Mitsuboshi Belting Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥45.87B
• Operating Income: ¥4.60B
• Net Income: ¥3.87B
• EPS: ¥137.45

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: A mixed quarter with stable top-line and operating performance but a sharp decline in net income, against a fortress balance sheet and below-target ROIC. Revenue rose 0.9% YoY to 458.7, indicating flattish demand across automotive and industrial end-markets. Gross profit reached 141.5 for a gross margin of 30.9%, reflecting steady cost pass-through and input cost normalization. Operating income edged up 1.1% YoY to 46.0, translating into a 10.0% operating margin, essentially stable. Ordinary income jumped 18.4% YoY to 50.8, helped by non-operating income of 6.6 (notably interest income 2.1 and dividends 3.0). Despite higher ordinary income, net income fell 36.5% YoY to 38.7 (net margin 8.4%), implying prior-year one-offs or base effects not repeated this year and/or mix in taxes/minorities; effective tax rate is 28.9%. With no prior-period margin disclosures, basis point changes cannot be precisely calculated; directionally, operating margin looks flat-to-slightly expanded, while net margin compressed materially YoY. Earnings quality cannot be assessed due to unreported cash flow data; OCF/NI and FCF are N/A. Balance sheet strength is notable: current ratio 348.6%, quick ratio 273.7%, cash and deposits 302.1 vs short-term loans 23.0, and D/E of 0.33x, implying very low financial risk. Interest coverage is extremely strong at 183.9x, indicating negligible interest burden. ROE is modest at 3.9% per DuPont (margin 8.4% × asset turnover 0.351 × leverage 1.33x), constrained by low asset turnover and conservative leverage. ROIC is 4.5%, below the 7–8% target range and below the 5% warning threshold, flagging capital efficiency as the key structural issue. The non-operating income ratio of 17.1% suggests a meaningful contribution from financial assets, partially cushioning operating cyclicality. Dividend sustainability is uncertain: a calculated payout ratio of 149.5% appears elevated relative to earnings, though ample cash provides near-term coverage; without OCF data the medium-term sustainability is unclear. Forward-looking, the focus is on improving ROIC via asset efficiency and profitable growth, sustaining operating margins amid input cost and FX volatility, and normalizing the gap between ordinary and net income. Overall, fundamentals are stable at the operating level with robust liquidity, but capital efficiency and the NI decline are the main concerns.

Profitability Analysis

ROE decomposition: ROE 3.9% = Net Profit Margin (8.4%) × Asset Turnover (0.351) × Financial Leverage (1.33x). The weakest component is asset turnover at 0.351, indicating slow capital turns typical of asset-heavy manufacturing and elevated working capital. Financial leverage is conservative at 1.33x (Assets/Equity), limiting ROE lift from gearing. Net margin of 8.4% is reasonable for the sector this half, supported by a 10.0% operating margin and meaningful non-operating income. The largest directional change YoY appears at the net margin level (net income -36.5% YoY vs revenue +0.9%), implying compression likely from prior-year one-offs not repeating and/or tax/mix effects rather than core margin erosion (ordinary income +18.4%). Business drivers: steady gross margin reflects stabilized raw materials and continued pricing discipline; non-operating income (dividends 3.0, interest 2.1) augmented ordinary income; however, below-the-line items and taxes brought down NI. Sustainability: operating margin looks sustainable near 10% barring sharp input or FX swings; non-operating income is partly market/interest-rate dependent; the NI dip appears one-off in nature, but confirmation requires details on special gains/losses and minority interests. Watch for SG&A growth versus revenue: SG&A is 95.5, but YoY SG&A growth is undisclosed; absent data we cannot confirm operating leverage or deleverage. Overall, ROE is constrained by low capital turns and low leverage; improving asset efficiency (inventory and receivables turns) is the clearest path to better ROE.

Growth Assessment

Revenue growth of +0.9% YoY indicates a soft but resilient demand environment in automotive/industrial belts. Operating income +1.1% YoY demonstrates stable operating execution with flat-to-slight margin trends. Ordinary income +18.4% YoY benefited from higher non-operating returns (dividends and interest), which may not be reliably repeatable if rates/dividends normalize. Net income -36.5% YoY signals base effects or non-recurring factors; core profitability appears better captured by ordinary income progression than by bottom line this half. Profit quality leans on operating margin resilience; however, the non-operating income ratio (17.1%) and the disconnect between ordinary and net income temper visibility. With ROIC at 4.5%, growth should prioritize high-return projects and working capital discipline over pure volume expansion. Outlook hinges on end-market trends (auto production, factory MRO demand), FX (USD/JPY), and raw materials (petrochemical/rubber) cost trajectory. Near-term growth is likely modest; the company’s balance sheet provides capacity for selective investment to improve capital efficiency.

Financial Health

Liquidity is very strong: current ratio 348.6% and quick ratio 273.7%, with cash and deposits 302.1 far exceeding short-term loans 23.0 and accounts payable 96.0. No warning thresholds breached (Current Ratio <1.0 or D/E >2.0) — both are comfortably healthy. Solvency is robust with total liabilities 324.1 vs total equity 983.1 (D/E 0.33x). Maturity mismatch risk is low: current assets 763.5 vs current liabilities 219.0; cash and receivables alone (501.3) more than cover all current liabilities. Interest coverage is exceptionally high at 183.9x, indicating minimal refinancing pressure. No off-balance sheet obligations are disclosed in the data provided.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income and FCF cannot be assessed; we cannot validate earnings-to-cash conversion. With net income at 38.7 and significant cash on hand (302.1), near-term liquidity is ample, but medium-term sustainability requires positive OCF and disciplined capex. Working capital appears sizable (inventories 163.9, receivables 199.1, payables 96.0), but without period-to-period changes we cannot infer cash generation or potential working capital release/consumption. No signs of manipulation can be concluded due to missing cash flow detail.

Dividend Sustainability

The calculated payout ratio is 149.5%, implying dividends exceed current earnings, which is typically unsustainable if persistent. FCF coverage is unreported; without OCF and capex, we cannot confirm cash coverage. Near-term dividends could be supported by large cash reserves (302.1) and low leverage, but over the medium term, sustainability requires either higher earnings/OCF or recalibration of payouts. Policy visibility is limited due to missing DPS and total dividend disclosures; monitor updated guidance and capital allocation commentary.

Risk Assessment

Business Risks:

• End-market cyclicality in automotive OEM and aftermarket demand
• Industrial production and capex cycles affecting conveyor/industrial belting
• Raw material price volatility (rubber, petrochemicals, steel cords)
• FX fluctuations (JPY vs USD/EUR/Asian currencies) impacting margins and translation
• Supply chain disruptions affecting input availability and logistics costs

Financial Risks:

• ROIC at 4.5% below target range, risking value dilution if growth outpaces returns
• Elevated payout ratio (149.5%) relative to earnings absent OCF support
• Earnings reliance on non-operating income (17.1% of profits) that may be less stable
• Potential tax rate and below-the-line volatility driving NI swings

Key Concerns:

• Net income declined 36.5% YoY despite stronger ordinary income, indicating base effects or one-offs
• Low asset turnover (0.351) constraining ROE and capital efficiency
• Data gaps on cash flows, capex, and DPS obscure assessment of cash generation and payout capacity

Investment Implications

Key Takeaways:

• Operating performance stable with 10.0% operating margin and slight top-line growth
• Ordinary income strength (+18.4% YoY) aided by dividends and interest
• Net income weakness (-36.5% YoY) likely reflects non-recurring factors rather than core deterioration
• Balance sheet is very strong (current ratio 3.49x, D/E 0.33x, cash 302.1)
• Capital efficiency is the main issue: ROIC 4.5% and ROE 3.9% constrained by low asset turns
• Dividend payout appears high relative to earnings (149.5%); sustainability uncertain without OCF

Metrics to Watch:

• Operating cash flow and FCF trends; OCF/NI > 1.0 target
• Inventory and receivables turnover to lift asset efficiency and ROIC
• Gross and operating margin resilience amid raw material and FX moves
• Ordinary vs net income gap and any special items driving volatility
• Capex and project ROIC to ensure returns exceed cost of capital
• Dividend policy updates and payout target alignment with cash generation

Relative Positioning: Versus domestic peers in industrial/automotive components, Mitsuboshi Belting exhibits stronger liquidity and conservative leverage but lags on capital efficiency (ROIC/ROE) and shows greater sensitivity of bottom-line to non-operating elements; near-term defensiveness comes from cash-rich balance sheet, while medium-term upside depends on improving asset turns and sustaining 10% operating margins.

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