PACIFIC METALS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.46B
• Operating Income: ¥-4.04B
• Net Income: ¥-1.91B
• EPS: ¥-59.91

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

For FY2026 Q2 (cumulative), Pacific Metals Co., Ltd. reported a steep contraction in topline and remained loss-making at the operating and net levels. Revenue declined 43.0% year over year to ¥4,463 million, while cost of sales of ¥11,186 million drove a gross loss of ¥3,351 million and a gross margin of -75.1%, indicating severe pricing pressure and/or under-absorption of fixed costs. Operating income was a loss of ¥4,042 million, broadly flat YoY per the disclosure, implying that cost actions and/or mix offsets did not materially change the operating loss trajectory despite the significant revenue drop. Ordinary income improved relative to operating income to a loss of ¥1,086 million, suggesting substantial net non-operating gains (approximately ¥2,956 million) that partially cushioned operating weakness—likely from financial income, equity-method income, or FX-related gains (the specific components are not disclosed). Net income was a loss of ¥1,095 million (EPS: -¥59.91), with reported tax expense of ¥177 million; the effective tax rate metric is not meaningful given negative pretax profit. The DuPont bridge shows net margin of -24.54%, asset turnover of 0.070x, and low financial leverage of 1.07x, yielding an ROE of -1.83%, which aligns with the reported figure. Balance sheet strength is notable: total assets were ¥63,830 million against total equity of ¥59,696 million and total liabilities of ¥4,138 million, implying an equity ratio near 93.5% (despite the tabulated 0.0% placeholder). Liquidity appears ample with current assets of ¥38,510 million versus current liabilities of ¥1,230 million, translating to a current ratio of 3,130.9% and working capital of ¥37,280 million; the quick ratio of 2,799.7% further indicates a strong short-term buffer. Debt metrics are conservative, with a debt-to-equity ratio of 0.07x, reflecting a lightly leveraged balance sheet. Inventory stood at ¥4,074 million, a modest share of current assets, which may help reduce inventory valuation risk in a falling price environment. Cash flow statement items (OCF, investing CF, financing CF, and cash balance) and depreciation/interest expense were not disclosed in this dataset and appear as zero placeholders; therefore, cash flow quality and interest coverage cannot be assessed from the provided figures. The earnings profile remains highly sensitive to commodity pricing and plant utilization given the scale of gross loss relative to revenue. The heavy reliance on non-operating income to narrow losses highlights fragile underlying operations in the period. Dividend information for the period is not disclosed (DPS shows as zero placeholder), so payout stance cannot be inferred from this dataset. Overall, the company exhibits strong solvency and liquidity but weak profitability and low asset turnover in the half-year, with interim loss containment partly driven by non-operating items. Data limitations constrain visibility on cash generation, capex intensity, and recurring non-operating drivers; conclusions are therefore focused on the disclosed P/L and balance sheet signals.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin at -24.54% and asset turnover at 0.070x combine with low financial leverage (1.07x) to yield ROE of -1.83%. Margin quality: Gross margin of -75.1% (gross loss ¥3.351bn on ¥4.463bn revenue) indicates severe negative spread between realized pricing and cost base, likely reflecting unfavorable commodity prices, weak volumes, and under-absorption of fixed costs; SG&A is not disclosed, but operating loss of ¥4.042bn implies limited cost pass-through. Operating leverage: The large swing in gross profitability relative to revenue suggests high fixed-cost intensity; with revenue down 43% YoY, operating income remained negative and broadly unchanged YoY, implying some offset from cost control or mix but still high sensitivity to volume/price. Non-operating contribution: Ordinary loss (-¥1.086bn) vs operating loss (-¥4.042bn) implies net non-operating gains of ~¥2.956bn that masked the full extent of operating weakness; sustainability of these gains is uncertain without disclosure of components. Tax: Reported tax expense of ¥177m despite a net loss suggests non-deductible items, deferred tax movements, or jurisdictional mix effects; an effective rate is not meaningful with negative pretax income.

Growth Assessment

Revenue contracted 43.0% YoY to ¥4.463bn, signaling substantial cyclical or pricing headwinds. The negative gross margin points to deteriorated unit economics versus prior year; absent data on volumes and realized prices, we infer revenue pressure likely from lower ferro-nickel prices and/or reduced shipments. Profit quality is weak: operating loss widened versus revenue contraction, and ordinary results depend on non-operating income to narrow losses. Outlook hinges on commodity price normalization, utilization recovery, and cost restructuring; with low asset turnover (0.070x) and heavy fixed costs implied, profit recovery requires both price and volume improvements. Given strong balance sheet capacity, the company can withstand a downturn, but near-term earnings are likely to remain volatile. No guidance or order book details are provided; thus, sustainability of any non-operating gains is uncertain. In the absence of disclosed capex and OCF, growth investment pace and its timing cannot be assessed from this dataset.

Financial Health

Liquidity: Current assets ¥38.51bn versus current liabilities ¥1.23bn yield a current ratio of 31.3x and quick ratio of 28.0x, indicating very strong short-term coverage. Working capital totals ¥37.28bn, providing ample buffer. Solvency: Total liabilities ¥4.14bn against equity ¥59.70bn imply a debt-to-equity ratio of 0.07x and an equity ratio near 93.5% (derived), signifying low leverage. Capital structure: Minimal liabilities suggest limited financial risk and capacity to absorb operating losses. Interest expense is not disclosed; thus, interest coverage cannot be computed. Asset efficiency: Asset turnover of 0.070x is low for a capital-intensive processor, indicating under-utilization in the period.

Cash Flow Quality

Cash flow statements (OCF, investing CF, financing CF, cash balance) are not disclosed in the dataset and appear as zero placeholders; therefore, we cannot evaluate operating cash conversion, working capital release/absorption, or free cash generation. Depreciation is also undisclosed, preventing EBITDA estimation and cash earnings normalization. Earnings quality: The reliance on non-operating gains (~¥3.0bn) to narrow the ordinary loss highlights low quality of earnings in this half. Working capital: Inventories are ¥4.07bn within current assets of ¥38.51bn; absent OCF detail, we cannot assess whether inventory or receivable movements aided or hurt cash. Free cash flow: Not computable from provided data; any FCF-based ratios (e.g., OCF/NI, FCF coverage) shown as zero should be treated as unavailable rather than true zeros.

Dividend Sustainability

Dividend per share and payout metrics are not disclosed for the period (zeros are placeholders). With net loss of ¥1.095bn and absence of cash flow data, we cannot assess payout ratios or FCF coverage. Balance sheet strength (equity ratio ~93.5%, low D/E 0.07x) provides capacity, but given operating losses and uncertain cash generation, a conservative stance would be expected in a downturn. Any dividend policy outlook requires management guidance and visibility on price/volume recovery and capex needs, which are not available here.

Risk Assessment

Business Risks:

• Commodity price volatility in nickel/ferronickel impacting realized prices and margins
• High fixed-cost base leading to pronounced operating leverage in downturns
• Potential under-utilization of production capacity, depressing asset turnover
• Customer demand cyclicality tied to stainless steel and industrial end-markets
• Raw material sourcing and energy cost fluctuations affecting cost of sales
• FX volatility influencing both non-operating results and input/output pricing

Financial Risks:

• Sustained operating losses could erode equity if prolonged
• Dependence on non-operating gains to narrow losses introduces earnings volatility
• Limited visibility on cash flows due to undisclosed OCF/CFs and depreciation
• Inventory valuation risk in falling price environments

Key Concerns:

• Gross margin of -75.1% indicating severe cost/price imbalance
• Revenue down 43.0% YoY with asset turnover at 0.070x
• Ordinary loss mitigated by ~¥2.956bn non-operating gains of uncertain recurrence
• Insufficient disclosure on cash flows and capex to evaluate sustainability

Investment Implications

Key Takeaways:

• Strong balance sheet with equity ratio ~93.5% and D/E 0.07x provides resilience
• Profitability is weak: operating loss of ¥4.042bn and net margin -24.54%
• Non-operating gains materially supported ordinary results; durability unclear
• Liquidity is ample with ¥37.28bn working capital and very high current/quick ratios
• Low asset turnover (0.070x) underscores utilization and demand headwinds

Metrics to Watch:

• Realized ferronickel prices and production volumes/utilization
• Gross margin recovery and unit cash costs (energy, raw materials)
• Non-operating income components (FX, investment income) and recurrence
• OCF and FCF once disclosed; capex requirements and maintenance schedule
• Inventory levels and turnover; working capital movements
• Leverage and liquidity trends (D/E, current ratio) if losses persist

Relative Positioning: Compared with typical metals and materials peers, the company currently exhibits weaker operating profitability and asset efficiency but materially stronger solvency and liquidity, positioning it to endure the downturn while awaiting a potential commodity/volume recovery.

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