ANEST IWATA Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥26.32B
• Operating Income: ¥2.51B
• Net Income: ¥2.51B
• EPS: ¥54.89

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

Verdict: A solid but mixed quarter—top line dipped modestly while operating profitability compressed, yet bottom-line resilience and strong cash generation underpin healthy financial footing. Revenue was 263.25 (100M JPY), down 2.7% YoY, with gross profit of 122.28 and gross margin at 46.5%. Operating income declined 15.2% YoY to 25.11, yielding a 9.5% operating margin. Ordinary income fell a milder 4.8% YoY to 32.96 aided by strong non-operating gains (net +7.84), cushioning the operating softness. Net income was 21.60, down just 1.5% YoY, producing an 8.2% net margin. Operating margin compressed by about 141 bps YoY (from ~11.0% to 9.5%), while ordinary margin compressed ~28 bps (from ~12.8% to 12.5%). Net margin marginally expanded by ~9 bps (from ~8.1% to 8.2%) due to supportive non-operating items and a 23.1% effective tax rate. Earnings quality was high, with OCF of 40.26 exceeding net income by 1.86x, indicating robust cash conversion. The balance sheet remains conservative: current ratio 365%, quick ratio 310%, D/E 0.29x, and cash and deposits of 201.41 comfortably exceed short-term loans of 8.34. ROE sits at 4.0%—low versus typical machinery sector aspirations—constrained by modest asset turnover (0.382x) and limited leverage (1.29x). ROIC at 5.6% trails the 7–8% management benchmark commonly targeted in Japan’s industrials, implying value-creation headroom. Dividend payout is elevated at a calculated 87%, but estimated FCF (OCF minus capex) of ~23.95 appears to cover shareholder returns including buybacks this period. Total comprehensive income of 15.30 was below net income, reflecting OCI headwinds (likely FX or securities valuation), a consideration for equity trends. Forward-looking, stabilizing non-operating items cannot be relied upon indefinitely; restoring operating leverage via SG&A control and pricing/mix improvements will be key to re-expanding margins.

Profitability Analysis

DuPont decomposition: ROE (4.0%) = Net profit margin (8.2%) × Asset turnover (0.382x) × Financial leverage (1.29x). The most constraining component is asset turnover at 0.382x, followed by modest financial leverage, while net margin remains reasonable. The YoY operating margin compressed by ~141 bps as operating income declined (-15.2%) faster than revenue (-2.7%), implying negative operating leverage and/or unfavorable mix and higher SG&A ratio. SG&A consumed 36.9% of sales (97.16/263.25), which likely rose as a percent of sales YoY given the revenue decline; this is the main driver of the operating margin squeeze. Ordinary income was comparatively supported by net non-operating gains of 7.84 (8.40 income less 0.56 expenses), reducing the drop to -4.8% YoY; this is beneficial but not a core, controllable profit lever. The reliance on non-operating support appears partly opportunistic (e.g., FX or financial income) and not necessarily durable. Sustainability: revenue softness combined with elevated SG&A intensity is likely cyclical and controllable over time via cost optimization and pricing; however, absent stronger demand or mix/pricing gains, the operating margin could remain under pressure near term. Concerning trends: operating profit fell more than sales; watch for SG&A growth outpacing revenue and continued dependence on non-operating items to hold ordinary profit.

Growth Assessment

Revenue contracted 2.7% YoY to 263.25, indicating softer demand or adverse mix/FX in the period. Operating income declined 15.2% YoY to 25.11, reflecting negative operating leverage. Ordinary income fell a milder 4.8% due to non-operating tailwinds, and net income slipped only 1.5% as tax and non-operating factors cushioned. The gross margin at 46.5% remains healthy, suggesting product/aftermarket mix strength; the pressure is at the SG&A level. Given the company’s end-markets (compressors/coating equipment), cyclical industrial demand, export exposure, and FX can swing quarterly momentum. Near-term outlook hinges on order trends, pricing discipline to offset cost inflation, and inventory normalization; absent re-acceleration, operating margin recovery may be gradual. Non-operating support is unpredictable; medium-term growth quality depends on improving core operating profitability rather than financial items.

Financial Health

Liquidity is strong: current ratio 364.9% and quick ratio 310.1% far exceed benchmarks; no warning flags (both well above 1.0). Solvency is conservative: D/E at 0.29x, interest coverage at 73.85x, and ample cash (201.41) versus short-term loans (8.34). No explicit long-term loans were reported (unreported in XBRL), but overall liabilities are modest at 154.40 against equity of 534.91. Maturity mismatch risk appears low given large current assets (442.53) relative to current liabilities (121.29). Off-balance sheet obligations were not disclosed in the provided data; absent such disclosures, contingent obligations cannot be assessed.

Cash Flow Quality

OCF of 40.26 is 1.86x net income (21.60), a strong conversion indicating high earnings quality this period. With capex of 16.31, estimated FCF is approximately 23.95 (OCF minus capex), despite FCF not being explicitly disclosed. Financing CF was -18.20, including share repurchases of -2.90; dividends paid were unreported, but the calculated payout ratio is 87%, implying total dividend outflow of roughly 18.79 against NI. On this basis, FCF appears to cover dividends and buybacks combined this period. Working capital details by change are unavailable; therefore, we cannot isolate whether cash generation benefited from temporary working capital inflows. No overt signs of manipulation are evident in the limited dataset, but monitoring inventory and receivables days versus payables is advisable when historical balance sheets are available.

Dividend Sustainability

The calculated payout ratio is 87%, above the <60% benchmark for conservative sustainability. Nonetheless, estimated FCF of ~23.95 appears to cover an implied dividend of ~18.79 and buybacks of 2.90, suggesting near-term coverage is adequate. Balance sheet strength (net cash posture implied by high cash vs. small short-term loans) provides additional buffer. Sustainability will depend on restoring operating margin and maintaining OCF resilience; if operating softness persists, an 80%+ payout could constrain reinvestment flexibility. DPS was unreported; policy clarity (target payout or DOE) is not available in the data.

Risk Assessment

Business Risks:

• Industrial demand cyclicality affecting compressors and coating equipment
• Pricing pressure and input cost inflation compressing operating margins
• FX volatility impacting export competitiveness and non-operating gains
• Product mix shifts reducing gross-to-operating margin conversion
• Supply chain and logistics cost variability impacting delivery and costs

Financial Risks:

• High payout ratio (~87%) limiting reinvestment flexibility if cash flow weakens
• Reliance on non-operating income (net +7.84) to support ordinary profit
• OCI volatility (comprehensive income below net income) affecting equity
• Potential visibility gap due to unreported long-term debt and detailed SG&A breakdown

Key Concerns:

• Operating margin compression of ~141 bps YoY despite only -2.7% revenue decline
• ROE at 4.0% and ROIC at 5.6% below typical targets, signaling suboptimal capital efficiency
• Asset turnover at 0.382x indicating underutilized assets or weak throughput

Investment Implications

Key Takeaways:

• Core profitability weakened at the operating level; ordinary and net income were supported by non-operating items
• Cash generation remains robust with OCF/NI at 1.86x and estimated positive FCF
• Balance sheet is very strong with ample cash and low leverage
• ROE and ROIC are below peer aspirations, pointing to the need for better asset utilization and margin recapture
• Dividend payout is high but appears covered by current FCF; long-term sustainability hinges on operating recovery

Metrics to Watch:

• Order intake and backlog trends by region/product
• Operating margin and SG&A-to-sales ratio trajectory
• Price/mix versus input cost inflation (gross-to-operating margin bridge)
• Non-operating income components and volatility (FX, financial income/expenses)
• WC metrics: inventory and receivables days relative to sales
• Capex intensity and returns (ROIC progression toward 7–8%)
• Comprehensive income vs net income (OCI impacts on equity)

Relative Positioning: Within Japanese industrial machinery peers, the company’s financial strength (net cash, high liquidity) is a positive differentiator, but profitability metrics (ROE ~4%, ROIC ~5.6%) trail sector norms. Execution on operating margin restoration and asset turnover improvements is required to close the gap.

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