SHIBAURA MACHINE CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥67.64B
• Operating Income: ¥2.04B
• Net Income: ¥8.60B
• EPS: ¥74.45

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

Shibaura Machine (6104) reported FY2026 Q2 consolidated results under JGAAP showing a sharp cyclical downswing in profitability against a softer top line. Revenue declined 22.1% YoY to ¥67.6bn, while operating income fell 75.8% YoY to ¥2.0bn, evidencing significant negative operating leverage. Net income was ¥1.76bn (−79.5% YoY) with EPS of ¥74.45. Despite the profit compression, the provided gross profit margin metric of 42.3% implies solid value-add in the product mix; however, elevated SG&A and/or under-absorption are compressing operating margins. Ordinary income of ¥2.44bn exceeded operating income, suggesting non-operating gains or financial income partly offset operating weakness. Cash generation remained resilient: operating cash flow of ¥8.09bn was 4.6x net income, indicating sound earnings-to-cash conversion in the period. The balance sheet appears robust with total assets of ¥187.4bn, equity of ¥118.7bn, and current ratio of 211.5%, supporting liquidity through the cycle. Working capital is sizable at ¥79.7bn, including inventories of ¥35.8bn, which is typical for capital goods but requires careful management in a downturn. Interest expense is modest at ¥112m with interest coverage of 18.2x, underscoring low financial risk. DuPont metrics yield ROE of 1.48% on a net margin of 2.60%, asset turnover of 0.361x, and financial leverage of 1.58x, highlighting that profitability, not leverage, is the principal driver of low returns in the half. The reported equity ratio is shown as 0.0% (undisclosed), but the balance sheet figures imply an equity-to-asset ratio of roughly 63%, pointing to a conservative capital structure. Investing cash flow, cash and equivalents, and several per-share items were undisclosed (shown as 0), limiting full free cash flow and per-share analyses. Dividend data for the period are not provided, with DPS shown as 0.00 (undisclosed) and payout ratio at 0.0%. The operating backdrop for injection molding machines, die casting machines, and machine tools remains challenging amid weaker capex in autos/electronics and China-related softness. Near-term visibility hinges on order recovery, backlog conversion, and inventory normalization. Overall, the company retains strong liquidity and low leverage but faces cyclical demand pressure and margin headwinds, with cash generation offering a partial offset.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 2.60%
• asset_turnover: 0.361
• financial_leverage: 1.58
• calculated_ROE: 1.48%
• commentary: Low ROE is driven by thin net margins, not by leverage; asset turnover is subdued, consistent with a capital goods business in a softer demand phase. margin_quality: The provided gross margin metric is 42.3%, indicating healthy manufacturing value-add. However, operating margin compressed sharply as operating income fell 75.8% YoY on a 22.1% revenue decline, implying higher overhead burden and under-absorption. EBITDA margin stands at 4.9%, reflecting limited operating buffer; ordinary income exceeded operating income, suggesting non-operating support. operating_leverage: Pronounced negative operating leverage: revenue −22.1% YoY versus operating income −75.8% YoY. This indicates high fixed-cost intensity and/or pricing pressure, with SG&A and factory fixed costs not flexing fully with volume.

Growth Assessment

revenue_sustainability: Revenue at ¥67.6bn declined materially YoY, consistent with cyclical weakness in machine tools and molding equipment demand. The level of current assets and inventories suggests backlog conversion potential, but sustainability depends on order inflows from autos, electronics, and general industry. profit_quality: Net margin at 2.60% is slim; however, OCF/NI at 4.6x indicates earnings converted strongly to cash in the period. Ordinary income topping operating income implies some reliance on non-operating items. outlook: Near-term growth hinges on order recovery in autos/electronics, stabilization in China/ASEAN, and easing of customer capex caution. Margin recovery will require volume normalization and cost pass-through. Absence of disclosed investing cash flows limits visibility on capacity/capex-driven growth.

Financial Health

liquidity: Current ratio 211.5% and quick ratio 161.4% indicate strong near-term liquidity. Working capital of ¥79.7bn provides operational flexibility but requires careful turnover management. solvency: Interest coverage at 18.2x and a reported debt-to-equity ratio of 0.69x point to low financial risk. Using disclosed equity and assets, the implied equity ratio is approximately 63% despite the reported (undisclosed) 0.0%, indicating a conservative balance sheet. capital_structure: Total equity ¥118.7bn vs. total liabilities ¥82.4bn shows net asset strength. Leverage remains modest; financial flexibility is supported by low interest burden.

Cash Flow Quality

earnings_quality: OCF of ¥8.09bn versus net income of ¥1.76bn (OCF/NI 4.6x) suggests strong cash realization, likely aided by working capital inflows or advances. Depreciation of ¥1.28bn supports non-cash add-backs. FCF_analysis: Free cash flow cannot be determined because investing cash flow is undisclosed (shown as 0). As such, FCF and FCF yield assessments are not possible for the period. working_capital: Inventories are ¥35.8bn within current assets of ¥151.2bn; with revenue down, inventory turnover risk rises. The large working capital base was a likely lever for the positive OCF, but sustainability depends on order intake and delivery timing.

Dividend Sustainability

payout_ratio_assessment: DPS is shown as 0.00 and payout ratio 0.0%, which indicates non-disclosure for this interim period rather than a hard zero. With net income positive and leverage low, the capacity exists, but policy details are not provided here. FCF_coverage: FCF coverage cannot be assessed because investing cash flow and thus FCF are undisclosed for the period. policy_outlook: Given cyclicality and margin compression, management may prioritize liquidity and investment over distributions in the near term; explicit guidance is not available in the provided data.

Risk Assessment

Business Risks:

• Cyclical demand in autos, electronics, and general industrial end-markets
• Pricing pressure and under-absorption during volume downturns
• Export exposure to China/ASEAN and FX volatility impacting orders and margins
• Supply chain and component availability affecting lead times and costs
• Competitive intensity in injection molding and machine tool markets

Financial Risks:

• Earnings sensitivity to volume due to fixed cost base (negative operating leverage)
• Inventory build and working capital swings in downturns
• Potential reliance on non-operating income to support ordinary income
• Tax charge volatility given the discrepancy between income tax line and effective tax rate metric

Key Concerns:

• Sharp deterioration in operating income relative to revenue decline
• Sustainability of cash conversion if working capital tailwinds reverse
• Visibility on capex and FCF constrained by undisclosed investing cash flows

Investment Implications

Key Takeaways:

• Revenue down 22.1% YoY with operating income down 75.8% indicates strong negative operating leverage
• Gross margin metric of 42.3% suggests inherent value-add, but SG&A/fixed costs weigh on operating margin
• ROE at 1.48% is depressed primarily by low net margins
• Balance sheet is conservative with implied equity ratio around 63% and interest coverage 18.2x
• OCF robust at ¥8.09bn (4.6x net income), though FCF unassessable due to undisclosed investing flows
• Large working capital and inventories require active management amid softer demand

Metrics to Watch:

• Order intake/book-to-bill and backlog conversion
• Operating margin trajectory and SG&A control
• Inventory days and receivable/payable turnover
• Capex and investing cash flows to assess FCF and capacity plans
• Pricing/mix in core molding and machine tool segments
• FX rates and overseas demand indicators (China, ASEAN, North America)

Relative Positioning: Within Japan-listed industrial machinery peers, Shibaura Machine shows above-average balance sheet strength and liquidity but currently exhibits below-peer profitability due to cyclical headwinds and fixed-cost absorption; recovery potential depends on order inflection and working capital normalization.

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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