UACJ Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥540.12B
• Operating Income: ¥22.63B
• Net Income: ¥9.95B
• EPS: ¥40.70

Income Statement

Balance Sheet

Cash Flow Statement

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

UACJ reported FY2026 Q2 consolidated IFRS results showing resilient top-line but materially compressed profitability. Revenue rose 10.9% year over year to 5,401.25 (100M JPY), indicating healthy demand and/or price/mix support across aluminum rolling and fabricated products. Gross profit was 705.47, translating to a gross margin of 13.1%, which appears modest for a midstream metals processor and suggests cost pressure from aluminum input prices and energy/logistics. SG&A was 380.87, leaving operating income of 226.27, down 36.6% YoY, and an operating margin of roughly 4.2%. The decline from operating income to profit before tax (PBT 145.37) implies net finance and/or other non-operating losses of approximately 80.9, indicating a heavier cost of capital and/or valuation/FX impacts in the period. Net income fell 55.9% YoY to 73.69 (net margin ~1.4%), with a high effective tax rate of 47.5% further dampening bottom-line conversion. DuPont analysis shows ROE of 2.2% driven by a thin net margin (1.4%), moderate asset turnover (0.537x), and relatively high financial leverage (3.06x), highlighting sensitivity to margin swings. The balance sheet shows total assets of 10,055.28 and equity of 3,287.19 (equity ratio 29.6%), pointing to a leveraged capital structure typical for metals processing. Short-term loans of 1,472.32 and long-term loans of 1,935.03 indicate at least 3,407.35 of interest-bearing debt outstanding, although the total interest-bearing debt figure is unreported. Working capital is sizable, with current assets of 4,795.45, including inventories of 2,441.08 and receivables of 1,873.43, while payables stand at 1,406.15; inventory intensity remains high relative to half-year sales. Total comprehensive income of 129.19 exceeds net income, suggesting favorable other comprehensive income (likely FX-related translation gains or financial asset valuation). Cash and equivalents were 263.29, which is modest relative to total debt indicated by disclosed loans, underscoring the importance of steady operating cash flow. The reported payout ratio of 377.2% indicates dividends far above period earnings, likely reflecting policy smoothing and interim dynamics rather than a structural stance; sustainability will depend on second-half profitability and cash generation. Many CF items, non-operating breakdowns, and capital expenditures were unreported, limiting precision on earnings quality and FCF coverage. Overall, the quarter reflects solid demand but significant cost and financing headwinds, pressuring returns and raising the bar for margin recovery in 2H. Key drivers to watch are aluminum price spreads, energy costs, inventory normalization, and the effective tax rate.

Profitability Analysis

ROE of 2.2% decomposes into net margin 1.4% x asset turnover 0.537x x equity multiplier 3.06x. The principal drag is margin: despite a 10.9% YoY revenue increase, operating income fell 36.6% to 226.27, compressing operating margin to ~4.2%. The gap between operating income (226.27) and PBT (145.37) of ~80.9 suggests higher net interest and/or other losses, which further depress net margin. Gross margin at 13.1% appears constrained, consistent with unfavorable price-cost lag, energy costs, or product mix. Operating leverage was negative in the period—cost inflation and non-operating burden more than offset volume/price gains—resulting in a sharp decline in earnings. The effective tax rate of 47.5% amplified the drop from PBT to net income, hinting at non-deductible items, regional mix, or one-offs. Absent depreciation/EBITDA disclosures, we cannot assess EBITDA margin or interest coverage; however, the magnitude of the OI-to-PBT delta indicates meaningful finance costs or valuation effects.

Growth Assessment

Top-line growth of 10.9% YoY to 5,401.25 is solid for a cyclical aluminum processor, implying recovery in auto/can stock/industrial segments and/or pass-through pricing. However, profit growth was negative: operating income -36.6% and net income -55.9% YoY, indicating weak operating leverage and margin headwinds. The revenue increase appears at least partly price-driven, but cost pass-through lag likely compressed spreads, reducing gross and operating margins. The equity-method income of 5.17 contributes at the margin but is insufficient to offset core profit pressure. Total comprehensive income (129.19) outpaced net income, suggesting currency or valuation gains in OCI that are not cash earnings. Near-term outlook hinges on normalization of input costs, improved price-cost spread, and inventory optimization; if spreads stabilize and tax rate normalizes, profit conversion could improve in 2H. Sustainability of revenue growth will depend on auto demand in Japan/Asia, beverage can stock, and global aluminum dynamics; with inventories at 2,441.08, a destock could temporarily weigh on volumes if demand softens.

Financial Health

Total assets are 10,055.28 and equity is 3,287.19, for an equity ratio of 29.6%, indicating a leveraged but not unusual structure for the industry. Disclosed loans total at least 3,407.35 (short-term 1,472.32; long-term 1,935.03), while cash is 263.29, implying net debt is substantial relative to equity and cash. The provided debt-to-equity ratio is 1.98x, reinforcing meaningful leverage risk. Liquidity assessment is limited by unreported current liabilities and cash flow, but current assets are 4,795.45, including sizable inventories (2,441.08) and receivables (1,873.43); payables are 1,406.15, implying a significant working capital investment. The short-term loan balance of 1,472.32 introduces refinancing and interest rate exposure. Solvency is adequate on book metrics but sensitive to earnings volatility; the drop from operating income to PBT suggests non-trivial interest/other expense. Absent interest expense and EBITDA, we cannot compute coverage ratios, but bottom-line compression highlights the need to preserve cash and margins.

Cash Flow Quality

Operating cash flow was unreported, preventing direct assessment of earnings-to-cash conversion. Earnings quality appears pressured: net margin is only 1.4% and the effective tax rate is elevated at 47.5%, which may include non-cash items or geographic mix effects. The sizable inventories (2,441.08) and receivables (1,873.43) relative to half-year revenue imply working capital absorption that can dampen OCF during growth phases. Free cash flow cannot be determined due to missing OCF and capex data; however, the industry typically requires ongoing capex for rolling mill maintenance and quality upgrades. The gap between operating income (226.27) and PBT (145.37) suggests material finance/other costs that are cash or quasi-cash in nature; absent detail, we assume a portion is interest, which would weigh on OCF. Total comprehensive income exceeding net income hints at OCI gains that do not improve OCF.

Dividend Sustainability

The reported payout ratio of 377.2% indicates dividends far in excess of period earnings, which is unlikely to be sustainable if earnings remain at current levels. Given missing OCF and FCF data, FCF coverage of dividends cannot be assessed; however, with cash of 263.29 and meaningful short-term loans (1,472.32), internal funding capacity appears constrained if profitability does not recover in 2H. UACJ historically targets stable dividends, so the high payout likely reflects interim timing and earnings trough dynamics rather than a permanent stance. Sustainability will depend on recovery in operating margin, normalization of the effective tax rate, and working capital release. If inventory levels normalize and spreads improve, cash generation could better align with dividend outlays; absent that, balance sheet flexibility may narrow.

Risk Assessment

Business Risks:

• Aluminum price volatility and timing mismatch in pass-through contracts affecting spreads
• Energy and logistics cost inflation compressing gross margins
• Demand cyclicality in autos, beverage can stock, and industrial applications
• FX fluctuations (USD/JPY) impacting input costs and translation effects
• Inventory risk given high inventories (2,441.08) relative to half-year sales
• Customer concentration and pricing pressure in OEM supply chains
• Potential impairment risks under IFRS if profitability remains weak

Financial Risks:

• Leverage risk with disclosed loans of at least 3,407.35 and an equity ratio of 29.6%
• Refinancing and interest rate exposure on short-term loans (1,472.32)
• High effective tax rate (47.5%) depressing net income and cash generation
• Spread between operating income and PBT (~80.9) indicating material finance/other costs
• Dividend payout above earnings (377.2%) reducing financial flexibility if sustained

Key Concerns:

• Operating income down 36.6% YoY despite 10.9% revenue growth
• Net margin only 1.4% and ROE 2.2%, below cost of equity benchmarks
• Limited disclosure of cash flow and interest expense hinders coverage assessment
• Large working capital tied in inventories and receivables during a volatile demand cycle

Investment Implications

Key Takeaways:

• Revenue growth is solid but margin compression drove a sharp earnings decline
• High leverage and financing costs magnify sensitivity to margin recovery
• Elevated effective tax rate exacerbated weak bottom-line conversion
• Inventory intensity suggests scope for working capital release if demand stabilizes
• Dividend payout currently exceeds earnings; sustainability hinges on 2H recovery

Metrics to Watch:

• Operating margin and gross spread versus LME aluminum and energy costs
• Gap between operating income and PBT as a proxy for finance/other costs
• Inventory and receivable turns; cash conversion cycle
• Effective tax rate normalization in 2H
• Net debt trajectory and any disclosure of interest expense/coverage
• Capex commitments and maintenance outage schedules impacting utilization

Relative Positioning: Within Japanese and global rolled aluminum peers, UACJ retains scale and product breadth but currently exhibits weaker profitability metrics (ROE 2.2%, operating margin ~4.2%) and higher leverage sensitivity; margin restoration and working capital discipline are needed to close the gap with best-in-class processors.

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