Mitsubishi Materials Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥829.91B
• Operating Income: ¥10.95B
• Net Income: ¥25.64B
• EPS: ¥41.98

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

Mitsubishi Materials’ FY2026 Q2 consolidated results under JGAAP show a sharp cyclical and margin-driven slowdown, with revenue down 16.1% year over year to ¥829.9bn and operating income down 60.3% to ¥10.9bn. Net income fell 77.8% to ¥5.5bn, compressing the net margin to 0.66% and pulling ROE down to 0.79% per the DuPont analysis provided. Gross profit is disclosed at ¥93.4bn, implying an 11.3% gross margin and a meaningful contraction from typical cycle peaks, consistent with price normalization and weaker volumes. EBITDA of ¥34.6bn (4.2% margin) indicates limited operating cushion, and operating leverage is working against the company in the current down-cycle. Interest coverage at 2.3x on an EBIT basis is adequate but leaves reduced headroom if earnings soften further. The OCF/Net Income ratio of -14.71x highlights significant earnings-to-cash conversion stress, driven likely by working capital movements and/or timing effects; investing cash flows are not disclosed this quarter. Financing cash inflows of ¥71.4bn suggest reliance on external funding to bridge negative operating cash flow and ongoing investment needs. On the balance sheet, total assets are ¥2.55tn and total equity ¥689.9bn, implying an equity ratio of about 27.1% (the reported equity ratio field is not populated), and a debt-to-equity ratio of 2.44x indicates a leveraged profile for a materials company. Liquidity metrics are acceptable with a current ratio of 112.9% and quick ratio of 101.2%, supported by positive working capital of ¥167.0bn. The DuPont breakdown (NPM 0.66%, asset turnover 0.326x, financial leverage 3.69x) shows low profitability and modest asset efficiency being amplified by leverage to produce a low single-digit ROE. The effective tax rate is shown as 0.0% in the provided metrics, which likely reflects accounting/timing effects rather than a sustainable rate. No dividend is disclosed for the period (DPS 0, payout ratio 0%), which is consistent with prioritizing balance sheet resilience amid weak cash generation. Overall, the quarter underscores the exposure to commodity and industrial demand cycles, with cash flow dynamics currently the primary constraint. Data limitations include unreported items (e.g., cash balance, investing CF, equity ratio field), so assessments focus on disclosed non-zero metrics and derived calculations. The near-term outlook hinges on inventory normalization, pricing discipline, and demand recovery across end-markets, alongside disciplined capital allocation to protect liquidity.

Profitability Analysis

ROE_decomposition: ROE 0.79% = Net margin 0.66% × Asset turnover 0.326 × Financial leverage 3.69. Profitability is the principal drag, with thin margins dampening returns despite leverage. margin_quality: Gross margin is 11.3% (¥93.4bn GP on ¥829.9bn sales), EBITDA margin 4.2% (¥34.6bn), and operating margin ~1.3% (¥10.9bn). The large YoY decline in operating income (-60.3%) suggests pricing pressure, adverse mix, and/or under-absorption of fixed costs. Ordinary income exceeded operating income (¥16.7bn vs. ¥10.9bn), indicating non-operating gains (e.g., FX/hedge/affiliates) partially offset operational weakness. operating_leverage: With EBITDA to operating income spread modest and revenue down 16.1% YoY, fixed-cost absorption worsened, amplifying the sales decline into a disproportionate profit contraction. Interest coverage is 2.3x on EBIT (10.9/4.75), indicating reduced flexibility if operating conditions deteriorate further.

Growth Assessment

revenue_sustainability: Sales fell 16.1% YoY to ¥829.9bn, consistent with cyclical softness in industrial and commodity-linked demand and potential price normalization. Asset turnover of 0.326x reflects subdued throughput. profit_quality: Net margin is 0.66% and EBITDA margin 4.2%, underscoring thin profitability and low incremental contribution. Ordinary income exceeding operating income suggests non-operating support; sustainability of such items is uncertain. outlook: Short-term growth hinges on pricing stabilization, inventory normalization, and demand recovery in key downstream sectors. A rebound in utilization would improve fixed-cost absorption and earnings elasticity; absent this, margins likely remain constrained.

Financial Health

liquidity: Current ratio 112.9% and quick ratio 101.2% indicate adequate near-term liquidity. Working capital is positive at ¥166.97bn, providing a buffer, though cash balance is not disclosed. solvency: Computed equity ratio is approximately 27.1% (¥689.9bn equity / ¥2.55tn assets), despite the reported equity ratio field being blank. Debt-to-equity of 2.44x and interest expense of ¥4.75bn point to a leveraged capital structure that requires sustained earnings to maintain coverage. capital_structure: Financing CF of ¥71.36bn in the quarter indicates reliance on external funding while OCF is negative. Ordinary income of ¥16.70bn versus operating income suggests some financial/associate income contribution, but recurring debt service capacity is tied to restoring operating margins.

Cash Flow Quality

earnings_quality: OCF/Net Income at -14.71x highlights weak cash conversion; earnings are not translating into cash due to sizable working capital outflows and/or timing/one-off effects. FCF_analysis: Investing CF is not disclosed; therefore, true FCF cannot be independently derived this quarter. The provided FCF metric is shown as 0, which likely reflects unavailable data rather than actual zero free cash flow. working_capital: Inventories stand at ¥151.72bn; with revenue down, inventory and receivables dynamics likely absorbed cash. Monitoring inventory turnover and receivables collection will be key to normalizing OCF.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is shown as 0 and payout ratio 0%. With net income positive but OCF deeply negative, a conservative stance on distributions is appropriate until cash earnings recover. FCF_coverage: FCF coverage is shown as 0.00x due to missing investing CF; thus, we cannot confirm dividend capacity from free cash flow this period. policy_outlook: Sustainable dividends require a return to positive, stable OCF and improved leverage metrics. Near-term policy will likely prioritize liquidity preservation and balance sheet stability.

Risk Assessment

Business Risks:

• Cyclical exposure to commodity prices and industrial demand impacting volumes and pricing
• Margin pressure from input cost volatility and product mix shifts
• Operating leverage leading to outsized profit swings on modest volume changes
• Potential supply chain and inventory risks affecting working capital
• FX and hedging impacts influencing non-operating income

Financial Risks:

• Negative operating cash flow requiring external financing in the period
• Leverage of 2.44x D/E raises sensitivity to earnings volatility
• Interest coverage at 2.3x leaves limited headroom if profits weaken
• Refinancing and interest rate risk given reliance on financing inflows

Key Concerns:

• Sustained weak cash conversion (OCF/NI -14.71x)
• Compressed margins (EBITDA margin 4.2%, net margin 0.66%)
• Dependence on non-operating items to support ordinary income

Investment Implications

Key Takeaways:

• Revenue contracted 16.1% YoY; profitability deteriorated materially
• ROE at 0.79% driven by very low net margin despite leverage
• EBIT interest coverage at 2.3x indicates tighter financial flexibility
• OCF deeply negative versus positive net income, highlighting cash conversion stress
• Liquidity adequate near term (current ratio 112.9%, quick ratio 101.2%), but supported by financing inflows
• Computed equity ratio around 27.1% suggests moderate capitalization for the sector

Metrics to Watch:

• Operating cash flow and working capital turnover (inventory and receivables days)
• EBITDA margin progression and utilization rates
• Net debt and interest coverage trends
• Price/mix recovery in core products and backlog indicators
• Non-operating income volatility (FX/hedge/associates)

Relative Positioning: Versus domestic diversified materials peers, the company currently exhibits weaker cash conversion, below-average ROE, and tighter interest coverage, offset by an acceptable liquidity profile and a moderate equity cushion.

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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