CKD Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥72.65B
• Operating Income: ¥7.87B
• Net Income: ¥6.34B
• EPS: ¥80.48

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

CKD Co., Ltd. (TSE: 6407) reported FY2026 Q2 consolidated results under JGAAP showing resilient profitability despite a softer topline. Revenue was ¥72.648bn, down 4.1% YoY, while operating income declined a steeper 14.2% YoY to ¥7.867bn, indicating negative operating leverage in the period. Gross profit was ¥22.040bn, translating to a gross margin of 30.3%, which is healthy for the sector and suggests decent pricing and product mix. Operating margin stood at 10.8%, and ordinary income of ¥7.9bn slightly exceeded operating income, implying net non-operating income broadly offsetting interest costs. Net income was ¥5.376bn, down 15.2% YoY, with a net margin of 7.4%. EBITDA was ¥11.049bn (15.2% margin), supported by ¥3.182bn of depreciation and amortization (~4.4% of sales). The DuPont decomposition yields a calculated ROE of 3.81% based on net margin 7.40%, asset turnover 0.342x, and financial leverage 1.51x, aligning with the reported ROE. Liquidity is strong: current ratio 328.8% and quick ratio 301.4% reflect ample short-term coverage and modest inventory intensity. The balance sheet is conservatively structured with total liabilities of ¥74.345bn versus equity of ¥141.238bn (debt-to-equity 0.53x); based on reported totals, the implied equity ratio is approximately 66%, although the disclosed equity ratio field is unreported. Cash generation quality appears solid with operating cash flow (OCF) of ¥6.834bn exceeding net income (OCF/NI 1.27x). Free cash flow cannot be assessed because investing cash flow and capex details are unreported in the XBRL; the reported zero should be treated as missing data rather than actual zero. Interest coverage is robust at 27.3x (operating income/interest expense), indicating low refinancing risk. On the downside, the sharper decline in operating income versus revenue highlights sensitivity to volume and mix, and asset turnover at 0.342x indicates subdued utilization for this period. The tax line in the calculated metrics shows 0.0% effective rate, which contradicts the presence of ¥2.883bn of income tax expense; using ordinary income as a proxy for pre-tax profit implies an effective tax rate closer to the mid-30% range, underscoring that the 0.0% figure is an unreported placeholder. Dividend fields are also unreported mid-year (DPS and payout shown as zero), so dividend capacity must be inferred from earnings power and OCF. Overall, CKD enters the second half with healthy liquidity and balance sheet strength, good cash conversion, but facing cyclical pressure evidenced by negative operating leverage and still-muted asset turns. Data limitations (notably equity ratio, cash/investing flows, DPS, outstanding shares) temper precision; the analysis focuses on disclosed non-zero items and internally consistent calculations.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 7.40%
• asset_turnover: 0.342
• financial_leverage: 1.51
• calculated_ROE: 3.81%
• comments: ROE softness is driven primarily by low asset turnover; margin is respectable and leverage is modest. margin_quality:
• gross_margin: 30.3%
• operating_margin: 10.8%
• ordinary_margin: 10.9%
• net_margin: 7.4%
• EBITDA_margin: 15.2%
• drivers: ['Gross margin resilience suggests stable pricing/mix and cost control.', 'Operating margin compressed more than sales due to negative operating leverage and fixed-cost absorption.'] operating_leverage:
• YoY_revenue_change: -4.1%
• YoY_operating_income_change: -14.2%
• interpretation: Profit sensitivity to revenue is high; fixed cost base and/or mix shifts amplified the earnings decline.
• interest_coverage: 27.3x (Operating income ¥7.867bn / Interest expense ¥0.288bn)

Growth Assessment

revenue_sustainability: Revenue declined 4.1% YoY, indicative of a soft demand environment likely tied to cyclical end-markets. Without order or backlog data, sustainability into H2 is uncertain. profit_quality: Net margin of 7.4% and EBITDA margin of 15.2% suggest underlying earnings quality remains sound despite lower volume. Ordinary income slightly above operating income indicates non-operating items were a small net positive. outlook: Given negative operating leverage in H1 and subdued asset turnover (0.342x), a cautious near-term outlook is prudent. Margin preservation will rely on continued cost discipline and mix management; revenue stabilization is key for operating margin recovery.

Financial Health

liquidity:

• current_assets: 131473000000
• current_liabilities: 39983000000
• current_ratio: 328.8%
• quick_ratio: 301.4%
• working_capital: 91490000000
• commentary: Substantial liquidity headroom with limited reliance on inventory to meet obligations. solvency:
• total_assets: 212709000000
• total_liabilities: 74345000000
• total_equity: 141238000000
• debt_to_equity: 0.53x
• interest_coverage: 27.3x
• equity_ratio_implied: ≈66.4% (calculated as equity/total assets)
• commentary: Low leverage and strong coverage metrics indicate conservative solvency risk. capital_structure: Balance sheet is equity-heavy, supporting resilience through cyclical downturns and providing capacity for investment and shareholder returns if warranted.

Cash Flow Quality

earnings_quality: OCF/Net income of 1.27x indicates earnings backed by cash generation. free_cash_flow:

• reported_FCF: Not assessable; Investing CF reported as 0 is an unreported item.
• capex_comment: Capex is not disclosed in the provided data; FCF cannot be reliably computed. working_capital: Net working capital is strong (¥91.49bn). Lack of turnover/DSO/DIO disclosures limits assessment of cash conversion cycle dynamics in the period.

Dividend Sustainability

payout_ratio_assessment: Payout ratio and DPS are shown as 0.0, which should be treated as undisclosed mid-year rather than actual zeros. With net income positive and OCF exceeding earnings, there appears to be capacity for distributions, but precise payout sustainability cannot be concluded without full-year cash flows and policy disclosure. FCF_coverage: Not determinable due to missing investing/Capex data. policy_outlook: No explicit guidance provided. Balance sheet strength and cash generation support optionality; actual payouts will depend on full-year performance and capital allocation priorities.

Risk Assessment

Business Risks:

• Cyclical demand in factory automation and industrial end-markets impacting order intake and utilization.
• Product mix and pricing pressure affecting gross margin.
• Supply chain and lead-time normalization potentially weighing on volumes and backlog.
• Geographic exposure and macro uncertainty (including China) influencing demand visibility.
• FX volatility (USD/JPY, CNY/JPY) affecting export competitiveness and translation.

Financial Risks:

• Negative operating leverage in downturns leading to outsized EBIT declines.
• Working capital swings could compress OCF if demand weakens or inventories/receivables build.
• Interest rate/credit spread increases modestly raising financing costs, though current coverage is robust.
• Data gaps on cash, investing, and capex obscure FCF visibility.

Key Concerns:

• Operating income falling faster than revenue (-14.2% vs -4.1%), underscoring cost absorption risk.
• Low asset turnover (0.342x) constraining ROE at 3.81%.
• Limited disclosure on investing cash flows and dividends hampers assessment of capital returns and FCF.

Investment Implications

Key Takeaways:

• Margins remain solid (GM 30.3%, OPM 10.8%) despite softer sales, evidencing cost control and mix resilience.
• ROE of 3.81% is constrained by low asset turnover; leverage is conservative at 0.53x D/E.
• Strong liquidity (current ratio 329%, quick ratio 301%) and robust interest coverage (27.3x) support financial flexibility.
• Cash conversion is healthy (OCF/NI 1.27x), but FCF cannot be confirmed due to missing capex data.
• Earnings sensitivity to volume remains elevated as evidenced by negative operating leverage.

Metrics to Watch:

• Order intake and book-to-bill for demand visibility.
• Gross and operating margin trends vs volume recovery.
• OCF/NI ratio and capex disclosures to gauge FCF.
• Inventory and receivables turnover (DIO/DSO) for working capital discipline.
• FX rates (USD/JPY, CNY/JPY) and their impact on margins.
• Interest expense trajectory and leverage metrics.

Relative Positioning: Within Japanese industrial automation peers, CKD shows above-average liquidity and conservative leverage with mid-teens EBITDA margin; however, current ROE is subdued due to low asset turnover and cyclical revenue softness.

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