COSMO ENERGY HOLDINGS COMPANY,LIMITED FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.33T
• Operating Income: ¥60.25B
• Net Income: ¥25.57B
• EPS: ¥143.93

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

Cosmo Energy Holdings (5021) reported FY2026 Q2 consolidated results under JGAAP showing modest topline growth with a strong rebound in profitability. Revenue rose 1.0% YoY to ¥1,333.8bn, while operating income jumped 46.2% YoY to ¥60.3bn, indicating solid operating leverage and improved margin environment. Gross profit reached ¥124.9bn, translating to a gross margin of 9.4%, consistent with an improved refining margin backdrop and/or better product mix. Operating margin expanded to 4.5% despite flat revenue, highlighting disciplined cost control and likely favorable market spreads. Ordinary income was ¥53.2bn, below operating income due to non-operating items, including interest expense of ¥2.6bn. Net income increased 14.5% YoY to ¥23.6bn, with EPS at ¥143.93. The DuPont profile shows a net margin of 1.77%, asset turnover of 0.631x, and financial leverage of 2.95x, yielding ROE of 3.30%, which is modest for a cyclical refiner and below likely cost of equity. Cash generation was positive but not strong relative to earnings: operating cash flow (OCF) was ¥21.2bn, yielding an OCF/Net Income ratio of 0.90, suggesting working capital absorption and/or tax/other cash items in the period. Liquidity appears adequate with a current ratio of 114% and quick ratio of 93%, while solvency is acceptable with debt-to-equity at 2.02x and an estimated equity ratio around 34% (reported equity ratio is unreported). Interest coverage is healthy at 23.2x, reflecting improved operating earnings and manageable financing costs. Balance sheet scale remains large (assets ¥2.115tn) consistent with the refinery-heavy asset base and inventories at ¥196.3bn. Dividend-related datapoints are unreported this quarter (DPS and FCF coverage show as zero, indicating missing disclosure), limiting payout assessment for the period. Overall, fundamentals reflect cyclical margin improvement, decent capital efficiency given the asset intensity, and good interest coverage, offset by modest ROE and uneven cash conversion. Outlook hinges on crack spreads, crude price volatility, inventory valuation effects, FX (USD/JPY), and domestic demand trends. Data gaps (investing cash flows, cash balance, share count details) limit full-cycle FCF and per-share analysis; conclusions are therefore constrained to available non-zero metrics.

Profitability Analysis

ROE_decomposition: ROE 3.30% = Net margin 1.77% × Asset turnover 0.631× × Financial leverage 2.95×. The return profile is driven more by balance-sheet leverage and asset intensity than by high margins. margin_quality: Gross margin 9.4% and operating margin 4.5% point to improved refining spreads and/or cost optimization. Ordinary income margin of ~4.0% trails operating margin due to non-operating costs. Net margin at 1.77% remains thin, typical for downstream energy with inventory and FX noise. Tax line reported (¥26.7bn) implies a meaningful tax burden despite a provided 'effective tax rate' metric showing 0.0% (likely placeholder); on face value, tax burden appears non-trivial. operating_leverage: Operating income grew 46.2% YoY on only 1.0% revenue growth, indicating strong operating leverage from spread improvement and fixed-cost dilution. EBITDA of ¥88.3bn (margin 6.6%) versus operating income of ¥60.3bn reflects D&A of ¥28.0bn, consistent with an asset-heavy base.

Growth Assessment

revenue_sustainability: Revenue growth of 1.0% YoY is modest; volume and price effects likely offset each other in a volatile crude and product price environment. Sustainability depends on domestic demand resilience and export spreads. profit_quality: Operating profit growth far outpaced revenue, signaling reliance on margin tailwinds (crack spreads, product mix, inventory valuation). Such gains can be transient; the durability will track refining economics and FX. outlook: Key drivers include Middle East supply dynamics and OPEC+ policy, Japanese demand normalization, FX (yen depreciation typically benefits export realizations but raises crude input costs), and inventory valuation effects. Near-term, elevated spreads can sustain margins; medium term, structural demand decline and energy transition remain headwinds unless offset by petrochemical, E&P, or renewables contributions.

Financial Health

liquidity: Current ratio 114.1% and quick ratio 93.4% indicate adequate short-term coverage, supported by ¥196.3bn of inventories and sizeable current assets (¥1,079.1bn) versus current liabilities (¥945.5bn). Working capital is positive at ¥133.6bn. solvency: Debt-to-equity is 2.02x, consistent with capital-intensive refining. Estimated equity ratio is ~33.9% (717.0/2,114.9), though the reported equity ratio shows as unreported. Interest coverage is strong at 23.2x, suggesting manageable debt service. capital_structure: Total liabilities ¥1,449.1bn vs. equity ¥717.0bn indicates moderate leverage for the sector. Asset base of ¥2,114.9bn underscores ongoing capital intensity and maintenance capex needs.

Cash Flow Quality

earnings_quality: OCF/Net Income at 0.90 indicates generally reasonable conversion for a first-half period, though below 1.0 suggests working capital build and/or timing of tax/interest payments. EBITDA of ¥88.3bn provides a solid cash earnings base relative to OCF. FCF_analysis: Investing cash flow is unreported (shown as zero), preventing precise FCF calculation beyond the provided placeholder. With OCF at ¥21.2bn and capex unknown, underlying FCF direction cannot be confirmed. working_capital: Inventories of ¥196.3bn and large current balances suggest material working capital swings can affect period OCF. The modest cash conversion implies some absorption this quarter.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as zero, indicating missing disclosure rather than actual zero payout. EPS is ¥143.93, but without a reported dividend we cannot derive an actual payout ratio. FCF_coverage: FCF coverage is reported as 0.00x due to unreported investing cash flows/FCF; therefore, coverage cannot be assessed for the period. policy_outlook: Assessment is constrained by missing DPS/FCF data. Historically, refiners’ payouts track earnings cyclicality and balance sheet priorities (debt reduction, strategic capex). Monitoring formal guidance and capital allocation commentary is essential.

Risk Assessment

Business Risks:

• Refining margin (crack spread) volatility impacting operating margins
• Crude price swings and inventory valuation gains/losses
• FX (USD/JPY) volatility affecting input costs and export realizations
• Domestic fuel demand decline due to efficiency and electrification
• Operational risks from refinery outages/turnarounds and safety incidents
• Regulatory and environmental policy tightening (decarbonization, emissions)
• Competition in domestic marketing and pricing dynamics

Financial Risks:

• Exposure to working capital volatility and associated liquidity needs
• Moderate leverage (D/E 2.02x) in a cyclical industry
• Potential increase in interest costs if rates rise
• Capex intensity for maintenance and transition projects (with unreported investing CF)
• Tax volatility given complex segment mix and special items

Key Concerns:

• Sustainability of margin-driven profit surge amid cyclical spreads
• Modest ROE (3.30%) relative to likely cost of equity
• Limited visibility on free cash flow due to missing investing cash flow data
• Dividend visibility constrained by unreported DPS and FCF

Investment Implications

Key Takeaways:

• Strong operating leverage: operating income +46% on +1% revenue underscores spread tailwinds and cost discipline
• Healthy interest coverage (23.2x) and adequate liquidity (current ratio 114%) support near-term resilience
• Modest ROE (3.30%) highlights capital intensity and thin net margins
• Cash conversion (OCF/NI 0.90) is acceptable but indicates working capital drag
• Data gaps (investing CF, DPS, cash balance) limit full FCF and payout assessment

Metrics to Watch:

• Refining margins (gasoline/diesel crack spreads) and refinery utilization
• Net margin trajectory and operating margin sustainability
• OCF/Net Income and changes in working capital (inventory days, receivable/payable days)
• Net debt and net debt/EBITDA once cash and investing CF are disclosed
• FX (USD/JPY) and inventory valuation impacts
• Capex levels and project pipeline (including energy transition investments)
• Dividend policy disclosures and buyback activity

Relative Positioning: Within Japanese refiners, Cosmo’s quarter reflects typical cyclicality with improved earnings leverage and solid coverage metrics, but ROE remains modest versus peers and data gaps obscure comparative FCF and payout strength.

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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