak (ROIC -2.6%, ROE -6.7%) and must improve
• Large intangibles elevate risk of further non-cash charges if turnaround lags

Metrics to Watch:

• Revenue growth re-acceleration and order momentum
• Operating margin and SG&A-to-sales ratio trajectory
• EBITDA turning sustainably positive and interest coverage improvement
• Working capital movements (inventories 70.76, receivables 88.67) and OCF consistency
• Any disclosures on impairments, restructuring, or extraordinary items
• Capex and investing CF to assess FCF and dividend capacity

Relative Positioning: Versus domestic biotech/tool peers, liquidity and leverage are stronger than average, but profitability and capital efficiency are weaker given negative EBITDA, negative ROIC, and significant exposure to potential impairment from large intangibles.

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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