KOBELCO WIRE COMPANY,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥16.54B
• Operating Income: ¥319M
• Net Income: ¥512M
• EPS: ¥72.87

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

Shinko Wire Company Ltd. (Kobe Steel group) reported FY2026 Q2 (cumulative) revenue of ¥16.539bn, down 2.4% YoY, with material margin compression driving operating income down 50.3% YoY to ¥319m. Gross profit was ¥2.943bn, implying a gross margin of 17.8%, while operating margin fell to 1.9%, underscoring weaker pricing power and/or unfavorable mix and cost inflation. Ordinary income of ¥347m exceeded operating income, indicating positive net non-operating contributions (interest/dividends/FX/other) of about ¥28m. Net income of ¥430m was materially higher than ordinary income despite reported income tax expense of ¥160m, implying roughly ¥243m in net extraordinary gains in the period. EBITDA was ¥800m (margin 4.8%), and interest coverage remained comfortable at 8.4x, supported by modest interest expense (¥38m). DuPont decomposition indicates a net margin of 2.60%, asset turnover of 0.375x, and financial leverage of 1.82x, yielding an ROE of 1.77% on the provided basis. Liquidity appears strong with a current ratio of 210.7% and a quick ratio of 167.6%, backed by working capital of ¥12.856bn. The balance sheet shows total assets of ¥44.081bn and equity of ¥24.253bn, implying an equity ratio of roughly 55.0% (the reported 0.0% equity ratio is an unreported placeholder). Despite accounting profit, operating cash flow was negative at -¥601m, primarily suggesting working capital absorption; investing cash flow data were not disclosed, so free cash flow cannot be reliably assessed. Financing cash inflow of ¥692m suggests incremental borrowing and/or intra-group funding support during the period. No dividends were reported (DPS ¥0; payout 0.0%), consistent with preserving liquidity amid near-term earnings and cash flow volatility. Revenue contraction and operating income decline point to cyclical softness in end-markets such as automotive and industrial, and/or lagged pass-through of raw material costs. Profit quality is mixed: core profitability weakened, while bottom-line support came from non-operating and extraordinary gains. The company retains balance sheet resilience, providing flexibility to navigate near-term demand and cost pressures. Data limitations exist where zeros reflect non-disclosure (equity ratio, cash and equivalents, investing CF, shares), and conclusions are based on available non-zero items and standard analytical inferences.

Profitability Analysis

ROE_decomposition: ROE 1.77% = Net margin 2.60% × Asset turnover 0.375 × Leverage 1.82. The low net margin and modest asset turnover are the main drags, with leverage moderately amplifying returns. margin_quality: - Gross margin: 17.8% (¥2.943bn on ¥16.539bn). - Operating margin: 1.9% (¥319m), down sharply YoY (-50.3% OI) indicating compression from input costs/mix and limited price pass-through. - Net margin: 2.60% (¥430m), supported by non-operating and extraordinary gains (~¥271m combined), implying weaker underlying margin quality. operating_leverage: Revenue fell 2.4% YoY, but operating income fell 50.3% YoY, suggesting negative operating leverage and high fixed-cost sensitivity. EBITDA margin at 4.8% vs operating margin 1.9% indicates D&A burden (¥481m) but the larger driver of margin compression is gross-to-operating spread narrowing.

Growth Assessment

revenue_sustainability: Top-line decline of 2.4% YoY suggests soft demand in key end-markets (auto, construction, machinery) and/or price normalization after prior raw material surcharges. profit_quality: Ordinary income exceeded operating income by ~¥28m, and net income exceeded ordinary income by ~¥83m after tax, implying ~¥243m of net extraordinary gains pre-tax uplift. Bottom-line growth thus relies partly on non-recurring items, reducing earnings quality. outlook: Near-term growth hinges on demand stabilization and pass-through of raw material and energy costs. Recovery in automotive production and easing supply chain frictions could support volumes, but margin recovery will depend on pricing discipline and cost renegotiations. With EBITDA coverage of interest at 8.4x and ample liquidity, the company can weather cyclical softness, though core operating margin needs to rebound for sustainable earnings growth.

Financial Health

liquidity: Current ratio 210.7% and quick ratio 167.6% indicate strong short-term liquidity. Working capital is ¥12.856bn, providing a buffer against demand volatility. solvency: Debt-to-equity 0.83x suggests moderate leverage; interest coverage 8.4x is adequate. Based on total assets ¥44.081bn and equity ¥24.253bn, the computed equity ratio is ~55.0% (reported 0.0% is undisclosed), indicating solid capitalization. capital_structure: Leverage (assets/equity) at 1.82x aligns with DuPont inputs. Financing cash inflow of ¥692m in the half suggests incremental borrowing or group funding to support working capital amid negative OCF.

Cash Flow Quality

earnings_quality: OCF/Net income at -1.40 indicates that accrual earnings did not translate into cash, likely due to working capital build (e.g., receivables/inventories) and timing of tax/bonus payments. Extraordinary gains inferred in net income are non-cash or one-off, further weakening quality. FCF_analysis: Investing cash flow was undisclosed (reported as 0 per data convention), so free cash flow cannot be calculated reliably; reported FCF of 0 is a placeholder, not an economic assessment. working_capital: Inventories at ¥5.002bn within current assets of ¥24.471bn suggest a material inventory component; negative OCF despite profit implies inventory and/or receivables expansion. Without period-to-period WC detail, the exact drivers are unclear.

Dividend Sustainability

payout_ratio_assessment: No dividend declared (DPS ¥0; payout 0.0%). Given weak operating margin and negative OCF, a conservative payout stance is prudent. FCF_coverage: Not assessable for this period due to undisclosed investing CF; reported FCF coverage of 0.00x is a placeholder. Cash dividend capacity should be judged after OCF normalization and visibility on maintenance capex. policy_outlook: With leverage moderate and liquidity strong, the company has capacity to resume dividends when core OCF improves; however, current focus likely remains on stabilizing margins and funding working capital.

Risk Assessment

Business Risks:

• Cyclical demand in automotive, construction, and industrial end-markets
• Raw material (steel wire rod) and energy price volatility with lagged pass-through
• Product mix shifts affecting margins (e.g., commodity vs specialty wire)
• Customer concentration risk in OEM and tier-1 supply chains
• Competition from domestic and Asian peers pressuring pricing
• Potential supply chain disruptions and logistics costs

Financial Risks:

• Negative operating cash flow due to working capital absorption
• Reliance on financing inflows (¥692m) in the period
• Earnings dependence on non-operating/extraordinary gains
• Interest rate risk on floating-rate borrowings
• FX exposure on imports/exports impacting input costs and pricing

Key Concerns:

• Operating margin compressed to 1.9% with OI -50.3% YoY
• OCF/Net income at -1.40 indicating weak cash conversion
• Bottom-line uplift from one-off items (~¥243m) dilutes recurring earnings

Investment Implications

Key Takeaways:

• Revenue down 2.4% YoY; core profitability under pressure
• Operating margin 1.9% vs EBITDA margin 4.8% highlights limited buffer
• ROE 1.77% driven by thin margins and modest turnover; leverage modest
• Liquidity strong (current ratio 211%, quick ratio 168%); equity ratio ~55%
• OCF negative (-¥601m) despite profit; financing inflow ¥692m supports cash needs
• Non-operating and extraordinary gains materially support net income

Metrics to Watch:

• Operating margin and gross-to-operating spread
• OCF/Net income and free cash flow once investing CF is disclosed
• Inventory and receivables days (working capital intensity)
• Raw material pass-through timing and surcharge mechanisms
• Net debt/EBITDA and interest coverage
• Order trends in auto/industrial segments and pricing mix

Relative Positioning: A specialty steel wire producer with solid capitalization and liquidity but currently weaker operating profitability versus typical mid-cycle levels; maintaining competitiveness depends on pass-through discipline and mix toward higher value-added wire products.

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
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