FUJIKURA COMPOSITES Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥20.23B
• Operating Income: ¥2.68B
• Net Income: ¥2.20B
• EPS: ¥114.77

Income Statement

Balance Sheet

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: Solid Q2 FY2026 with healthy operating leverage and margin expansion, albeit with flat net margin due to a higher tax burden and limited non-operating uplift. Revenue rose 2.9% YoY to 202.3, while operating income increased 19.3% YoY to 26.84, driving operating margin up to 13.3%. Ordinary income climbed 15.2% YoY to 28.92, supported by 2.52 in non-operating income (notably 1.09 dividend income and 0.32 interest income). Net income grew a modest 2.7% to 21.99 as the effective tax rate of 27.3% normalized, diluting bottom-line growth. Gross margin stands at 32.8%, indicating favorable mix and/or successful cost pass-through. Operating margin expanded by about 182 bps YoY (from roughly 11.45% to 13.27%) on disciplined cost control and operating leverage. Ordinary margin expanded about 153 bps YoY (from ~12.77% to 14.30%), aided by higher non-operating income. Net margin was essentially flat, compressing by about 2 bps YoY (from ~10.89% to 10.87%). Balance sheet strength is a standout: current ratio 472%, quick ratio 409%, and net cash position of roughly 75 (cash 107 vs total loans 32). Interest coverage is very strong at 107x, underscoring limited financial risk. ROE is 6.2%, supported by a net margin of ~10.9%, asset turnover of 0.429, and low financial leverage of 1.32x; room remains to lift returns via efficiency gains. ROIC at 6.9% is near the common 7–8% management target range but shy of an “excellent” >8% threshold. Earnings quality cannot be fully evaluated due to unreported cash flows, a key limitation for assessing sustainability. Dividend payout appears elevated at 68.2%, which could constrain capital allocation flexibility if OCF does not match net income. Forward-looking, continued cost discipline and pricing power will be needed to sustain the improved operating margin against potential raw material and FX volatility.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.2% = Net Profit Margin (10.9%) × Asset Turnover (0.429) × Financial Leverage (1.32x). The largest positive driver YoY appears to be margin expansion at the operating and ordinary levels (operating margin +~182 bps; ordinary margin +~153 bps), while net margin was flat due to a higher tax rate and smaller non-operating uplift relative to growth in pretax income. Business drivers: pricing/mix and SG&A discipline likely widened operating spread, while dividend and interest income supported ordinary income. Sustainability: margin gains could be sustained if price pass-through and mix hold, but are vulnerable to raw material cost swings and demand normalization; non-operating income (dividends/interest) is partly recurring but not fully controllable. Asset turnover at 0.429 suggests moderate efficiency; improvements in inventory and receivables turns could enhance ROE without adding leverage. Watchfulness: No evidence SG&A grew faster than revenue (operating margin expanded while revenue grew only 2.9%), implying positive operating leverage rather than overhead creep.

Growth Assessment

Top-line growth was moderate at +2.9% YoY to 202.3, with outperformance at the operating income level (+19.3% YoY) indicating effective cost control and/or favorable mix. Ordinary income growth of +15.2% YoY was aided by higher non-operating income (2.52), including dividends (1.09) and interest (0.32). Net income growth lagged at +2.7% due to the effective tax rate of 27.3% and limited incremental non-operating tailwinds. Revenue sustainability hinges on underlying end-market demand (likely automotive/industrial), where incremental gains may depend on new product ramp and continued pricing discipline. Profit quality is decent at the operating level given margin expansion, but full quality assessment is constrained by absent cash flow data. Outlook: If raw material inflation is benign and pricing holds, operating margins can remain above prior-year levels; however, a weaker demand environment or adverse FX could cap operating leverage. Non-operating contributions (dividends/interest) should remain supportive but are not primary growth engines.

Financial Health

Liquidity is very strong: current ratio 472.5% and quick ratio 408.8%, with no warning thresholds breached. Solvency is conservative with D/E of 0.32x and equity/asset ratio implied around 75.9% (357.59 / 471.43). The company holds net cash of roughly 75 (cash 107.31 vs total loans 32.00), providing ample financial flexibility. Maturity mismatch risk is low: current assets 287.34 materially exceed current liabilities 60.81, and short-term loans (8.00) are well covered by cash on hand. No off-balance sheet obligations are disclosed in the provided data; absence of disclosure does not rule them out.

Cash Flow Quality

Operating cash flow, free cash flow, and capex are unreported, so OCF/Net Income and FCF coverage cannot be assessed. Accordingly, we cannot confirm cash conversion or the sustainability of earnings from a cash perspective. Working capital appears ample (working capital 226.53), but without period-to-period movements we cannot detect working capital-driven earnings management. Interest coverage is robust (107x), suggesting minimal cash interest burden.

Dividend Sustainability

The calculated payout ratio is 68.2%, above the generic sustainability benchmark (<60%). With OCF and FCF unreported, we cannot verify cash coverage of the dividend. The sizable net cash position provides a buffer, but sustained payout at ~68% would ideally be supported by stable OCF and modest capex needs. Policy outlook cannot be inferred from the data provided; watch for guidance on full-year dividends, payout policy, and capital allocation priorities.

Risk Assessment

Business Risks:

• Raw material cost volatility (rubber/resins/chemicals) impacting gross margin.
• Demand cyclicality in key end-markets (automotive/industrial/consumer) affecting volumes and mix.
• FX fluctuations influencing input costs and export competitiveness.
• Pricing power risk if customers resist pass-through in a slowing macro environment.
• Supply chain disruptions that could elevate logistics costs or extend lead times.

Financial Risks:

• Dividend payout ratio of ~68% could pressure cash if OCF weakens (cash flow data unreported).
• Equity returns (ROE 6.2%) remain modest; reliance on efficiency improvements rather than leverage.
• Potential exposure to interest income normalization if rates decline, reducing non-operating support.

Key Concerns:

• Inability to assess cash flow conversion (OCF/NI) due to unreported cash flows.
• Net margin flat despite strong operating leverage, implying tax and below-the-line factors may cap EPS growth.
• ROIC at 6.9% is near target but below the >8% excellence threshold, limiting value creation headroom.

Investment Implications

Key Takeaways:

• Operating margin expanded ~182 bps YoY to ~13.3% on modest +2.9% revenue growth, indicating solid operating leverage.
• Net margin was flat (~10.9%) due to a normalized tax rate, muting EPS leverage.
• Balance sheet is very strong with net cash ~75 and liquidity ratios far above benchmarks.
• ROE 6.2% and ROIC 6.9% suggest improving but not yet best-in-class capital efficiency.
• Non-operating income (dividends/interest) provided incremental support but is not the core driver.

Metrics to Watch:

• Operating cash flow and FCF (for dividend coverage and earnings quality).
• Gross and operating margin trajectory versus raw material and FX trends.
• Working capital turns (AR days, inventory days, AP days) to lift asset turnover.
• Capex plans and ROIC progression toward >8%.
• Pricing power and demand indicators in core end-markets.

Relative Positioning: Within Japanese industrial components/advanced materials peers, the company shows superior balance sheet strength, improving operating profitability, and moderate returns; upside depends on sustaining margin gains and improving asset efficiency while maintaining disciplined capital allocation.

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