Mitsui Kinzoku Company,Limited FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥364.31B
• Operating Income: ¥39.77B
• Net Income: ¥38.71B
• EPS: ¥333.09

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

Mitsui Kinzoku (5706) delivered steady top-line and operating performance in FY2026 Q2, with revenue up 4.6% year over year to ¥364.3bn and operating income up 2.4% to ¥39.8bn. Gross profit reached ¥75.3bn, implying a gross margin of 20.7%, while EBITDA was ¥56.1bn, translating to an EBITDA margin of 15.4%. Despite the resilient operations, net income fell sharply by 48.6% YoY to ¥19.0bn, indicating sizable non-operating and/or extraordinary headwinds or a different tax profile relative to the prior year. Ordinary income of ¥39.1bn was close to operating income, suggesting modest net non-operating drag in the period, with reported interest expense of ¥1.35bn and strong interest coverage of 29.4x. DuPont metrics show a net margin of 5.23%, asset turnover of 0.549x, and financial leverage of 1.88x, resulting in a calculated ROE of 5.39%. The OCF-to-net-income ratio stood at 2.10x, signaling solid cash conversion and supportive earnings quality for the half. The balance sheet appears conservative: total assets were ¥663.5bn, equity was ¥353.5bn, and liabilities were ¥317.1bn, implying a computed equity ratio of roughly 53% despite the equity ratio field showing 0% (unreported). Liquidity is robust with a current ratio of 195.7% and a quick ratio of 163.8%, and working capital of ¥181.4bn provides ample buffer. Debt-to-equity is shown at 0.90x (based on total liabilities), though interest-bearing debt details are not disclosed. The decline in net income versus relatively stable operating results hints at one-off items, valuation effects, or other non-operating factors rather than a deterioration in core profitability. Free cash flow cannot be determined from the dataset because investing cash flows/capex are unreported, which constrains dividend and reinvestment assessments. Dividend data shows a DPS of ¥0 and a payout ratio of 0%, but this may reflect timing or non-disclosure rather than policy; outstanding shares are also unreported. Overall, operational momentum is intact but operating leverage appears muted as operating income growth lagged revenue growth. The company’s cash generation and liquidity are strong, cushioning against volatility in non-ferrous markets and cyclical end-demand. Key watch items include the drivers of the net income decline, sustainability of margins amid input price swings, and forthcoming disclosure on capex and strategic investments.

Profitability Analysis

ROE decomposition indicates moderate returns driven more by balance sheet strength than margins: net profit margin 5.23% × asset turnover 0.549 × financial leverage 1.88 = ROE 5.39%. The margin profile shows a 20.7% gross margin, 10.9% operating margin (¥39.8bn/¥364.3bn), and a 15.4% EBITDA margin, pointing to reasonable cost discipline and a material non-cash component (D&A ¥16.3bn). Operating leverage was subdued this half: revenue grew 4.6% YoY while operating income rose 2.4% YoY, implying either adverse mix, input cost pressure, or incremental fixed-cost absorption. Ordinary income (¥39.1bn) was close to operating income, suggesting limited net non-operating burden aside from interest and potential valuation effects; however, the sharp drop in net income (−48.6% YoY) signals non-recurring items or tax-related factors affecting the bottom line. Interest expense is manageable at ¥1.35bn with 29.4x coverage, reinforcing that financing costs are not the primary profitability constraint. Overall profitability quality is solid at the operating level, but bottom-line volatility reduces the translation of operating gains into ROE.

Growth Assessment

Revenue grew 4.6% YoY to ¥364.3bn, indicating stable demand across the portfolio against a likely cyclical backdrop. Operating income growth of 2.4% YoY lagged sales, suggesting limited operating leverage and/or margin pressure in certain businesses. The substantial YoY decline in net income (−48.6%) despite only modest changes in operating and ordinary income points to non-operating or extraordinary items, or different tax dynamics versus the prior year; this dampens the quality of reported profit growth. Gross profit of ¥75.3bn and EBITDA of ¥56.1bn indicate that core operations remain resilient with mid-teens EBITDA margin. Given the asset turnover of 0.549x, future growth in ROE will likely require either better margin capture or faster asset turns rather than additional leverage. Outlook hinges on commodity price trends, demand in electronics/auto-related materials, and cost pass-through; the current period demonstrates the ability to sustain operations but with limited incremental margin. With limited disclosure on capex and investing cash flows, visibility on capacity-led growth or mix upgrades is constrained.

Financial Health

Total assets were ¥663.5bn against total equity of ¥353.5bn and total liabilities of ¥317.1bn, implying an equity ratio of roughly 53% (computed) and financial leverage of 1.88x. Liquidity is strong: current ratio 195.7%, quick ratio 163.8%, and working capital ¥181.4bn suggest ample short-term coverage. The reported debt-to-equity ratio of 0.90x uses total liabilities; the level of interest-bearing debt is not disclosed, so true leverage may be lower. Interest expense is modest at ¥1.35bn with very comfortable coverage (29.4x), pointing to low refinancing risk under current conditions. Inventories are ¥60.5bn; without prior-period comparatives, inventory risk cannot be fully assessed, but liquidity ratios imply manageable working capital. Overall solvency and liquidity appear sound, with capacity to absorb cyclical shocks.

Cash Flow Quality

Operating cash flow of ¥39.9bn is 2.10x net income (¥19.0bn), indicating strong cash conversion and supportive accrual quality. EBITDA of ¥56.1bn and D&A of ¥16.3bn align with reported operating income, suggesting clean operating cash generation. Working capital dynamics are not disclosed in detail; however, the magnitude of OCF relative to earnings implies either favorable working capital movements or conservative accruals. Investing cash flow is unreported (shown as 0), so free cash flow cannot be reliably calculated; FCF shown as 0 reflects non-disclosure rather than true zero. Financing cash flow outflow of ¥31.8bn suggests debt reduction, dividends, or share-related cash movements, but the breakdown is unavailable. Cash and equivalents are unreported, limiting end-period liquidity reconciliation. Overall, cash flow quality appears solid on the OCF side, but the absence of capex data is a key gap for full FCF assessment.

Dividend Sustainability

Annual DPS is shown as ¥0.00 with a payout ratio of 0.0% and FCF coverage of 0.00x; these likely reflect non-disclosure/timing rather than definitive policy. With net income of ¥19.0bn and OCF of ¥39.9bn, internal capacity to fund distributions exists in principle, but the lack of capex data prevents evaluating sustainable FCF after investments. Financing outflows of ¥31.8bn could include dividends or debt service, but the components are not disclosed. Without outstanding share data, per-share distribution analysis is not feasible. In sum, dividend sustainability cannot be concluded from this dataset; clarity on capex, cash balance, and explicit dividend guidance is needed.

Risk Assessment

Business Risks:

• Commodity price volatility (non-ferrous metals) affecting selling prices and margins
• Cyclical demand in electronics and automotive end-markets impacting volumes and mix
• Input cost inflation and energy prices pressuring gross margin
• Foreign exchange fluctuations influencing revenues and costs
• Supply chain disruptions affecting procurement and lead times
• Regulatory and environmental compliance costs for smelting/materials operations

Financial Risks:

• Bottom-line volatility from non-operating/extraordinary items as evidenced by −48.6% YoY net income
• Limited visibility on capex and investing cash flows, constraining FCF assessment
• Potential working capital swings tied to commodity prices and customer cycles
• Interest rate risk on any unreported interest-bearing debt
• FX translation and transaction impacts on earnings and cash flows

Key Concerns:

• Sharp divergence between operating income (+2.4% YoY) and net income (−48.6% YoY)
• Unreported investing cash flows and cash balance, limiting FCF and liquidity analysis
• Equity ratio field reported as 0% (unreported) despite strong computed equity ratio, highlighting disclosure gaps

Investment Implications

Key Takeaways:

• Core operations resilient: revenue +4.6% YoY, operating income +2.4% YoY, EBITDA margin 15.4%
• ROE 5.39% driven by moderate margins and low leverage; scope for improvement via margin or asset turns
• OCF robust at ¥39.9bn (2.10x net income), indicating solid cash conversion
• Net income decline suggests non-operating or extraordinary factors; monitor bottom-line normalization
• Balance sheet conservative with computed equity ratio ~53% and strong liquidity (current ratio ~196%)
• Capex/ICF not disclosed; FCF and dividend capacity cannot be fully assessed

Metrics to Watch:

• Breakdown of non-operating/extraordinary gains/losses and tax effects driving net income volatility
• Capex and investing cash flows to determine sustainable FCF
• Gross and operating margin trends versus commodity/input cost movements
• Working capital metrics (inventory days, receivables/payables) for cash conversion resilience
• Ordinary income and interest-bearing debt levels to validate leverage and coverage
• FX sensitivity and hedging disclosures

Relative Positioning: Relative to typical Japanese non-ferrous/materials peers, Mitsui Kinzoku shows solid operational margins and strong liquidity with moderate leverage, but exhibits higher bottom-line volatility this period due to non-operating factors; improved disclosure on capex and capital allocation would enhance comparability.

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