PILLAR Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥28.16B
• Operating Income: ¥5.61B
• Net Income: ¥4.05B
• EPS: ¥174.69

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: Solid but slightly softer quarter, with resilient bottom-line growth despite mild top-line and operating profit declines. Revenue was 281.61 (−1.3% YoY), while operating income was 56.05 (−3.8% YoY), indicating modest top-line softness and some operating leverage pressure. Gross profit of 113.86 translates to a 40.4% gross margin, supporting a healthy profitability profile. Operating margin stands at about 19.9%, down roughly 50 bps from an estimated ~20.4% in the prior-year period based on the disclosed YoY deltas. Ordinary income edged up to 57.76 (+0.4% YoY), supported by net non-operating income of 1.71 (non-op income 2.81 vs non-op expenses 1.10). Net income rose to 40.48 (+4.1% YoY), with net margin at 14.4%, up about ~80 bps versus an estimated ~13.6% last year. Earnings quality was strong: OCF of 66.91 outpaced net income (OCF/NI = 1.65x), indicating solid cash conversion. Balance sheet strength is a clear positive, with equity at 749.79 (equity ratio ~75.8% of assets by calculation) and very low leverage (D/E 0.32x) and ample liquidity (current ratio 479%). Interest coverage is robust at 76.8x, underscoring limited financial risk. ROE is modest at 5.4% given low leverage and a conservative capital structure, while ROIC of 7.1% sits around the common target range. The quarter saw share repurchases of 20.00, implying continued shareholder returns alongside financing cash outflows of −39.39. Margins were mixed: slight operating margin compression but improved net margin due to stable non-operating items and tax effects. With revenue softness and SG&A discipline implied (operating margin only slightly lower), margin resilience is reasonable but sensitive to volume. Forward-looking, the firm appears well-positioned to navigate volatility given liquidity and low leverage, but sustaining EPS growth will likely require stable demand and continued cost control; the current payout ratio of 77.3% suggests limited room for dividend acceleration absent stronger FCF growth. Data gaps (investing CF, DPS, capex) limit full FCF and dividend coverage analysis, but cash and OCF provide a cushion. Overall, fundamentals remain sturdy, with cautious watchpoints on growth momentum and operating leverage.

Profitability Analysis

DuPont decomposition: ROE 5.4% = Net Profit Margin 14.4% × Asset Turnover 0.285 × Financial Leverage 1.32x. The component showing the largest constraint on ROE is asset turnover (0.285), reflecting a sizable asset base relative to sales; financial leverage is intentionally conservative. Versus last year, operating margin compressed by ~50 bps (current ~19.9% vs prior ~20.4% estimated), while net margin expanded by ~80 bps (14.4% vs ~13.6%), aided by steady non-operating income and tax rate dynamics. The business driver of the operating margin dip appears to be mild negative operating leverage as revenue declined 1.3% YoY and operating income fell 3.8% YoY; SG&A details are unreported, but the gap implies fixed-cost absorption pressure. This change looks cyclical and potentially reversible with volume recovery rather than structural deterioration. Sustainability: gross margin at 40.4% and EBITDA margin at 25.7% remain healthy, suggesting product mix and pricing are holding; operating margin should stabilize if volumes improve and cost discipline continues. Watch for SG&A growth exceeding revenue growth in subsequent quarters; the current spread (OI down more than sales) warrants monitoring but is not alarming.

Growth Assessment

Top line declined 1.3% YoY to 281.61, indicating a modest slowdown. Operating income decreased 3.8% YoY to 56.05, reflecting slight negative operating leverage. Ordinary income increased 0.4% and net income rose 4.1%, demonstrating resilience below the operating line via stable non-operating contributions and manageable tax rate (effective tax 29.9%). Non-operating income of 2.81 (notably 1.06 in dividends) and low interest expense (0.73) provided incremental support. EBITDA of 72.34 implies steady underlying earnings capacity despite softer revenue. Outlook: with ROIC at 7.1% (in line with typical target ranges), continued disciplined capital allocation could sustain value creation; however, sustaining profit growth likely requires stabilization in end-market demand and vigilance on fixed-cost absorption. Absent segment/backlog data, revenue sustainability cannot be fully assessed; we would track order intake, book-to-bill, and pricing mix for momentum signals.

Financial Health

Liquidity is exceptionally strong: current ratio 479% and quick ratio 460%, with cash and deposits at 213.04 against current liabilities of 101.95. There is no liquidity warning (well above 1.0). Working capital is 386.77, and accounts receivable (126.25) far exceed accounts payable (10.72), indicating a net investment in working capital but no near-term strain. Solvency is conservative: total liabilities 239.96 vs equity 749.79 (equity ratio ~75.8% by calculation), and D/E at 0.32x. Interest-bearing debt detail is partially unreported, but disclosed short-term loans (7.50) and long-term loans (6.25) are very small. Interest coverage at 76.8x signals negligible debt service risk. Maturity mismatch risk is low given current assets (488.72) well in excess of current liabilities. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF/Net Income is 1.65x, indicating strong cash conversion and no immediate earnings quality concerns. Operating CF of 66.91 comfortably covers interest expense (0.73) and suggests capacity to fund ordinary capex, although investing CF and capex are unreported. Free cash flow cannot be precisely determined; as a proxy, if maintenance capex roughly approximates D&A (16.29), implied pre-dividend FCF would still be positive, but this is an assumption. Financing CF of −39.39 includes share repurchases of −20.00; dividends paid are unreported, so total shareholder return cash outflows are incomplete. Working capital behavior cannot be decomposed due to lack of subcomponents, but the strong OCF suggests no aggressive working capital manipulation this quarter.

Dividend Sustainability

The calculated payout ratio is 77.3%, above the typical <60% comfort threshold, implying limited buffer if earnings soften. With OCF exceeding net income (1.65x), cash coverage looks decent, but without capex and dividend cash data, FCF coverage cannot be verified. Low leverage and a large cash position provide flexibility to sustain dividends near current levels; however, any acceleration in payouts or buybacks would ideally be supported by stable or growing FCF. Policy outlook: given conservative balance sheet management and ongoing buybacks (20.00 this period), shareholder returns appear a priority, but prudence suggests maintaining payout near current levels until revenue momentum and FCF visibility improve.

Risk Assessment

Business Risks:

• Demand softness: −1.3% YoY revenue decline suggests near-term end-market weakness.
• Operating leverage risk: OI fell faster than sales (−3.8% vs −1.3%), indicating sensitivity to volume.
• Cost inflation and wage pressure could further compress operating margins if pricing power wanes.
• Product mix/pricing risk impacting gross margin (40.4%) if competitive intensity rises.

Financial Risks:

• Dividend coverage risk with a high payout ratio (77.3%) if earnings or OCF weaken.
• Limited visibility on capex and investing CF may mask higher cash needs.
• Potential FX exposure (not disclosed) could affect margins and non-operating items.

Key Concerns:

• Slight operating margin compression (~50 bps) despite strong gross/EBITDA margins.
• Data gaps: unreported investing CF, capex, dividends paid, and SG&A breakdown constrain FCF and cost-structure analysis.
• Low asset turnover (0.285) caps ROE at 5.4% despite healthy margins.

Investment Implications

Key Takeaways:

• Resilient bottom line: net income +4.1% YoY despite modest revenue decline.
• Healthy profitability: gross margin 40.4%, EBITDA margin 25.7%, operating margin ~19.9%.
• Strong cash generation: OCF/NI 1.65x and ample liquidity (cash 213.04).
• Conservative balance sheet: equity ratio ~75.8% and D/E 0.32x; interest coverage 76.8x.
• ROIC 7.1% aligns with target range, but ROE is modest at 5.4% due to low leverage and low asset turnover.
• Payout ratio at 77.3% implies limited headroom for higher dividends without stronger FCF.

Metrics to Watch:

• Order intake/backlog and book-to-bill for demand visibility.
• Operating margin trajectory and SG&A growth vs revenue.
• Gross margin mix and pricing power.
• OCF vs NI and working capital turns (AR/AP days, inventory days).
• Capex and investing CF to assess true FCF.
• ROIC progression and capital allocation (buybacks/dividends).

Relative Positioning: Within industrial peers, Pillar demonstrates above-average balance sheet strength and solid cash conversion, with competitive operating margins but modest ROE constrained by low asset turnover and conservative leverage.

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