FUJI LATEX CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.42B
• Operating Income: ¥248M
• Net Income: ¥58M
• EPS: ¥29.61

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

For FY2026 Q2, Fuji Latex (51990) delivered mixed results: topline contracted while profitability at the operating level improved markedly. Revenue declined 5.9% YoY to ¥3,425 million, but operating income surged 84.0% YoY to ¥248 million, implying stronger cost discipline, a favorable mix shift, and/or pricing resilience. Gross profit was ¥787 million with a gross margin of 23.0%, and EBITDA reached ¥392 million (11.4% margin), indicating healthy operating efficiency despite softer sales. Ordinary income of ¥214 million sits below operating income, reflecting net non-operating expenses, largely interest (¥27 million) and other ordinary items. Net income fell 35.4% YoY to ¥37 million, a sharp drop relative to ordinary income, suggesting the presence of extraordinary losses and/or other below-the-line charges and minority interest impacts under JGAAP. DuPont analysis shows ROE of 0.92%, driven by a thin net margin of 1.08%, asset turnover of 0.331x, and financial leverage of 2.58x. Liquidity is adequate with a current ratio of 134.2% and quick ratio of 120.9%, supported by working capital of ¥1,645.8 million. Solvency is moderate: debt-to-equity stands at 1.74x and our derived equity ratio (Total Equity/Total Assets) is approximately 38.7% (based on ¥4,007 million equity and ¥10,356 million assets), even though the reported equity ratio field is shown as 0.0% (undisclosed). Operating cash flow was solid at ¥201 million, equating to 5.42x net income, which indicates solid earnings-to-cash conversion this half. Free cash flow is shown as zero due to undisclosed investing cash flows; hence true FCF cannot be assessed from the provided data. Interest coverage is comfortable at 9.2x, providing a buffer against rate or earnings volatility. Tax expense of ¥39 million alongside a low net profit suggests unusual items rather than tax as the main driver of weak bottom-line performance. Dividend per share is shown as ¥0.00 with a 0.0% payout ratio, but dividend policy and actual distributions are unclear given disclosure limitations. Overall, the company demonstrated meaningful operating improvement and cash generation despite revenue headwinds, but bottom-line weakness and leverage warrant attention. Data gaps (cash balance, investing cash flows, equity ratio disclosure, share count) limit completeness of the assessment, and interpretations rely on the non-zero items provided. Outlook hinges on sustaining cost control, managing non-operating/extraordinary impacts, and stabilizing revenue in core latex-related businesses.

Profitability Analysis

ROE of 0.92% is explained by a net profit margin of 1.08%, asset turnover of 0.331x, and financial leverage of 2.58x. The margin structure shows a 23.0% gross margin (¥786.8m/¥3,425.0m) and about a 7.2% operating margin (¥248.0m/¥3,425.0m), indicating robust operating improvement despite a 5.9% revenue decline. EBITDA margin at 11.4% reflects reasonable operating efficiency and cost containment (depreciation and amortization of ¥143.7m). Operating income expanded 84.0% YoY on lower sales, pointing to positive operating leverage from fixed-cost absorption or structural cost actions. Ordinary income of ¥214.0m underscores a drag from non-operating expenses (notably ¥27.1m interest) and possibly other ordinary losses. The steep drop from ordinary income to net income (¥214.0m to ¥37.0m) signals material extraordinary or below-the-line charges, which depress net margin and ROE. Interest coverage at 9.2x is healthy, indicating that current operating earnings can comfortably service interest costs. Overall profitability quality at the operating level looks improved, but sustainability depends on maintaining gross margin discipline and reducing non-operating/extraordinary burden.

Growth Assessment

Revenue decreased 5.9% YoY to ¥3,425m, indicating end-demand softness or pricing/mix adjustments in core latex segments. Despite the top-line decline, operating income rose 84.0% YoY to ¥248m, suggesting effective cost control, improved product mix, or productivity gains. Gross profit of ¥787m with a 23.0% margin supports the view that cost pass-through or mix improvements are helping offset volume pressure. Ordinary income of ¥214m trails operating income, showing continued non-operating headwinds; addressing financing and other ordinary costs would improve PBT momentum. Net income fell 35.4% YoY to ¥37m due to extraordinary/one-off factors, implying that bottom-line recovery lags operating recovery. Earnings quality appears stronger at the cash level (OCF ¥201m vs NI ¥37m), which mitigates concerns around the headline net profit contraction. Near-term outlook depends on stabilizing sales while retaining margin gains; sustaining an 11%+ EBITDA margin would provide resilience if volumes remain soft. A return to growth likely requires demand normalization in key end markets and disciplined pricing to protect gross margins.

Financial Health

Total assets are ¥10,356m and total equity is ¥4,007m, implying an approximate equity ratio of 38.7% (derived), despite the equity ratio field being undisclosed (0.0% placeholder). Total liabilities are ¥6,988m, with current liabilities of ¥4,812m. Liquidity is adequate: current ratio 134.2% and quick ratio 120.9%, backed by working capital of ¥1,645.8m and inventories of ¥641.5m. Leverage is moderate-to-elevated with debt-to-equity of 1.74x and financial leverage (assets/equity) of 2.58x. Interest expense of ¥27.1m is manageable given interest coverage of 9.2x. The capital structure appears balanced but leaves limited room for incremental debt without pressuring coverage if operating conditions weaken. The decline from operating income to ordinary income indicates some ongoing non-operating costs that weigh on financial flexibility. Overall solvency is acceptable, but deleveraging or improving ordinary income would strengthen the balance sheet.

Cash Flow Quality

Operating cash flow of ¥200.7m is 5.42x reported net income (¥37.0m), signaling strong earnings-to-cash conversion and suggesting accruals worked favorably (e.g., working capital release or non-cash charges). Depreciation and amortization of ¥143.7m supports cash-generative operations relative to accounting earnings. Investing cash flows are undisclosed (shown as 0), so free cash flow cannot be reliably calculated; the reported FCF of 0 reflects missing capex data rather than true FCF. Financing cash flow of -¥90.4m indicates net outflows (e.g., debt repayment or distribution), funded by OCF. Working capital appears to be a source of cash given the high OCF relative to NI, but detailed drivers (receivables, payables, inventory turns) are not disclosed. Overall cash flow quality is solid at the operating level, but full assessment is constrained by the absence of investing cash flow data and undisclosed cash balances.

Dividend Sustainability

Annual DPS is shown as ¥0.00 and payout ratio 0.0%, but disclosure gaps (outstanding shares, cash, and investing cash flows) limit visibility into policy and coverage. With OCF of ¥200.7m and positive operating earnings, the business could theoretically support some level of distribution; however, leverage (D/E 1.74x) and the large gap between ordinary and net income argue for prudence. Given FCF is unassessable due to undisclosed investing cash flows, true dividend coverage cannot be established; the reported FCF coverage of 0.00x is not meaningful. Near-term dividend stance likely depends on capex needs, any extraordinary losses, and the company’s balance sheet priorities. Until bottom-line volatility normalizes and investing cash needs are clarified, payout visibility remains limited.

Risk Assessment

Business Risks:

• End-market demand volatility in latex products (e.g., medical, industrial, consumer applications)
• Raw material price fluctuations (natural rubber/latex and petrochemical inputs)
• Pricing pressure and competition in commoditized product segments
• Regulatory and quality compliance requirements for medical/health-related products
• FX exposure on imported materials and exported products
• Capacity utilization and fixed-cost absorption risk amid softer volumes
• Customer concentration and OEM procurement dynamics

Financial Risks:

• Moderate leverage (debt-to-equity 1.74x) and associated refinancing/interest rate risk
• Non-operating and extraordinary losses depressing net income versus operating profits
• Working capital swings impacting operating cash flow sustainability
• Potential capex requirements (undisclosed) that could pressure free cash flow
• Limited disclosure on cash balances constraining liquidity assessment

Key Concerns:

• Sharp drop from ordinary income (¥214m) to net income (¥37m) suggests material below-the-line charges
• Revenue contraction (-5.9% YoY) despite margin gains raises questions about demand durability
• Undisclosed investing cash flows prevent free cash flow evaluation and dividend coverage analysis

Investment Implications

Key Takeaways:

• Top-line declined 5.9% YoY to ¥3,425m, but operating income rose 84.0% to ¥248m, indicating improved cost/mix dynamics
• EBITDA margin at 11.4% and gross margin at 23.0% signal resilient operating performance
• Ordinary-to-net income gap (¥214m to ¥37m) points to one-offs or extraordinary items weighing on bottom line
• OCF of ¥200.7m (5.42x NI) demonstrates strong cash conversion in the half
• Liquidity is adequate (current ratio 134.2%, quick ratio 120.9%) with working capital of ¥1,645.8m
• Leverage is moderate-to-elevated (D/E 1.74x; financial leverage 2.58x), but interest coverage is comfortable at 9.2x
• Equity ratio derived at ~38.7% supports solvency, despite the equity ratio field being undisclosed
• Dividend visibility is low due to undisclosed FCF and cash balances

Metrics to Watch:

• Revenue trajectory and order intake to confirm stabilization after -5.9% YoY
• Gross and operating margins to gauge sustainability of recent efficiency gains
• Extraordinary items and other below-the-line impacts driving the net income shortfall
• Investing cash flows and capex plans to assess true free cash flow
• Leverage and interest coverage trends amid potential rate moves
• Working capital metrics (DSO/DPO/DOH) underlying strong OCF

Relative Positioning: Within Japan’s latex and rubber product peers, Fuji Latex appears to be a mid-sized, niche-focused manufacturer demonstrating resilient operating margins despite a sales decline. Leverage is somewhat higher than conservative peers, but coverage is sound. The primary differentiator near term is improved operating efficiency contrasted with weaker bottom-line due to non-operating/extraordinary charges.

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