TSURUMI MANUFACTURING CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥35.76B
• Operating Income: ¥5.38B
• Net Income: ¥4.34B
• EPS: ¥73.67

Income Statement

Balance Sheet

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

Tsurumi Manufacturing Co., Ltd. (6351) delivered strong top-line and operating performance in FY2026 Q2, with revenue up 23.7% year over year to ¥35.76bn, indicating robust demand across its pump and related equipment lines. Gross profit reached ¥11.29bn, implying a gross margin of 31.6%, which is healthy for a mid-cap industrial maker. Operating income grew 21.7% YoY to ¥5.38bn, yielding an operating margin of roughly 15.0%, evidencing good operating leverage and cost control despite input cost volatility. Ordinary income was ¥5.83bn, exceeding operating income by about ¥0.45bn, suggesting positive net non-operating contributions (e.g., financial income, FX, or equity-method results). Despite this, net income declined 16.2% YoY to ¥3.55bn, implying that below-the-line factors (taxes, minorities, or extraordinary items under JGAAP) likely weighed on the bottom line versus the prior year. The net profit margin was 9.92%, respectable but reflecting the aforementioned below-the-line drag. DuPont metrics show asset turnover of 0.281x and low financial leverage of 1.28x, leading to a reported/derived ROE of 3.58% for the half-year period; on a simple run-rate basis this would suggest a solid, though not excessive, annualized return, subject to seasonality. The balance sheet appears conservative: liabilities of ¥35.66bn against total assets of ¥127.05bn and reported total equity of ¥98.98bn point to an equity ratio near 78% (despite the reported equity ratio field being undisclosed), and a debt-to-equity ratio of 0.36x. Liquidity is strong with a current ratio of 316% and a quick ratio of 238%, supported by sizable working capital of ¥55.83bn. Inventories of ¥20.30bn versus six-month cost of sales of ¥17.61bn imply relatively heavy inventory on hand, which may be strategic to ensure supply reliability but merits monitoring for turnover. Interest expense is modest at ¥45m, and interest coverage is very high at about 119.5x, highlighting minimal refinancing or rate risk in the near term. Tax expense reported at ¥1.14bn suggests a plausible effective tax rate in the high teens to low 20s range on typical definitions, though exact pretax figures are not fully disclosed in the dataset. Cash flow statements are not disclosed in this extract, so operating cash flow and free cash flow cannot be assessed; this limits conclusions on cash conversion and dividend capacity. Dividend data are also not disclosed; thus, payout policy cannot be evaluated from this dataset alone. Overall, the company demonstrates healthy growth and margins with a fortress-like balance sheet, albeit with a YoY decline in net income likely tied to below-the-line items; data gaps around cash flows and dividends warrant cautious interpretation.

Profitability Analysis

ROE_decomposition: ROE ≈ 3.58% for the period, derived from net margin 9.92% × asset turnover 0.281 × financial leverage 1.28. Operating margin stands at ~15.0% (¥5,376m / ¥35,759m), gross margin at 31.6%. Ordinary margin is ~16.3% (¥5,826m / ¥35,759m), indicating positive non-operating contributions. The main drag from operating to net appears to be below-the-line items (taxes/minorities/extraordinary) rather than financial costs, as interest expense is only ¥45m. margin_quality: Gross margin of 31.6% and operating margin of ~15.0% signal good pricing power and cost management in a generally competitive capital goods market. The spread between ordinary and operating income (+¥450m) suggests tailwinds from non-operating items (likely FX or investment income), which may not be recurring. The net margin of 9.92% remains solid, but the YoY decline in net income implies less favorable below-the-line impacts versus the prior year. operating_leverage: Revenue grew 23.7% while operating income rose 21.7% YoY, indicating largely proportional cost scaling with modest negative mix or cost headwinds. Given the sizeable fixed-cost base typical for pump manufacturing, sustaining mid-teens operating margin at higher volumes indicates disciplined overhead control; however, the slight underperformance of OI growth vs. revenue suggests some temporary inefficiencies or deliberate investment in SG&A/production capacity.

Growth Assessment

revenue_sustainability: The 23.7% YoY revenue growth likely reflects strong demand across construction, infrastructure, dewatering, and export markets. Sustainability will depend on pipeline visibility, public/private capex cycles, overseas project momentum, and FX. No segment/geographic breakdown is disclosed here, so breadth of growth cannot be verified. profit_quality: Operating profit growth (+21.7% YoY) corroborates genuine operating momentum, with margins at healthy levels. The divergence between operating and net income YoY (net down 16.2%) points to non-operating/extraordinary or tax/minority effects; thus, the core earnings trajectory looks stronger than the bottom-line headline suggests. outlook: With strong orders environment in infrastructure and flood-control solutions domestically and abroad, demand drivers appear intact. Continued cost normalization and a stable input price environment would support margins. Key watchpoints are inventory normalization, any reversal of non-operating gains, and potential reversion of tax/minority impacts that weighed on net income.

Financial Health

liquidity: Current assets ¥81.66bn vs. current liabilities ¥25.83bn yields a current ratio of 316% and a quick ratio of 238%, signaling ample short-term liquidity. Working capital stands at ¥55.83bn. solvency: Total liabilities are ¥35.66bn against reported equity of ¥98.98bn, implying low leverage (liabilities/equity 0.36x) and an equity ratio near ~78% by calculation (equity/assets), notwithstanding the equity ratio field being undisclosed. Interest coverage is about 119.5x, reflecting minimal solvency risk. capital_structure: The company operates with conservative leverage (financial leverage 1.28x) and modest interest expense (¥45m). Balance sheet strength provides capacity for investment and resilience through cycles. Note: Total assets (¥127.05bn) and the sum of liabilities plus equity (¥134.64bn) do not reconcile in this extract; this may reflect timing/classification differences or partial disclosure, so exact capital structure metrics should be validated against full filings.

Cash Flow Quality

earnings_quality: Operating income growth and solid margins indicate resilient core earnings. However, lack of disclosed cash flow statements prevents assessment of cash conversion, accrual intensity, or the durability of working capital dynamics. FCF_analysis: Operating CF and investing CF are not disclosed here, so free cash flow cannot be computed. With strong liquidity and low interest burden, the company is likely capable of funding operations and maintenance capex internally, but this cannot be confirmed without OCF/capex data. working_capital: Inventories are ¥20.30bn versus six-month cost of sales of ¥17.61bn, suggesting a relatively high inventory position; estimated half-year turns (using ending inventory) are ~0.87x. This may be strategic (lead-time buffers) but warrants monitoring for normalization and potential impact on OCF when demand moderates.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed in this dataset, so payout cannot be assessed. EPS for the period is ¥73.67, but without DPS we cannot compute payout. FCF_coverage: OCF and capex are not disclosed; therefore, FCF coverage of dividends cannot be evaluated. policy_outlook: Given a strong balance sheet (low leverage, high liquidity), the capacity for shareholder returns appears sound in principle, contingent on cash generation. However, absent cash flow and dividend disclosures, we cannot infer policy direction or sustainability. Refer to company guidance and historical policy for clarity.

Risk Assessment

Business Risks:

• Cyclical exposure to construction and infrastructure capex cycles domestically and overseas
• Raw material and component cost volatility impacting gross margins
• Foreign exchange fluctuations affecting export competitiveness and non-operating income
• Inventory management risk (obsolescence, carrying costs) given elevated inventory levels
• Project execution and delivery timing affecting revenue recognition and working capital
• Competitive pricing pressure in pumps and fluid management solutions

Financial Risks:

• Potential reversal of non-operating gains (e.g., FX) that supported ordinary income
• Tax rate and minority interest volatility impacting net income
• Cash conversion risk if inventory and receivables remain elevated
• Data gaps on cash flows and debt composition limiting visibility on FCF and refinancing profile

Key Concerns:

• Net income declined 16.2% YoY despite strong operating growth, indicating below-the-line headwinds
• Inventories high relative to six-month COGS, requiring careful turnover management
• Lack of disclosed cash flow data prevents confirmation of earnings-to-cash conversion

Investment Implications

Key Takeaways:

• Strong revenue growth (+23.7% YoY) with healthy gross (31.6%) and operating (~15.0%) margins
• Operating income up 21.7% YoY; core earnings momentum intact
• Net income decline (-16.2% YoY) likely due to non-operating, tax, minority, or extraordinary effects
• Very conservative balance sheet: equity ratio ~78% (by calculation), liabilities/equity 0.36x
• Excellent liquidity (current ratio 316%, quick ratio 238%) and interest coverage (~119.5x)
• Inventory build versus six-month COGS suggests working capital sensitivity
• Cash flow and dividend data not disclosed; limits assessment of FCF and payout sustainability

Metrics to Watch:

• Order intake/backlog and book-to-bill to gauge revenue sustainability
• Inventory turnover and receivables days to track cash conversion
• Operating margin trajectory vs. input costs and pricing
• Ordinary vs. operating income gap (FX and other non-operating items)
• Effective tax rate and minority interests impacts on net income
• OCF and capex when disclosed to derive FCF and coverage of potential dividends

Relative Positioning: Within Japanese mid-cap industrial equipment peers (e.g., pump and fluid-handling makers), Tsurumi exhibits above-average balance sheet strength and competitive margins, with lower leverage and strong interest coverage; earnings quality appears solid at the operating level, though bottom-line volatility from below-the-line items and limited cash flow disclosure temper visibility.

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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