TYK CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥16.07B
• Operating Income: ¥1.90B
• Net Income: ¥1.86B
• EPS: ¥30.71

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

TYK Co., Ltd. (5363) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth but softer operating profitability. Revenue was ¥16.074 billion, up 2.8% year over year, indicating resilient demand but limited pricing/mix upside. Gross profit was ¥4.491 billion, implying a gross margin of 27.9%, which is healthy for refractory/ceramics but suggests some cost pressure given the decline in operating income. Operating income of ¥1.904 billion fell 10.9% YoY, signaling negative operating leverage as cost inflation or mix outweighed revenue growth. Ordinary income exceeded operating income at ¥2.301 billion, pointing to meaningful non-operating contributions (e.g., financial or other income) supporting bottom-line results. Net income was ¥1.364 billion (down 10.1% YoY), translating to a net margin of 8.49% and EPS of ¥30.71. EBITDA reached ¥2.384 billion, with a margin of 14.8%, reflecting solid cash earnings given relatively low D&A of ¥480 million. Interest expense was minimal at ¥8.8 million, and interest coverage was a robust 216.7x, underscoring limited financial risk from debt service. The balance sheet is conservative, with total assets of ¥62.462 billion, total liabilities of ¥11.798 billion, and total equity of ¥49.990 billion; this implies an equity ratio of roughly 80.0% (calculated from the disclosed balances). Liquidity appears strong: current assets of ¥36.310 billion versus current liabilities of ¥7.713 billion yields a current ratio of 470.8%, though the quick ratio is likely overstated because inventories were not disclosed (0 indicates unreported). Cash generation was solid: operating cash flow was ¥1.892 billion, exceeding net income (OCF/NI of 1.39x), indicating sound earnings quality. Investing cash flow was not disclosed, so free cash flow cannot be determined from the submission; the reported FCF of 0 should be treated as unreported, not zero. Dividends were not reported (annual DPS shown as 0.00 is unreported), so payout and FCF coverage cannot be assessed from this dataset. DuPont analysis indicates low leverage (financial leverage 1.25x), modest asset turnover (0.257x), and an 8.49% net margin, yielding a calculated ROE of 2.73%. Overall, TYK exhibits a solid balance sheet and good cash conversion, but near-term operating margin compression and dependence on non-operating income temper the quality of earnings. The outlook hinges on cost pass-through, energy and raw material dynamics, and demand stability in end markets relevant to refractories/ceramics. Data limitations (notably inventories, investing cash flows, cash balances, and shares outstanding) constrain deeper analysis; conclusions are based solely on available non-zero disclosures.

Profitability Analysis

ROE is 2.73% per DuPont: net margin 8.49% × asset turnover 0.257 × financial leverage 1.25. Net margin of 8.49% is respectable, aided by non-operating gains (ordinary income > operating by ~¥397 million). Asset turnover at 0.257x is typical of asset-intensive ceramics/refractories, reflecting significant fixed asset base relative to sales. Financial leverage is low (1.25x), which limits ROE expansion from gearing but strengthens financial resilience. Operating margin is 11.8% (¥1.904b/¥16.074b), down YoY given the -10.9% decline in operating income against +2.8% revenue, indicating negative operating leverage in the period. Gross margin of 27.9% suggests reasonable pricing power but also cost pressure (energy/raw materials or product mix) compressing the spread to operating margin. EBITDA margin at 14.8% versus operating margin 11.8% implies D&A burden of ~3.0% of sales, consistent with a moderately capital-intensive profile. Interest expense is de minimis (¥8.8m), so financial expenses are not the source of profit pressure. Effective tax rate is not reliably indicated by the provided “0.0%” metric; using net income plus income tax (¥1.364b + ¥722m) implies an approximate ETR of ~34.6%, broadly in line with statutory levels. Overall margin quality is mixed: core operating margin contracted, while ordinary income buoyed overall profitability.

Growth Assessment

Revenue increased 2.8% YoY to ¥16.074 billion, indicating stable demand but modest growth momentum. Operating income declined 10.9% YoY to ¥1.904 billion despite higher sales, highlighting cost pressures and/or unfavorable mix, and signaling negative operating leverage. Net income decreased 10.1% YoY to ¥1.364 billion, reflecting the operating margin compression partly offset by non-operating income. The sustainability of revenue growth likely depends on end-market activity in industrial materials and the company’s ability to pass through energy/raw-material cost fluctuations. Profit quality leans on non-operating items this quarter (ordinary income of ¥2.301b vs operating income of ¥1.904b), which may not be recurring; core profitability would benefit from tighter cost control and improved mix. With EBITDA at ¥2.384 billion and D&A at ¥480 million, cash earnings remain solid, supporting reinvestment capacity. Looking ahead, maintaining gross margin and restoring operating margin will be key; monitoring price negotiations, energy surcharge mechanisms, and procurement will inform margin trajectory. Given limited disclosed backlog or segment detail, the near-term outlook is cautious on margins but stable on revenue.

Financial Health

The company maintains a strong balance sheet: total assets ¥62.462b, total liabilities ¥11.798b, and total equity ¥49.990b, implying an equity ratio near 80% (calculated). Debt-to-equity of 0.24x (based on total liabilities) suggests low leverage and ample solvency headroom. Liquidity is robust with current assets of ¥36.310b against current liabilities of ¥7.713b, producing a current ratio of 4.71x; however, the quick ratio equals the current ratio only because inventories were not disclosed in the dataset. Working capital is sizable at ¥28.597b, indicating strong short-term funding for operations. Interest coverage is 216.7x, reflecting negligible debt service burden. Cash and cash equivalents were not disclosed (0 indicates unreported), so net cash position cannot be determined from this data. Overall, solvency and liquidity appear very strong based on the disclosed balances.

Cash Flow Quality

Operating cash flow of ¥1.892b exceeds net income of ¥1.364b, yielding an OCF/NI ratio of 1.39x, which supports the quality of earnings and suggests limited accrual build. Depreciation of ¥480m is modest relative to EBITDA (¥2.384b), implying healthy cash conversion of operating profit. Working capital details (inventories, receivables, payables) were not disclosed, limiting the ability to pinpoint drivers of OCF; nonetheless, the >1x OCF/NI ratio is a positive indicator. Investing cash flow is unreported in this submission (shown as 0), so capex and free cash flow cannot be reliably calculated; the “FCF: 0” metric should be treated as not available rather than zero. Financing cash flow was an outflow of ¥414m, indicating distributions or debt repayment, but specifics are not provided. In sum, cash earnings are strong, but full FCF assessment awaits capex disclosure.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed in this dataset (values shown as 0 indicate unreported, not zero). With EPS at ¥30.71 and OCF at ¥1.892b, coverage capacity for potential dividends appears adequate from earnings and cash flow, but actual distributions cannot be evaluated without DPS and capex data. FCF coverage is also not assessable due to unreported investing cash flows. Company policy signals (e.g., payout ratio targets) are not provided here; absent such disclosure, dividend outlook remains indeterminate based solely on this data.

Risk Assessment

Business Risks:

• End-market cyclicality in steel, glass, cement, and industrial materials affecting refractory and ceramics demand
• Raw material and energy price volatility impacting gross margins if pass-through is delayed or incomplete
• Product mix and pricing pressure leading to operating margin compression (observed this period)
• Foreign exchange fluctuations influencing imported input costs and overseas earnings translation
• Customer concentration risk with large industrial clients potentially impacting volume and pricing
• Environmental and regulatory compliance costs related to kiln operations and emissions standards
• Supply chain disruptions for key raw materials and logistics

Financial Risks:

• Limited transparency on cash balances, investing cash flows, and inventories in this dataset
• Potential non-operating income volatility given ordinary income exceeded operating income
• Pension or other long-term obligations not disclosed here could affect solvency metrics
• Interest rate changes have limited direct impact given low leverage, but could affect non-operating financial income

Key Concerns:

• Negative operating leverage: operating income declined 10.9% YoY despite 2.8% revenue growth
• Dependence on non-operating gains to support ordinary income
• Incomplete disclosure on inventories and capex prevents full assessment of working capital and FCF

Investment Implications

Key Takeaways:

• Modest top-line growth (+2.8% YoY) but operating margin compression (operating income -10.9% YoY)
• Strong balance sheet with low leverage (liabilities ¥11.8b vs equity ¥49.99b) and high liquidity (current ratio ~4.7x)
• High cash conversion (OCF/NI 1.39x) supports earnings quality
• ROE of 2.73% constrained by low leverage and modest asset turnover; margin improvement is key to ROE uplift
• Non-operating income (ordinary > operating by ~¥0.40b) is a notable contributor this period

Metrics to Watch:

• Gross and operating margin trends, including cost pass-through effectiveness
• Composition of ordinary income and sustainability of non-operating gains
• OCF/NI ratio and working capital movements once inventories/receivables/payables are disclosed
• Capex and investing cash flows to assess FCF and reinvestment needs
• Asset turnover and utilization, given capital intensity
• FX rates and energy/raw material cost indices relevant to refractories/ceramics

Relative Positioning: Relative to domestic ceramics/refractory peers, TYK exhibits a stronger balance sheet with lower leverage and ample liquidity, mid-teens EBITDA margin, but a lower ROE in the period due to modest asset turnover and operating margin compression; sustained margin recovery would be necessary to close the ROE gap.

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