SATO CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥78.25B
• Operating Income: ¥5.10B
• Net Income: ¥3.48B
• EPS: ¥94.02

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

SATO (6287) reported FY2026 Q2 (cumulative) consolidated results under JGAAP with modest topline growth but softer operating profitability. Revenue was ¥78.25bn, up 2.8% YoY, indicating steady demand across auto-ID and labeling solutions, but likely with mixed regional or segment trends not disclosed here. Gross profit was ¥31.12bn, implying a solid gross margin of 39.8%, consistent with a solutions-heavy mix but possibly pressured by input costs or pricing dynamics. Operating income declined 11.7% YoY to ¥5.10bn, compressing the operating margin to 6.5%, signaling negative operating leverage as SG&A growth outpaced revenue. Ordinary income was ¥4.46bn, below operating income, suggesting net non-operating expenses of roughly ¥0.64bn, including ¥0.24bn of interest expense and other items (e.g., FX or equity-method losses). Net income rose slightly by 0.8% YoY to ¥3.05bn, implying normalizing below-the-line items and a still-healthy tax burden. The reported net margin stood at 3.9%, while EBITDA was ¥7.69bn (9.8% margin), cushioning the decline at the EBIT line. DuPont analysis indicates ROE of 3.65% (Net margin 3.90% x Asset turnover 0.556 x Financial leverage 1.68), highlighting that returns are currently constrained by modest margins and turnover rather than leverage. The balance sheet is robust: total assets ¥140.66bn and total equity ¥83.66bn imply an equity ratio around 59.5% (the 0.0% equity ratio shown is an undisclosed placeholder). Liquidity is strong with a current ratio of 219.7% and quick ratio of 183.9%, backed by ¥49.88bn of working capital; cash and equivalents were not disclosed in this dataset. Operating cash flow was ¥6.18bn, more than 2x net income, signaling healthy earnings conversion; investing cash flow was not disclosed, preventing a reliable free cash flow estimate despite a displayed 0. Capex details are absent; depreciation and amortization were ¥2.59bn, which is useful for benchmarking maintenance investment needs once disclosed. Leverage is moderate with liabilities-to-equity at 0.71x and interest coverage a comfortable 21.3x, indicating ample headroom under current rates. The apparent effective tax rate listed as 0.0% is not representative; using ordinary income as a proxy for pre-tax income, the implied effective tax rate is roughly 31%. Dividend data (DPS and payout) were not disclosed for the period, so distribution capacity must be inferred indirectly from earnings and cash flow resilience. Overall, SATO demonstrates balance sheet strength and good cash conversion but faces near-term margin pressure and negative operating leverage, with limited visibility on capex and capital allocation due to disclosure gaps.

Profitability Analysis

ROE_decomposition: ROE 3.65% = Net margin 3.90% x Asset turnover 0.556 x Financial leverage 1.68. Returns are constrained primarily by modest net margin and asset turnover; leverage is not the driver. margin_quality: Gross margin 39.8% is healthy for a solutions-centric model. Operating margin at 6.5% (¥5.10bn EBIT) declined YoY (-11.7% in absolute EBIT) despite revenue growth, indicating cost inflation and/or higher SG&A. Ordinary margin of 5.7% reflects additional non-operating costs (~¥0.64bn net). Net margin at 3.9% is stable but leaves limited buffer for shocks. operating_leverage: Negative operating leverage this half: +2.8% revenue vs. -11.7% operating income suggests fixed cost absorption and/or opex growth exceeded gross profit gains. EBITDA margin (9.8%) provided some cushion versus EBIT, but deleveraging at the operating line is evident.

Growth Assessment

revenue_sustainability: Revenue grew 2.8% YoY to ¥78.25bn, indicating steady but not robust demand. Without segment/regional breakdown or order/backlog data, sustainability rests on ongoing auto-ID adoption and replacement cycles. profit_quality: Net income increased 0.8% YoY despite weaker EBIT, implying support from below-the-line items and a normal tax incidence. Ordinary income below EBIT indicates non-operating headwinds (FX/financial items). Margin compression at EBIT is the key quality concern. outlook: Absent guidance, medium-term growth hinges on solution-led wins, pricing power, and cost discipline. Near-term, focus on gross margin protection, SG&A efficiency, and stabilization of non-operating items. FX and component costs could swing results given global exposure.

Financial Health

liquidity: Current ratio 219.7% and quick ratio 183.9% indicate strong short-term coverage. Working capital is ¥49.88bn. Cash and equivalents were not disclosed, but liquidity appears comfortable given current asset composition. solvency: Total liabilities ¥59.52bn vs. equity ¥83.66bn (liabilities/equity 0.71x). Implied equity ratio ≈59.5% (the 0.0% shown is undisclosed). Interest coverage at 21.3x (EBIT/interest) suggests low refinancing risk under current earnings. capital_structure: Financial leverage at 1.68x (assets/equity) is conservative. Balance sheet capacity exists for investment, but capex and acquisition plans are not disclosed in this dataset.

Cash Flow Quality

earnings_quality: OCF of ¥6.18bn is 2.03x net income (¥3.05bn), signaling strong cash conversion, likely aided by working capital inflows and non-cash D&A (¥2.59bn). FCF_analysis: Investing cash flow is not disclosed (shown as 0), so FCF cannot be reliably calculated; the displayed FCF of 0 is a placeholder. Using OCF alone suggests capacity to fund typical maintenance capex, but visibility on growth capex is absent. working_capital: Inventories at ¥14.92bn are manageable relative to scale; inventory turns and receivable/payable dynamics are not disclosed. The large working capital base (¥49.88bn) supports operations but needs monitoring for build-ups that could compress OCF.

Dividend Sustainability

payout_ratio_assessment: EPS is ¥94.02, but DPS and payout ratio were not disclosed for the period (0 values are placeholders). Thus, actual payout cannot be assessed from this data. FCF_coverage: FCF is not computable due to undisclosed investing cash flows. OCF of ¥6.18bn suggests potential coverage for modest distributions, but confirmation requires capex and policy details. policy_outlook: No dividend policy information provided. Sustainability will depend on maintaining EBIT margins, stable OCF/NI conversion, and disciplined capex.

Risk Assessment

Business Risks:

• Margin pressure from input cost inflation and pricing competition in auto-ID and solutions
• Project timing and mix shifts impacting gross margin and opex efficiency
• Supply chain and component availability affecting deliveries and costs
• FX volatility impacting both revenue and non-operating items
• Execution risk in systems integration and service delivery

Financial Risks:

• Non-operating losses (e.g., FX or financial items) depressing ordinary income
• Working capital swings that could reduce OCF conversion in weaker quarters
• Interest rate risk, albeit mitigated by strong coverage (21.3x)
• Potential capex upcycles not visible due to undisclosed investing cash flows

Key Concerns:

• Negative operating leverage despite revenue growth
• Lack of disclosure on investing cash flow and dividend details
• Ordinary income below operating income indicating non-operating headwinds

Investment Implications

Key Takeaways:

• Top-line up 2.8% YoY to ¥78.25bn, but EBIT down 11.7% with operating margin at 6.5%
• Strong gross margin (39.8%) and EBITDA margin (9.8%), yet deleveraging at EBIT
• OCF robust at ¥6.18bn (2.03x net income), supporting earnings quality
• Balance sheet solid: equity ratio ≈59.5%, liabilities/equity 0.71x, interest coverage 21.3x
• Non-operating expenses (~¥0.64bn) weighed on ordinary income (¥4.46bn)
• Dividend and capex details not disclosed; FCF cannot be determined from provided data

Metrics to Watch:

• Operating margin trajectory and SG&A ratio
• Gross margin resilience and pricing versus input costs
• Order intake/backlog and regional/segment mix (when disclosed)
• OCF/NI ratio and working capital movements (inventory, receivables, payables)
• Capex and investing cash flows to assess FCF and capital allocation
• ROE improvement drivers: asset turnover and margin expansion

Relative Positioning: Within Japan-listed industrial tech/auto-ID peers, SATO exhibits stronger liquidity and moderate leverage with above-average gross margins but mid-single-digit operating margins; near-term performance is constrained by negative operating leverage and non-operating headwinds, pending clearer visibility on investment needs and capital 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
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