FURUKAWA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥97.64B
• Operating Income: ¥4.21B
• Net Income: ¥8.81B
• EPS: ¥145.09

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

Furukawa Co., Ltd. (5715) delivered mixed FY2026 Q2 consolidated results under JGAAP: top-line growth and stronger operating performance contrasted with sharply lower bottom-line profit and very weak operating cash flow. Revenue rose 4.4% YoY to ¥97.6bn, with gross profit of ¥13.4bn and an operating income of ¥4.21bn, up 20.6% YoY, indicating positive operating leverage and better cost control. Ordinary income reached ¥6.30bn, outpacing operating income and implying meaningful non-operating gains (e.g., financial income, FX or equity-method), which supported pre-tax earnings. Despite this, net income declined 43.8% YoY to ¥4.91bn, suggesting a tougher comparison in below-operating items versus the prior year and/or higher tax and minority interests effects. The net margin stood at 5.02%, and EBITDA was ¥6.60bn (6.8% margin), pointing to a modest but improved operating profile versus revenue growth. DuPont metrics show ROE of 3.59% (net margin 5.02%, asset turnover 0.388x, financial leverage 1.85x), indicating modest returns on equity, with leverage moderate and efficiency in line with a capital-intensive portfolio. The balance sheet remains conservative: equity is ¥136.4bn against total assets of ¥251.9bn (equity-to-asset ratio ~54%), while total liabilities are ¥123.5bn, resulting in a debt-to-equity proxy of 0.91x. Liquidity is robust with a current ratio of 220% and a quick ratio of 178%, supported by ¥63.6bn of working capital. However, operating cash flow was deeply negative at -¥15.4bn, implying substantial working capital outflows and/or cash tax timing that offset accounting profits. Interest coverage is strong at 15.9x (EBIT basis), indicating low near-term refinancing risk. The effective tax rate shown in the computed metrics (0.0%) is not reliable; using reported tax expense, we estimate an implied effective tax rate in the mid-30% range for the period. Dividend-related data (DPS, payout) are not disclosed in the feed and should not be interpreted as zero, and investing cash flow and cash/equivalents are also unreported, limiting FCF analysis. Overall, the company shows improving operating momentum and solid solvency, but earnings quality is weakened by poor cash conversion and a larger reliance on non-operating items to bridge operating income to ordinary income. Monitoring working capital discipline and the sustainability of non-operating gains will be critical for the second half and full-year trajectory.

Profitability Analysis

ROE of 3.59% decomposes into a 5.02% net margin, 0.388x asset turnover, and 1.85x financial leverage, reflecting modest profitability with moderate capital efficiency and conservative leverage. Operating margin is approximately 4.3% (¥4.21bn/¥97.64bn), expanding faster than revenue (operating income +20.6% YoY vs. revenue +4.4% YoY), indicating positive operating leverage. Gross margin is 13.7%, suggesting cost of sales discipline despite input cost pressures typical for metals/materials/machinery mixes. EBITDA margin of 6.8% provides a buffer over operating margin, with D&A at ¥2.39bn implying a capital-intensive asset base. The ordinary margin (~6.5%) exceeds the operating margin, indicating non-operating tailwinds (e.g., financial income or FX gains), which may be less stable than core operations. Interest burden is light (interest expense ¥264m) relative to EBIT, with 15.9x coverage. Overall profitability is improving at the operating line, but bottom-line volatility (net income -43.8% YoY) highlights sensitivity to non-operating and tax items.

Growth Assessment

Top-line growth of 4.4% YoY to ¥97.6bn appears steady, consistent with gradual demand recovery in machinery/materials end markets. Operating income growth of 20.6% YoY signals effective cost control and/or mix improvement, delivering margin expansion and positive operating leverage. Ordinary income at ¥6.30bn surpassed operating income, but reliance on non-operating gains may not be durable, and thus profit quality below operating income is less robust. Net income fell 43.8% YoY to ¥4.91bn, suggesting a high base in the prior period from favorable below-OP items or lower taxes/minorities; absent extraordinary items, underlying operating growth looks healthier than the headline net decline. With EBITDA at ¥6.60bn, incremental margins versus revenue are reasonable for a mid-cap diversified industrial/materials player. Sustainability of revenue growth will hinge on end-market demand (construction/mining machinery, rock drills, copper foil/electronic materials) and currency trends. Outlook: if volume/mix and cost control persist, operating profit growth could continue into 2H; however, normalizing non-operating gains and tighter working capital could temper ordinary/net income growth.

Financial Health

Liquidity is strong: current ratio 219.8%, quick ratio 177.7%, and working capital ¥63.65bn, supporting near-term obligations. Solvency is comfortable: total liabilities/total assets ~49% and equity/asset ratio is approximately 54% (equity ratio in the feed is unreported). Debt-to-equity proxy is 0.91x (total liabilities to equity), consistent with moderate leverage for the sector. Interest coverage of 15.9x indicates low refinancing risk and ample cushion against rate increases. Asset base of ¥251.9bn against equity of ¥136.4bn yields financial leverage of 1.85x, consistent with DuPont inputs. Overall capital structure is balanced, with adequate headroom for cyclical volatility.

Cash Flow Quality

Operating cash flow of -¥15.42bn contrasts with net income of ¥4.91bn (OCF/NI = -3.14), signaling weak cash conversion for the period. The delta implies significant working capital consumption (e.g., receivables build, inventory build, or payables reductions) and/or cash tax/timing effects. D&A of ¥2.39bn supports the non-cash portion of earnings, but this was more than offset by working capital outflows. Investing cash flow and cash & equivalents were not disclosed; thus, free cash flow cannot be reliably computed from the data provided (the reported FCF of zero in the feed should be treated as unreported). Given negative OCF, FCF was likely negative absent asset disposals or material investment inflows. Monitoring inventory, receivables, and prepayments into 2H will be critical to assess normalization of cash conversion.

Dividend Sustainability

Dividend per share (DPS) and payout ratio figures are not disclosed in this dataset and should not be interpreted as zero. With EPS of ¥145.09 for the period, accounting capacity for shareholder returns exists; however, negative operating cash flow in the period weakens near-term cash coverage. Without investing cash flow and cash balance disclosure, we cannot assess free cash flow coverage or cash-on-hand support with precision. Balance sheet strength (equity ratio ~54% by our calculation and moderate leverage) suggests flexibility, but sustainable dividends ultimately depend on turning operating profit into cash and on capital expenditure needs for growth businesses (e.g., electronic materials). Policy-wise, management’s dividend stance is not provided; visibility improves once 2H cash flows and capex plans are disclosed.

Risk Assessment

Business Risks:

• End-market cyclicality in construction/mining machinery and infrastructure investment affecting rock drills and industrial machinery sales
• Commodity price volatility (non-ferrous metals) impacting input costs and product pricing
• Semiconductor and electronics cycle exposure via copper foil/electronic materials
• Foreign exchange fluctuations (JPY vs. USD and others) affecting both competitiveness and non-operating items
• Energy and raw material cost inflation compressing margins
• Supply chain disruptions impacting deliveries and inventory levels
• Environmental, health, and safety compliance and potential remediation liabilities

Financial Risks:

• Weak operating cash conversion in the period creating funding needs for working capital
• Potential normalization of non-operating gains reducing ordinary income
• Interest rate risk on floating-rate debt despite current strong coverage
• Capex requirements for growth and maintenance within a capital-intensive portfolio
• Tax rate volatility and timing differences impacting net income

Key Concerns:

• Negative operating cash flow of -¥15.4bn versus positive net income indicates low earnings quality in the period
• Net income decline of 43.8% YoY despite stronger operating profit points to reliance on below-OP items
• Visibility on free cash flow is limited due to undisclosed investing cash flow and cash balances

Investment Implications

Key Takeaways:

• Revenue grew 4.4% YoY to ¥97.6bn with operating income up 20.6% YoY, evidencing positive operating leverage
• Ordinary income (¥6.30bn) exceeded operating income, implying support from non-operating gains
• Net income fell 43.8% YoY to ¥4.91bn; headline earnings are sensitive to below-operating and tax items
• Margins: gross 13.7%, operating ~4.3%, EBITDA 6.8%, net 5.0%
• ROE is modest at 3.59% with leverage at 1.85x and asset turnover 0.388x
• Liquidity is strong (current ratio ~220%, quick ratio ~178%), and leverage is moderate (liabilities/equity ~0.91x)
• Operating cash flow was -¥15.4bn, indicating material working capital outflows and/or timing effects
• Dividend data not disclosed; assess sustainability after 2H cash flow and capex updates

Metrics to Watch:

• Operating cash flow normalization and working capital (AR, inventory, AP) trends
• Sustainability of non-operating gains that elevate ordinary income above operating income
• Order backlog and book-to-bill in machinery and materials segments
• Gross and operating margin trajectory amid input cost and FX moves
• Capex commitments versus EBITDA to gauge medium-term FCF
• Effective tax rate and any extraordinary items affecting net income

Relative Positioning: Within Japan’s diversified materials and industrial machinery space, the company exhibits stronger balance sheet resilience and interest coverage than many mid-cap peers, with improving operating margins but weaker cash conversion in the current period; its return profile (ROE ~3.6%) remains modest and appears more sensitive to non-operating items than best-in-class peers.

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