PHC Holdings Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥173.38B
• Operating Income: ¥10.38B
• Net Income: ¥-692M
• EPS: ¥-4.42

Income Statement

Balance Sheet

Cash Flow Statement

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

PHC Holdings reported FY2026 Q2 consolidated results under IFRS with essentially flat top-line and improved operating profitability but a bottom-line net loss driven by heavy non-operating and tax burdens. Revenue was 1,733.75 (100M JPY), down 0.3% YoY, indicating stable demand amid a mixed operating environment. Gross profit of 812.27 implies a gross margin of 46.9%, reflecting solid product mix and cost discipline. SG&A was 720.71, and operating income rose 12.7% YoY to 103.78, lifting the operating margin to about 6.0% despite marginal revenue decline, suggesting operating leverage and cost control. However, profit before tax dropped to 9.41, implying sizable non-operating charges (interest, valuation effects, and equity-method loss), which overwhelmed operating gains. Net income was a small loss at -5.59, worsened by an unusually high effective tax rate of 360.1%, likely reflecting non-cash tax effects, jurisdictional mix, or valuation allowances. Total comprehensive income was positive at 72.36, likely aided by favorable FX translation or OCI gains, softening the headline loss. Cash generation was strong: operating cash flow came in at 137.67, and with investing outflows of 49.83, free cash flow reached 87.84, indicating earnings quality above headline net profit. The balance sheet remains leveraged: total liabilities of 3,913.10 versus equity of 1,460.41 yield a debt-to-equity of 2.68x, and the equity ratio stands at 27.9%. Debt composition shows 342.78 short-term loans and 2,209.82 long-term loans, highlighting refinancing and interest-rate sensitivity. Asset turnover is modest at 0.330, consistent with a diversified healthcare/diagnostics profile with meaningful intangible and fixed asset bases. DuPont analysis translates to a calculated ROE of -0.4%, driven by a slim negative net margin, low-to-moderate asset turnover, and relatively high financial leverage. Liquidity ratios (current/quick) are unreported, but cash and equivalents are 395.92, and inventories are 516.94, so near-term liquidity depends on actual payables and receivables that were not disclosed. EBITDA was 246.88 (14.2% margin), providing a more normalized view of operating capacity before non-cash charges and financing. While dividend details are unreported, the calculated payout ratio is not meaningful due to the net loss; FCF coverage is shown as 1.65x, suggesting some capacity but constrained by leverage. Overall, the quarter shows improved core operations overshadowed by financing and tax headwinds; deleveraging and normalization of the non-operating line are key to unlocking ROE, with stable revenue and cash generation providing a foundation. Data limitations exist due to several unreported XBRL items; the analysis focuses on disclosed non-zero items.

Profitability Analysis

ROE_decomposition: Net profit margin: -0.3%, Asset turnover: 0.330x, Financial leverage: 3.60x; Calculated ROE: -0.4%. The negative ROE is mainly due to a small net loss despite positive operating income, while leverage amplifies the impact of the negative margin. margin_quality: Gross margin at 46.9% is healthy for the portfolio. Operating margin improved to about 6.0% (103.78 / 1,733.75), up YoY given operating income growth amid flat revenue. EBITDA margin of 14.2% indicates meaningful non-cash D&A (143.10), implying a capital-intensive and intangible-rich base (consistent with IFRS). The drop from operating income to profit before tax (from 103.78 to 9.41) signals heavy non-operating drag (interest, equity-method loss of -1.62, and other items). operating_leverage: Revenue declined 0.3% YoY while operating income rose 12.7%, showing positive operating leverage via SG&A control and mix. However, leverage benefits did not translate to bottom-line due to financing and tax effects.

Growth Assessment

revenue_sustainability: Flat revenue (-0.3% YoY) suggests stable end-market demand in diagnostics and life sciences, with potential FX and pricing/mix offsets. No segment detail was provided, so sustainability by business line cannot be assessed. profit_quality: Core profitability improved at the operating level; EBITDA of 246.88 and OCF of 137.67 support underlying earnings quality. The net loss stems from non-operating and tax effects rather than core operations. outlook: If operating discipline continues and non-operating headwinds (interest costs, FX/valuation swings) normalize, profitability can recover toward positive ROE. Revenue growth will likely hinge on product launches, geographic mix, and healthcare capital spending; deleveraging would be a catalyst for EPS normalization.

Financial Health

liquidity: Cash and equivalents are 395.92. Current assets are 1,727.90, but current liabilities were not disclosed, so current and quick ratios are N/A. Inventories total 516.94; accounts payable of 656.65 exceed inventories, implying supplier financing. Near-term liquidity assessment is constrained by missing receivables and cash detail. solvency: Total liabilities 3,913.10 vs equity 1,460.41 implies equity ratio 27.9% and debt-to-equity of 2.68x. Loans include 342.78 short-term and 2,209.82 long-term; interest-bearing debt total is unreported, but the large PBT-OP gap indicates a high interest burden. Asset turnover 0.330 suggests a balance-sheet-heavy structure. capital_structure: Leverage is elevated, with meaningful long-term loans. Financial flexibility depends on OCF durability and access to refinancing markets; positive comprehensive income supports equity, but persistent non-operating drag could pressure covenants if applicable.

Cash Flow Quality

earnings_quality: OCF of 137.67 versus net income of -5.59 yields an OCF/Net Income ratio of -24.63x, indicating cash generation far exceeds accounting profit due to D&A (143.10) and non-operating/tax items. EBITDA of 246.88 further corroborates cash-generative operations. FCF_analysis: Investing CF was -49.83, resulting in FCF of 87.84. Capex specifics were unreported; thus, investing outflows may include both capex and M&A/intangibles. FCF is sufficient to partially deleverage or cover prospective dividends, but interest and refinancing demands remain material. working_capital: Inventories of 516.94 and payables of 656.65 suggest supplier credit support. Receivables and other current items are unreported, so we cannot compute days working capital; nonetheless, positive OCF implies working-capital discipline in the period.

Dividend Sustainability

payout_ratio_assessment: EPS was -4.42 JPY and the calculated payout ratio is -952.1%, which is not meaningful due to a net loss. Dividend amounts and DPS are unreported. FCF_coverage: FCF coverage is indicated at 1.65x, suggesting theoretical capacity from cash flow to fund dividends; however, high leverage and interest needs imply prioritization of debt service and deleveraging. policy_outlook: Given leverage and net loss, a conservative payout stance would be consistent until non-operating charges normalize and ROE turns sustainably positive. No explicit guidance is available in the provided data.

Risk Assessment

Business Risks:

• Healthcare market cyclicality in capital equipment and diagnostics demand
• Pricing and reimbursement pressures across geographies
• FX volatility affecting reported results and OCI
• Product mix and new product launch execution
• Supply chain and component availability for instruments and consumables

Financial Risks:

• High leverage with 2.68x liabilities-to-equity and sizable loans (ST 342.78, LT 2,209.82)
• Interest rate and refinancing risk given large non-operating burden
• Tax rate volatility (effective rate 360.1%) impacting net income unpredictably
• Potential impairment risk on intangibles/goodwill (balances unreported)

Key Concerns:

• Large gap between operating income (103.78) and profit before tax (9.41)
• Sustainability of OCF amid leverage and potential interest cost increases
• Visibility on current liabilities and cash balances by region/legal entity due to unreported items

Investment Implications

Key Takeaways:

• Core operations improved: operating income +12.7% YoY on -0.3% revenue, operating margin ~6.0%
• Non-operating and tax items erased operating gains, yielding a small net loss
• Cash generation strong: OCF 137.67 and FCF 87.84 support balance sheet needs
• Leverage remains high (equity ratio 27.9%, D/E 2.68x), with significant loan balances
• Positive total comprehensive income suggests FX/OCI support to equity in the quarter

Metrics to Watch:

• Non-operating expense run-rate (OP to PBT bridge) and net interest cost
• Net debt to EBITDA and interest coverage (once interest disclosed)
• Working capital metrics (DSO/DIO/DPO) when receivables and current liabilities are available
• Effective tax rate normalization and any valuation allowance changes
• Operating margin trajectory and SG&A ratio
• Refinancing schedule and cost of debt

Relative Positioning: Within Japan-listed healthcare/diagnostics peers, PHC exhibits lower bottom-line profitability due to financing/tax drag and higher leverage, but its operating margin and EBITDA profile indicate a solid core franchise; deleveraging is key to closing the ROE gap versus peers.

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