Achilles Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥38.91B
• Operating Income: ¥1.27B
• Net Income: ¥1.59B
• EPS: ¥98.73

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

Akiles Co., Ltd. (TSE: 51420) reported FY2026 Q2 consolidated results under JGAAP showing broadly stable topline and operating performance with some pressure at the bottom line. Revenue was ¥38.915bn, up +0.2% YoY, indicating a flat demand environment across core product categories. Gross profit was ¥6.934bn, implying a gross margin of 17.8%, suggesting modest pricing power and partial recovery/management of input costs. Operating income was ¥1.275bn, effectively flat YoY, with an operating margin of 3.3%, pointing to limited operating leverage in the period. Ordinary income reached ¥1.48bn, reflecting a small non-operating contribution versus operating income, while interest expense remained low at ¥54m. Net income declined -15.1% YoY to ¥1.349bn despite stable operating profit, implying non-operating and/or tax factors weighed on the bottom line. Based on income tax expense of ¥215m and implied pre-tax profit around ¥1.56bn, the effective tax rate appears roughly 14%, despite the 0.0% metric shown in the summary (the 0% figure should be treated as unreported/invalid). DuPont analysis indicates a net margin of 3.47%, asset turnover of 0.491x, and financial leverage of ~2.0x, yielding an ROE of 3.41% for the interim period, which is modest for the sector. Liquidity is solid with a current ratio of 156.8% and quick ratio of 126.4%, supported by working capital of ¥16.56bn. Total liabilities of ¥40.17bn versus equity of ¥39.61bn implies a liabilities-to-equity of ~1.01x, a moderate gearing profile by industrial standards. Operating cash flow was ¥1.789bn, exceeding net income (OCF/NI = 1.33x), signaling reasonable earnings quality and cash conversion. EBITDA of ¥2.684bn and interest coverage of 23.6x underscore ample headroom for financial obligations. Several data points are unreported (e.g., equity ratio, cash and equivalents, investing cash flows, DPS, share counts), limiting completeness of capital allocation and FCF analyses. Overall, the company exhibits steady operations, disciplined cost management, and conservative financing, but subdued ROE and limited revenue momentum cap returns in the period. The outlook hinges on margin recovery via input cost normalization, product mix improvements, and working capital discipline to sustain OCF amid a flat demand backdrop.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 3.47% × Asset turnover 0.491 × Financial leverage 2.00 ≈ ROE 3.41%. The ROE level is modest and reflects thin margins and relatively low asset velocity rather than excessive leverage. Operating margin is 3.3% (¥1.275bn / ¥38.915bn), flat YoY, indicating that cost controls offset muted pricing/demand. Gross margin at 17.8% suggests partial containment of raw material and logistics costs; however, the spread to operating margin remains wide, implying SG&A intensity is still a drag. Ordinary income exceeds operating income by ~¥205m, indicating positive non-operating balance (e.g., financial income/FX), while interest burden is negligible (¥54m). EBITDA margin of 6.9% highlights limited operating leverage; incremental revenue did not translate meaningfully to EBIT, consistent with +0.2% revenue growth and flat OI. Margin quality appears reasonable: OCF/NI at 1.33x supports that earnings are backed by cash generation. The decline in net income (-15.1% YoY) despite flat OI points to non-operating/tax effects rather than core margin deterioration. Overall, profitability is stable but not high; improvements likely require mix upgrades, price discipline, and fixed-cost absorption from volume recovery.

Growth Assessment

Revenue growth of +0.2% YoY indicates a largely stagnant demand environment, possibly reflecting softness in downstream industrial or consumer end-markets. Operating income was flat YoY, implying that cost savings and pricing actions offset input inflation but offered little incremental operating leverage. The -15.1% YoY decline in net income hints at headwinds from non-operating items and/or tax normalization rather than a deteriorating core. Given EBITDA margin at 6.9% and OI margin at 3.3%, incremental growth will require either better mix (higher-margin products) or scale benefits; otherwise, growth may remain low-quality with limited drop-through. The ordinary income exceeding operating income suggests some support from non-operating gains, which may not be sustainable. Asset turnover at 0.491x indicates moderate capital intensity; improving working capital turns could enhance growth efficiency. Outlook near term is cautiously stable: flat to modest revenue growth with margin resilience tied to input cost trends (PVC, urethane, petrochemical derivatives), pricing discipline, and FX. Absent a clear catalyst (new product cycles, capacity rationalization, or market recovery), growth is likely muted, and profit quality will depend on maintaining gross spreads and SG&A control.

Financial Health

Liquidity appears strong: current ratio 156.8% and quick ratio 126.4% underscore comfortable short-term coverage, supported by ¥16.56bn of working capital. Inventories stand at ¥8.874bn, reasonable versus sales; inventory management will be important if demand remains flat. Total liabilities are ¥40.168bn versus equity of ¥39.608bn (liabilities-to-equity ~1.01x), indicating moderate leverage; interest burden is minimal with coverage at 23.6x. Equity ratio is shown as 0.0% but should be treated as unreported; based on balance sheet totals, a simple equity-to-asset proxy would be ~50%. Solvency thus appears sound, with adequate capital buffers. The absence of disclosed cash and equivalents limits visibility on immediate liquidity headroom, though operating cash generation helps. Overall, the capital structure is conservative, and refinancing/interest rate risk appears low given small interest expense.

Cash Flow Quality

Operating cash flow of ¥1.789bn exceeds net income of ¥1.349bn (OCF/NI = 1.33x), indicating solid cash conversion and limited reliance on accruals. D&A of ¥1.409bn supports that EBITDA converts reasonably into cash, assuming stable working capital. Free cash flow cannot be assessed due to unreported investing cash flows (reported as 0 by data convention); therefore, FCF and FCF coverage metrics should not be interpreted as zero. Financing cash flow was -¥853m, suggesting debt repayment and/or shareholder returns, but specifics are not disclosed. Working capital is ample at ¥16.56bn; given the flat revenue, any inventory build-up or receivable elongation could pressure OCF, so monitoring days inventory and days sales outstanding is key. Overall, earnings quality appears adequate with positive cash conversion in the period.

Dividend Sustainability

Dividend data (DPS, payout ratio, FCF coverage) are unreported in the dataset and should not be interpreted as zero. With net income of ¥1.349bn, modest leverage, and strong interest coverage, the capacity to sustain ordinary dividends would typically depend on capex needs (unreported here) and working capital demands. OCF of ¥1.789bn provides a buffer, but without investing cash flow disclosure, true FCF is unknown. Policy-wise, under JGAAP many mid-cap industrials target stable or progressive dividends; however, the -15% YoY decline in net income and muted ROE (3.41%) may constrain upward adjustments absent clearer growth/FCF visibility. In summary, payout sustainability cannot be conclusively assessed; cash generation looks supportive, but confirmation requires capex and explicit dividend policy disclosures.

Risk Assessment

Business Risks:

• Raw material price volatility (PVC, urethane, petrochemical inputs) impacting gross margins
• Demand softness in downstream industrial/consumer sectors leading to low operating leverage
• FX fluctuations affecting import costs and export competitiveness
• Competitive pricing pressure in plastics/industrial materials markets
• Product mix risk if higher-margin lines underperform
• Supply chain disruptions and logistics cost variability

Financial Risks:

• Working capital swings affecting OCF despite stable earnings
• Potential capex requirements (undisclosed) that could compress FCF
• Exposure to interest rate normalization on any variable-rate debt (though current interest expense is low)
• Tax rate normalization variability impacting net income

Key Concerns:

• Subdued ROE at 3.41% with limited operating leverage
• Net income decline (-15.1% YoY) despite flat operating income
• Limited revenue momentum (+0.2% YoY) indicating a tepid demand backdrop
• Incomplete disclosures (cash, investing CF, dividend metrics) hindering FCF and payout assessment

Investment Implications

Key Takeaways:

• Stable topline (+0.2% YoY) with flat operating income signals resilient but non-accelerating core operations
• Gross margin of 17.8% and OCF/NI of 1.33x point to acceptable earnings quality
• ROE at 3.41% is modest, constrained by thin margins and moderate asset turnover
• Strong liquidity (current ratio 157%, quick ratio 126%) and low interest burden support balance sheet resilience
• Net income decline (-15.1% YoY) likely reflects non-operating/tax effects rather than core deterioration
• Non-operating income positive and interest expense small, but sustainability of non-operating gains is uncertain
• Data gaps on capex, cash, and dividends limit clarity on FCF and capital return capacity

Metrics to Watch:

• Gross margin trajectory versus input cost trends (PVC/urethane prices) and pricing actions
• Operating margin and SG&A ratio for signs of operating leverage
• Inventory and receivable turns (working capital intensity) and OCF/NI ratio sustainability
• Capex and investing cash flows to gauge true FCF generation
• Ordinary income components (FX/financial) and effective tax rate normalization
• Interest-bearing debt levels and interest coverage amid rate changes
• Revenue mix by product/region for margin enhancement opportunities

Relative Positioning: Within Japan mid-cap industrial materials/plastics peers, Akiles exhibits conservative leverage and solid liquidity but delivers below-average ROE and modest margins; the profile is defensive rather than growth-led, pending clearer catalysts for margin expansion or asset efficiency gains.

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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