ENVIPRO HOLDINGS Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥9.99B
• Operating Income: ¥422M
• Net Income: ¥34M
• EPS: ¥10.64

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

Envipro Holdings (56980) reported FY2026 Q1 consolidated results under JGAAP showing resilient profitability despite a sharp top-line contraction. Revenue was JPY 9,991 million, down 18.5% YoY, reflecting softer volumes and/or commodity price normalization in recycling/metal-related markets. Gross profit was JPY 1,599.7 million, implying a gross margin of 16.0%, which is solid for a recycling-centric portfolio. Operating income rose 33.7% YoY to JPY 422 million, lifting operating margin to 4.2%, indicating strong cost discipline and favorable mix. Ordinary income was JPY 440 million, and net income surged to JPY 301 million (+780.0% YoY), with a net margin of 3.01%. The DuPont bridge indicates ROE of 1.77%, driven by a 3.01% net margin, asset turnover of 0.322x, and financial leverage of 1.82x. Liquidity appears robust with a current ratio of 182% and quick ratio of 145%, supported by working capital of JPY 7,145 million. Capital structure is moderate, with liabilities at 45% of assets and an implied equity ratio near 55% (the reported equity ratio is unreported in XBRL). Interest coverage is healthy at 36.6x, suggesting limited near-term refinancing stress. Cash flow data (OCF/FCF) and D&A were not disclosed; as a result, EBITDA and cash conversion metrics cannot be assessed this quarter. Inventory stood at JPY 3,249.5 million; relative to quarterly COGS, this suggests roughly 27–28 days of inventory on hand, reasonable for the business. Dividend-related metrics are largely uninformative this quarter given undisclosed cash flows, with DPS and payout ratio reported as zero (unreported). Despite revenue pressure, the margin expansion and operating income growth imply effective pricing/mix management and SG&A control. The company’s balance sheet capacity and interest coverage provide a cushion against commodity and volume volatility. Key data limitations include the absence of operating, investing, and financing cash flows, D&A, and share count, which constrain per-share and cash-based analyses. Overall, the quarter highlights improving profitability dynamics against a softer revenue backdrop, but better visibility on cash generation will be important to validate earnings quality and dividend capacity.

Profitability Analysis

ROE decomposition: ROE 1.77% = Net margin 3.01% × Asset turnover 0.322 × Financial leverage 1.82. The primary driver is margin improvement at the operating level, partially offset by low turnover typical of a Q1 balance sheet base. Leverage is moderate and not the main ROE lever. margin_quality: Gross margin at 16.0% and operating margin at 4.2% indicate disciplined cost control and likely mix/pricing benefits despite revenue decline. Ordinary margin is 4.4% (JPY 440m/JPY 9,991m), and net margin is 3.01%. The implied effective tax rate based on ordinary income and income tax is roughly 3.9% (JPY 17.0m/JPY 440.0m), though the provided calculated metric shows 0.0% due to disclosure constraints. operating_leverage: Revenue declined 18.5% YoY while operating income increased 33.7% YoY, implying positive operating leverage from SG&A containment and/or margin mix. The ability to expand OPM to 4.2% in a down-revenue quarter suggests structural cost improvements or favorable spreads in certain product streams.

Growth Assessment

revenue_sustainability: Top line fell 18.5% YoY to JPY 9,991m, likely reflecting commodity price normalization and volume softness. Sustainability will hinge on scrap collection volumes, processing yields, and price spreads across ferrous/non-ferrous streams. profit_quality: Operating income growth outpaced revenue despite lower sales, indicating improved spread capture and cost efficiency. However, absence of D&A and OCF data limits assessment of recurring versus non-recurring drivers and cash conversion. outlook: If pricing/mix resilience and cost discipline persist, margins can remain above prior cycle averages even amid subdued volumes. Recovery in industrial activity and metal prices could catalyze top-line normalization. Near-term visibility remains tied to commodity volatility and customer procurement trends.

Financial Health

liquidity: Current ratio 181.9%, quick ratio 144.6%, working capital JPY 7,145.5m. Liquidity is ample, supported by sizable current assets relative to current liabilities. solvency: Debt-to-equity is 0.82x; total liabilities/total assets is 45.1%. Interest coverage is strong at 36.6x, indicating manageable debt service. capital_structure: Total assets JPY 31,031m, total equity JPY 17,022m. The reported equity ratio is undisclosed, but implied equity ratio is approximately 54.9% (equity/assets), indicating a conservative balance sheet.

Cash Flow Quality

earnings_quality: Net income of JPY 301m and operating income of JPY 422m are solid, but absence of OCF and D&A precludes evaluating cash earnings, accrual intensity, or EBITDA. Interest expense of JPY 11.5m versus operating income indicates limited financial drag. FCF_analysis: Operating and investing cash flows were not disclosed; therefore, FCF cannot be calculated this quarter. Capex requirements and maintenance intensity remain unknown in this period. working_capital: Inventories of JPY 3,249.5m equate to roughly 27–28 days of COGS on a quarterly basis (inventory/COGS × ~90 days), suggesting reasonable inventory management. Receivables and payables details were not provided, limiting a full cash conversion cycle analysis.

Dividend Sustainability

payout_ratio_assessment: EPS was JPY 10.64. DPS and payout ratio are shown as zero (unreported), so payout discipline cannot be assessed from this dataset. FCF_coverage: OCF and FCF were not disclosed, preventing evaluation of dividend coverage by free cash flow. policy_outlook: With moderate leverage and strong interest coverage, the balance sheet could support a measured payout when cash generation is confirmed. However, given commodity cyclicality, a conservative, earnings-and-FCF-linked policy would be prudent; visibility will improve once cash flow disclosures resume.

Risk Assessment

Business Risks:

• Commodity price volatility in ferrous and non-ferrous metals affecting spreads and inventory valuation
• Volume volatility tied to industrial activity and scrap collection flows
• Customer concentration and procurement timing risk
• Energy and logistics cost inflation impacting processing margins
• Regulatory and environmental compliance costs in recycling operations
• Operational disruptions at sorting/processing facilities

Financial Risks:

• Working capital swings due to price and volume fluctuations
• Potential inventory valuation losses in falling price environments
• Refinancing and interest rate risk, albeit mitigated by current coverage
• Limited visibility on cash generation due to undisclosed OCF/FCF

Key Concerns:

• Revenue decline of 18.5% YoY despite profit growth raises questions on sustainability of margin gains
• Lack of disclosed cash flows and D&A obscures earnings quality and reinvestment needs
• Cyclical exposure to metal price and industrial demand conditions

Investment Implications

Key Takeaways:

• Solid margin performance: operating margin 4.2% despite an 18.5% YoY revenue decline
• ROE at 1.77% driven mainly by margin and moderate leverage; turnover is subdued on Q1 base
• Healthy liquidity (current ratio 182%, quick ratio 145%) and strong interest coverage (36.6x)
• Cash flow data absent; EBITDA not computable, limiting cash-based valuation cross-checks
• Inventory days appear reasonable (~27–28 days), suggesting disciplined working capital
• Implied equity ratio ~55% indicates conservative capital structure

Metrics to Watch:

• OCF and FCF disclosure and OCF/NI conversion in subsequent quarters
• Gross and operating margin sustainability versus commodity spread movements
• Volume trends in scrap intake and processed tonnage
• Inventory levels relative to COGS and potential valuation impacts
• Debt levels, interest expense trajectory, and covenants
• Capex intensity (maintenance vs. growth) once investing CF is disclosed

Relative Positioning: Within Japan’s recycling and metal processing peers, Envipro exhibits stronger-than-typical Q1 operating discipline with mid-teens gross margin and ~4% OPM, supported by a conservative balance sheet; however, lack of cash flow disclosure this quarter tempers confidence relative to peers with clearer FCF visibility.

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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