ASAHI RUBBER INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.88B
• Operating Income: ¥122M
• Net Income: ¥-86M
• EPS: ¥19.53

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

Asahi Rubber Co., Ltd. (TSE: 5162) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥3,885 million, up 5.2% year over year, indicating modest top-line expansion. Gross profit of ¥718.5 million implies a gross margin of 18.5%, which is adequate but leaves limited room for overhead absorption. Operating income was ¥122 million, essentially flat year over year, signaling that higher sales did not translate into higher operating profit due to margin pressure or increased operating expenses. Ordinary income came in at ¥119 million and net income at ¥89 million, also flat year over year, yielding a net margin of 2.29%. EBITDA was ¥360.1 million with a 9.3% margin, supported by depreciation and amortization of ¥238.1 million, indicating a capital-intensive asset base for a company of this scale. Interest expense was modest at ¥3.9 million, and the interest coverage ratio was strong at 30.9x, demonstrating comfortable debt service capacity. The DuPont decomposition shows a calculated ROE of 1.84%, driven by a 2.29% net margin, 0.397x asset turnover, and 2.02x financial leverage—collectively indicating subdued profitability on equity despite acceptable leverage. On the balance sheet, total assets were ¥9,775 million and total equity ¥4,833 million, implying an equity ratio of roughly 49.5% (computed), even though the reported equity ratio field is unreported. Liquidity is solid with a current ratio of 178.6% and a quick ratio of 164.1%, underpinned by working capital of ¥2,233 million. Operating cash flow was ¥146.9 million, exceeding net income (OCF/NI of 1.65x), suggestive of reasonable earnings quality, though investing cash flow was not disclosed and free cash flow was not derivable from the provided data. Financing cash flow was an inflow of ¥247.3 million, indicating reliance on external capital during the half, possibly to support capex or working capital, though the uses cannot be confirmed from the unreported investing line. Dividend per share is reported as zero with a payout ratio of 0%, implying a conservative stance on shareholder returns at this stage. The company’s effective tax rate based on provided tax expense (¥19.0 million) and ordinary income (¥119 million) is approximately 16%, although the calculated metric shows 0.0%, which we treat as a limitation of the reported metric. The flat operating income against higher sales suggests operating leverage is currently muted, likely due to cost inflation, product mix, or pricing dynamics. Overall, Asahi Rubber exhibits stable top-line growth, constrained margin expansion, robust liquidity, and manageable leverage, but low ROE and limited operating profit growth temper the quality of earnings momentum. Data limitations (e.g., unreported investing cash flows, cash balance, and share count) restrict the depth of cash deployment and per-share analysis. Given the interim nature of Q2 figures, seasonality and timing effects may also influence margins and cash flow patterns.

Profitability Analysis

ROE_decomposition: ROE 1.84% = Net profit margin 2.29% × Asset turnover 0.397× × Financial leverage 2.02×. The primary drag is the low net margin, while leverage is moderate and asset turnover is subdued. margin_quality: Gross margin: 18.5% (¥718.5m/¥3,885m). Operating margin: 3.14% (¥122m/¥3,885m). Ordinary margin: 3.06% (¥119m/¥3,885m). Net margin: 2.29% (¥89m/¥3,885m). Flat YoY operating income despite 5.2% revenue growth indicates margin compression at the operating level, likely from higher SG&A, input costs, or pricing pressure. operating_leverage: Revenue +5.2% YoY with operating income flat implies minimal operating leverage realization in the period. D&A of ¥238.1m is sizable relative to EBIT (¥122m), indicating that fixed cost absorption could aid margins if volumes rise, but was not evident this quarter.

Growth Assessment

revenue_sustainability: Top-line growth of 5.2% YoY appears steady. Without segment or geographic breakdowns, sustainability drivers (price vs. volume vs. mix) are unclear, but growth is in line with modest demand recovery. profit_quality: Net income was flat YoY, with an OCF/NI ratio of 1.65× suggesting reasonable earnings-to-cash conversion. However, margin compression at the operating level indicates quality headwinds from costs or mix. outlook: Assuming stable demand and some normalization of input costs, there is room for modest operating margin improvement. Realization of pricing actions and cost control will be key to translating sales growth into profit growth in the second half.

Financial Health

liquidity: Current ratio 178.6% and quick ratio 164.1% indicate strong short-term liquidity. Working capital totals ¥2,233 million, providing a robust buffer. solvency: Total equity ¥4,833m vs. total assets ¥9,775m implies a computed equity ratio near 49.5% (reported equity ratio is unreported). Debt-to-equity at 0.91x suggests moderate leverage. capital_structure: Interest expense ¥3.9m with EBIT coverage of 30.9× signals comfortable service capacity. Financing CF inflow of ¥247.3m indicates incremental external funding; without investing CF, the precise funding purpose is unclear.

Cash Flow Quality

earnings_quality: OCF of ¥146.9m vs. net income of ¥89.0m yields an OCF/NI ratio of 1.65×, supportive of earnings quality. Accrual intensity appears modest given the conversion, though detailed working capital drivers are not disclosed. FCF_analysis: Investing cash flow is unreported (recorded as zero), preventing derivation of capex and free cash flow. EBITDA of ¥360.1m and D&A of ¥238.1m suggest ongoing reinvestment needs typical of the sector. working_capital: Current ratios imply adequate management of receivables and payables. Inventories at ¥412.6m are relatively light within current assets, backing a strong quick ratio. Specific period movements are not provided.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is reported at ¥0.00 with a 0.0% payout ratio, indicating retention of earnings. Given low ROE (1.84%) and flat earnings, reinvestment or balance sheet strengthening may be prioritized. FCF_coverage: Free cash flow coverage cannot be assessed due to unreported investing cash flows; mechanically reported FCF is 0, which reflects disclosure limits rather than actual zero capex. policy_outlook: With modest profitability and ongoing reinvestment needs implied by D&A, a conservative dividend stance appears consistent. Future dividends will hinge on margin recovery and visibility on sustainable FCF.

Risk Assessment

Business Risks:

• Input cost inflation or supply chain tightness compressing gross and operating margins
• Product mix or pricing power limitations limiting operating leverage
• Customer concentration risks typical in auto/electronics rubber components (industry-general risk)
• Cyclical exposure to industrial and automotive demand trends

Financial Risks:

• Moderate leverage (D/E 0.91x) could rise if external financing continues without earnings growth
• Limited visibility on capex and cash balances due to unreported investing CF and cash data
• Low ROE (1.84%) raises risk of capital inefficiency if margins do not improve

Key Concerns:

• Flat operating and net income despite higher sales indicates margin pressure
• Inability to assess free cash flow and capex intensity due to unreported investing cash flows
• Low asset turnover (0.397x) and low ROE constrain value creation absent margin recovery

Investment Implications

Key Takeaways:

• Revenue grew 5.2% YoY to ¥3,885m, but operating income was flat at ¥122m
• Gross margin 18.5% and operating margin 3.14% reflect compressed profitability
• EBITDA margin at 9.3% with D&A of ¥238.1m underscores capex needs
• ROE is low at 1.84%, driven by thin net margins and modest asset turnover
• Liquidity is robust (current ratio 178.6%, quick ratio 164.1%) and interest coverage is strong at 30.9x
• OCF/NI of 1.65× indicates reasonable earnings-to-cash conversion
• Investing CF and cash balance unreported; FCF and net cash/debt positions cannot be confirmed
• Dividend suspended (DPS ¥0), consistent with preservation of cash amid modest profitability

Metrics to Watch:

• Gross and operating margin trajectory in H2 and full-year
• Capex and investing cash flows (when disclosed) to gauge true FCF
• Working capital turns and asset turnover improvement
• Pricing/mix changes and pass-through of input costs
• Leverage trend (debt-to-equity) and financing cash flow dependence
• Order backlog or book-to-bill (if disclosed) for demand visibility

Relative Positioning: Within small-cap Japanese industrial/rubber component peers, Asahi Rubber shows solid liquidity and coverage but below-average ROE and muted operating leverage; clarity on capex and sustained margin improvement would be needed to close the gap with higher-ROE peers.

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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