SWCC Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥128.86B
• Operating Income: ¥11.65B
• Net Income: ¥3.95B
• EPS: ¥246.88

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

SWCC Co., Ltd. reported solid topline and operating performance for FY2026 Q2 (cumulative), with revenue up 9.8% year over year to ¥128.86bn and operating income up 11.9% to ¥11.65bn, indicating modest positive operating leverage. Gross profit rose to ¥18.70bn, translating to a gross margin of 14.5%, while the operating margin improved to roughly 9.0%, demonstrating decent cost pass-through and efficiency. Ordinary income of ¥11.30bn was slightly below operating income, implying a small net non-operating expense burden, largely consistent with the reported interest expense of ¥0.27bn. Net income surged 104.1% YoY to ¥7.31bn, a significantly faster pace than operating income, suggesting the YoY improvement was aided by non-operating and/or below-the-line items rather than purely operational drivers. The DuPont framework shows a net margin of 5.67%, asset turnover of 0.641x, and financial leverage of 2.08x, yielding a calculated ROE of 7.56%, which matches the reported level. EBITDA reached ¥13.57bn, implying an EBITDA margin of 10.5%, consistent with a capital-intensive manufacturing profile. Liquidity is adequate but not abundant, with a current ratio of 112.7% and a quick ratio of 96.9%, while working capital stands at ¥12.44bn. Leverage is moderate at a debt-to-equity ratio of 1.23x, and interest coverage is strong at 42.7x, indicating comfortable debt serviceability given current earnings power. Despite healthy profit metrics, operating cash flow was only ¥0.86bn versus net income of ¥7.31bn (OCF/NI of 0.12), pointing to a material working capital drag or timing effects during the period. Investing cash flow and cash and equivalents were not disclosed in the provided XBRL extract, limiting free cash flow assessment; the reported FCF of zero should be treated as not available rather than economically zero. The reported effective tax rate metric shows 0.0%, but disclosed tax expense of ¥3.18bn implies an effective rate of roughly 30% versus a pre-tax proxy, suggesting the 0.0% is simply not disclosed via that metric. Balance sheet totals show assets of ¥201.19bn and equity of ¥96.64bn (equity ratio not disclosed), consistent with the calculated financial leverage used in DuPont. Dividends were not disclosed for the period (DPS and payout ratio show as zero due to non-disclosure), so dividend policy inference is constrained. Per-share analysis is limited because outstanding shares, treasury shares, and BVPS are not disclosed in this extract, although EPS is provided at ¥246.88. Overall, the company demonstrates improving profitability and strong coverage metrics but faces a near-term cash conversion shortfall and incomplete disclosures on cash, capex, and dividends, which are important for assessing capital allocation and sustainability.

Profitability Analysis

ROE is 7.56% via DuPont (Net margin 5.67% x Asset turnover 0.641x x Leverage 2.08x). Operating margin is approximately 9.0% (¥11.65bn / ¥128.86bn), up faster than revenue (+11.9% OI vs +9.8% sales), indicating modest positive operating leverage. Gross margin of 14.5% suggests acceptable pass-through of input costs in a wire/cable-heavy product mix, with scope for further improvement via mix and cost control. EBITDA margin of 10.5% reflects a typical capital-intensive industrial margin structure; D&A of ¥1.92bn is modest relative to EBITDA, implying supportive EBIT conversion. Ordinary income trails operating income slightly (¥11.30bn vs ¥11.65bn), implying small net non-operating costs; interest expense of ¥0.27bn is the primary drag. Interest coverage is strong at 42.7x (EBIT/interest), underscoring resilient profitability relative to funding costs. Net income growth (+104.1% YoY) far outpaced operating income growth, implying improved below-the-line items or absence of prior-year one-offs; margin expansion alone does not explain the magnitude of net profit growth. Overall profitability quality is good at the operating level, but the sizeable NI step-up warrants caution in extrapolation without more detail on extraordinary/one-off factors.

Growth Assessment

Revenue growth of +9.8% YoY indicates healthy demand across end markets such as power infrastructure, industrial, and communications. Operating income growth of +11.9% YoY outpacing sales reflects incremental margin improvements and effective cost management. The very strong net income growth (+104.1% YoY) appears non-linear relative to operating performance, suggesting contributions from non-operating improvements and/or base effects from prior-year charges. Sustainability of the top-line appears reasonable given the scale of YoY increase, but visibility on backlog, pricing, and volume by segment is not available in the provided data. Margin sustainability hinges on continued cost pass-through of metals and energy, product mix shifts toward higher-value cables and components, and utilization levels. Outlook factors include domestic grid reinforcement, renewable integration, and industrial capex cycles, balanced against commodity price volatility and project timing. With incomplete disclosure on segment detail and order trends in this extract, we assume medium visibility on revenue and operating profit trajectories.

Financial Health

Total assets are ¥201.19bn, liabilities ¥118.84bn, and equity ¥96.64bn, implying financial leverage (A/E) of ~2.08x and a D/E of 1.23x. Liquidity is adequate: current ratio 112.7% and quick ratio 96.9%, with working capital of ¥12.44bn. Interest coverage at 42.7x indicates comfortable debt service capacity. The equity ratio figure is not disclosed in this extract, but the balance sheet supports a moderate leverage profile. Ordinary income being close to operating income suggests limited reliance on non-operating gains for ongoing solvency support. Overall capital structure appears balanced for an industrial manufacturer, though the thin quick ratio warrants monitoring if working capital needs continue to rise.

Cash Flow Quality

OCF of ¥0.86bn versus net income of ¥7.31bn yields an OCF/NI ratio of 0.12, indicating weak cash conversion in the period—likely driven by working capital build (e.g., receivables or inventories) or timing of advances and project milestones. EBITDA of ¥13.57bn against modest D&A (¥1.92bn) supports underlying earnings quality at the operating level, but cash realization lagged. Investing CF is not disclosed here, so free cash flow cannot be reliably derived; the displayed FCF of zero should be interpreted as not available. Financing CF was an inflow of ¥3.84bn, implying reliance on external funding to support cash needs during the period of weak OCF. Given the nature of project and inventory cycles in cables and systems, quarter/half-year cash flow volatility can be substantial; sustained low OCF/NI over multiple periods would be a concern. Working capital management will be the primary determinant of near-term cash flow quality.

Dividend Sustainability

Dividend data are not disclosed in this extract (DPS and payout ratio show as zero due to non-reporting). With EPS at ¥246.88 and positive net income, earnings capacity to fund dividends appears present, but cash coverage is unclear given weak OCF in the period and undisclosed capex. Free cash flow could not be assessed due to missing investing CF, so FCF coverage of dividends cannot be evaluated. Policy outlook cannot be inferred without historical payout trends and balance sheet cash data. As such, dividend sustainability assessment is constrained; continued profitability and normalization of cash conversion would be supportive, but confirmation requires disclosure on capex and cash balances.

Risk Assessment

Business Risks:

• Commodity price volatility (especially copper and aluminum) affecting input costs and pricing
• Project timing and execution risk in power infrastructure and industrial cable businesses
• Demand cyclicality tied to construction, utilities, telecom, and industrial capex
• Energy cost fluctuations impacting manufacturing margins
• Supply chain constraints or lead-time variability for raw materials
• Foreign exchange exposure on imports/exports and material purchases
• Competition from domestic and global peers leading to pricing pressure

Financial Risks:

• Weak cash conversion this period (OCF/NI 0.12) increasing reliance on external funding
• Working capital expansion risk during growth phases pressuring liquidity
• Moderate leverage (D/E 1.23x) that could rise if cash generation lags
• Potential interest rate increases raising funding costs (though coverage is currently strong)
• Limited visibility on capex and cash balances due to undisclosed items

Key Concerns:

• Sustainability of the outsized net income growth relative to operating trends
• Normalization of operating cash flow and working capital intensity
• Lack of disclosure on investing cash flows, cash balances, and dividend policy in the extract

Investment Implications

Key Takeaways:

• Solid revenue and operating profit growth with improving operating margin (~9.0%)
• ROE of 7.56% driven by moderate leverage (2.08x) and a 5.67% net margin
• Interest coverage very strong (42.7x), indicating ample serviceability
• Cash conversion weak in the period (OCF/NI 0.12), likely due to working capital
• Dividend and FCF assessment limited due to undisclosed items (capex, cash, DPS)

Metrics to Watch:

• OCF/Net income ratio and trends in receivables, inventories, and payables
• Operating margin progression and gross margin stability amid input cost changes
• Order intake/backlog and project timing indicators
• Capex outlays and investing cash flows (once disclosed) to gauge FCF
• Leverage (D/E) and interest coverage sustainability
• Any updates on dividend policy and cash balance disclosures

Relative Positioning: Within Japan’s wire and cable peer set, the company’s operating margin near 9% and ROE around 7.5% indicate competitive profitability supported by moderate leverage, while this period’s weak cash conversion leaves it somewhat less robust on near-term liquidity than peers with steadier OCF; fuller benchmarking requires segment and cash disclosure.

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