OKAMOTO INDUSTRIES,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥52.90B
• Operating Income: ¥2.50B
• Net Income: ¥2.96B
• EPS: ¥112.83

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

Okamoto Co., Ltd. (TSE:5122) reported FY2026 Q2 (cumulative) consolidated results under JGAAP marked by resilient top-line but pronounced profit compression. Revenue was ¥52.9bn, down 2.9% YoY, indicating modest demand softness or price normalization after prior inflationary tailwinds. Gross profit was ¥12.4bn, implying a gross margin of 23.5%, which is adequate for a specialty materials/consumer products mix but suggests input cost pressure versus the prior year. Operating income declined sharply to ¥2.50bn (-49.1% YoY), yielding an operating margin of 4.7%, reflecting negative operating leverage and/or increased SG&A/logistics costs. Ordinary income exceeded operating income at ¥3.38bn, supported by non-operating gains and minimal interest burden (interest expense only ¥14m), cushioning earnings. Net income was ¥1.94bn (-34.8% YoY), for a net margin of 3.67% and EPS of ¥112.83. The DuPont bridge shows low interim ROE of 1.97% (Net margin 3.67% × Asset turnover 0.350 × Leverage 1.53), well below typical cost of equity, highlighting profit headwinds rather than balance sheet constraints. The balance sheet is conservative: total assets ¥151.2bn, equity ¥98.8bn, liabilities ¥51.7bn, implying a liabilities-to-equity ratio of 0.52x and an equity ratio around 65% (calculated), despite the reported “0.0%” equity ratio placeholder. Liquidity is strong with a current ratio of 2.42x and a quick ratio of 2.11x, and working capital of ¥52.4bn, providing substantial operational flexibility. Interest coverage is very high at 178.8x (operating income/interest expense), underscoring low financial risk. Cash flow statement items were not disclosed in the dataset, limiting assessment of earnings-to-cash conversion. Depreciation and amortization were also not disclosed, meaning EBITDA metrics cannot be interpreted from the provided figures. Dividend data (DPS and payout) were not disclosed; therefore, distribution policy trends cannot be inferred from this extract. Overall, the quarter illustrates cost pressure and negative operating leverage on a stable revenue base, but underpinned by a robust balance sheet and negligible financial risk. The outlook hinges on near-term margin repair through input cost normalization, mix/pricing, and cost control, alongside maintaining non-operating gains that supported ordinary income.

Profitability Analysis

ROE_decomposition: ROE 1.97% = Net margin 3.67% × Asset turnover 0.350 × Financial leverage 1.53. The low ROE is driven primarily by compressed margins rather than asset utilization or leverage. Asset turnover at 0.350 (interim basis) and leverage at 1.53 are conservative; incremental ROE improvement requires margin recovery. margin_quality: Gross margin is 23.5% (¥12.4bn/¥52.9bn). Operating margin fell to 4.7% (¥2.50bn/¥52.9bn), indicating higher SG&A/overheads or weaker product mix. Ordinary margin improved versus operating margin (6.4%) due to non-operating gains; interest burden is negligible. Net margin is 3.67%. Tax expense was ¥1.41bn; based on net income and tax expense, an indicative effective tax rate is roughly ~42% (¥1.41bn / [¥1.94bn + ¥1.41bn]), though this may differ from statutory ETR due to non-operating and extraordinary items. operating_leverage: Revenue declined 2.9% YoY while operating income declined 49.1% YoY, signaling significant negative operating leverage (high fixed cost absorption and/or increased overheads). The gap between gross and operating margins points to SG&A/logistics or energy cost pressures and potentially lower pricing power in parts of the portfolio.

Growth Assessment

revenue_sustainability: Revenue of ¥52.9bn (-2.9% YoY) suggests modest volume or price pressure; demand appears broadly resilient but lacks growth catalysts in the period. profit_quality: Ordinary income exceeded operating income, implying reliance on non-operating gains (e.g., financial income/FX). Core earnings quality is weakened by operating margin compression despite stable gross margin in the low-20s. outlook: Near-term growth depends on cost normalization (raw materials, utilities), price/mix management, and SG&A discipline. Stabilization of non-operating items would help sustain ordinary income, but sustainable EPS growth requires operating margin repair.

Financial Health

liquidity: Current assets ¥89.35bn vs current liabilities ¥36.95bn -> current ratio 2.42x; quick ratio 2.11x after inventories of ¥11.35bn, indicating strong near-term liquidity. solvency: Total liabilities ¥51.67bn vs equity ¥98.80bn -> liabilities-to-equity 0.52x; implied equity ratio ≈ 65.4% (¥98.80bn/¥151.15bn). Interest expense is minimal (¥14m) and interest coverage is 178.8x, indicating very low solvency risk. capital_structure: Low leverage (assets/equity 1.53x). The company appears primarily equity-financed with ample headroom to invest or absorb shocks without balance sheet strain.

Cash Flow Quality

earnings_quality: Operating cash flow was not disclosed; therefore, OCF/Net income and cash conversion cannot be assessed from the provided data. FCF_analysis: Investing and financing cash flows were not disclosed; FCF cannot be derived. Capex intensity and maintenance vs growth capex split are unknown in this extract. working_capital: Working capital is strong at ¥52.40bn, supported by high current asset coverage. Inventory level is ¥11.35bn (~12.7% of current assets), suggesting manageable inventory risk; detailed turns and DIO cannot be assessed without additional data.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio were not disclosed in the provided dataset; no conclusion can be drawn on current payout practices from this extract. FCF_coverage: FCF data was not disclosed; coverage of dividends by FCF cannot be assessed. policy_outlook: Given the conservative balance sheet and low financial leverage, capacity for distributions likely exists structurally; however, current profit compression suggests prudence until operating margins normalize. Visibility is limited without disclosed dividend and cash flow figures.

Risk Assessment

Business Risks:

• Raw material and energy cost volatility impacting gross and operating margins
• Negative operating leverage due to fixed cost base amid soft volumes
• Pricing pressure and product mix shifts in consumer/industrial segments
• FX fluctuations affecting non-operating income and import costs
• Supply chain and logistics cost variability
• Competitive intensity in gloves, films, and related product categories

Financial Risks:

• Potential earnings volatility if non-operating gains normalize
• Working capital swings affecting cash conversion (OCF not disclosed)
• Tax rate variability given indication of a relatively high implied ETR

Key Concerns:

• Operating income declined 49.1% YoY on a modest 2.9% revenue decline, indicating strong negative operating leverage
• Core profitability relies on non-operating gains to lift ordinary income above operating income
• Cash flow data absence limits assessment of earnings quality and dividend capacity

Investment Implications

Key Takeaways:

• Revenue resilient but down 2.9% YoY; core margin pressure is the principal issue
• Operating margin compressed to 4.7%, driving ROE down to 1.97%
• Balance sheet is robust with implied equity ratio ~65% and interest coverage 178.8x
• Ordinary income support from non-operating items mitigated operating weakness
• Liquidity strong: current ratio 2.42x, quick ratio 2.11x, working capital ¥52.4bn

Metrics to Watch:

• Gross and operating margin trajectory (cost normalization, pricing/mix)
• SG&A ratio and fixed cost absorption
• Non-operating income sustainability (FX/financial income)
• Cash conversion (OCF/NI) and capex once disclosed
• Inventory turns and receivables collection to monitor working capital efficiency

Relative Positioning: Within Japan’s rubber/plastics and consumer materials peers, Okamoto exhibits a very strong balance sheet and liquidity but currently underperforms on profitability (low-single-digit operating margin and sub-2% ROE at the interim stage). Margin recovery is the key differentiator needed to close the gap to peer-level returns.

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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