JX Advanced Metals Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥396.39B
• Operating Income: ¥70.03B
• Net Income: ¥51.48B
• EPS: ¥46.32

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: A mixed quarter with solid top-line growth and resilient bottom-line delivery, but visible operating margin compression and elevated reliance on non-operating/affiliate income. Revenue rose 17.6% YoY to 3,963.91, demonstrating robust demand/pricing across metals-related businesses. Gross profit was 933.98, implying a gross margin of 23.6% in the period. Operating income increased modestly by 2.8% YoY to 700.34, translating to an operating margin of about 17.7%. Net income rose 16.9% YoY to 429.41, yielding a net margin of 10.8%. Based on the growth rates, we estimate prior-year operating margin around 20.2%, implying operating margin compressed roughly 250–260 bps YoY. Net margin appears roughly flat to slightly down by about 10 bps YoY (from ~10.9% to 10.8%), suggesting below-the-line support (equity-method income, tax rate) offset weaker operating spread. Equity-method investment income was 307.68, accounting for approximately 45.3% of profit contribution—a material driver this quarter. ROE calculated at 5.8% (NPM 10.8% × AT 0.301 × leverage 1.79x) is moderate, constrained by low asset turnover. ROIC of 5.1% trails the 7–8% benchmark, indicating capital efficiency below management targets and peer best practices. Balance sheet is conservative with equity ratio 47.8% and D/E 0.79x, but working capital is inventory-heavy (inventories 2,811.19 vs receivables 1,427.96). Cash flow disclosure is absent; therefore, earnings quality cannot be validated via OCF/NI, a key limitation. The dividend payout ratio is calculated at 51.9%, within a broadly sustainable zone, but FCF coverage cannot be assessed due to missing cash flow and capex data. Forward-looking, the high equity-method contribution raises volatility risk tied to affiliates and commodity/FX cycles. Near term, revenue momentum is supportive, yet margin recovery will depend on smelting spreads, input costs, and affiliate earnings stability.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 10.8% × Asset Turnover 0.301 × Financial Leverage 1.79x = ROE 5.8%. The most notable driver YoY is the contraction at the operating level: operating income grew only 2.8% vs revenue +17.6%, implying operating margin compression of roughly 250–260 bps. Business context likely includes tighter smelting/refining spreads, mixed product mix, and/or pass-through lags of input costs (energy, consumables), partly offset by strong affiliate/equity-method contributions (307.68). The relatively low asset turnover (0.301) caps ROE despite decent net margin, reflecting an asset-intensive business and large inventories. The net margin held roughly flat due to supportive below-OP items (equity-method profit) and a stable effective tax rate (24.1%). Sustainability: Operating margin pressure may ease if TC/RCs improve, energy costs normalize, or product mix skews favorable; however, equity-method income can be volatile with market conditions. Watch for SG&A growth relative to revenue—SG&A was 520.25; we lack YoY SG&A, but if SG&A growth outpaces revenue in subsequent quarters, operating leverage could deteriorate further.

Growth Assessment

Revenue growth of +17.6% is strong and suggests healthy pricing/volume in metals. Operating income growth of +2.8% lagged revenue, indicating negative operating leverage this quarter. Net income +16.9% benefited from material equity-method contributions and possibly mix/tax effects. With equity-method income at 307.68 (about 45% of profit contribution), growth sustainability hinges on affiliate performance and commodity/FX cycles. Non-operating income ratio of 71.7% underscores heavy below-OP support in the profit structure this period; recurring vs one-time elements should be clarified by management. ROIC at 5.1% is below the 7–8% target range, implying efficiency improvement is needed to sustain value accretion. Near-term outlook: topline should remain sensitive to copper and precious metal prices and smelting terms; margins depend on energy/input cost dynamics and inventory valuation effects. We lack segment detail; resource vs non-resource splits would aid assessing durability. Guidance implications: if affiliate earnings normalize lower or commodity prices soften, net profit could undershoot despite solid sales.

Financial Health

Liquidity: Current ratio cannot be calculated due to missing current liabilities; no automatic warning. Working capital is large with current assets at 5,041.92, including inventories 2,811.19 and receivables 1,427.96. Short-term loans are 1,398.03; while cash is unreported, current assets appear to cover short-term borrowings, mitigating near-term maturity risk. Solvency: D/E at 0.79x is conservative; equity ratio is 47.8%, indicating a solid capital base. Long-term loans total 1,782.21, balanced against noncurrent assets of 8,128.46, suggesting reasonable term structure. Maturity mismatch: Without full current liabilities, we cannot conclude definitively, but the scale of current assets relative to short-term loans is reassuring. Off-balance sheet: None disclosed in the provided data.

Cash Flow Quality

OCF is unreported; OCF/Net Income cannot be assessed, so earnings quality cannot be validated via cash conversion. Free cash flow and capex are unreported, preventing coverage analysis for dividends and debt. Inventory intensity (2,811.19) implies potential volatility in working capital and OCF tied to commodity price swings and throughput; however, absence of period-over-period working capital movements limits further inference. No signs of working capital manipulation can be identified from a single-period snapshot.

Dividend Sustainability

Payout ratio is calculated at 51.9%, within the <60% benchmark for sustainability. Q3 DPS reported at 91.55 JPY; given EPS (basic) of 46.32 JPY for the period, this suggests either an interim plus special component or timing differences—clarification from the company is needed. FCF coverage is indeterminable due to missing OCF and capex data. Balance sheet capacity (equity ratio 47.8%, D/E 0.79x) provides some buffer, but with ROE at 5.8% and ROIC at 5.1%, scope for dividend expansion is likely constrained by the need to invest for efficiency and growth. Policy outlook depends on affiliate earnings stability and cash generation; absent OCF data, we assume a cautious but maintainable dividend stance.

Risk Assessment

Business Risks:

• Commodity price volatility (copper, precious metals) impacting revenues, inventory valuation, and smelting/refining margins
• Equity-method earnings volatility from affiliates (307.68; ~45% of profit contribution)
• Energy and consumable cost inflation affecting smelting spreads
• FX fluctuations (USD/JPY) influencing both operating and affiliate results
• Potential changes in TC/RC terms and product mix
• Environmental/regulatory compliance costs and potential liabilities in metals processing

Financial Risks:

• Working capital swings due to large inventories (2,811.19) and metal price changes
• Short-term debt refinancing risk (short-term loans 1,398.03) if credit conditions tighten
• Interest rate risk on floating-rate debt (interest expense not disclosed)
• Dependence on non-operating/affiliate income to sustain net profit

Key Concerns:

• ROIC at 5.1% below the 7–8% benchmark
• Operating margin compression of ~250–260 bps YoY despite strong sales growth
• High reliance on equity-method income (45.3%), elevating earnings volatility
• Insufficient cash flow disclosure prevents assessment of earnings quality and dividend coverage

Investment Implications

Key Takeaways:

• Strong revenue growth (+17.6%) but muted operating profit growth (+2.8%) points to negative operating leverage this quarter
• Operating margin compressed to ~17.7% (down ~250–260 bps YoY)
• Net margin held ~flat at 10.8% aided by substantial equity-method income (307.68)
• ROE moderate at 5.8% due to low asset turnover (0.301) and margin headwinds
• ROIC 5.1% suggests room for capital efficiency improvement
• Balance sheet conservative (D/E 0.79x; equity ratio 47.8%)

Metrics to Watch:

• Equity-method income breakdown (resource vs non-resource affiliates) and sustainability
• Operating margin trajectory and SG&A discipline vs revenue growth
• OCF/Net Income once disclosed (target >1.0) and FCF after capex
• Inventory levels and days vs metal price trends
• TC/RC movements and energy cost trends
• FX sensitivity (USD/JPY) and hedging effectiveness
• ROIC progression toward 7–8% target

Relative Positioning: Within Japan’s non-ferrous/metals complex, the company shows solid sales momentum and a conservative balance sheet but trails top-tier peers on ROIC and exhibits elevated reliance on affiliate income, making earnings more sensitive to commodity/FX cycles and affiliate performance relative to more integrated 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