SHINAGAWA REFRA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥81.84B
• Operating Income: ¥6.17B
• Net Income: ¥5.06B
• EPS: ¥95.22

Income Statement

Balance Sheet

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

Shinagawa Refractories (TSE:5351) posted FY2026 Q2 consolidated results under JGAAP with strong top-line growth but weaker profits, implying cost pressures and negative operating leverage in the period. Revenue rose 20.0% YoY to ¥81.8bn, pointing to solid demand and/or successful price increases. Despite this, operating income declined 2.5% YoY to ¥6.18bn, indicating margin compression amid rising input costs, mix effects, or higher SG&A. Net income fell 11.6% YoY to ¥4.34bn, further reflecting non-operating items and taxes. The reported gross profit was ¥16.17bn, corresponding to a gross margin of about 19.8%; this aligns with the provided gross margin metric. Note that the reported cost of sales (¥52.06bn) is not arithmetically consistent with the gross profit figure, so we rely on the provided gross profit and gross margin for analysis. Operating margin stands near 7.5%, which, combined with the YoY decline in operating income, suggests negative operating leverage despite strong revenue growth. DuPont decomposition shows a net margin of 5.31%, asset turnover of 0.369x, and financial leverage of 2.19x, yielding ROE of 4.30%, a modest level for a cyclical materials business. Liquidity appears solid with a current ratio of 184.6% and quick ratio of 159.4%, supported by ¥49.0bn of working capital. Capital structure is balanced with total liabilities of ¥101.4bn and equity of ¥101.0bn, implying an equity ratio around 45.6% based on totals (the reported equity ratio line shows 0.0%, which is an unreported placeholder). Interest coverage is robust at 47.1x, indicating low near-term refinancing risk. The implied effective tax rate is approximately 34–35% based on income tax versus pre-tax earnings, despite a reported 0.0% line item (unreported). Cash flow statements are not disclosed in the provided XBRL fields (zeros represent unreported), so operating and free cash flow quality cannot be assessed from this dataset. Dividend information is also unreported (DPS and payout ratio shown as 0.00), precluding a payout or coverage analysis this quarter. Overall, the quarter demonstrates healthy demand but pressure on profitability and ROE, with a strong liquidity position and manageable leverage. Key watch points are gross and operating margin trajectory, price pass-through to offset energy and raw material costs, and confirmation of cash flow conversion once disclosed.

Profitability Analysis

ROE decomposition: ROE 4.30% = Net margin 5.31% × Asset turnover 0.369 × Financial leverage 2.19. The low ROE is primarily constrained by modest net margins and low asset turnover typical of a capital-intensive refractories business. margin_quality: Gross margin approximately 19.8% (based on gross profit ¥16.17bn and revenue ¥81.84bn). Operating margin ~7.5% (¥6.18bn/¥81.84bn). Net margin 5.31% (¥4.34bn/¥81.84bn). YoY decline in operating income despite 20% revenue growth indicates margin pressure from input costs, product mix, or SG&A escalation. operating_leverage: Negative in the period: revenue +20.0% YoY while operating income −2.5% YoY, implying incremental costs outpaced incremental revenue. Focus on cost pass-through cadence and mix normalization to restore positive operating leverage.

Growth Assessment

revenue_sustainability: Top-line growth of +20.0% YoY suggests strong end-market demand (steel/cement/glass) and/or price hikes. Sustainability depends on steel production trends, capital spending cycles, and competitive pricing dynamics in refractories. profit_quality: Ordinary income of ¥6.91bn exceeded operating income, aided by non-operating items; however, net income decline (−11.6% YoY) and lower operating profit point to underlying margin pressure. Effective tax rate implied ~34–35%, consistent with historical levels for domestic operations. outlook: If input costs (energy, magnesia, alumina, logistics) stabilize and pricing continues to catch up, margins could normalize. Absent disclosed orders/backlog, visibility is limited; monitoring price realization vs. cost inflation will be key in 2H.

Financial Health

liquidity: Current ratio 184.6% and quick ratio 159.4% reflect strong short-term solvency. Working capital stands at ¥49.01bn (current assets ¥106.96bn less current liabilities ¥57.96bn). Inventories of ¥14.55bn appear manageable within the current asset base. solvency: Total liabilities ¥101.39bn vs. equity ¥100.97bn, implying liabilities-to-equity ~1.00x. Using totals, the implied equity ratio is ~45.6% (equity/total assets), despite the reported 0.0% line (unreported). Interest coverage is healthy at 47.1x (operating income/interest expense), indicating ample buffer. capital_structure: Financial leverage factor 2.19x (assets/equity) is moderate for the sector, providing capacity but limiting ROE uplift given current margins.

Cash Flow Quality

earnings_quality: Cash flow statements are not disclosed in the provided dataset (zeros indicate unreported). As such, we cannot validate accruals, OCF-to-net income, or cash conversion cycle for this period. FCF_analysis: Free cash flow cannot be computed without operating and investing cash flow disclosure. Capex intensity and maintenance vs. growth split are not available. working_capital: Balance sheet shows strong working capital; however, period-over-period changes in receivables, payables, and inventory are not provided, limiting assessment of cash conversion efficiency.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are shown as 0.00 in the dataset, indicating no disclosure for this period. We therefore cannot compute a payout ratio against EPS of ¥95.22. FCF_coverage: Undeterminable due to unreported OCF and capex. Dividend coverage from free cash flow cannot be assessed. policy_outlook: No updated guidance or policy details provided in the dataset. If historical practice involves stable dividends, sustainability would hinge on margin recovery and cash generation; confirmation awaits cash flow disclosure.

Risk Assessment

Business Risks:

• Exposure to cyclical steel, cement, and glass end-markets impacting refractory demand.
• Raw material and energy price volatility (magnesia, alumina, bauxite, coke, electricity, gas).
• Pricing power and pass-through timing lag vs. cost inflation.
• Product mix shifts toward lower-margin contracts or geographies.
• Competition from global refractory producers and import pressures.
• Operational execution in capex/maintenance outages at customer sites.
• Supply chain disruptions and logistics costs.

Financial Risks:

• Potential margin compression leading to lower interest coverage if costs spike.
• Working capital swings affecting operating cash flow and liquidity.
• Currency fluctuations impacting import costs and overseas subsidiaries.
• Capital expenditure needs for capacity/modernization increasing leverage if debt-funded.

Key Concerns:

• Negative operating leverage despite strong revenue growth.
• Low ROE at 4.30% given capital intensity.
• Lack of cash flow disclosure this quarter, limiting earnings quality assessment.

Investment Implications

Key Takeaways:

• Strong revenue growth (+20% YoY) but weaker operating and net profits.
• Gross margin ~19.8% and operating margin ~7.5% highlight cost pressure.
• ROE at 4.30% reflects modest profitability and low asset turnover.
• Liquidity is solid; leverage moderate with liabilities/equity ~1.00x and 47x interest cover.
• Cash flow and dividend data not disclosed; await updates for quality and payout assessment.

Metrics to Watch:

• Gross and operating margin progression (price realization vs. input costs).
• Order trends/backlog and utilization at key steel customers.
• Working capital days (receivables, inventory) once cash flow data is available.
• Capex levels and maintenance vs. growth split.
• FX rates and energy cost indices influencing COGS.

Relative Positioning: Within the refractories space, the company exhibits healthy top-line momentum and strong liquidity with moderate leverage, but profitability and ROE are currently subdued relative to peers that have fully passed through cost inflation.

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