Arisawa Mfg.Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥26.54B
• Operating Income: ¥2.45B
• Net Income: ¥2.12B
• EPS: ¥47.00

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

Arisawa Manufacturing Co., Ltd. (5208) reported FY2026 Q2 consolidated JGAAP results with solid top-line growth but weaker earnings leverage. Revenue rose 5.4% year over year to ¥26.54bn, while operating income declined 10.2% to ¥2.45bn, indicating cost pressure and/or adverse mix despite higher sales. Gross profit was ¥6.19bn, translating to a 23.3% gross margin, which is respectable but points to some compression versus revenue growth. Operating margin settled at 9.3%, and ordinary income margin at 8.1%, both signaling modest deleveraging. Net income was ¥1.56bn, down 26.4% YoY, with a net margin of 5.9%, reflecting both the weaker operating result and a normalizing tax burden. The effective tax rate, estimated from income tax expense of ¥0.80bn over ordinary income of ¥2.15bn, is roughly 37%, contradicting any automated “0.0%” indicator and aligning with typical domestic rates. DuPont analysis shows ROE at 3.23%, decomposed into a 5.89% net margin, 0.344x asset turnover, and 1.60x financial leverage; the principal drag is low asset turnover, with margins under cyclical pressure in the period. Liquidity appears strong: current ratio is 266%, quick ratio is 234%, and working capital stands at ¥30.95bn, giving ample buffer against near-term obligations. The balance sheet is conservatively structured: total liabilities are ¥23.18bn against total equity of ¥48.29bn, implying liabilities-to-equity of 0.48x and an equity-to-assets ratio around 62.6%, even though the “equity ratio” field is undisclosed. Interest coverage is robust at 25.5x, supported by modest interest expense of ¥96m. Cash generation quality is solid with operating cash flow (OCF) of ¥3.26bn exceeding net income 2.1x, suggesting favorable working-capital movements and/or non-cash charges underpinning earnings quality. Investing cash flow is unreported and thus free cash flow (FCF) cannot be reliably derived for the period despite a placeholder ‘0’; consequently, dividend sustainability analysis must be framed with that limitation. Dividend data show a DPS and payout ratio of 0% as undisclosed/placeholder; no conclusion can be drawn about distributions in this interim snapshot. Overall, the company demonstrates strong liquidity and solvency, healthy cash conversion, but softer operating leverage and asset utilization, which collectively pressure ROE. Outlook hinges on recovering operating margin, sustaining cash conversion, and maintaining disciplined capital expenditure. Data limitations exist around cash, FCF, equity ratio, and share count, but available non-zero metrics provide a coherent picture of fundamentals.

Profitability Analysis

ROE_decomposition: ROE 3.23% = Net margin 5.89% × Asset turnover 0.344 × Financial leverage 1.60. The primary constraint is low asset turnover; margins are mid-teens at EBITDA level but sub-10% at operating level, with conservative leverage limiting ROE amplification. margin_quality: Gross margin 23.3% (¥6.19bn GP) indicates reasonable value-add but some compression relative to revenue growth. Operating margin 9.3% (¥2.45bn) declined YoY with operating income down 10.2% despite +5.4% revenue, indicating unfavorable mix, higher input costs, or higher SG&A/R&D. Ordinary margin 8.1% and net margin 5.9% reflect typical tax drag (~37% effective) and modest non-operating net expense. operating_leverage: Negative operating leverage in the period: +5.4% revenue versus -10.2% operating income implies costs grew faster than sales. EBITDA margin of 13.1% vs operating margin of 9.3% suggests D&A burden of ~3.8% of revenue; limited fixed-cost absorption contributed to margin pressure.

Growth Assessment

revenue_sustainability: Top-line growth of 5.4% YoY suggests steady demand; sustainability depends on product mix (e.g., advanced materials, electronics-related substrates) and pricing power amid input cost dynamics. profit_quality: OCF/NI at 2.09x and D&A of ¥1.01bn support earnings quality; interest coverage 25.5x shows resilience. However, the decline in operating income versus revenue growth signals margin sensitivity to cost inflation or mix. outlook: Near-term earnings trajectory hinges on stabilizing gross margin, disciplined SG&A, and recovery in utilization. If mix improves and cost headwinds ease, operating leverage could normalize; otherwise, ROE may remain subdued.

Financial Health

liquidity: Current ratio 266.5%, quick ratio 233.6%, working capital ¥30.95bn (CA ¥49.53bn vs CL ¥18.58bn) indicate strong short-term liquidity with low refinancing risk. solvency: Total liabilities ¥23.18bn vs total equity ¥48.29bn (~0.48x liabilities-to-equity). Equity-to-assets approximates 62.6% (¥48.29bn/¥77.17bn), pointing to a conservative capital structure even though the ‘equity ratio’ field is undisclosed. capital_structure: Leverage is modest (assets/equity 1.60x). Interest expense ¥96m is small relative to EBIT, supporting a 25.5x coverage. Balance sheet capacity exists for investment, but returns discipline is key given current ROE.

Cash Flow Quality

earnings_quality: OCF ¥3.26bn exceeds net income ¥1.56bn (2.09x), implying robust cash conversion aided by non-cash charges (D&A ¥1.01bn) and likely favorable working-capital contribution. FCF_analysis: Investing CF is undisclosed (recorded as 0), so FCF cannot be reliably measured for the period. Using the placeholder ‘0’ would misstate true FCF; assessment deferred until capex data are available. working_capital: Inventories ¥6.12bn are modest relative to current assets, supporting the 234% quick ratio. The strong OCF suggests no material build in receivables/inventories this period, though detailed components are not disclosed.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is shown as 0% due to undisclosed dividends; no inference should be made about policy from this placeholder. FCF_coverage: Not assessable this quarter because investing cash flow (proxy for capex) is undisclosed; OCF alone is healthy but FCF coverage requires capex data. policy_outlook: Given strong balance sheet and cash generation, the company has capacity for distributions over the cycle; however, near-term changes would depend on capex plans and profit recovery. No explicit policy information is provided in the data.

Risk Assessment

Business Risks:

• Margin sensitivity to raw material and energy costs affecting gross margin
• Product mix shifts in electronics/advanced materials end-markets impacting ASPs and utilization
• Cyclical demand in key customer industries (e.g., semiconductors, displays, automotive electronics)
• FX volatility affecting export competitiveness and input costs (if relevant to procurement/sales)
• Supply chain constraints or lead-time variability impacting delivery and inventory levels

Financial Risks:

• ROE pressure from low asset turnover and modest operating margin
• Potential capex upcycle could compress FCF if investing needs rise
• Tax rate normalization (~mid-to-high 30s) dampening net margins
• Concentration risk if a few large customers dominate sales (not disclosed but typical for sector)

Key Concerns:

• Negative operating leverage despite revenue growth
• Insufficient visibility on capex and FCF due to undisclosed investing cash flows
• Low asset turnover limiting returns despite conservative leverage

Investment Implications

Key Takeaways:

• Top-line growth (+5.4% YoY) but operating income down (-10.2%): margins under pressure
• Strong liquidity and conservative balance sheet (equity-to-assets ~62.6%)
• High cash conversion (OCF/NI 2.1x) supports earnings quality
• ROE at 3.23% constrained by low asset turnover and margin compression
• Interest coverage robust at 25.5x; financial risk is low
• Data gaps on investing CF and dividends limit FCF and payout analysis

Metrics to Watch:

• Gross and operating margin trajectory vs input costs
• Capex and investing cash flows to gauge FCF and capital intensity
• Asset turnover (Revenue/Assets) and inventory turns
• Order backlog or book-to-bill (if disclosed) for demand visibility
• Tax rate normalization and its impact on net margin
• Working-capital movements affecting OCF sustainability

Relative Positioning: Compared to typical TSE advanced materials/electronics suppliers, Arisawa exhibits stronger-than-average liquidity and conservative leverage, with mid-pack margins but below-average asset turnover and ROE in this period.

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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