UMC Electronics Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥56.19B
• Operating Income: ¥766M
• Net Income: ¥-456M
• EPS: ¥13.97

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

UMC Electronics (TSE:6615) reported FY2026 Q2 (cumulative) consolidated results under JGAAP with revenue of ¥56.2bn, declining 13.9% YoY, reflecting softer demand and/or portfolio rationalization in EMS end-markets. Despite the top-line contraction, operating income held at ¥0.77bn, essentially flat YoY (+0.1%), indicating some cost discipline and operating leverage control. Gross profit was ¥3.40bn, translating to a 6.1% gross margin; we base margin analysis on the disclosed gross profit figure due to an apparent mismatch with the reported cost of sales line. EBITDA was ¥2.43bn, implying a 4.3% EBITDA margin, and depreciation/amortization totaled ¥1.66bn, consistent with a capital-intensive EMS manufacturing footprint. Ordinary income of ¥0.64bn fell below operating income, reflecting a sizable interest burden (interest expense ¥0.34bn) and indicating meaningful financial leverage in the capital structure. Net income was ¥0.42bn (EPS ¥13.97), effectively flat YoY, with a reported effective tax rate of 0.0% despite income tax expense of ¥0.15bn, suggesting classification or timing effects; we treat the effective tax rate metric as not indicative this period. DuPont decomposition shows a slim net margin of 0.74%, asset turnover of 0.773x, and financial leverage of 4.58x, delivering a calculated and reported ROE of 2.61%. The ROE profile is being supported more by leverage than by profitability, a typical pattern in EMS operators under margin pressure. Balance sheet scale stands at ¥72.7bn in total assets, with total equity of ¥15.9bn (implied equity ratio c. 21.8% using available figures, despite a reported 0.0% that appears to be an undisclosed metric). Liabilities are ¥58.3bn, of which current liabilities are ¥46.0bn versus current assets of ¥45.7bn, yielding a current ratio of 99.3% and a slightly negative working capital of about ¥0.3bn. Operating cash flow was very strong at ¥7.75bn, far exceeding net income (OCF/NI 18.7x), likely driven by working capital release; however, investing cash flow and cash balances were not disclosed in the dataset. Financing cash flow was an outflow of ¥3.00bn, implying net debt reduction or lease/interest-bearing repayments, which is constructive. Dividend per share is reported at ¥0.00 with a 0% payout ratio, consistent with balance-sheet repair and cash preservation in a lower-margin, leveraged context. Interest coverage of 2.2x is adequate but not robust, underscoring sensitivity to cyclical downturns or further margin compression. Overall, the company maintained operating profitability in the face of double-digit revenue decline, generated substantial operating cash, and appears to be deleveraging, but continues to operate with thin margins and modest ROE supported by leverage. Data limitations include undisclosed inventory, cash and equivalents, investing cash flows, and share count; our analysis focuses on the disclosed non-zero items and internally consistent derived metrics.

Profitability Analysis

ROE_decomposition: ROE 2.61% = Net margin 0.74% × Asset turnover 0.773× × Financial leverage 4.58×. Profitability is margin-constrained; leverage provides most of the ROE support while asset efficiency is moderate for EMS. margin_quality: Gross margin 6.1% on ¥56.2bn revenue signals tight spread typical of EMS, with cost control offsetting volume decline. Operating margin ~1.4% (¥0.77bn/¥56.2bn) is thin but stable YoY. Ordinary margin ~1.1% reflects a material interest drag (¥344m). Net margin 0.74% remains low, indicating limited pricing power and exposure to mix and utilization. operating_leverage: Operating income was flat YoY despite a 13.9% revenue drop, implying positive cost flexibility and mix benefits. EBITDA margin of 4.3% vs operating margin of ~1.4% highlights a significant D&A load; profitability is sensitive to capacity utilization. Interest coverage at 2.2x indicates limited room for incremental financial leverage without improving margins.

Growth Assessment

revenue_sustainability: Revenue declined 13.9% YoY to ¥56.2bn, suggesting end-market softness (e.g., industrial/auto electronics) or customer destocking. Sustainability depends on order backlog and utilization; absent disclosed backlog, we assume cautious near-term growth. profit_quality: Operating income stability (+0.1% YoY) despite sales contraction suggests improved mix, procurement savings, or overhead reductions. However, net profitability remains constrained by financing costs and thin gross margin. outlook: Without disclosed segment/backlog, base-case implies gradual normalization contingent on demand recovery and continued cost control. Recovery in utilization would provide operating leverage, but interest burden caps net profit improvement unless deleveraging continues.

Financial Health

liquidity: Current assets ¥45.74bn vs current liabilities ¥46.04bn yields a 99.3% current ratio and slightly negative working capital (~¥0.30bn), indicating tight short-term liquidity management typical for EMS. Quick ratio is reported at 99.3%; inventory data are undisclosed. solvency: Total liabilities ¥58.31bn vs equity ¥15.88bn implies liabilities/equity of 3.67x and an implied equity ratio of ~21.8% (based on available figures). Interest coverage at 2.2x is acceptable but leaves limited cushion under stress. capital_structure: Financial leverage (assets/equity) of 4.58× underpins ROE but heightens sensitivity to margin downturns. Financing CF (-¥2.99bn) suggests repayment activity, supportive of gradual deleveraging if sustained.

Cash Flow Quality

earnings_quality: OCF of ¥7.75bn vs net income of ¥0.42bn (OCF/NI 18.7×) indicates strong cash conversion, driven likely by working capital release and disciplined receivables/inventory management; sustainability is uncertain without inventory/cash detail. FCF_analysis: Investing CF is undisclosed; reported FCF is 0 (undisclosed), so we cannot compute economic FCF. If maintenance capex is similar to D&A (¥1.66bn), implied pre-financing cash generation could still be solid in this period, but this is an assumption. working_capital: Negative reported working capital (¥-0.30bn) indicates reliance on supplier financing, consistent with EMS models. The strong OCF suggests favorable swings in receivables/payables; reversals could normalize cash in subsequent periods.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0.00 and payout ratio 0.0%, aligning with the low net margin (0.74%) and leveraged balance sheet. Conservatism is appropriate until profitability and coverage improve. FCF_coverage: FCF coverage cannot be assessed due to undisclosed investing CF and cash. On a proxy basis, OCF of ¥7.75bn comfortably covers zero dividends but may be influenced by temporary working capital inflows. policy_outlook: With ROE at 2.61% and interest coverage at 2.2x, management is likely to prioritize deleveraging and reinvestment over distributions until margins and balance-sheet metrics improve.

Risk Assessment

Business Risks:

• End-market cyclicality in EMS customers (auto/industrial/electronics) driving volume volatility
• Thin gross and operating margins (6.1% and ~1.4%) heightening sensitivity to utilization and mix
• Customer concentration risks typical of EMS (not disclosed but structurally relevant)
• Supply chain volatility affecting component costs and delivery schedules
• FX exposure on imported components and export sales, impacting margins

Financial Risks:

• High leverage: liabilities/equity 3.67x and financial leverage 4.58x
• Interest burden (¥344m) with modest 2.2x interest coverage
• Tight liquidity: current ratio 99.3% and negative working capital (~¥0.30bn)
• Potential reversal of working capital tailwinds that boosted OCF
• Undisclosed cash, inventory, and investing CF reducing visibility

Key Concerns:

• Sustained revenue decline (-13.9% YoY) with limited pricing power
• Dependence on leverage to generate a modest ROE (2.61%)
• Data gaps (cash, inventory, investing CF) constrain assessment of resilience

Investment Implications

Key Takeaways:

• Top line down 13.9% YoY to ¥56.2bn, but operating income stable at ¥0.77bn
• Margins remain thin: gross 6.1%, EBITDA 4.3%, operating ~1.4%, net 0.74%
• Leverage elevates risk: liabilities/equity 3.67x; interest coverage 2.2x
• OCF strong at ¥7.75bn (OCF/NI 18.7×), likely from working capital release
• Balance sheet implied equity ratio ~21.8%, suggesting moderate solvency but limited buffer

Metrics to Watch:

• Order trends and backlog/utilization to gauge revenue recovery
• Gross margin trajectory and component cost pass-through
• Interest-bearing debt levels and interest coverage improvement
• Working capital turns (receivables, payables, inventory) for OCF sustainability
• Capex vs D&A to assess maintenance needs and true FCF

Relative Positioning: Within Japan-listed EMS peers, profitability is at the low end on net margin and ROE, with leverage and tight liquidity elevating risk; cash generation this period is a positive outlier but may reflect temporary working capital movements.

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