Bando Chemical Industries,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥59.09B
• Operating Income: ¥6.57B
• Net Income: ¥4.83B
• EPS: ¥115.97

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

Verdict: A solid FY2026 Q2 with strong margin-driven earnings growth and healthy cash generation, despite only modest top-line expansion. Revenue rose 1.7% YoY to 590.94, while operating income surged 30.1% YoY to 65.69, evidencing significant operating leverage. Operating margin expanded to 11.1%, up approximately 242 basis points from an estimated 8.7% a year ago, as disciplined cost control and mix outweighed input cost pressures. Gross profit reached 172.06 with a gross margin of 29.1%, and EBITDA was 92.24, implying a 15.6% EBITDA margin. Net income grew 46.2% YoY to 48.19, taking net margin to 8.2%. Equity-method investment income contributed 6.45, a modest 9.8% of profits, indicating limited reliance on affiliates for this period’s performance. Cash conversion was strong: operating cash flow of 83.45 exceeded net income (OCF/NI 1.73x), and free cash flow (OCF + investing CF) totaled 71.70. Balance sheet strength remains a key support with equity ratio at 71.6%, low interest-bearing debt (short-term 4.83; long-term 15.62), and cash & equivalents of 163.73. Leverage is conservative (total liabilities/equity 0.39x; Debt/EBITDA ~0.22x), providing flexibility to fund capex (23.22), dividends, and buybacks (11.81). The effective tax rate was 26.7%, broadly in line with Japan’s statutory range. ROE is 5.6% on DuPont, driven chiefly by margin improvement rather than leverage or asset turnover, but remains below an 8% aspirational threshold. ROIC of 5.5% suggests improving, but still mediocre capital efficiency, leaving room for further optimization. Earnings quality appears high given OCF outpacing NI, limited financial risk, and contained non-operating dependence. Key watchpoints include sustaining cost discipline as wage and energy costs rise and managing inventory levels relative to demand. Forward-looking, the company appears well-positioned to maintain improved margins if input costs and FX remain manageable, with balance sheet strength underpinning shareholder returns.

Profitability Analysis

ROE decomposition (DuPont): ROE 5.6% = Net Profit Margin (8.2%) × Asset Turnover (0.493) × Financial Leverage (1.39x). The most notable change versus last year is the net profit margin, inferred from operating income rising 30.1% on just 1.7% revenue growth; operating margin expanded about 242 bps to 11.1%. Business driver: gross-to-operating spread improved through SG&A discipline and better mix/pricing, while equity-method income (6.45) provided only a modest uplift. Sustainability: margin gains look partly structural (pricing, cost control) but will be tested by raw material/rubber and energy costs; ongoing wage inflation could pressure SG&A. Asset turnover at 0.493 remains subdued, reflecting a capital-intensive and inventory-bearing model; acceleration likely requires stronger volume or tighter working capital turns. Leverage stayed conservative at 1.39x assets/equity; ROE improvement is not leverage-driven and thus of higher quality. Watch for SG&A trend relative to revenue; although SG&A level is 127.42, lack of YoY detail limits confirmation, but the magnitude of operating leverage implies SG&A grew below revenue.

Growth Assessment

Top-line growth was modest at +1.7% YoY, suggesting volumes/pricing were disciplined but not a primary earnings driver. Profit growth was robust: operating income +30.1% and net income +46.2% YoY, highlighting improved margin structure. Operating margin rose to 11.1% (about +242 bps YoY), with EBITDA margin at 15.6%, indicating solid operating efficiency. Equity-method income contribution (6.45; ~9.8% of profit) was supportive but not the core driver. With ROIC at 5.5%, incremental returns are improving but remain below a typical 7–8% target, suggesting continued focus on portfolio productivity and pricing. Outlook hinges on maintaining cost pass-through, stabilizing raw material costs, and steady demand in industrial/auto-related end markets. Absent a revenue acceleration, sustaining double-digit margins will be critical for further ROE uplift.

Financial Health

Liquidity is strong in aggregate, with current assets of 618.88; however, current liabilities are unreported, so the current ratio is not calculable. There is no warning trigger for D/E, as total liabilities/equity is 0.39x and interest-bearing debt is low (ST 4.83; LT 15.62). Maturity mismatch risk appears low: short-term loans (4.83) are minimal relative to current assets (618.88), and cash & equivalents are 163.73. Equity ratio is high at 71.6%, reflecting a robust capital base. No off-balance sheet obligations are disclosed in the data set. Overall solvency and funding flexibility remain strong.

Cash Flow Quality

OCF/Net Income is 1.73x, above the 1.0 threshold, signaling high earnings quality. Free cash flow of 71.70 (defined here as OCF + investing CF) comfortably covers capex of 23.22 and provides room for shareholder returns. Working capital quality cannot be fully assessed due to lack of period-over-period AR, inventory, and AP movement data; however, the strong OCF relative to earnings suggests limited earnings inflation from receivables or inventory build in this period. Financing CF was -86.18, including share repurchases of 11.81 and likely dividends (unreported), implying active capital returns funded by internally generated cash.

Dividend Sustainability

The calculated payout ratio is 69.7%, slightly above the <60% benchmark, but FCF coverage is a comfortable 2.13x, indicating current distributions are covered by cash generation. With low net debt and strong OCF, the company appears capable of sustaining its dividend under current conditions. Key sensitivities are margin resilience (input costs, wage inflation) and capex needs; should ROIC initiatives require higher investment, payout flexibility may be needed. Dividend and total dividend paid figures are unreported; assessment relies on the provided payout and FCF coverage metrics.

Risk Assessment

Business Risks:

• End-market cyclicality in automotive and industrial machinery affecting belt and rubber product demand
• Raw material (rubber, petrochemical inputs) and energy cost volatility pressuring margins
• FX fluctuations impacting overseas revenues and input costs
• Pricing discipline and customer pushback risk as the company sustains elevated margins
• Execution risk in improving ROIC from 5.5% toward target levels

Financial Risks:

• Potential working capital swings (AR/inventory) given manufacturing footprint, with limited visibility due to unreported current liabilities
• Equity-method income volatility (6.45 this period) modest but non-zero contribution to earnings
• Interest rate risk minimal given low debt, but reinvestment risk on cash balances

Key Concerns:

• ROE at 5.6% and ROIC at 5.5% remain below typical investor hurdles, requiring sustained margin and asset turn improvements
• Sustainability of ~242 bps operating margin expansion if input costs re-accelerate
• Data limitations: lack of detailed SG&A breakdown, current liabilities, interest expense, and dividend cash outflow

Investment Implications

Key Takeaways:

• Earnings beat quality: strong operating leverage with OCF/NI at 1.73x
• Operating margin expanded to 11.1%, up ~242 bps YoY, despite modest +1.7% revenue growth
• Balance sheet resilience with equity ratio 71.6% and low interest-bearing debt
• FCF of 71.70 supports both capex and shareholder returns (buybacks 11.81; dividends unreported)
• ROIC 5.5% indicates progress needed on capital efficiency

Metrics to Watch:

• Operating margin sustainability and SG&A growth vs revenue
• Input cost indices (rubber, petrochemicals) and energy costs
• Working capital turns (AR days, inventory days) once disclosed
• Equity-method income stability and contribution
• ROIC trajectory and capex discipline
• FX impacts on revenue and cost base

Relative Positioning: Within Japanese industrial rubber/components peers, Bando Chemical shows healthier margin momentum and a stronger balance sheet than many mid-cap peers, but lags on ROIC/ROE relative to top-tier operators; continued focus on cost discipline and asset efficiency is key to narrowing 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
• 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