OKUMA Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥105.22B
• Operating Income: ¥6.06B
• Net Income: ¥4.52B
• EPS: ¥75.26

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

Verdict: Solid topline growth with resilient ordinary/net profit expansion, but modest operating margin compression and subpar capital efficiency persist. Revenue rose 10.5% YoY to 1,052.2, underpinned by robust demand and pricing/mix, lifting gross profit to 317.4 and operating income to 60.6 (+7.7% YoY). Ordinary income advanced 14.6% to 62.1, aided by 11.2 in non-operating income (notably 6.1 dividend income and 3.0 interest income). Net income climbed 27.2% to 45.5, reflecting improved non-operating balance and a stable effective tax rate of 27.3%. Gross margin printed at 30.2%, while operating margin was 5.8%; net margin improved to 4.3%. Operating margin compressed by roughly 15 bps YoY (from ~5.9% to ~5.8%), whereas net margin expanded about 57 bps (from ~3.8% to ~4.3%), thanks to better non-operating results. Earnings quality is strong: OCF of 83.2 exceeds net income (OCF/NI 1.83x), indicating solid cash conversion. However, capex of 109.4 outpaced OCF, implying negative estimated FCF for the half, which weighs on near-term cash flexibility. The balance sheet remains exceptionally sound: equity ratio is approximately 79%, current ratio 397%, and D/E 0.26x, with interest coverage at 118.8x. Inventory is sizable at 895.6, which supports deliveries but depresses asset turnover (0.342) and ROIC (2.1%, below the 5% warning threshold). Comprehensive income of 87.0 materially exceeded net income, implying sizable unrealized OCI gains (likely securities/FX), boosting equity. Non-operating income accounted for a meaningful share (non-operating income ratio 24.6%), cushioning operating margin pressure this quarter. Reported payout ratio (calculated) of 222% looks elevated for the interim period and is not corroborated by disclosed dividend cash flows; treat with caution. Near-term, order backlog digestion, inventory normalization, and capex ramp discipline will be pivotal to improve ROIC. Overall, the quarter demonstrates healthy demand and strong cash generation from operations, but capital efficiency and operating margin leverage require attention to drive more durable ROE improvement.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 4.3% × Asset turnover 0.342 × Financial leverage 1.26x = ROE 1.9% (aligned with reported). The largest drag is asset turnover (0.342), reflecting high inventory and a sizable asset base relative to sales. Net profit margin improved YoY (approx. +57 bps) on stronger non-operating contributions (dividends/interest) and stable tax rate, while operating margin saw mild compression (~15 bps), likely from SG&A rising faster than gross profit and/or delivery mix. Financial leverage is low (1.26x) given the strong equity base, limiting ROE uplift from leverage. Business drivers: elevated inventories to meet backlog and lead-time stability suppress turnover; cost structure includes rising fixed costs (labor, development and go-to-market) that limited operating margin expansion despite higher sales; non-operating gains (dividends/interest on robust cash and securities portfolio) supported ordinary income. Sustainability: asset turnover can improve if inventory normalizes and shipments convert; margin trajectory depends on price discipline and cost control, while non-operating income is partly market-dependent and may not be consistently repeatable. Watch for SG&A growth versus revenue (SG&A 256.9 against gross profit 317.4 implies tight operating spread); sustained SG&A growth above revenue would pressure operating leverage.

Growth Assessment

Topline grew 10.5% YoY to 1,052.2, indicating resilient demand for machine tools/systems. Operating income grew 7.7% to 60.6, lagging revenue growth due to slight margin compression. Ordinary income outpaced at +14.6% to 62.1 on higher dividends and interest income, while net income surged 27.2% to 45.5 on improved non-operating balance and no extraordinary drag. Gross margin at 30.2% suggests stable pricing/mix versus input costs; however, EBITDA margin of 9.9% and operating margin of 5.8% point to limited operating leverage in the half. Growth quality is supported by strong OCF (83.2), though capex (109.4) indicates continued strategic investment that temporarily suppresses FCF. Revenue sustainability hinges on order trends in autos, general machinery, and semiconductor-related capital goods; absent order disclosure, we infer demand is stable-to-improving given revenue growth and inventory levels. Outlook: if backlog converts and inventories normalize, turnover and ROIC should lift; price/cost and FX remain swing factors. Non-operating income (dividends/interest) provides a cushion but is less controllable and could reverse with market/interest rate changes.

Financial Health

Liquidity is very strong: current ratio 396.6% and quick ratio 196.9%; no red flags (both well above benchmarks). Solvency is solid: D/E 0.26x and interest coverage 118.78x; no leverage stress. Equity ratio (calculated) is approximately 79.3% (2,437.6 / 3,074.4), indicating a highly capitalized balance sheet. Cash and deposits are 430.1, comfortably covering a large portion of current liabilities (448.5) even before receivables (366.3). Maturity mismatch risk appears low given modest long-term loans (50.0) and strong liquidity; short-term loans are unreported but do not appear necessary given working capital of 1,330.3. Off-balance sheet obligations are not disclosed in the provided data; none can be assessed. No warnings triggered for Current Ratio < 1.0 or D/E > 2.0.

Cash Flow Quality

Earnings quality is high: OCF/Net Income is 1.83x, signaling strong cash conversion and low accrual risk in the period. Estimated FCF appears negative for the half as capex (109.35) exceeded OCF (83.19), implying roughly -26 on an estimated basis; this is manageable given the cash balance and low leverage but suggests internal funding of capex absorbs operating cash. Working capital: large inventories (895.6) indicate potential for future cash release if conversion accelerates; conversely, if demand slows, inventory could tie up cash and pressure OCF. No signs of working capital manipulation are evident from the limited data; OCF strength versus NI argues against aggressive revenue recognition. Financing CF was -35.33, reflecting outflows likely from debt reduction or shareholder returns; dividends paid are unreported, limiting precision.

Dividend Sustainability

Reported payout ratio (calculated) is 222.4%, which appears elevated and likely reflects interim-period timing and/or the calculation basis; dividend cash outflow is unreported, so interpret cautiously. On a cash basis, OCF did not cover capex, implying limited residual cash for dividends in the half without drawing on the cash balance. However, the balance sheet is very strong (cash 430.1, low debt), suggesting near-term capacity to maintain shareholder returns if policy targets are unchanged. Sustainability medium-term hinges on restoring positive FCF (via inventory normalization and capex discipline) and improving ROIC. Without disclosed DPS or full-year guidance, we cannot precisely assess coverage; watch full-year FCF and payout policy commentary.

Risk Assessment

Business Risks:

• Cyclical demand in machine tools tied to global capex (auto, general machinery, semiconductor, energy).
• Inventory overhang risk (inventories 895.6) if order intake slows, impacting margins and OCF.
• Pricing pressure from competitors amid currency and input cost volatility.
• Execution risk in converting backlog and delivering complex systems on time and budget.

Financial Risks:

• ROIC at 2.1% is below the 5% warning threshold, indicating capital efficiency risk.
• Non-operating income dependency (dividends/interest) partially supports profits; market-rate and valuation sensitive.
• Negative estimated FCF in the half due to capex exceeding OCF; reliance on cash balance for coverage.
• Potential OCI volatility given sizable investment securities (389.6) affecting equity and comprehensive income.

Key Concerns:

• Operating margin compression (~15 bps YoY) despite double-digit revenue growth.
• Asset turnover of 0.342 depressing ROE (1.9%) despite low leverage.
• Unreported dividend cash flows and DPS limit confidence in payout analysis; calculated payout ratio appears elevated.
• Limited visibility on order intake/backlog and segment mix, constraining forward assessment.

Investment Implications

Key Takeaways:

• Demand resilience: revenue +10.5% YoY with healthy gross profit.
• Margin mix: operating margin slightly compressed; net margin improved on non-operating gains.
• Cash quality: OCF robust (1.83x NI) but capex-heavy half implies negative estimated FCF.
• Balance sheet strength: equity ratio ~79%, D/E 0.26x, interest coverage 118.8x.
• Capital efficiency: ROIC 2.1% and asset turnover 0.342 are the key drags on ROE (1.9%).

Metrics to Watch:

• Orders/book-to-bill and backlog conversion.
• Inventory turnover and working capital release.
• Operating margin trajectory vs SG&A growth.
• ROIC improvement (targeting >5% first, then 7–8%).
• FCF after capex and dividend coverage.
• Non-operating income sensitivity (dividend/interest income) and OCI swings.

Relative Positioning: Within Japan machine tools/FA peers, Okuma shows superior balance sheet strength and cash conversion this half, but lags on capital efficiency (low ROIC/asset turnover) and operating margin leverage. Sustained improvement will hinge on inventory normalization, pricing discipline, and capex returns.

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