TAIHEIYO CEMENT CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥438.14B
• Operating Income: ¥32.85B
• Net Income: ¥30.87B
• EPS: ¥219.68

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

Taiheiyo Cement (5233) reported FY2026 Q2 (cumulative) consolidated results under JGAAP with revenue of ¥438.1bn (-1.2% YoY) and operating income of ¥32.85bn (-9.7% YoY), indicating negative operating leverage as modest top-line softness translated into a larger contraction in profits. Gross profit of ¥105.57bn implies a gross margin of 24.1%, while the operating margin was 7.5%, and net income came in at ¥24.49bn (net margin 5.59%). Ordinary income slightly exceeded operating income (¥32.95bn vs. ¥32.85bn), suggesting small net non-operating gains despite ¥2.02bn in interest expense. EBITDA was ¥62.25bn, for a 14.2% EBITDA margin, reflecting solid underlying cash earnings. DuPont metrics show a calculated ROE of 3.66% driven by a net margin of 5.59%, asset turnover of 0.306x, and financial leverage of 2.14x—an overall modest return profile for the period. Liquidity is tight with a current ratio of 104.5% and a quick ratio of 90.5%, indicating reliance on inventory and the need for careful working capital management. Balance sheet leverage looks moderate: total liabilities of ¥747.6bn against total equity of ¥669.5bn (D/E ~1.12x), and an implied equity ratio of roughly 46.7% (calculated from disclosed totals), even though the reported equity ratio field is shown as 0.0% (undisclosed). Interest coverage is healthy at 16.2x (EBIT/interest), supporting solvency. Cash generation quality appears good with operating cash flow of ¥41.10bn, which is 1.68x net income; this indicates earnings are backed by cash inflows and likely aided by disciplined working capital. However, investing cash flow, cash balance, capex, and detailed financing flows are not disclosed (zeros reflect non-disclosure), limiting free cash flow assessment and net debt visibility. EPS is ¥219.68, but share count and book value per share are undisclosed in the dataset, constraining per-share and valuation diagnostics. Dividend data are also undisclosed (DPS and payout shown as 0.00), so distribution policy assessment must rely on historical patterns and balance sheet capacity rather than the current dataset. Overall, the company exhibits resilient cash earnings and strong interest coverage but faces pressure from negative operating leverage and tight short-term liquidity. Outlook hinges on sustaining cement price realizations, energy cost trajectories, and project demand normalization in Japan and overseas. Data gaps around capex, cash, and dividends are the main constraints to a fuller assessment.

Profitability Analysis

ROE of 3.66% decomposes into a 5.59% net margin, 0.306x asset turnover, and 2.14x financial leverage, implying profitability driven more by margins than by capital efficiency. Operating margin stands at 7.5% (¥32.85bn/¥438.14bn), down more sharply than revenue (-9.7% vs. -1.2% YoY), evidencing negative operating leverage and likely cost stickiness in SG&A/fixed production overhead. Gross margin of 24.1% indicates reasonable price-cost spread but suggests energy, logistics, or raw material costs remain meaningful constraints. EBITDA margin of 14.2% provides a cushion relative to operating income, with D&A of ¥29.40bn (D&A as ~6.7% of sales), consistent with a capital-intensive profile. Ordinary income surpassing operating income by ~¥0.09bn despite ¥2.02bn interest expense implies non-operating gains (e.g., FX, equity-method, or other income) offset financing costs. Interest coverage at 16.2x demonstrates ample buffer from operating earnings to service debt, supporting ongoing profitability stability. Without segment disclosures, it is not possible to parse regional or business-line margin dynamics; however, the delta between gross and operating margins suggests SG&A discipline remains an area of focus. The effective tax rate shown as 0.0% is clearly not representative; using disclosed income tax of ¥8.997bn against an approximation of pre-tax income (near ordinary income) implies a plausible effective tax rate in the high-20s percent. Overall margin quality is decent, but sensitivity to energy/fuel costs and the ability to hold pricing will drive incremental profitability.

Growth Assessment

Revenue declined 1.2% YoY to ¥438.14bn, signaling stable-to-soft demand conditions across cement and related businesses in the first half. Operating income fell 9.7% YoY to ¥32.85bn, indicating negative operating leverage and potential pressure from cost pass-through lag or mix effects. Net income declined 18.9% YoY to ¥24.49bn, further magnified by below-the-line items and taxes. The modest ordinary income uplift over operating income suggests some support from non-operating items, but the core trend is driven by weaker operating performance. Sustainability of revenue hinges on domestic construction demand, public works budgeting, and overseas exposure; an improving price environment could offset volume softness. Profit quality appears reasonable given OCF/net income of 1.68x, indicating cash-backed earnings despite lower profits. Near-term growth will likely depend on maintaining price realizations against potential volatility in energy and shipping costs. Medium-term outlook benefits from infrastructure projects and potential normalization in input costs; however, CO2 compliance investments and kiln modernization may temper profit growth if capex needs are elevated. No guidance is provided here, and lack of segment detail limits visibility on specific growth drivers or geographies. Overall, the trajectory is one of near-term pressure but potentially stabilizing margins if cost inflation subsides and pricing holds.

Financial Health

Total assets of ¥1,433.86bn and total equity of ¥669.50bn imply an equity ratio of ~46.7% (calculated), reflecting a solid capital base; the reported equity ratio of 0.0% is a non-disclosure placeholder. Total liabilities of ¥747.57bn produce a D/E of ~1.12x, a moderate leverage level for a capital-intensive industry. Liquidity is tight: current assets of ¥405.73bn vs. current liabilities of ¥388.35bn yield a current ratio of 1.05x and a quick ratio of 0.91x, underscoring limited headroom without inventory monetization. Working capital is positive but slim at ¥17.38bn. Interest coverage is comfortable at 16.2x, suggesting manageable debt service risk. Absence of disclosed cash and net debt prevents assessment of cash buffers or net leverage; thus, short-term liquidity reliance on bank lines and internal cash generation cannot be fully evaluated. Inventory of ¥54.37bn forms a meaningful portion of current assets; efficient turnover will be important to sustain liquidity. Overall solvency appears sound given equity and coverage, but short-term liquidity bears monitoring.

Cash Flow Quality

Operating cash flow of ¥41.10bn versus net income of ¥24.49bn yields an OCF/NI of 1.68x, indicating good earnings quality and positive working capital contribution or non-cash add-backs. EBITDA of ¥62.25bn versus OCF implies a 66% conversion to cash in the half, reasonable for a seasonal and capital-intensive business. Investing cash flow is undisclosed (0 placeholder), preventing determination of capex and, by extension, true free cash flow. Reported free cash flow of 0 should be treated as not available rather than zero. Financing cash flow of -¥5.58bn suggests net outflows (e.g., repayments or dividends), but details are not provided. Cash and equivalents are undisclosed, limiting insight into immediate liquidity buffers and net debt. Working capital management appears supportive given positive OCF with modest revenue decline; however, with inventories significant and the quick ratio below 1.0, conversion of receivables/inventory remains a key driver. In summary, cash earnings back reported profits, but lack of capex data is the main gap to assessing sustainable FCF.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed in the dataset (zeros indicate non-disclosure). With EPS at ¥219.68 in H1, capacity for dividends would depend on full-year earnings, capex intensity, and balance sheet priorities. Interest coverage (16.2x) and an implied equity ratio of ~46.7% suggest balance sheet capacity exists, but tight short-term liquidity (quick ratio 0.91x) argues for prudence. Without capex and cash data, FCF coverage of dividends cannot be determined. Historically in Japan, cement producers have targeted stable dividends, but policy specifics for this period are not provided here. Until capex and cash positions are disclosed, dividend sustainability assessment should be treated as inconclusive, with emphasis on maintaining liquidity and funding decarbonization investments.

Risk Assessment

Business Risks:

• Energy and fuel price volatility impacting cement production costs
• Sensitivity of cement demand to construction cycles and public works budgets
• Ability to sustain price increases amid competitive dynamics
• Logistics and shipping cost fluctuations affecting delivered margins
• CO2 regulations requiring significant capex for decarbonization and alternative fuels
• Overseas market exposure and FX translating into earnings volatility
• Raw material availability and quality affecting clinker and cement output
• Supply chain disruptions impacting kiln uptime and maintenance schedules

Financial Risks:

• Tight short-term liquidity with quick ratio below 1.0
• Potential refinancing or interest rate risk despite strong coverage
• Limited visibility on capex and cash, complicating FCF planning
• Working capital swings (receivables and inventories) affecting OCF
• Currency risk on foreign debt or operations (if applicable)

Key Concerns:

• Negative operating leverage as operating income fell more than revenue
• Undisclosed capex and cash balance impede FCF and net debt assessment
• Reliance on inventory to support liquidity given sub-1.0 quick ratio

Investment Implications

Key Takeaways:

• Stable revenue but pressured profitability, with operating income down 9.7% YoY
• Margins remain decent (GPM 24.1%, OPM 7.5%, EBITDA margin 14.2%) but sensitive to costs
• Strong interest coverage (16.2x) and solid calculated equity ratio (~46.7%) underpin solvency
• Operating cash flow robust at ¥41.1bn; earnings quality appears good (OCF/NI 1.68x)
• Short-term liquidity is tight (current ratio 1.05x; quick ratio 0.91x), requiring vigilant working capital management
• Data gaps on cash, capex, FCF, and dividends limit visibility into shareholder returns and net leverage

Metrics to Watch:

• Cement price realization and volume trends by region
• Fuel and electricity cost indices (coal, petcoke, power)
• Capex and maintenance spending guidance; decarbonization investments
• Working capital days (DSO, DIO, DPO) and inventory levels
• Net debt and liquidity (cash balance, unused credit lines) once disclosed
• Ordinary income drivers (non-operating gains/losses) and interest expense trajectory

Relative Positioning: Within the Japan cement peer group, Taiheiyo’s scale and diversified footprint typically confer advantages in sourcing and pricing; the calculated equity ratio suggests a comparatively solid capital base and interest coverage is strong, but profitability this half reflects negative operating leverage and near-term margin pressure similar to peers amid input cost volatility.

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