OKUMA Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥105.22B
• Operating Income: ¥6.06B
• Net Income: ¥3.58B
• 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

Okuma (6103) reported FY2026 Q2 consolidated results under JGAAP showing resilient top-line growth and moderate profitability, supported by very strong liquidity and cash generation. Revenue reached ¥105.2bn, up 10.5% YoY, indicating healthy demand relative to the prior-year half. Gross profit was ¥30.9bn, implying a gross margin of 29.4%, which is solid for a capital goods manufacturer and suggests reasonable pricing and cost control. Operating income was ¥6.1bn (+7.7% YoY), translating to a 5.8% operating margin; this indicates slight operating deleverage versus gross margin, likely from SG&A and R&D discipline offsetting input cost pressures. Ordinary income was ¥6.2bn, with minimal financial drag as interest expense was only ¥32m, underpinning an interest coverage ratio of 189x. Net income was ¥4.6bn (+27.2% YoY), with net margin at 4.33%, reflecting strong bottom-line growth relative to revenue and operating profit. Depreciation & amortization totaled ¥4.86bn, and EBITDA was ¥10.9bn (EBITDA margin 10.4%), highlighting a capital-intensive profile with adequate earnings before non-cash charges. The DuPont decomposition shows ROE of 1.87%, driven by a 4.33% net margin, asset turnover of 0.342x, and low financial leverage of 1.26x—indicating that current returns are primarily constrained by asset intensity and modest margins rather than balance sheet leverage. Balance sheet strength is a key highlight: total assets are ¥307.4bn with equity of ¥243.8bn, implying an equity ratio of roughly 79% (the reported equity ratio field is unreported). Liquidity is ample, with a current ratio of 432% and quick ratio of 232%, supported by large working capital (¥141.9bn). Operating cash flow was strong at ¥18.5bn, equating to an OCF/Net Income ratio of 4.06x, signaling high earnings quality and likely positive working-capital contribution during the half. Inventories stand at ¥85.6bn, a large balance relative to cost of sales; inventory days appear elevated, a typical feature for machine tool makers but a watch point for cash conversion ahead. Financing cash flow was a small net inflow (¥0.126bn), consistent with a low-debt posture; investing cash flow is unreported, limiting free cash flow assessment beyond noting strong OCF. Dividend data are unreported (DPS and payout ratio show as zero placeholders), so capital return policy can’t be inferred from this dataset. Overall, the company demonstrates solid growth, satisfactory margins for the cycle, robust cash conversion, and a fortress balance sheet, but ROE remains subdued due to low asset turnover and conservative leverage. Data gaps (equity ratio, cash balance, investing cash flows, dividend figures) constrain some conclusions, but the available metrics indicate a sound financial position entering the back half.

Profitability Analysis

DuPont ROE is 1.87%, decomposed into a 4.33% net margin, 0.342x asset turnover, and 1.26x financial leverage; the low leverage and asset intensity cap ROE upside. Gross margin of 29.4% is healthy for machine tools, implying maintained pricing and manageable input costs. Operating margin is 5.8% (¥6.06bn/¥105.22bn), showing a typical gap versus gross margin due to SG&A/R&D; modest YoY operating profit growth (+7.7%) trails revenue growth (+10.5%), suggesting some operating deleverage in the period. Ordinary margin is approximately 5.9%, with minimal financial costs (interest expense ¥32m), so financing structure has little impact on profitability. Net margin at 4.33% benefits from low interest and a moderate tax burden in the period; the reported effective tax rate field is unreported, but income tax of ¥2.19bn versus pretax suggests a normalizing rate on a full-year basis. EBITDA margin is 10.4%, with D&A at 4.6% of revenue; this indicates a capital-intensive asset base but adequate cash earnings from operations. Mix and pricing likely supported gross margin resilience; however, the widening gap between gross and operating margin implies SG&A absorption or investment in growth/support functions. Operating leverage appears moderate: revenue +10.5% vs. operating income +7.7% suggests partial dilution, potentially from higher fixed costs, currency effects, or product/customer mix. Interest coverage at 189x confirms that profitability isn’t constrained by financing costs. Overall margin quality is satisfactory, with most pressure occurring below gross profit.

Growth Assessment

Revenue grew 10.5% YoY to ¥105.2bn, indicating demand resilience amid a mixed capital goods cycle. Operating income growth of 7.7% YoY lagged revenue, suggesting incremental cost pressure or growth investments trimming operating leverage in the half. Net income rose 27.2% YoY, outperforming operating profit, aided by low financial costs and possibly favorable non-operating items or tax normalization. The sustainability of mid-single-digit operating margins rests on pricing discipline, product mix (high-value machine tools and solutions), and supply chain stability. Gross margin at 29.4% suggests pricing power and cost control, but elevated inventories may indicate supply/delivery sequencing or a cautious demand outlook; future revenue recognition should benefit if order conversions proceed smoothly. Asset turnover at 0.342x is typical for H1 and the industry; full-year turnover will depend on H2 shipping and installation cadence. Profit quality appears solid given strong OCF conversion (OCF/NI 4.06x), implying underlying demand translated into cash, potentially supported by advances or receivables collection. Outlook hinges on order intake, backlog conversion, and regional mix (especially export markets), none of which are disclosed here; absent these, a neutral stance on sustainability is prudent. Without investing cash flow data, growth capacity via capex can’t be quantified, though D&A of ¥4.86bn implies ongoing asset renewal needs. Overall, near-term growth appears intact, with watch points around operating leverage, inventory normalization, and order momentum.

Financial Health

Total assets are ¥307.4bn and equity is ¥243.8bn, implying an estimated equity ratio of ~79% (reported equity ratio line is unreported). Total liabilities are ¥60.1bn, yielding a conservative capital structure with debt-to-equity at 0.25x (as provided). Liquidity is very strong: current ratio 432% and quick ratio 232%, supported by ¥141.9bn in working capital. Current assets are ¥184.6bn, including inventories of ¥85.6bn; current liabilities are ¥42.7bn, suggesting ample short-term coverage even if inventories are discounted. Interest expense is negligible at ¥32m, and interest coverage is 189x, underscoring minimal refinancing risk. While cash and equivalents are unreported, the quick ratio and robust OCF imply sufficient liquidity buffers. Solvency risk is low given the large equity base and limited leverage; financial flexibility for investment appears high. The main balance sheet watch item is inventory magnitude relative to COGS, which can affect future cash conversion if demand slows.

Cash Flow Quality

Operating cash flow of ¥18.5bn against net income of ¥4.55bn yields an OCF/NI ratio of 4.06x, signaling strong earnings quality and favorable working capital dynamics in the half. EBITDA of ¥10.9bn provides a healthy cash earnings base; non-cash D&A is ¥4.86bn. Free cash flow is not computable from the dataset since investing cash flow is unreported (the displayed zero is a placeholder), and capex cannot be inferred. Working capital appears to have been a net source of cash given the strong OCF relative to earnings, despite elevated inventories; details by component (AR/AP/inventory) are not disclosed. Inventory stands at ¥85.6bn; using H1 COGS, indicative inventory days appear high, typical for the sector but a key determinant of future OCF. With minimal interest burden, operating cash flow largely translates to pre-dividend free cash potential, subject to actual capex levels. Overall, cash flow quality in this half looks robust, but sustainability depends on backlog conversion and inventory normalization.

Dividend Sustainability

Dividend information is unreported in this dataset (DPS, payout ratio, and FCF coverage lines show zeros as placeholders), so we cannot assess current distributions or policy from the provided figures. Earnings capacity appears adequate, and OCF of ¥18.5bn suggests room for distributions after investment needs, but absence of capex/investing cash flow data prevents a true FCF coverage analysis. With a strong balance sheet (estimated ~79% equity ratio) and low leverage, financial flexibility for dividends exists in principle. Sustainability would depend on the cadence of cash generation in H2, capex requirements for capacity/modernization, and management’s capital allocation framework. Until DPS and capex are disclosed, payout ratio assessment must remain indeterminate. Policy outlook cannot be inferred without historical or guided payout targets.

Risk Assessment

Business Risks:

• Cyclical demand in global machine tools and capital goods leading to order volatility
• Potential slowdown in key end markets (automotive, general machinery, electronics) impacting backlog conversion
• Pricing pressure from competitors during downcycles affecting gross margins
• Supply chain disruptions or component shortages affecting delivery schedules and costs
• FX volatility (JPY fluctuations) impacting export competitiveness and translation of overseas sales
• High inventory levels increasing risk of obsolescence or discounting if demand softens

Financial Risks:

• Inventory magnitude relative to H1 COGS could weigh on future operating cash flow if turnover slows
• Customer credit risk in a cyclical sector potentially increasing receivables risk (AR not disclosed)
• Capex requirements (not disclosed) may compress free cash flow in investment upcycles
• Limited financial leverage means ROE improvement relies on margin and turnover rather than gearing

Key Concerns:

• Operating leverage lagging revenue growth (OP +7.7% vs. sales +10.5%)
• ROE at 1.87% remains low due to asset intensity and conservative leverage
• Data gaps in investing cash flows and cash balances constrain FCF and liquidity verification
• Elevated inventories necessitate close monitoring of demand and production alignment

Investment Implications

Key Takeaways:

• Top-line growth of 10.5% YoY with solid gross margin of 29.4% indicates healthy demand and pricing
• Operating margin at 5.8% shows modest deleverage vs. gross margin; cost discipline remains a lever
• ROE of 1.87% is constrained by asset turnover (0.342x) and low leverage (1.26x)
• Balance sheet strength is a differentiator with an estimated ~79% equity ratio and minimal interest burden
• OCF of ¥18.5bn (OCF/NI 4.06x) signals strong earnings quality; FCF unknown due to missing capex data
• Inventory scale is high; normalization is key for sustained cash conversion

Metrics to Watch:

• Order intake, book-to-bill, and backlog conversion in H2
• Gross and operating margin trajectory, including mix and pricing effects
• Working capital metrics: inventory days, receivable days, and payables coverage
• Operating cash flow sustainability and capex (once disclosed) to gauge true FCF
• FX rates and hedging impacts on margins and competitiveness
• Equity ratio and debt levels for any shifts in capital structure

Relative Positioning: Within Japanese machine tool peers, Okuma exhibits a very strong balance sheet and robust cash conversion this half, with margins that are solid but not leading, and ROE that trails due to conservative leverage and asset intensity.

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