SAKURA RUBBER CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.47B
• Operating Income: ¥-3M
• Net Income: ¥-212M
• EPS: ¥-4.88

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

Sakuragomu (51890) delivered strong top-line growth in FY2026 Q2 with revenue of 4,475 million yen, up 28.3% year over year, but remained loss-making at the operating and net levels. Gross profit was 707.9 million yen, implying a gross margin of 15.8%, and EBITDA was positive at 143.0 million yen (3.2% margin), indicating improving contribution but insufficient to cover fixed costs. Operating income was a marginal loss of 3 million yen and ordinary income was a loss of 8 million yen, highlighting limited operating leverage to date despite robust sales growth. Net income was a loss of 9 million yen (EPS -4.88), with an effective tax rate reading of 0.0% for the period and an income tax line of -51.6 million yen (likely tax credits or timing effects). DuPont analysis shows a slightly negative ROE of -0.10% driven by a net margin of -0.20%, low asset turnover of 0.290x (interim), and modest financial leverage of 1.70x. Liquidity is strong: current ratio 224%, quick ratio 219.5%, and working capital of 6,638 million yen, suggesting ample near-term funding capacity for operations. The balance sheet is conservative with total assets of 15,441 million yen and total liabilities of 7,530 million yen, implying an equity-to-asset ratio around 59% based on provided equity of 9,101 million yen (the reported equity ratio of 0.0% appears undisclosed rather than actual). Interest expense was 20.0 million yen and interest coverage was -0.1x on EBIT, reflecting thin earnings headroom; however, positive EBITDA provides some cushion. Operating cash flow was solid at 347.8 million yen despite the small net loss, indicating favorable earnings quality for the half on a cash basis, likely aided by working capital dynamics. Investing cash flow and cash balance were shown as zero, which should be interpreted as undisclosed for this period rather than true zeros; hence free cash flow cannot be reliably assessed. Financing cash flow was an outflow of 231.9 million yen, consistent with debt repayment or dividend/treasury actions (dividends are zero). Dividend per share was 0.00 with a payout ratio of 0.0%, appropriate given the loss and the focus on strengthening profitability. The combination of strong revenue growth, positive EBITDA, and robust liquidity suggests improving fundamentals, but margin recovery to consistently positive operating income remains the key variable. Asset turnover is modest for a manufacturing profile, implying scope for better utilization or mix improvements to lift ROE. Overall, financial health is sound, but profitability is subpar and interest coverage is weak at the EBIT level; execution on cost control and pricing/mix will determine the pace of recovery. Data limitations exist (several zero placeholders denote undisclosed items), so conclusions emphasize the reported non-zero metrics and calculated ratios.

Profitability Analysis

ROE is -0.10% per DuPont, decomposed into a net margin of -0.20%, asset turnover of 0.290x (interim), and financial leverage of 1.70x. The negative net margin, despite 28.3% revenue growth, underscores that gross margin (15.8%) and operating costs collectively have not yet scaled down enough; operating income was -3 million yen, essentially breakeven. EBITDA margin of 3.2% indicates that depreciation (146.0 million yen) and other fixed charges push EBIT negative; this points to fixed-cost drag and limited operating leverage so far. The shift from positive EBITDA to slightly negative EBIT suggests cost absorption remains a headwind; improving utilization and mix should have a leveraged effect on EBIT as volumes rise. Ordinary income of -8 million yen and interest expense of 20.0 million yen produced an EBIT interest coverage of -0.1x, reflecting low earnings headroom at the operating level. The negative net margin alongside a negative effective tax rate line (income tax -51.6 million yen) suggests non-recurring or timing effects in taxes, not sustainable drivers of net profit. Margin quality: gross margin at 15.8% is modest for value-added rubber/industrial products and leaves limited buffer for SG&A; pricing actions and input cost pass-through will be important. With asset turnover at 0.290x on an interim basis, annualized turnover could normalize higher, but currently it depresses ROE alongside the thin margins. Overall profitability is fragile but near an inflection to positive EBIT if revenue momentum persists and fixed costs are contained.

Growth Assessment

Revenue growth of 28.3% YoY to 4,475 million yen is strong and broad-based momentum is implied, though segment details are not disclosed. The positive EBITDA alongside higher sales indicates that growth is not purely volume-dilutive; however, it has not yet translated into operating profit, suggesting cost inflation or pricing/mix constraints. Sustainability hinges on maintaining order momentum and improving contribution margins through price discipline and product mix. With asset turnover at 0.290x (interim), utilization could improve as the book converts to shipments; this would support operating leverage in coming quarters. Profit quality is mixed: operating income remains slightly negative, but OCF is positive (347.8 million yen), implying that reported losses may include non-cash charges and working capital normalization. Outlook: if revenue growth continues at a double-digit pace and gross margin holds or expands, breakeven EBIT should move to positive territory; interest burden is manageable if EBITDA expands further. Absence of disclosed investment cash flows limits visibility on capacity expansion or maintenance capex; growth appears to be driven by existing capacity and commercial execution.

Financial Health

Liquidity is strong with a current ratio of 224% and quick ratio of 219.5%, supported by current assets of 11,990.7 million yen versus current liabilities of 5,352.2 million yen. Working capital stands at 6,638.5 million yen, providing ample operational flexibility. Solvency is sound: total liabilities of 7,530.1 million yen against equity of 9,101.0 million yen imply a liabilities-to-equity ratio of roughly 0.83x and an equity/asset ratio near 59% (equity ratio reported as 0.0% is undisclosed, not actual). Capital structure is conservative, but interest coverage on EBIT is weak at -0.1x due to near-breakeven operating income; improving EBIT is necessary to restore comfortable coverage. There is no disclosed cash balance in the dataset (0 denotes undisclosed), but strong working capital and positive OCF reduce near-term liquidity risk. No alarm signs on leverage, though profitability needs to catch up to support debt service with margin of safety.

Cash Flow Quality

Operating cash flow of 347.8 million yen contrasts favorably with net income of -9 million yen (OCF/NI ratio of -38.64 due to negative denominator), indicating robust cash generation relative to accounting earnings for the half. Positive OCF alongside negative EBIT suggests non-cash charges (depreciation 146.0 million yen) and likely favorable working capital movements (details not disclosed) are supporting cash. Investing cash flow is undisclosed (shown as 0), so free cash flow cannot be reliably computed; the reported FCF of 0 should be treated as not available. Financing cash flow was an outflow of 231.9 million yen, consistent with debt reduction or other financing uses; dividend outflow appears zero. Earnings quality appears acceptable for an interim period: EBITDA positive, non-cash charges significant, and cash conversion supported by working capital; sustainability into H2 depends on maintaining sales and managing inventories/receivables. Working capital composition is partially visible (inventories 242.5 million yen are small relative to current assets), implying receivables and/or cash equivalents are the larger components, but exact balances are undisclosed.

Dividend Sustainability

DPS is 0.00 with a payout ratio of 0.0%, appropriate given the net loss and focus on restoring profitability. With investing cash flows undisclosed, free cash flow coverage cannot be assessed; however, positive operating cash flow and strong liquidity provide flexibility. Given interest coverage at the EBIT level is negative and profitability remains fragile, a conservative dividend stance is likely prudent until sustained positive net income and FCF are demonstrated. Policy outlook: the company is likely to prioritize reinvestment and balance sheet resilience, with any future distributions contingent on margin recovery and consistent positive earnings.

Risk Assessment

Business Risks:

• Margin pressure from input cost inflation and limited pass-through, reflected in a 15.8% gross margin and negative operating income.
• Execution risk in achieving operating leverage despite 28.3% revenue growth.
• Product mix and pricing risk that may cap EBITDA margin expansion from the current 3.2%.
• Demand cyclicality in industrial end-markets, potentially affecting asset turnover (0.290x interim).
• Dependency on working capital efficiency to sustain cash generation.

Financial Risks:

• Weak interest coverage at the EBIT level (-0.1x), leaving little buffer if rates or interest expense rise.
• Potential cash flow volatility given reliance on working capital movements; investing cash flows undisclosed.
• Negative net margin (-0.20%) and small net loss, risking covenant headroom if leverage increases.
• Tax line volatility (income tax -51.6 million yen) affecting net income comparability.

Key Concerns:

• Sustaining revenue growth while lifting gross and operating margins to firmly positive territory.
• Restoring EBIT-based interest coverage comfortably above 1.0x.
• Limited visibility on capex and FCF due to undisclosed investing cash flows.
• Ensuring asset utilization improves to enhance ROE beyond the current -0.10%.

Investment Implications

Key Takeaways:

• Strong top-line growth (+28.3% YoY) but operating income remains marginally negative (-3 million yen).
• EBITDA positive at 143.0 million yen (3.2% margin), indicating potential for operating leverage if volumes and mix improve.
• Solid liquidity (current ratio 224%, quick ratio 219.5%) and moderate leverage (liabilities/equity ~0.83x) underpin financial flexibility.
• OCF is healthy (347.8 million yen) despite a small net loss, suggesting acceptable earnings quality for the half.
• Interest coverage is weak on EBIT (-0.1x); profit expansion is necessary to de-risk the capital structure at the income statement level.
• Data gaps (equity ratio, cash, investing CF) constrain FCF and capex visibility; conclusions rely on available non-zero metrics.

Metrics to Watch:

• Gross margin progression from 15.8% and EBITDA margin from 3.2% in subsequent quarters.
• Operating income turning sustainably positive and EBIT interest coverage moving above 1.5x.
• Working capital trends (receivables days, inventory levels) and their impact on OCF.
• Asset turnover improvements from 0.290x (interim) as utilization rises.
• Disclosure of capex/investing cash flows to assess true FCF and reinvestment needs.

Relative Positioning: Versus typical TSE small-cap industrial/manufacturing peers, Sakuragomu shows stronger balance sheet liquidity and moderate leverage but weaker profitability and interest coverage; execution on margin expansion is the primary differentiator to close the gap.

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
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