ENEOS Holdings,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.69T
• Operating Income: ¥166.74B
• Net Income: ¥95.91B
• EPS: ¥24.07

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

ENEOS Holdings (IFRS, consolidated) delivered a significant recovery in profitability at the operating level in FY2026 Q2 despite a decline in topline. Revenue fell 5.3% YoY to 56,919.22, reflecting softer product prices/volumes and likely normalization in energy-related pricing. Operating income surged 115.6% YoY to 1,667.38, pushing the operating margin to roughly 2.9%, supported by cost discipline and sizable positive other operating items, as SG&A alone would not bridge the gap from gross profit to operating profit. Gross margin improved to 8.3%, with gross profit of 4,699.26 against cost of sales of 55,421.04, indicating improved refining/petrochem spreads and/or inventory valuation effects. Net income was 647.54, down 5.0% YoY, implying negative non-operating impacts and a low effective tax rate (9.6%) that partially cushioned below-the-line headwinds. Profit before tax of 1,578.96 was below operating profit, suggesting net non-operating losses of about 88, including potential financial costs or fair value impacts; equity method income was modest at 32.03. EBITDA rose to 3,496.76 (6.1% margin), underpinned by improved operating efficiency and D&A of 1,829.38. Cash generation was sound at the operating level, with OCF of 1,276.63 (OCF/NI = 1.97x), evidencing decent earnings quality. Free cash flow was slightly negative at -300.48 due to investing outflows, but capex of 1,671.83 ran below D&A, signaling prudence on capital spending. The balance sheet remains solid with total assets of 87,071.03 and equity of 34,676.71, yielding an equity ratio of 35.8% and an asset-to-equity multiplier of 2.51x. Leverage measured as total liabilities to equity is 1.53x, manageable for a cyclical refiner/integrated energy business. Working capital is heavy given the business model, with inventories of 15,897.86 and receivables of 14,040.83; current liabilities were unreported, limiting liquidity ratio analysis. Capital returns were aggressive: dividends paid of 329.23 and share repurchases of 1,346.01 resulted in total shareholder distributions well above net income and OCF in the period. The calculated payout ratio is 108.7% and FCF coverage of dividends is -0.43x, highlighting a reliance on balance sheet capacity and timing of cash flows to fund distributions. DuPont analysis indicates a calculated ROE of 1.9% (net margin 1.1%, asset turnover 0.654x, leverage 2.51x), showing modest returns constrained by slim net margins in a volatile industry. Comprehensive income (764.92) exceeded net income due to positive OCI, partially offsetting below-the-line pressures. Overall, the quarter evidences strong operating execution and improved margins, but bottom-line and cash distribution coverage remain sensitive to non-operating items and cash outlays. Data gaps (e.g., interest expense, current liabilities, DPS) limit precision in certain ratios; conclusions are based on available disclosed figures.

Profitability Analysis

ROE_decomposition: Calculated ROE 1.9% = Net margin 1.1% x Asset turnover 0.654 x Financial leverage 2.51x. The primary constraint is low net margin despite healthier operating margin, with non-operating losses diluting ROE. margin_quality: - Gross margin: 8.3% (4,699.26 / 56,919.22). - Operating margin: ~2.9% (1,667.38 / 56,919.22). - EBITDA margin: 6.1%. SG&A ratio is 7.4% (4,205.16 / 56,919.22). The gap between gross profit minus SG&A (≈494) and reported operating income (1,667) implies sizable positive other operating income or cost reversals. Effective tax rate is low at 9.6%, likely non-recurring or mix-driven. operating_leverage: Despite revenue declining 5.3% YoY, operating income rose 115.6% YoY, signalling strong operating leverage via cost control and improved spreads/inventory effects. This suggests high sensitivity of profits to margin changes typical for refining/energy segments.

Growth Assessment

revenue_sustainability: Revenue of 56,919.22 declined 5.3% YoY, reflecting commodity price normalization and/or volume softness. Given energy price volatility and large working capital swings, topline growth visibility remains limited near-term. profit_quality: Operating profit expansion was driven by margin improvements and other operating items; EBITDA strength supports underlying improvement. However, net profit fell 5.0% YoY due to negative non-operating effects, suggesting some fragility in bottom-line growth. outlook: Sustained profitability hinges on refining margins, petrochemical spreads, inventory valuation impacts, and FX/crude dynamics. Continued cost discipline and calibrated capex (capex < D&A) support medium-term earnings resilience, but non-operating volatility may persist.

Financial Health

liquidity: Cash and equivalents were 8,465.63. Current assets were 42,075.38, with inventories 15,897.86 and receivables 14,040.83. Current liabilities are unreported, so current and quick ratios are not calculable; working capital cannot be precisely derived beyond acknowledging a large current asset base. solvency: Total liabilities 53,188.14 vs equity 34,676.71 imply a debt-to-equity (liabilities-to-equity) ratio of 1.53x and equity ratio of 35.8%. The asset-to-equity multiplier is 2.51x, in line with an integrated energy balance sheet. capital_structure: Interest-bearing debt breakdown is unreported; financing CF of -3,334.31 and large buybacks suggest active balance sheet management. Without interest expense disclosure, interest coverage cannot be assessed.

Cash Flow Quality

earnings_quality: OCF/Net income is 1.97x, indicating strong cash conversion and limited accrual risk in the period. Effective tax cash burden appears light given the 9.6% rate. FCF_analysis: OCF 1,276.63 minus capex 1,671.83 results in negative FCF of -395.20 on a simple basis; reported FCF is -300.48 reflecting other investing inflows/outflows. Capex below D&A (1,671.83 < 1,829.38) suggests maintenance-level spending or deferrals. working_capital: Large inventories (15,897.86) and receivables (14,040.83) are typical for the sector and can drive OCF volatility with commodity price swings and timing effects. Current liabilities are unreported, limiting detailed WC turnover analysis.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 108.7%; DPS is unreported, so this ratio likely reflects total planned cash dividends against earnings under internal methodology. Based on disclosed dividends paid (329.23) vs net income (647.54), cash payout observed this period is ~51%, but buybacks elevate total distribution to ~259% of net income. FCF_coverage: FCF coverage of dividends is -0.43x, indicating dividends were not covered by FCF in the period; funding relied on cash on hand or financing inflows earlier, while this period’s financing CF was negative due to buybacks/debt service. policy_outlook: Given capex discipline and sizeable cash balance, near-term dividends appear manageable, but sustained over-distribution relative to FCF would depend on commodity cycle strength and balance sheet capacity. DPS trajectory is unclear due to unreported DPS figures.

Risk Assessment

Business Risks:

• Commodity price volatility impacting refining margins and inventory valuation
• Demand fluctuations for refined products and petrochemicals
• FX volatility (USD/JPY) affecting crude purchase costs and export/import margins
• Regulatory and environmental policy changes impacting refining and metals operations
• Operational risks including outages, safety incidents, and turnaround schedules
• Competition from domestic peers and imported refined products

Financial Risks:

• Non-operating volatility (derivatives, equity-method, and financial items) pressuring net income
• Distribution levels (dividends + buybacks) exceeding FCF, increasing reliance on balance sheet
• Liquidity assessment constrained by unreported current liabilities and interest expense
• Potential refinancing risk if interest-bearing debt is significant (details unreported)

Key Concerns:

• Sustainability of margin-driven operating profit gains amid a softer topline
• Coverage of shareholder returns when FCF is negative
• Limited visibility on interest burden and near-term liquidity ratios due to data gaps

Investment Implications

Key Takeaways:

• Strong operating recovery: operating income +115.6% YoY with operating margin ~2.9%
• Net income declined 5.0% YoY due to negative non-operating items despite low tax rate
• Cash conversion solid (OCF/NI 1.97x), but FCF negative (-300.48)
• Capex below D&A indicates disciplined investment posture
• Balance sheet moderate: equity ratio 35.8%, liabilities/equity 1.53x
• Aggressive shareholder returns (dividends + buybacks) exceed net income and FCF
• DuPont ROE 1.9% constrained by thin net margin despite leverage and asset turnover

Metrics to Watch:

• Refining margins and petrochemical spreads
• Inventory valuation impacts and working capital movements
• Non-operating gains/losses and interest expense once disclosed
• OCF sustainability and FCF coverage of dividends
• Capex trajectory relative to D&A
• Equity ratio and net debt once interest-bearing debt data is available
• FX (USD/JPY) and crude price trends

Relative Positioning: Within the Japanese energy/refining peer set, the company shows strong operating rebound and disciplined capex, but reported net margin and FCF coverage trail the level typically needed for fully self-funded shareholder distributions; balance sheet strength offers flexibility, subject to commodity cycle conditions.

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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