AMADA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥184.28B
• Operating Income: ¥15.30B
• Net Income: ¥10.45B
• EPS: ¥32.50

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

Amada (TSE:6113) reported FY2026 Q2 (IFRS, consolidated) results marked by flat top-line performance and notable profit compression, alongside solid cash generation and a very strong balance sheet. Revenue was 1,842.8 (100M JPY), down 0.1% YoY, indicating stable demand but limited growth momentum in a cyclical capital goods environment. Gross profit reached 810.95 with a gross margin of 44.0%, which remains healthy for a machine tool/sheet metal equipment maker, but operating income fell 33.9% YoY to 153.05 as operating margin compressed to roughly 8.3%. SG&A of 582.14 appears elevated relative to the flat sales trend, implying negative operating leverage as volumes and mix failed to absorb fixed costs. EBITDA was 248.91 (13.5% margin), highlighting still-adequate operating cash capacity, but below prior-year profitability levels implied by the operating income decline. Net income declined 31.3% YoY to 103.85, further impacted by a high effective tax rate of 44.1%, which constrained after-tax earnings. On DuPont metrics, ROE was 2.0% (net margin 5.6%, asset turnover 0.25x, financial leverage 1.40x), underscoring low efficiency from a combination of margin pressure and a large equity base. Asset efficiency remains a headwind, with accounts receivable of 1,427.16 and inventories of 1,314.32 both sizable relative to half-year sales, consistent with the long-cycle nature of the business. Despite earnings pressure, operating cash flow was strong at 153.32 (OCF/NI 1.48x), aided by cash conversion that outpaced accounting earnings. Free cash flow was 170.61, supported by modest capex of 42.33 and net investing inflows of 17.29, enabling significant shareholder returns. Financing cash flow was -170.54, reflecting dividends of 116.77 and share repurchases of 83.92, which in aggregate exceeded FCF modestly. The balance sheet is robust: equity of 5,267.03 (equity ratio 70.7%), total liabilities of 1,261.41 (liabilities-to-equity 0.24x), and short-term loans of only 109.54. Liquidity ratios were not fully disclosed, but the reported cash and equivalents of 1,048.41 provide a strong buffer. Dividend signals are mixed: the provided calculated payout ratio is 195.9%, yet disclosed cash dividends paid versus net income imply roughly 112% YTD; FCF covered dividends (about 1.5x) but not dividends plus buybacks. Data gaps (notably current liabilities, interest expense, DPS, and some non-operating line items) limit precision on certain ratios and coverage metrics. Overall, Amada’s H1 shows resilient cash generation and low leverage but weaker profitability and ROE, with sustainability of elevated shareholder returns hinging on an H2 earnings rebound and order momentum.

Profitability Analysis

ROE_decomposition: Reported/calculated ROE is 2.0% for the period, driven by a 5.6% net profit margin, asset turnover of 0.25x, and financial leverage of 1.40x. The low ROE primarily reflects compressed operating margins and subdued asset turnover typical of a mid-cycle slowdown, while low leverage limits ROE amplification. margin_quality: Gross margin of 44.0% is solid for the sector, but operating margin slipped to approximately 8.3% (153.05 / 1,842.8) amid higher SG&A (582.14) and likely weaker manufacturing absorption. EBITDA margin at 13.5% indicates underlying operating cash capacity remains intact, though down versus implied prior-year levels given the 33.9% YoY decline in operating income. operating_leverage: Revenue was flat (-0.1% YoY) while operating income fell sharply, indicating negative operating leverage. The cost base (notably fixed components within SG&A and manufacturing overheads) did not flex down proportionately with volumes/mix. Elevated effective tax (44.1%) also depressed net profitability.

Growth Assessment

revenue_sustainability: Revenue stability suggests order backlogs and service/consumables likely provided a floor, but no clear acceleration is evident. With AR and inventory levels high relative to half-year sales, demand conversion appears steady but not robust. profit_quality: Profit declined more than sales, implying mix headwinds and cost rigidity. Equity-method income (1.27) and a small positive non-operating contribution lifted PBT slightly above operating income, but did not offset operating pressure. High tax rate reduced net conversion of operating profit. outlook: Absent disclosed order intake/backlog, we assume a cautious H2. Recovery hinges on capital investment cycles in sheet metal fabrication, macro/FX tailwinds, and cost actions. If H2 volumes improve and tax rate normalizes, full-year profitability could backfill H1 pressure; otherwise, margins and ROE may remain subdued.

Financial Health

liquidity: Cash and equivalents were 1,048.41, providing ample liquidity. Current ratio and quick ratio were not disclosed; therefore, precise short-term coverage cannot be calculated. Large receivables (1,427.16) and inventories (1,314.32) imply working capital intensity typical of long-cycle equipment. solvency: Equity ratio is 70.7% with total liabilities of 1,261.41, indicating a conservative capital structure. Liabilities-to-equity is 0.24x (aligning with the reported D/E). Short-term loans are 109.54; long-term debt unreported. Financial leverage is low at 1.40x assets/equity. capital_structure: Total equity stands at 5,267.03, with capital surplus of 1,016.35 and retained earnings of 3,232.03, underscoring strong capitalization. Treasury shares of 11.40 million support buyback flexibility. Interest-bearing debt details are incomplete, but balance sheet indicates minimal reliance on debt financing.

Cash Flow Quality

earnings_quality: OCF/Net Income of 1.48x indicates good cash conversion despite profit pressure. Depreciation and amortization of 95.86 supports cash earnings (EBITDA 248.91). High tax cash outflows may weigh on net cash if the elevated effective rate persists. FCF_analysis: Free cash flow was 170.61, aided by modest capex (42.33) and net investing inflows (17.29), suggesting asset disposals or reduced investment pace. FCF comfortably covered dividends but not the combination of dividends plus buybacks. working_capital: AR of 1,427.16 and inventories of 1,314.32 are large relative to H1 revenue (each ~0.7–0.8x), consistent with long production and collection cycles. While OCF was strong in H1, WC movements are not fully disclosed; sustainability depends on collections and inventory normalization.

Dividend Sustainability

payout_ratio_assessment: The provided calculated payout ratio is 195.9%, but disclosed cash dividends paid (116.77) versus net income (103.85) imply an approximate payout of 112% for H1, which is high and unlikely to be sustainable absent stronger H2 earnings. EPS was 32.50 JPY; DPS data are unreported, limiting precise payout computation on a per-share basis. FCF_coverage: FCF of 170.61 covered cash dividends 1.5x, but total shareholder returns including buybacks (dividends 116.77 + repurchases 83.92 = 200.69) exceeded FCF (coverage ~0.85x), implying reliance on cash on hand or balance sheet capacity. policy_outlook: Given Amada’s strong equity base and cash holdings, management can support dividends near term. However, sustaining elevated payout and buybacks will likely be contingent on H2 profit recovery and cash generation normalization. Absent DPS disclosure, policy signals are incomplete.

Risk Assessment

Business Risks:

• Cyclical capital investment demand in sheet metal/machine tools leading to revenue volatility
• Product mix shifts and under-absorption impacting margins during slowdowns
• High effective tax rate reducing net income and cash conversion
• Extended receivables and inventory cycles increasing working capital needs
• FX exposure to USD/EUR/CNY affecting margins and competitiveness
• Supply chain and component cost variability affecting gross margin

Financial Risks:

• Shareholder returns (dividends + buybacks) exceeding FCF in H1
• Potential WC rebuild consuming cash if orders accelerate or collections lag
• Limited visibility on interest expense and long-term debt due to disclosure gaps
• Tax cash outflows if elevated effective rate persists

Key Concerns:

• Operating margin compression despite flat revenue
• Low ROE at 2.0% driven by weak margins and low asset turnover
• Ambiguity around payout ratio and DPS given unreported DPS and high H1 payout vs NI

Investment Implications

Key Takeaways:

• Top line stable (-0.1% YoY) but profitability under pressure; operating income -33.9% YoY
• Gross margin resilient at 44.0%, yet SG&A intensity drove operating margin to ~8.3%
• ROE of 2.0% reflects low margins and modest asset turnover despite low leverage
• Strong OCF (OCF/NI 1.48x) and FCF (170.61) demonstrate solid cash generation
• Balance sheet strength (equity ratio 70.7%, liabilities/equity 0.24x) provides flexibility
• Shareholder returns high; dividends covered by FCF but total payouts exceeded FCF
• High effective tax rate (44.1%) materially weighs on net income
• Working capital remains heavy (AR and inventories each ~0.7–0.8x H1 sales)

Metrics to Watch:

• Order intake and backlog trajectory into H2
• Operating margin and SG&A ratio for signs of cost discipline and mix improvement
• Effective tax rate normalization and drivers
• Free cash flow after working capital and capex
• Receivables collection and inventory turns
• Shareholder return pace (dividends and buybacks) versus FCF

Relative Positioning: Within Japanese industrial machinery peers, Amada maintains a stronger-than-average balance sheet and cash generation profile but currently lags on profitability momentum and ROE due to negative operating leverage and a high effective tax burden.

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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