Sumitomo Osaka Cement Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥105.77B
• Operating Income: ¥4.12B
• Net Income: ¥1.02B
• EPS: ¥172.48

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

Sumitomo Osaka Cement (5232) reported FY2026 Q2 consolidated results under JGAAP showing mixed top-line and markedly improved profitability. Revenue was ¥105.8bn, down 2.6% YoY, indicating volume softness or portfolio mix headwinds, yet gross profit of ¥22.6bn yielded a solid gross margin of 21.3%. Operating income rose sharply to ¥4.1bn (+80.7% YoY), lifting the operating margin to approximately 3.9%, suggesting improved pricing discipline, fuel and power cost normalization, and/or better product mix. Ordinary income was ¥4.2bn, modestly above operating income, implying stable non-operating items net of interest expense of ¥0.47bn. Net income was ¥5.59bn (+492.8% YoY) with a 5.28% net margin, notably outpacing ordinary income, likely reflecting one-off gains or tax effects; the precise drivers are not fully discernible from the disclosed line items. EBITDA was ¥14.76bn, with a 14.0% margin, underscoring substantial non-cash charges (depreciation and amortization of ¥10.64bn) typical for a capital-intensive cement business. The DuPont framework shows a calculated ROE of 2.89% based on a 5.28% net margin, 0.297x asset turnover, and 1.84x financial leverage—an improvement in earnings quality but still modest return on equity for the cycle. Liquidity remains sound, with a current ratio of 124.4% and a quick ratio of 110.9%, and working capital of ¥20.40bn supports operational resilience. Leverage is manageable, with a debt-to-equity proxy of 0.82x and asset/equity leverage of 1.84x, consistent with sector norms. Operating cash flow of ¥10.19bn exceeded net income (OCF/NI 1.82x), indicating solid cash conversion, likely aided by working capital discipline; detailed drivers are not disclosed. Investment cash flows and cash/cash equivalents were not reported in this extract, limiting visibility on capex and free cash flow, which are important for a capex-heavy industry. Interest coverage of 8.7x indicates adequate headroom against funding costs. Effective tax rate information is inconclusive in the provided metrics despite tax expense disclosure, and may reflect interim factors or disclosure alignment. Dividend information is not disclosed in this dataset; payout and coverage metrics appear as zero placeholders and should not be interpreted as actual zero. Overall, despite lower revenue, the company delivered margin recovery and strong operating cash generation in 1H, while balance sheet and liquidity remain healthy. Data gaps (investing cash flows, cash balances, dividends, shares) constrain the depth of valuation and FCF sustainability assessment, but the available non-zero data point to improving profitability momentum.

Profitability Analysis

ROE decomposition: Net margin 5.28% x asset turnover 0.297 x financial leverage 1.84 yields a calculated ROE of 2.89%, consistent with the reported figure. Operating margin improved to approximately 3.9% (¥4.12bn operating income on ¥105.77bn revenue), up sharply YoY, suggesting price-cost spread recovery as energy and raw material inflation pressures ease and/or successful pass-through. Gross margin of 21.3% indicates better cost absorption and possibly favorable product mix; the spread between gross and operating margins (about 17.4pp) reflects sizable SG&A and other operating costs, typical for the sector but improving given the YoY operating profit jump. EBITDA margin of 14.0% confirms healthy operating cash earnings considering the capital intensity of cement; depreciation of ¥10.64bn underscores heavy asset base. Ordinary income marginally exceeded operating income (¥4.23bn vs ¥4.12bn), implying relatively balanced non-operating items net of interest expense of ¥0.47bn. Net income exceeded ordinary income materially (¥5.59bn vs ¥4.23bn), pointing to extraordinary gains and/or tax effects; while the exact components are not broken out here, this elevates headline profitability beyond core operations. Operating leverage appears positive: a 2.6% revenue decline coincided with an 80.7% surge in operating income, indicating tight cost control and improved price realization. Interest coverage at 8.7x (EBIT/interest) is comfortable, suggesting profitability adequately covers financing costs. Overall profitability quality improved, but a portion of net profit uplift likely stems from non-recurring or non-operating items, making ordinary and operating profit better indicators of core earnings.

Growth Assessment

Top-line contracted 2.6% YoY to ¥105.77bn, indicating weaker volumes, mix shifts, or timing effects in domestic cement demand and related businesses. Despite revenue softness, operating profit grew 80.7% to ¥4.12bn, reflecting improved price-cost dynamics and cost discipline. Gross profit of ¥22.58bn with a 21.3% margin suggests cost normalization (fuel/power) and/or better mix in specialty materials and construction-related products. Ordinary income of ¥4.23bn signals that non-operating items were stable net of interest, supporting the sustainability of the core recovery. Net income growth (+492.8% YoY) appears partly driven by non-operating/extraordinary factors, as net profit exceeds ordinary profit by roughly ¥1.36bn; this inflates YoY growth optics relative to core trends. Asset turnover of 0.297x is subdued, consistent with a capital-heavy profile and half-year data; improving utilization and shipment recovery are needed for sustained revenue growth. EBITDA margin at 14.0% offers some buffer against cyclicality, and improved operating leverage bodes well if demand stabilizes. Looking ahead, revenue sustainability will hinge on domestic construction activity, pricing to offset input volatility, and performance of non-cement segments; the current margin traction provides a base, but top-line visibility remains limited given the YoY decline. With OCF outpacing NI, earnings quality appears supportive of near-term growth investments, subject to capex needs not disclosed here. Overall outlook: cautious on revenue, constructive on margin resilience, pending confirmation from subsequent quarters.

Financial Health

Total assets were ¥356.49bn against total liabilities of ¥159.37bn and equity of ¥193.62bn, giving financial leverage (assets/equity) of 1.84x. The implied debt-to-equity proxy (total liabilities/equity) is 0.82x, indicating a balanced capital structure for the sector. Liquidity is adequate with current assets of ¥104.14bn and current liabilities of ¥83.74bn, yielding a current ratio of 124.4% and quick ratio of 110.9%; inventories are ¥11.24bn, modest relative to current assets. Working capital of ¥20.40bn provides operational flexibility. Interest expense of ¥0.47bn is well-covered by EBIT (8.7x) and by EBITDA (approximately 31x), suggesting low refinancing risk under current earnings power. Equity ratio was not disclosed in this dataset; however, equity constitutes a large portion of the balance sheet, consistent with the leverage metrics. No cash and cash equivalents data are provided here, so absolute liquidity buffers cannot be quantified from this extract. Overall solvency appears sound, with ample headroom provided by equity and moderate liabilities.

Cash Flow Quality

Operating cash flow of ¥10.19bn exceeds net income of ¥5.59bn (OCF/NI 1.82x), indicating strong cash conversion and supportive earnings quality in the period. This outperformance likely reflects favorable working capital movements and the add-back of substantial non-cash depreciation (¥10.64bn), though specific working capital components are not disclosed. Free cash flow cannot be reliably calculated because investing cash flows and capex are not reported in this extract (investing CF shown as zero indicates non-disclosure, not actual zero). Financing cash flow was a modest outflow of ¥0.38bn, consistent with stable debt and equity activities. EBITDA of ¥14.76bn provides additional comfort that cash earnings support operations and interest obligations. Without capex data, it is not possible to assess maintenance vs. growth investment intensity; given the industry, capex is typically material and will influence full-year FCF. Overall, cash flow quality is solid on the operating side, but FCF visibility is limited pending investment cash flow disclosure.

Dividend Sustainability

Dividend per share and payout metrics are not disclosed in this dataset (zeros indicate non-reporting). As such, payout ratio and FCF coverage cannot be assessed from the provided figures. On fundamentals, the company generated ¥10.19bn in OCF against ¥5.59bn in NI, which would generally support distributions if capex requirements and balance sheet priorities allow. However, in a capital-intensive sector, maintenance and strategic capex often consume a sizable portion of OCF, and investing CF information is necessary to judge sustainability. Policy-wise, Japanese industrials often target stable dividends with a focus on medium-term payout ratios, but no company-specific policy details are included here. Conclusion: insufficient disclosed data in this extract to evaluate dividend sustainability; future assessment requires capex, cash balances, and formal payout guidance.

Risk Assessment

Business Risks:

• Domestic cement demand softness and construction cycle volatility impacting volumes and pricing
• Energy and raw material price volatility (coal, petcoke, electricity) affecting cost base and margins
• Carbon-related regulatory costs and decarbonization capex requirements
• Competitive pricing pressure from domestic peers and imports/export dynamics
• Project timing and seasonality, including weather-related disruptions
• Mix risk between cement, construction materials, and specialty products impacting profitability
• Potential one-off gains/losses or tax effects distorting net income visibility

Financial Risks:

• Capex intensity potentially compressing free cash flow in weaker cycles
• Interest rate and credit spread risks, albeit mitigated by current interest coverage
• Working capital swings affecting operating cash flow
• Limited disclosure on cash balances reduces visibility on immediate liquidity buffers
• Exposure to potential impairment risks given large fixed asset base

Key Concerns:

• Revenue decline (-2.6% YoY) despite strong profit recovery raises questions on demand trajectory
• Net income materially above ordinary income suggests non-recurring items; underlying earnings may be lower
• Lack of investing cash flow disclosure prevents assessment of free cash flow and dividend capacity

Investment Implications

Key Takeaways:

• Profitability recovery: operating income up 80.7% YoY to ¥4.12bn despite a 2.6% revenue decline
• Margins improved with gross margin at 21.3% and EBITDA margin at 14.0%
• Solid cash conversion with OCF/NI at 1.82x indicates healthy earnings quality
• Balance sheet resilient: leverage 0.82x liabilities-to-equity and interest coverage 8.7x
• Underlying earnings likely best reflected by operating/ordinary income as net income includes non-core effects
• Data gaps (capex, cash, dividends, shares) limit FCF and shareholder return analysis

Metrics to Watch:

• Cement selling prices and shipment volumes (domestic and export)
• Fuel and electricity costs, and price-cost spread
• Capex and investing cash flows to gauge FCF and decarbonization spend
• Ordinary income vs. net income gap to monitor one-off items
• Working capital movements and inventory levels
• Interest coverage and leverage trends
• Segment performance in non-cement businesses

Relative Positioning: Within the Japanese cement peer set, Sumitomo Osaka Cement appears to have achieved notable margin recovery and maintains moderate leverage, positioning it as a disciplined operator with improving earnings quality; however, revenue headwinds and incomplete FCF visibility place it mid-pack on growth resilience pending further disclosure.

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
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