RHEON AUTOMATIC MACHINERY CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.94B
• Operating Income: ¥2.45B
• Net Income: ¥1.89B
• EPS: ¥63.55

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

Leon Automatic Machinery (6272) reported FY2026 Q2 (first half) consolidated results under JGAAP showing resilient top-line performance but softer profitability. Revenue grew 1.2% YoY to ¥19.94bn, indicating stable demand despite macro uncertainties. Gross profit of ¥9.05bn implies a strong gross margin of 45.4%, underscoring pricing power and/or favorable mix. Operating income declined 11.4% YoY to ¥2.45bn, compressing the operating margin to roughly 12.3%, likely due to higher SG&A, R&D, or adverse mix (details not disclosed). Ordinary income exceeded operating income at ¥2.56bn, suggesting modest non-operating gains or financial income offsetting some operating weakness. Net income fell 9.5% YoY to ¥1.71bn, with an implied effective tax rate around 33%, consistent with a normalized tax burden. The DuPont framework indicates ROE of 4.27%, with a healthy net margin (8.58%), low asset turnover (0.398x), and conservative leverage (1.25x), pointing to balance-sheet strength but capital efficiency headroom. Liquidity is robust with a current ratio of 328% and quick ratio of 259%, while solvency is strong given low leverage and an implied equity ratio near 80%. Cash conversion is healthy: operating cash flow of ¥1.82bn slightly exceeds net income (OCF/NI ≈ 1.07), indicating reasonable earnings quality in H1. EBITDA of ¥3.18bn (15.9% margin) and interest coverage of ~472x underscore ample operating cushion and minimal financial risk. Working capital is sizable at ¥20.21bn, providing operational flexibility but potentially weighing on asset turnover. Financing cash outflows of ¥0.66bn signal shareholder returns or debt repayments, though cash, investing CF, and share-related details were not disclosed this period. Dividend metrics (DPS, payout, FCF coverage) are not reported; any assessment relies on inferred cash generation and policy norms rather than disclosed figures. Overall, the company exhibits strong balance-sheet resilience and solid cash generation, but near-term profitability pressure (lower operating income YoY) and modest growth temper the outlook. The key watchpoints are margin trajectory in H2, order intake/backlog sustainability, and working capital discipline, which will determine full-year capital efficiency and ROE. Data limitations around cash, investing CF, and share metrics constrain precision but do not alter the central narrative of operationally solid but margin-challenged H1 performance.

Profitability Analysis

ROE decomposition: ROE 4.27% = Net margin 8.58% × Asset turnover 0.398 × Financial leverage 1.25. ROA approximates 3.41% (8.58% × 0.398), and leverage modestly amplifies ROE. margin_quality: Gross margin is high at 45.4%, indicating strong product economics. Operating margin of ~12.3% (¥2.448bn/¥19.937bn) contracted YoY as operating income fell 11.4% on +1.2% revenue, pointing to higher operating costs or unfavorable mix. Ordinary margin (~12.8%) exceeds operating margin, implying non-operating tailwinds (e.g., FX gains, financial income). Net margin of 8.58% remains healthy after a normalized implied tax rate (~33%). operating_leverage: With revenue +1.2% and operating income -11.4% YoY, incremental margins were negative in H1, signaling operating deleverage (cost base not flexing with volume). EBITDA margin of 15.9% provides cushion, but SG&A or R&D intensity has likely risen.

Growth Assessment

revenue_sustainability: Top-line growth of 1.2% YoY suggests stable demand but limited momentum; sustainability hinges on order intake, backlog conversion, and customer capex cycles (not disclosed). profit_quality: Ordinary income above operating income suggests recurring non-operating support; core profit softness is the primary drag. OCF/NI of 1.07 supports the quality of earnings, with cash generation broadly aligned to accounting profit. outlook: For H2, key drivers will be gross margin stability, SG&A control, and backlog execution. Reacceleration requires either volume recovery or cost normalization. Given conservative leverage and liquidity, the company is well-positioned to invest for growth if demand strengthens.

Financial Health

liquidity: Current ratio 327.9% and quick ratio 259.1% indicate strong short-term liquidity. Working capital is ¥20.21bn, providing ample buffer. solvency: Debt-to-equity 0.26x and implied equity ratio ~79.9% (¥40.021bn/¥50.078bn) reflect a very conservative balance sheet. Interest coverage ~472x underscores minimal refinancing risk. capital_structure: Low leverage (Assets/Equity 1.25x) constrains ROE but minimizes financial risk. Ordinary income benefits slightly from non-operating items rather than leverage.

Cash Flow Quality

earnings_quality: OCF of ¥1.825bn versus net income of ¥1.710bn yields OCF/NI ≈ 1.07, indicating solid cash realization of earnings. FCF_analysis: Investing cash flow was not disclosed (reported as 0). As a result, FCF cannot be precisely calculated from disclosed data this period. EBITDA of ¥3.175bn and positive OCF suggest capacity to fund typical maintenance capex. working_capital: Current assets ¥29.07bn versus current liabilities ¥8.87bn indicates ample coverage. Inventory of ¥6.10bn is meaningful; absent turnover data, the risk is holding costs and potential write-downs if demand slows.

Dividend Sustainability

payout_ratio_assessment: Dividend metrics (DPS and payout ratio) are not disclosed this period (shown as 0 by data feed). Based on earnings and low leverage, the company appears to have capacity for dividends, but policy and quantum cannot be inferred from the provided data. FCF_coverage: FCF not derivable due to unreported investing CF; therefore, dividend coverage by FCF cannot be assessed quantitatively for H1. policy_outlook: Financing CF outflow of ¥0.663bn could reflect dividends and/or debt repayments; without DPS disclosure, we cannot ascribe policy changes. Balance-sheet strength supports potential continuity of returns, pending FY guidance.

Risk Assessment

Business Risks:

• Demand cyclicality in capital goods/food machinery end-markets affecting orders and backlog conversion
• Input cost inflation and component availability impacting gross margin
• Product mix shifts and project timing creating margin volatility
• FX fluctuations if export exposure is material (non-operating gains/losses can affect ordinary income)
• Customer investment delays due to macro uncertainty

Financial Risks:

• Operating deleverage if volumes soften, compressing margins
• Working capital build (inventory/receivables) potentially diluting cash conversion
• Capex needs for product development or capacity could pressure short-term FCF (investing CF not disclosed)
• Concentration risk in certain customers or geographies (not disclosed but typical for specialized machinery)

Key Concerns:

• Operating income decline (-11.4% YoY) despite modest revenue growth
• Reliance on non-operating items to lift ordinary income above operating income
• Limited visibility on cash, investing CF, and dividends due to unreported items

Investment Implications

Key Takeaways:

• Stable revenue (+1.2% YoY) but margin compression led to lower operating income
• Strong gross margin (45.4%) and robust liquidity underpin resilience
• ROE of 4.27% reflects conservative leverage and low asset turnover; capital efficiency is a medium-term lever
• Solid cash conversion (OCF/NI ≈ 1.07) supports earnings quality
• Data gaps (cash, investing CF, DPS) limit precision on FCF and shareholder return assessment

Metrics to Watch:

• Order intake and backlog/book-to-bill for H2 visibility
• Gross and operating margin trajectory; SG&A ratio and operating leverage
• OCF/NI and working capital turns (inventory and receivables days)
• Capex and investing CF to gauge FCF and potential returns
• FX impacts within non-operating income
• Equity ratio and asset turnover progress (capital efficiency)

Relative Positioning: Within TSE-listed machinery peers, the company exhibits above-average balance-sheet strength and healthy gross margins, offset by modest growth, operating deleverage in H1, and low asset turnover that dampens ROE.

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