RISO KAGAKU CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥37.62B
• Operating Income: ¥2.54B
• Net Income: ¥1.78B
• EPS: ¥27.96

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

RISO Kagaku (TSE: 6413) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line softness but resilient bottom-line support from non-operating items and disciplined cost control. Revenue declined 1.4% YoY to ¥37.6bn, while operating income fell 9.4% YoY to ¥2.54bn, indicating some operating deleverage in the half. Gross profit of ¥22.39bn translated to a high gross margin of 59.5%, underscoring strong product mix/pricing discipline and/or a relatively high value-add model. Operating margin stood at 6.8%, pressured versus revenue given cost inflation or SG&A absorption against slightly lower sales. Ordinary income of ¥2.81bn exceeded operating income, suggesting positive non-operating contributions (e.g., FX gains or financial income) offsetting weak operating leverage. Net income increased 0.5% YoY to ¥1.79bn despite lower operating profit, highlighting the importance of below-the-line supports in this period. DuPont deconstruction yields ROE of 2.74%, with components of 4.76% net margin, 0.418x asset turnover, and 1.37x financial leverage—indicating low leverage and modest asset productivity constrain equity returns. Liquidity remains robust: current ratio 229% and quick ratio 187% reflect ample short-term coverage and healthy working capital of ¥23.24bn. The balance sheet is conservative with total liabilities of ¥22.41bn versus equity of ¥65.48bn (D/E 0.34x), implying low solvency risk. Interest expense is minimal at ¥18m and interest coverage is very strong at ~141x, reducing financing vulnerability. Operating cash flow was healthy at ¥2.35bn, roughly 1.31x net income, suggesting decent earnings quality; however, investing cash flow and cash & equivalents were not disclosed in XBRL, limiting full free cash flow assessment. EBITDA of ¥3.95bn (10.5% margin) indicates reasonable cash earnings capacity relative to revenue. The reported effective tax rate metric shows 0.0% in the dataset, but using disclosed income tax of ¥0.85bn and ordinary income of ¥2.81bn implies an effective rate around 30%, pointing to a data disclosure/labeling gap rather than an abnormally low tax burden. Dividends and share data items were undisclosed (shown as zero), preventing per-share and payout-based interpretations; thus dividend sustainability must be assessed qualitatively. Overall, the company shows strong gross margin and liquidity, subdued growth, low leverage, and low ROE; sustaining improvements in operating leverage and asset turnover will be key to lifting equity returns.

Profitability Analysis

ROE decomposition (DuPont): Net margin 4.76% × Asset turnover 0.418 × Leverage 1.37 = ROE 2.74%. The low ROE primarily reflects modest asset turnover and restrained leverage; margin contribution is positive but not sufficient to offset the other drags. Gross margin at 59.5% is structurally high, likely due to pricing power and/or product mix; however, operating margin of ~6.8% (¥2.54bn/¥37.62bn) indicates SG&A intensity and fixed-cost absorption pressures in a slightly contracting revenue environment. EBITDA margin of 10.5% highlights reasonable cash profitability, but the EBITDA-to-Operating Income gap (D&A ¥1.41bn) suggests ongoing capital intensity that must be covered by cash generation. Ordinary income exceeded operating income by ~¥0.27bn, implying supportive non-operating gains that may not be consistently repeatable, so core profitability is somewhat weaker than headline ordinary/net results. Interest burden is negligible (interest coverage ~141x), so financial expenses do not constrain margins. Operating leverage: with revenue down 1.4% and operating income down 9.4% YoY, cost base rigidity is evident; small sales declines can disproportionately impact operating profit, indicating scope to optimize SG&A and manufacturing overheads to reduce sensitivity.

Growth Assessment

Revenue declined 1.4% YoY to ¥37.62bn, signaling lack of top-line momentum in the half; sustaining growth may require product refresh cycles, channel execution, or geographic mix improvements. Operating income fell 9.4% YoY, underperforming revenue, which suggests negative operating leverage and possibly inflationary input or SG&A pressures. Net income edged up 0.5% YoY due to non-operating supports, implying limited quality of profit growth from a core operations perspective. Gross margin resilience indicates underlying product value, but the drop-through to operating profit was limited, highlighting cost-side challenges. With asset turnover at 0.418x (half-year basis figure provided) and leverage low, near-term ROE expansion will hinge on stabilizing revenue and improving operating efficiency rather than balance sheet tactics. The outlook will depend on demand conditions in key regions and segments, cost normalization, and potential benefits from FX; however, reliance on non-operating gains introduces volatility risk to ordinary/net income. Given data limitations (no capex, cash, or backlog disclosed), growth durability cannot be fully assessed; watch for second-half seasonality and order intake to gauge run-rate.

Financial Health

Liquidity is strong: current assets ¥41.23bn vs current liabilities ¥17.99bn yield a current ratio of ~229%; quick ratio ~187% after excluding inventories, indicating robust near-term coverage. Working capital is sizable at ¥23.24bn, offering flexibility but also requiring disciplined inventory and receivables management. Solvency risk appears low: total liabilities ¥22.41bn vs equity ¥65.48bn (D/E 0.34x), with interest expense only ¥18m and interest coverage ~141x. Total assets stand at ¥89.91bn, equity at ¥65.48bn; the reported equity ratio of 0.0% is an undisclosed field rather than an actual metric. Overall capital structure is conservative with ample equity cushion, leaving room for investment or shareholder returns if cash generation supports it. Note that cash & equivalents were not disclosed in the dataset, which limits precision on immediate liquidity, but the strong working capital and low leverage mitigate concerns.

Cash Flow Quality

Operating cash flow of ¥2.35bn is ~1.31x net income (¥1.79bn), indicating earnings are backed by cash generation and suggesting limited accrual risk in the half. D&A of ¥1.41bn supports EBITDA-to-OCF conversion, but without investing cash flow disclosure (shown as zero/unreported), we cannot determine capex or true free cash flow. The provided FCF metric of zero reflects missing investing data rather than actual FCF. Working capital appears well-managed given strong liquidity ratios; however, inventory of ¥7.65bn amidst slightly lower sales warrants monitoring for potential obsolescence or extended holding periods if demand softens. With interest burden minimal, cash generation is primarily a function of operating performance and capex cadence, both of which require fuller disclosure to assess sustainability.

Dividend Sustainability

Dividend per share, payout ratio, and FCF coverage were undisclosed (displayed as zeros in the dataset). Consequently, we cannot quantify dividend affordability. Qualitatively, the company exhibits low leverage, strong liquidity, and positive OCF in the period, which are supportive factors for shareholder returns. However, low ROE (2.74%) and the reliance on non-operating items to offset weaker operating leverage suggest prudence; sustainable dividends would ideally be covered by core free cash flow, which cannot be confirmed without capex data. Dividend policy outlook will hinge on visibility into capex requirements, second-half cash generation, and management’s capital allocation priorities.

Risk Assessment

Business Risks:

• Top-line softness in core printing/office equipment solutions leading to operating deleverage
• Pricing pressure and competitive intensity in mature markets
• Input cost inflation and supply chain volatility affecting gross-to-operating margin conversion
• FX fluctuations impacting ordinary income and overseas demand
• Inventory obsolescence risk amid product cycle transitions
• Geographic demand variability and channel execution risk

Financial Risks:

• Limited visibility on cash and investing cash flows due to undisclosed items
• Potential working capital swings affecting OCF consistency
• Low ROE driven by modest asset turnover and low leverage, constraining capital efficiency
• Exposure to non-operating income volatility (e.g., FX gains/losses) influencing ordinary/net income
• Capex intensity uncertainty given D&A of ¥1.41bn without capex disclosure

Key Concerns:

• Revenue decline (-1.4% YoY) with operating income down more sharply (-9.4% YoY)
• Core operating leverage appears weak; cost structure rigidity
• ROE at 2.74% below typical cost of equity benchmarks
• Inadequate disclosure of investing CF, cash balances, and dividend metrics limits full assessment

Investment Implications

Key Takeaways:

• High gross margin (59.5%) but weaker operating leverage in FY26 Q2
• Ordinary and net income supported by non-operating items; core earnings softer
• Strong liquidity (current ratio 229%, quick ratio 187%) and low leverage (D/E 0.34x)
• Healthy OCF (¥2.35bn) with OCF/NI at 1.31x; FCF not assessable due to missing capex data
• ROE modest at 2.74% driven by low asset turnover and conservative leverage

Metrics to Watch:

• Revenue trajectory and order intake/backlog in H2
• Operating margin and SG&A ratio trends (operating leverage)
• Capex and investing cash flows to derive true FCF
• OCF/Net income ratio and working capital turns (inventory days, receivable days)
• FX impact on non-operating income and sensitivity of ordinary profit
• ROE drivers: asset turnover improvement and capital allocation actions

Relative Positioning: Versus TSE office equipment/electronics peers, the company exhibits conservative balance sheet metrics and strong liquidity with above-average gross margins, but lower ROE and softer growth momentum; operational execution to enhance operating leverage and asset efficiency is key to narrowing the performance 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