TOKYO ROPE MFG.CO.,LTD FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥30.36B
• Operating Income: ¥1.41B
• Net Income: ¥1.25B
• EPS: ¥110.73

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

Tokyo Rope (Tokyo Seiko) delivered a resilient FY2026 Q2, with revenue up 1.9% year on year to 30.36 billion yen and operating income up a stronger 20.7% to 1.41 billion yen, indicating positive operating leverage. Gross profit reached 6.28 billion yen, implying a gross margin of 20.7%, which appears stable to slightly improved given the modest top-line growth. Operating margin rose to approximately 4.7%, reflecting cost discipline and likely mix improvements in higher value-added products. Ordinary income was 1.68 billion yen, while net income increased 37.9% to 1.73 billion yen (EPS 110.73 yen), aided by non-operating/extraordinary gains and a low effective tax burden in the period. The reported net margin of 5.69% sits above the ordinary margin, consistent with the presence of non-operating or extraordinary gains. DuPont decomposition shows a net margin of 5.69%, asset turnover of 0.349x, and financial leverage of 2.31x, producing an ROE of 4.58%. On balance sheet strength, total assets were 87.00 billion yen, equity 37.71 billion yen, implying a computed equity ratio of roughly 43.3% (despite the line item showing 0.0%, which indicates non-disclosure in the XBRL). Leverage appears moderate with a debt-to-equity ratio of 1.34x and interest coverage robust at 12.1x, signaling comfortable debt service capacity. Liquidity is adequate but not abundant, with a current ratio of 116.5% and a quick ratio of 94.1%, implying some reliance on inventory to meet short-term obligations. Operating cash flow was 1.15 billion yen, about 0.67x net income, suggesting weaker cash conversion in the half year, likely due to working capital absorption. EBITDA was 2.35 billion yen, supported by 0.93 billion yen of depreciation and amortization, underpinning earnings quality at the operating line. Financing cash flow was a small outflow of 0.12 billion yen; investing cash flow and cash balance were not disclosed, which constrains free cash flow and liquidity analysis. Dividend data show DPS 0.00 and payout 0.0%, which likely reflect non-disclosure or timing rather than a definitive policy change within the half year. Overall, profitability momentum is improving, leverage is manageable, and interest coverage is strong, but cash conversion and limited disclosure on investing and cash balances temper visibility. The outlook hinges on sustaining pricing/mix discipline, managing steel cost pass-through, and stabilizing working capital.

Profitability Analysis

ROE at 4.58% is driven by a 5.69% net margin, 0.349x asset turnover, and 2.31x financial leverage. Operating margin of roughly 4.7% (1.41bn/30.36bn) improved faster than revenue (+20.7% OI vs +1.9% revenue), evidencing positive operating leverage. Gross margin of 20.7% supports the view that pricing/mix and/or input cost controls improved despite modest demand growth. Ordinary margin (~5.5%) and a net margin of 5.69% indicate incremental non-operating/extraordinary gains and light tax burden in the period. EBITDA margin of 7.7% (2.35bn/30.36bn) shows reasonable buffer over operating margin, with D&A of 0.93bn implying a capital-intensive base typical of steel rope/infrastructure product lines. Interest coverage at 12.1x (EBIT/interest ≈ 1.41bn/0.117bn) is strong, confirming manageable financing costs. Overall margin quality appears better at the operating level than the net level (which benefited from below-normal taxation and non-operating gains), so normalized profitability is closer to the operating run-rate than current net margin. Continued mix shift toward higher value-added infrastructure-related products should support margins, while sensitivity to steel costs and project timing remains.

Growth Assessment

Top-line growth was modest at +1.9% YoY to 30.36bn yen, suggesting stable core demand with potential softness in certain end-markets offset by strength in others. Profit growth outpaced sales, with operating income +20.7% YoY, reflecting efficiency gains, pricing discipline, and mix improvements. Net income rose 37.9% YoY, aided by non-operating/extraordinary items and a low effective tax rate, which may not be recurring. Revenue sustainability appears acceptable given diversified exposure to infrastructure, construction, and industrial demand, but visibility is inherently project- and order-driven. Profit quality is better judged at the operating level, where gains appear more structural (cost control, scale benefits) than at the net level. Over the next periods, sustaining higher operating margin will require continued pass-through of input costs and stable utilization. Growth will also depend on order intake for infrastructure projects and steel cord demand cycles; FX and export mix could add volatility. Overall outlook: modest revenue growth with potential for continued operating leverage, tempered by raw material and working capital dynamics.

Financial Health

Total assets of 87.00bn yen and total equity of 37.71bn yen imply a computed equity ratio of ~43.3% (despite a disclosed 0.0% due to non-reporting), indicating a solid capital base. Total liabilities are 50.68bn yen; debt-to-equity is 1.34x, consistent with moderate leverage for an industrial manufacturer. Liquidity: current ratio 116.5% and quick ratio 94.1% suggest adequate short-term coverage but reliance on inventory to bridge liquidity. Working capital is positive at 5.74bn yen, with inventories of 7.78bn yen indicating scope for cash release if inventory turns improve. Interest coverage of 12.1x indicates comfortable debt service capacity under current earnings. Absence of disclosed cash and cash equivalents limits precision on immediate liquidity buffers, but the balance sheet structure appears reasonable. Overall solvency is sound, with adequate equity cushion and manageable leverage.

Cash Flow Quality

Operating cash flow was 1.15bn yen, 0.67x of net income (1.73bn), pointing to weaker conversion this half, likely from working capital outflows (receivables, inventories, or lower payables). EBITDA of 2.35bn yen vs OCF of 1.15bn suggests cash earnings were partially consumed by working capital needs. Free cash flow cannot be reliably assessed because investing cash flow (including capex) was not disclosed; reported FCF of 0 reflects non-disclosure, not zero spending. D&A of 0.93bn implies ongoing capex needs for maintenance; thus, normalized FCF is likely below OCF. Financing CF was a small outflow of 0.12bn, indicating limited balance sheet strain from financing activities in the period. Overall, earnings quality at the operating line looks reasonable, but cash realization lags, warranting monitoring of inventory and receivable turns and the timing of project cash collections.

Dividend Sustainability

Reported DPS and payout ratio are 0.00, which likely reflects non-disclosure or timing in the half rather than a definitive full-year policy. With EPS of 110.73 yen for the period and OCF at 1.15bn yen, interim payout capacity exists in principle, but the OCF/NI ratio of 0.67 and unknown capex temper coverage visibility. FCF coverage cannot be assessed because investing cash flows were not disclosed; reported FCF of 0 is a placeholder. Dividend sustainability for the full year will depend on: 1) normalized operating cash flow and working capital release, 2) capex commitments relative to EBITDA, and 3) leverage covenants and funding needs. Until investing cash flows and cash balances are disclosed, a robust assessment of dividend capacity remains constrained.

Risk Assessment

Business Risks:

• Raw material price volatility (steel) and energy costs affecting margins and pricing power
• Project timing and order intake variability in infrastructure and construction end-markets
• Exposure to automotive tire/steel cord cycles and global industrial demand
• FX fluctuations impacting export competitiveness and translation of overseas subsidiaries
• Competitive pressure in wire ropes, steel cords, and engineered products leading to price competition
• Execution risk on large projects (bridges, cables) including cost overruns and delivery schedules

Financial Risks:

• Working capital swings reducing cash conversion (inventories/receivables build)
• Interest rate and credit spread increases elevating finance costs despite current strong coverage
• Capex requirements for maintenance and upgrades potentially compressing free cash flow
• Limited disclosure on cash balances and investing cash flows constraining liquidity visibility
• Covenant headroom sensitivity if earnings weaken and leverage rises

Key Concerns:

• OCF/Net income at 0.67 indicates weaker cash conversion in the half
• Quick ratio below 100% suggests reliance on inventory for liquidity
• Net income uplift partly from non-operating/extraordinary gains and light taxation, which may not recur
• Absence of disclosed investing CF and cash balances impairs FCF and liquidity assessment

Investment Implications

Key Takeaways:

• Operating leverage evident: +1.9% sales vs +20.7% operating income with operating margin ~4.7%
• Net income growth (+37.9%) benefited from non-operating/extraordinary items and low tax
• Interest coverage strong at 12.1x; leverage moderate with D/E 1.34x and computed equity ratio ~43%
• Cash conversion soft (OCF/NI 0.67) amid working capital usage
• Liquidity adequate but not abundant: current ratio 116.5%, quick ratio 94.1%
• Limited disclosure on cash, investing CF, and dividends constrains visibility on FCF and payout capacity

Metrics to Watch:

• Order intake, backlog, and book-to-bill in infrastructure and steel cord segments
• Gross and operating margins vs steel input costs and pricing pass-through
• OCF/NI, inventory days, and receivable days for cash conversion
• Capex (maintenance vs growth) and resultant FCF
• Interest expense trajectory and leverage metrics (D/E, net debt/EBITDA when cash is disclosed)
• Tax rate normalization and non-operating/extraordinary items

Relative Positioning: Within Japanese industrial materials and engineered products, Tokyo Rope exhibits improving operating profitability and solid interest coverage with moderate leverage, but trails best-in-class peers on cash conversion and disclosure transparency this period; sustaining margin gains while normalizing working capital will be key to narrowing the gap.

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