DOWA HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥317.19B
• Operating Income: ¥11.75B
• Net Income: ¥21.20B
• EPS: ¥228.79

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

DOWA Holdings (5714) reported FY2026 Q2 consolidated results under JGAAP showing a clear slowdown versus the prior year and weaker profitability, while maintaining a solid balance sheet and liquidity profile. Revenue declined 10.0% YoY to ¥317.2bn, reflecting softer market conditions and likely lower metal price realizations and/or volumes across key businesses. Gross profit was ¥48.1bn, with a gross margin of 15.2%, indicating some resilience in upstream spreads but pressure compared to past strong cycles. Operating income fell 45.3% YoY to ¥11.8bn as operating margin compressed to 3.7%, pointing to negative operating leverage amid a weaker top line. Ordinary income was ¥15.6bn, benefiting from non-operating factors relative to operating profit, and net income came in at ¥13.6bn (‑33.6% YoY), implying a net margin of 4.30%. EBITDA was ¥24.6bn (7.8% margin), supported by ¥12.9bn of depreciation and amortization, underscoring an asset-heavy profile typical for smelting, recycling, and processing operations. DuPont decomposition yields ROE of 3.27%, driven by a modest net margin (4.30%), relatively low asset turnover (0.465x), and moderate financial leverage (1.64x). The balance sheet remains conservative: total assets ¥682.3bn against total equity ¥417.1bn and liabilities ¥257.5bn, implying liabilities-to-equity of 0.62x. Liquidity is robust with a current ratio of 182% and quick ratio of 155%, supported by ¥165.4bn in working capital. Interest coverage is strong at 25.7x (EBIT/interest), indicating ample cushion despite earnings pressure. Operating cash flow was negative at ¥3.1bn in the period despite positive earnings, suggesting working capital outflows and/or timing effects; investing cash flow was not disclosed in the XBRL (reported as 0), so free cash flow cannot be reliably assessed. The reported effective tax rate metric shows 0.0% in the calculated metrics, but the presence of ¥8.2bn income tax expense alongside ¥13.6bn net income indicates a meaningful tax burden; by inference, the effective tax rate appears closer to the high‑30% range, highlighting a data inconsistency in the calculated metric rather than a true 0% rate. Dividend information (DPS, payout) was not disclosed, and share data (shares outstanding, BVPS) were also unreported in XBRL; EPS is provided at ¥228.79, confirming per-share profitability. Overall, FY2026 Q2 reflects cyclical normalization from prior peaks and softer profitability across segments, though capital structure and liquidity remain healthy. The company’s resilience is supported by diversified businesses (nonferrous metals, environmental/recycling, electronic materials, metal processing, heat treatment), but earnings are currently pressured by macro factors such as commodity prices, demand softness, and cost inflation. With ongoing depreciation and likely elevated capex needs typical of the sector, sustained OCF generation will be important to fund investments without increasing leverage. Given the data limitations (notably cash flow detail, dividend, and share base data), conclusions on cash returns and FCF coverage must be tentative. The near-term outlook hinges on metal price trends, treatment and refining charges, by‑product pricing (e.g., sulfuric acid), FX (USD/JPY), and demand recovery in electronics-related end markets.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 4.30%
• asset_turnover: 0.465x
• financial_leverage: 1.64x
• calculated_ROE: 3.27%
• commentary: ROE softness is primarily from compressed margins and low asset turnover typical of an asset-intensive smelting/recycling platform; leverage is moderate and not the driver of returns. margin_quality: Gross margin of 15.2% indicates pressure relative to prior peaks; operating margin fell to 3.7% as fixed costs and energy/raw material inputs weighed on profitability. Ordinary margin improved versus operating due to non-operating contributions, but net margin of 4.3% remains subdued. operating_leverage: Revenue declined 10.0% YoY while operating income fell 45.3% YoY, evidencing negative operating leverage as fixed cost absorption weakened. EBITDA margin at 7.8% supports that most compression occurred below gross profit, likely in SG&A, energy, and maintenance costs.

Growth Assessment

revenue_sustainability: Top-line down 10.0% YoY to ¥317.2bn, consistent with softer commodity prices, selective volume declines, and potential normalization in recycling/electronic materials demand. profit_quality: Net income declined 33.6% YoY to ¥13.6bn; margin compression and higher operating leverage reduced earnings quality. Ordinary income exceeding operating income suggests reliance on non-operating support (e.g., financial income/hedge effects), which may be less sustainable. outlook: Recovery depends on LME price trends (copper, zinc, precious metals), treatment/refining charges, sulfuric acid/by-product pricing, FX tailwinds (weak JPY), and electronics/semiconductor cycle normalization. Near-term visibility is mixed; structural cost control and mix upgrades will be key to stabilizing margins.

Financial Health

liquidity:

• current_ratio: 182%
• quick_ratio: 155%
• working_capital: ¥165.4bn
• commentary: Ample short-term liquidity and inventory-lite quick ratio indicate room to manage cyclical swings. solvency:
• liabilities_to_equity: 0.62x
• interest_coverage: 25.7x
• commentary: Low leverage and strong coverage provide financial flexibility; refinancing risk appears limited. capital_structure: Total assets ¥682.3bn vs equity ¥417.1bn and liabilities ¥257.5bn; financial leverage 1.64x indicates a conservative balance sheet for a capital-intensive business.

Cash Flow Quality

earnings_quality: EBITDA of ¥24.6bn and net income of ¥13.6bn contrast with negative OCF (‑¥3.1bn), indicating working capital outflows and/or timing factors. This raises questions about near-term cash conversion. FCF_analysis: Investing cash flow and capex were not disclosed (reported as 0 in XBRL), preventing reliable FCF calculation. Reported FCF of 0 should be treated as ‘not available,’ not zero. working_capital: Current assets ¥367.0bn and current liabilities ¥201.7bn imply healthy liquidity, but the negative OCF suggests a period of cash tied in receivables or other current items. Monitoring inventory and receivable days is important to assess normalization in 2H.

Dividend Sustainability

payout_ratio_assessment: Dividend data (DPS) and payout ratio were not disclosed; the 0.00 values indicate missing data. EPS is ¥228.79, but without DPS we cannot compute a payout ratio. FCF_coverage: Undeterminable due to lack of capex/investing CF disclosure. Negative OCF this period suggests limited near-term coverage if dividends are paid, but this could normalize with working capital reversal. policy_outlook: Given cyclical earnings and investment needs in smelting/recycling and materials businesses, dividends are typically set with a medium-term payout framework; confirmation requires management guidance not provided here.

Risk Assessment

Business Risks:

• Commodity price volatility (copper, zinc, precious metals) impacting smelting margins and inventory valuation.
• Treatment/refining charge fluctuations and by-product pricing (e.g., sulfuric acid) affecting unit economics.
• Demand cyclicality in electronic materials and metal processing, linked to semiconductor and automotive sectors.
• Energy cost volatility and environmental compliance costs.
• Operational risks in smelting/recycling (maintenance outages, yield losses).
• FX fluctuations (USD/JPY) affecting USD-linked metal prices and costs.

Financial Risks:

• Negative operating cash flow in the period indicating working capital volatility.
• Potential capex intensity leading to free cash flow pressure in down cycles.
• Tax burden variability and possible one-offs affecting effective tax rate.
• Exposure to credit risk from customers in cyclical end-markets.

Key Concerns:

• Margin compression with operating income down 45.3% YoY on a 10% revenue decline.
• OCF of -¥3.1bn despite ¥13.6bn net income, highlighting weak cash conversion this period.
• Limited visibility on investing cash flows and capex due to unreported data, constraining FCF assessment.

Investment Implications

Key Takeaways:

• Earnings normalization: net margin 4.3% and ROE 3.27% reflect a softer phase of the cycle.
• Balance sheet strength: low leverage (liabilities/equity 0.62x) and strong liquidity (current ratio 182%).
• Cash conversion watch: negative OCF despite positive EBITDA requires monitoring for 2H reversal.
• Non-operating support: ordinary income above operating income suggests less repeatable drivers.
• Data gaps: lack of investing CF, DPS, and share base data limits precision on FCF and return metrics.

Metrics to Watch:

• LME metal prices and treatment/refining charges.
• By-product pricing (sulfuric acid) and inventory valuation impacts.
• FX (USD/JPY) sensitivity on revenues and costs.
• Segment margins (smelting/recycling, electronic materials, metal processing).
• Operating cash flow and working capital days (DSO, DIO, DPO).
• Capex commitments and investing cash flows.
• Energy costs and hedging outcomes.

Relative Positioning: Within Japan’s nonferrous and materials peers, DOWA exhibits a conservative balance sheet and diversified profit drivers but currently faces margin compression and weaker cash conversion; near-term performance hinges on commodity and electronics cycles while financial flexibility remains a differentiator.

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