Furukawa Electric Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥610.66B
• Operating Income: ¥19.36B
• Net Income: ¥12.78B
• EPS: ¥183.83

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

Furukawa Electric (5801) reported FY2026 Q2 consolidated results under JGAAP showing solid topline and profit growth with improving operating leverage, while margins and ROE remain modest. Revenue rose 7.1% YoY to ¥610.7bn, supported by broad-based demand and likely price pass-through in materials-centric businesses. Operating income increased 10.3% YoY to ¥19.4bn, lifting the operating margin to roughly 3.2%, indicative of slight operating leverage as opex grew slower than sales. Ordinary income was ¥20.5bn, exceeding operating income by about ¥1.1bn, suggesting a net positive contribution from non-operating items despite interest expense of ¥4.6bn. Net income advanced 15.7% YoY to ¥12.9bn, with an implied net margin of 2.12% and EPS of ¥183.83. Gross profit was ¥92.8bn with a gross margin of 15.2%, reflecting the industry’s cost pass-through model and input cost variability. EBITDA reached ¥39.7bn, implying an EBITDA margin of 6.5%, providing a reasonable buffer over interest expense as evidenced by EBIT interest coverage of about 4.2x. The DuPont decomposition indicates ROE of 3.36% (net margin 2.12% × asset turnover 0.592 × financial leverage 2.68), which is below typical equity cost thresholds and highlights profitability as the primary constraint. Liquidity appears adequate with a current ratio of 141.1% and a quick ratio of 121.7%, supported by ¥162.0bn of working capital. Total assets were ¥1,031.9bn and total equity ¥385.0bn, implying asset/equity leverage of 2.68x and a debt-to-equity metric of 1.59x, pointing to a moderately leveraged capital structure. Operating cash flow was positive at ¥15.5bn, exceeding net income (OCF/NI of 1.20), a favorable signal for earnings quality this quarter. Investing cash flow and cash balances were not disclosed in this dataset, limiting full free cash flow and liquidity analysis. Dividend per share and payout were not disclosed for the period in this dataset, so capital return assessment hinges on future disclosures. Overall, results show healthy YoY growth and incremental margin improvement, but absolute margins and ROE remain modest for the cycle. The balance sheet is stable with manageable interest burden, though leverage and working capital intensity require ongoing monitoring. Data limitations (e.g., undisclosed investing cash flows, cash and equivalents, share counts, and equity ratio metric) constrain the completeness of this review, so the analysis focuses on available non-zero items and implied relationships.

Profitability Analysis

ROE_decomposition: ROE 3.36% = Net margin 2.12% × Asset turnover 0.592 × Financial leverage 2.68. This indicates ROE is primarily constrained by low net margin rather than asset efficiency or leverage. margin_quality: Gross margin 15.2% (GP ¥92.8bn) suggests decent cost pass-through. Operating margin ~3.17% (OI ¥19.36bn on ¥610.66bn revenue) improved YoY in line with OI +10.3% vs revenue +7.1%. Net margin 2.12% benefited modestly from non-operating items as ordinary income exceeded operating income by ~¥1.14bn despite ¥4.64bn interest expense. operating_leverage: Operating income growth (+10.3% YoY) outpaced revenue growth (+7.1% YoY), indicating positive operating leverage. EBITDA margin of 6.5% vs operating margin of ~3.2% shows D&A intensity; sustaining leverage likely requires continued mix and pricing improvements.

Growth Assessment

revenue_sustainability: Revenue grew 7.1% YoY to ¥610.7bn, supported by volume/mix and likely pricing pass-through in cables/materials. Asset turnover of 0.592 suggests a capital-intensive model; sustaining growth will likely rely on backlog conversion and end-market demand stability. profit_quality: Net income +15.7% YoY to ¥12.95bn with OCF/NI of 1.20 indicates reasonably high earnings quality this quarter. Ordinary income (¥20.50bn) above operating income (¥19.36bn) implies supportive non-operating balance, but reliance should not be assumed structurally. outlook: With incremental margin expansion and manageable financing costs, modest profit growth can continue if demand and pricing remain firm. Key swing factors include input cost trends, project execution in energy/communications, and FX. Given modest starting margins, small improvements in utilization and mix can have outsized earnings effects.

Financial Health

liquidity: Current ratio 141.1% and quick ratio 121.7% (CA ¥556.4bn; CL ¥394.5bn; inventories ¥76.45bn) indicate adequate short-term coverage. Working capital stands at ~¥162.0bn. solvency: Total assets ¥1,031.9bn vs equity ¥385.0bn implies financial leverage of 2.68x. EBIT interest coverage ~4.2x (¥19.36bn/¥4.64bn) suggests interest is serviceable but sensitive to earnings volatility. capital_structure: Debt-to-equity of 1.59x (metric provided) indicates moderate leverage for a capital-intensive manufacturer. Equity ratio was not disclosed in this dataset (0.0% placeholder), so balance sheet resilience is assessed via leverage and coverage metrics.

Cash Flow Quality

earnings_quality: OCF of ¥15.50bn vs NI of ¥12.95bn yields OCF/NI of 1.20, supportive of earnings quality this quarter, likely aided by working capital discipline relative to growth. FCF_analysis: Investing cash flow was not disclosed in this dataset (reported as 0), so Free Cash Flow cannot be determined with precision. D&A is ¥20.37bn, but capex is not provided; any FCF inference would be assumption-driven. working_capital: With inventories at ¥76.45bn and strong quick ratio, short-term liquidity appears adequate. However, the business is working-capital intensive, and further revenue growth could temporarily absorb cash.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed in this dataset for the period (values shown as 0). As such, payout discipline cannot be evaluated from the provided figures. FCF_coverage: FCF coverage cannot be assessed due to undisclosed investing cash flows and FCF (reported as 0 placeholder). OCF is positive, suggesting capacity for distributions may exist depending on capex and debt service needs. policy_outlook: Without current dividend disclosure, capital return policy assessment is deferred to future reporting. Balance sheet and OCF trends appear supportive of flexibility, but visibility hinges on capex and leverage targets.

Risk Assessment

Business Risks:

• Input commodity and energy cost volatility affecting margins and pricing pass-through timing
• Project execution risk in large power/communications infrastructure contracts impacting working capital and profitability
• Demand cyclicality in telecom, automotive, and industrial end-markets
• Foreign exchange fluctuations affecting export competitiveness and translation
• Supply chain and logistics constraints influencing delivery schedules and costs

Financial Risks:

• Moderate leverage (financial leverage 2.68x; debt-to-equity 1.59x) amplifies earnings variability
• Interest burden (¥4.64bn) with EBIT coverage ~4.2x could tighten if operating conditions weaken
• Working capital intensity may absorb cash during growth phases
• Limited disclosure of cash and investing cash flows in the dataset constrains visibility on FCF and liquidity buffers

Key Concerns:

• Low absolute margins (operating ~3.2%, net 2.12%) constrain ROE (3.36%)
• Dependence on non-operating balance to bridge EBIT to ordinary income
• Data limitations (undisclosed cash, investing CF, DPS, equity ratio) reduce analytical certainty

Investment Implications

Key Takeaways:

• Solid YoY growth with slight margin expansion: revenue +7.1%, operating income +10.3%, net income +15.7%
• EBITDA margin 6.5% and EBIT interest coverage ~4.2x indicate manageable financing burden
• ROE at 3.36% remains subdued; profitability, not leverage, is the main ROE constraint
• Liquidity is adequate with current ratio 141% and quick ratio 122%, supported by ¥162bn working capital
• Earnings quality reasonable with OCF/NI at 1.20, but full FCF unassessable due to undisclosed investing CF

Metrics to Watch:

• Operating margin trajectory and gross margin resilience vs input costs
• Order backlog and book-to-bill in power cables and communications
• Capex and investing cash flows to gauge FCF and leverage path
• Interest-bearing debt levels and coverage ratios
• Working capital turns (inventory and receivable days) and OCF/NI sustainability
• FX sensitivity and commodity pass-through effectiveness

Relative Positioning: Within Japan’s wires, cables, and materials peer set, Furukawa Electric shows mid-tier liquidity and moderate leverage with margins on the lower side; incremental improvements in mix, execution, and cost pass-through could narrow the profitability gap if sustained.

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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