SAGAMI RUBBER INDUSTRIES CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.12B
• Operating Income: ¥161M
• Net Income: ¥389M
• EPS: ¥-11.64

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

Sagami Rubber Industries (51940) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth with significant operating margin recovery but a net loss driven by non-operating factors. Revenue rose 3.2% YoY to 3,120,000,000, while gross profit reached 772,164,000, implying a gross margin of 24.7%. Operating income surged to 161,000,000 (+316.6% YoY), indicating strong operating leverage and improved cost discipline relative to the prior-year period. Despite the operating recovery, ordinary income was -14,000,000, signaling material non-operating headwinds. Interest expense totaled 69,982,000 and, together with other non-operating losses of roughly 105,000,000, more than offset operating profit. The company posted a net loss of -126,000,000 (EPS -11.64), despite the operating turnaround; the provided effective tax rate metric is 0.0%, though a tax line of 145,286,000 is disclosed, likely reflecting tax adjustments or non-cash/timing effects. On a DuPont basis, ROE was -1.17%, driven by a -4.04% net margin, partially cushioned by asset turnover of 0.171 and financial leverage of 1.70. EBITDA was 493,229,000 (15.8% margin), and EBITDA-to-interest coverage stood at 2.3x, indicating modest but positive debt service capacity at the operating cash level. Operating cash flow was positive at 339,095,000, outpacing the net loss (OCF/NI = -2.69), suggesting non-cash charges and/or favorable working capital movements supported cash generation. Liquidity is tight with a current ratio of 91.4% and quick ratio of 55.8%, and working capital of -587,439,000 points to short-term funding pressure. The balance sheet shows total assets of 18,238,000,000 and equity of 10,752,000,000; this implies an equity ratio of roughly 58.9% even though the reported equity ratio field is unreported (0.0%). Debt-to-equity of 0.70x appears moderate, but the high level of current liabilities (6,838,381,000) relative to current assets (6,250,942,000) underscores refinancing and liquidity risk. Inventories stand at 2,434,933,000, making inventory management a key variable for cash conversion. Dividends were not paid (DPS 0.00) and payout ratio is 0.0%; free cash flow was not disclosed (FCF shown as 0 indicates unreported capex), so dividend coverage cannot be evaluated this period. Overall, the quarter reflects encouraging operating momentum offset by non-operating losses and constrained liquidity, with solid structural equity capitalization but near-term cash management challenges. Data limitations exist in several fields (equity ratio, cash/cash equivalents, investing CF, FCF, share data), and conclusions are based on disclosed non-zero items.

Profitability Analysis

ROE_decomposition: ROE of -1.17% reflects a negative net margin (-4.04%) with asset turnover of 0.171 and financial leverage of 1.70. The primary drag is profitability at the bottom line, not asset efficiency or leverage. margin_quality: Gross margin is 24.7% and EBITDA margin is 15.8%, indicating decent value add and improved operating efficiency. Operating margin recovery (operating income +316.6% YoY on +3.2% revenue) suggests better fixed-cost absorption and cost control. However, non-operating losses turned ordinary income to -14,000,000, undercutting margin conversion to net profit. operating_leverage: Revenue grew modestly, yet operating income expanded materially, evidencing strong operating leverage. D&A of 332,229,000 vs EBITDA of 493,229,000 implies a relatively asset-heavy base; the drop-through to EBIT was solid but vulnerable to non-operating swings (interest and other losses).

Growth Assessment

revenue_sustainability: Revenue increased 3.2% YoY to 3.12bn. Sustainability depends on end-market demand in healthcare/consumer rubber and industrial segments; current data shows stable but not rapid growth. profit_quality: Operating income of 161m versus EBITDA of 493m indicates substantial non-cash D&A as expected; operating performance improved markedly YoY. Nevertheless, ordinary and net losses indicate that profit quality is presently impaired by non-operating items (interest expense 70m and other non-operating losses ~105m). outlook: If operating momentum persists and non-operating losses normalize, the company could return to overall profitability. However, tight liquidity (current ratio 91.4%) and negative working capital heighten execution risk. Monitoring non-operating items (FX, valuation losses) is critical to the outlook.

Financial Health

liquidity: Current assets 6,250,942,000 vs current liabilities 6,838,381,000 yields a current ratio of 91.4% and a quick ratio of 55.8%, signaling short-term liquidity stress. Working capital is -587,439,000, implying reliance on short-term financing and/or rapid inventory turnover. solvency: Total liabilities are 7,518,457,000 against equity of 10,752,000,000, resulting in a debt-to-equity ratio of 0.70x, a moderate leverage profile. Implied equity ratio is approximately 58.9% (10,752/18,238), although the reported equity ratio field is unreported (0.0%). capital_structure: Liabilities skew current (6.84bn of 7.52bn total), suggesting refinancing and rollover risk. Interest coverage at 2.3x on an EBITDA basis is adequate but leaves limited buffer against further non-operating losses or higher interest rates.

Cash Flow Quality

earnings_quality: OCF of 339,095,000 versus net income of -126,000,000 indicates cash generation despite an accounting loss (OCF/NI = -2.69). This suggests significant non-cash charges (notably D&A of 332,229,000) and/or favorable working capital movements underpinning cash earnings. FCF_analysis: Free cash flow is not disclosed (shown as 0 indicates unreported investing cash flows/capex). With OCF positive, FCF outcome depends on the magnitude of capex in the period, which is not available. working_capital: Inventories are 2,434,933,000, a large component of current assets; effective inventory and receivables management remain crucial to sustaining positive OCF given negative working capital.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is 0.00 with a payout ratio of 0.0%, appropriate given the net loss of -126,000,000. FCF_coverage: FCF coverage cannot be assessed as FCF is undisclosed (displayed as 0 indicates unreported). Positive OCF is supportive, but capex needs are unknown. policy_outlook: Given operating recovery but net loss and tight liquidity, a cautious dividend stance appears prudent until non-operating losses abate and cash generation visibility improves.

Risk Assessment

Business Risks:

• Raw material price volatility (latex, rubber) impacting gross margin
• Foreign exchange fluctuations affecting import costs and non-operating gains/losses
• Demand variability in healthcare/consumer and industrial end-markets
• Energy and logistics cost inflation pressuring COGS
• Product and regulatory compliance risks in healthcare-related products
• Competition and pricing pressure in commoditizing segments

Financial Risks:

• Tight liquidity with current ratio at 91.4% and negative working capital
• High proportion of short-term liabilities requiring rollover
• Interest burden relative to EBITDA (2.3x coverage) limiting headroom
• Exposure to non-operating losses (FX/valuation) that can erase operating gains
• Potential sensitivity to interest rate increases
• Uncertainty around capex/FCF due to undisclosed investing cash flows

Key Concerns:

• Ordinary and net losses despite strong operating recovery
• Negative working capital and sub-1.0 current ratio
• Dependence on stabilizing non-operating items to return to profitability

Investment Implications

Key Takeaways:

• Operating profitability rebounded strongly (operating income +316.6% YoY) on modest revenue growth.
• Non-operating losses (interest and other items ~175m combined) swung ordinary income to a loss.
• Net loss of -126m contrasts with positive OCF of 339m, indicating supportive cash earnings.
• Liquidity is tight (current ratio 91.4%, working capital -587m), raising near-term funding risk.
• Leverage is moderate (D/E 0.70x) and implied equity ratio ~58.9%, providing balance sheet cushion.
• Visibility on FCF and cash balances is limited due to undisclosed investing CF and cash figures.

Metrics to Watch:

• Ordinary income and breakdown of non-operating gains/losses (including FX)
• Interest coverage and effective borrowing costs
• Working capital metrics (inventory and receivables turnover)
• Operating cash flow sustainability and capex (to infer true FCF)
• Current ratio and short-term debt refinancing profile
• Gross and operating margin trajectory as input costs evolve

Relative Positioning: Within Japanese rubber/healthcare-related product peers, the company shows improving operating margins but weaker liquidity and greater susceptibility to non-operating swings; balance sheet equity is comparatively solid, yet short-term funding dependence is higher than peers with stronger current ratios.

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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