USHIO INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥81.42B
• Operating Income: ¥4.01B
• Net Income: ¥2.30B
• EPS: ¥2.77

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

Ushio Inc. (TSE:6925) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥81.4bn, down 4.9% YoY, reflecting softer top-line conditions in its core markets. Gross profit was ¥31.0bn, yielding a solid gross margin of 38.0%, indicating relatively resilient product pricing and mix despite lower volume. Operating income declined 6.0% YoY to ¥4.0bn, with an operating margin of 4.9%, showing modest negative operating leverage as costs did not fully flex with revenue. Ordinary income reached ¥5.0bn, exceeding operating income and implying positive non-operating contributions (e.g., FX gains, dividends, or securities-related income). Net income, however, dropped sharply to ¥0.24bn (-89.6% YoY), compressing the net margin to 0.29%, which likely reflects extraordinary losses and/or non-recurring items under JGAAP (and potentially higher minority interests), rather than deterioration in core operations. Depreciation and amortization totaled ¥3.66bn, and EBITDA was ¥7.68bn (9.4% margin), supporting the view that cash earnings remain meaningfully above accounting profits. The company generated operating cash flow of ¥7.27bn, implying very strong cash realization versus net income (OCF/NI ~30x), consistent with non-cash/one-off charges depressing net profit. Liquidity remains robust with a current ratio of 363% and quick ratio of 304%, underpinned by ¥186.6bn in current assets and only ¥51.4bn in current liabilities. The balance sheet is conservative: total assets are ¥301.5bn against total equity of ¥188.7bn and total liabilities of ¥96.8bn, indicating low leverage (implied equity ratio ~62.6%) and a debt-to-equity ratio of 0.51x. Interest coverage is ample at 25.7x on an EBIT basis, pointing to minimal solvency risk. Reported investing cash flow and cash balances were not disclosed in the provided data, limiting free cash flow analysis and end-period liquidity granularity. Dividend per share and payout ratio were not disclosed here; therefore, distribution capacity cannot be quantified from the dataset, though the balance sheet could support flexibility. Overall, fundamentals suggest stable core profitability and cash generation with a transient hit below the operating line weighing on statutory net income. Key watch items include normalization of extraordinary items, progress in inventory management, and order momentum in end markets tied to semiconductors, imaging, and industrial applications. The outlook hinges on demand recovery in capital goods cycles and the company’s ability to sustain gross margins while tightening operating expenses.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 0.29% (¥0.24bn / ¥81.43bn), depressed by non-operating/extraordinary factors
• asset_turnover: 0.270x (provided), indicating moderate capital intensity
• financial_leverage: 1.60x (Assets/Equity ≈ ¥301.5bn/¥188.7bn)
• calculated_ROE: 0.13% (matches reported), primarily constrained by the very low net margin rather than leverage or turnover margin_quality:
• gross_margin: 38.0% (¥31.0bn/¥81.4bn), resilient despite revenue decline
• operating_margin: 4.9% (¥4.01bn/¥81.4bn), slightly down with modest negative operating leverage
• ordinary_margin: 6.2% (¥5.03bn/¥81.4bn), boosted by non-operating gains
• net_margin: 0.29%, heavily affected by below-the-line/extraordinary items under JGAAP operating_leverage: Revenue fell 4.9% YoY while operating income fell 6.0% YoY; this indicates mild negative operating leverage as fixed costs did not fully adjust to lower sales. EBITDA margin of 9.4% vs operating margin of 4.9% suggests a meaningful non-cash cost base (D&A) and scope to protect cash earnings even when revenues soften.

Growth Assessment

revenue_sustainability: Top line contracted 4.9% YoY to ¥81.4bn, signaling cyclical softness in key end markets (e.g., semiconductor/industrial exposure) and potential product/mix headwinds. Gross margin stability mitigates pricing concerns, hinting that the decline is more volume-driven than price-driven. profit_quality: Ordinary income exceeding operating income implies supportive non-operating items, but net income collapsed due to extraordinary/one-off impacts. Cash earnings (EBITDA ¥7.68bn) and OCF (¥7.27bn) outpace accounting profit, indicating underlying operations are stronger than the bottom line suggests. outlook: Recovery depends on demand normalization in capex-linked segments and continued gross margin discipline. If extraordinary losses subside, net margin should revert closer to operating/ordinary levels. Monitoring order trends, backlog, and utilization in semiconductor/imaging applications will be key for H2 momentum.

Financial Health

liquidity:

• current_ratio: 363% (¥186.6bn/¥51.4bn), very strong
• quick_ratio: 304% ((CA−Inventories)/CL = (¥186.6bn−¥30.4bn)/¥51.4bn), ample coverage
• working_capital: ¥135.2bn, providing substantial buffer for operations and investment needs solvency:
• total_assets: ¥301.5bn
• total_liabilities: ¥96.8bn
• total_equity: ¥188.7bn
• equity_ratio_comment: Reported equity ratio was not disclosed in the dataset; implied equity ratio is ~62.6% (Equity/Assets), indicating a conservative balance sheet.
• debt_to_equity: 0.51x (provided metric; interest-bearing debt split not disclosed)
• interest_coverage: 25.7x (EBIT/interest), very comfortable capital_structure: Low leverage with high equity cushion. Limited refinancing risk given strong liquidity and coverage. Capacity remains for selective strategic investments without stressing the balance sheet.

Cash Flow Quality

earnings_quality: OCF of ¥7.27bn vs net income of ¥0.24bn yields an OCF/NI ratio of ~30x, pointing to significant non-cash or non-recurring charges depressing net income. EBITDA of ¥7.68bn supports robust cash earnings. free_cash_flow_analysis: Investing cash flow was not disclosed in the provided data, preventing precise FCF calculation. Based on OCF alone, pre-investment cash generation is solid; actual FCF will depend on capex and investment outlays in the period. working_capital: Inventories at ¥30.4bn (~16% of current assets) appear manageable. Strong quick ratio implies limited near-term liquidity drag, but inventory turnover and receivable collections should be monitored to sustain OCF conversion.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio were not disclosed here. With net income temporarily depressed and OCF strong, capacity to fund dividends would depend more on cash flows and balance sheet than on current-period earnings. FCF_coverage: Not assessable from this dataset due to undisclosed investing cash flow; therefore, FCF coverage metrics cannot be computed. policy_outlook: Given the conservative balance sheet and healthy liquidity, the company retains flexibility on shareholder returns. However, near-term payout decisions may consider the transient nature of below-the-line losses and visibility on H2 cash generation.

Risk Assessment

Business Risks:

• Cyclical exposure to semiconductor, display, and industrial capex cycles affecting equipment and lamp demand
• Technology transition risk (e.g., shift from legacy lamps to LEDs/lasers or alternative light sources)
• Customer concentration and order volatility in capital equipment chains
• Pricing pressure if competitors discount into weaker demand
• Supply chain and component availability impacting lead times and costs
• Regulatory and safety standards for UV/visible light products across regions
• FX volatility (JPY vs USD/EUR) affecting export competitiveness and translation

Financial Risks:

• Potential for further extraordinary losses or impairments under JGAAP impacting net income
• Inventory obsolescence risk in fast-evolving product lines
• Tax rate volatility and timing differences influencing effective tax and bottom line
• Working capital swings that could dilute OCF if demand softens further
• Market value fluctuations of securities holdings impacting non-operating income

Key Concerns:

• Sharp drop in net income to ¥0.24bn despite stable operating performance
• Dependence on non-operating items to lift ordinary income above operating income
• Lack of disclosed investing cash flow and cash balance limits visibility on FCF and liquidity deployment

Investment Implications

Key Takeaways:

• Core operations appear resilient with 38.0% gross margin and 4.9% operating margin despite a 4.9% YoY revenue decline
• Net income weakness is likely driven by extraordinary/non-recurring items rather than deteriorating cash earnings
• Strong liquidity (current ratio 363%, quick ratio 304%) and conservative leverage (implied equity ratio ~62.6%) reduce balance sheet risk
• OCF of ¥7.27bn and EBITDA of ¥7.68bn demonstrate solid cash generation versus accounting profit
• Visibility on FCF and capital allocation is limited due to undisclosed investing cash flows

Metrics to Watch:

• Order intake, backlog, and book-to-bill in semiconductor/imaging-related segments
• Extraordinary items and reconciliation from ordinary income to net income
• Gross margin trajectory and pricing/mix developments
• Inventory turnover days and receivables collection to sustain OCF
• FX rates (USD/JPY, EUR/JPY) and non-operating income components
• Capex and investing cash flows to assess true FCF and return capacity

Relative Positioning: Within TSE-listed electronics/industrial peers, Ushio shows stronger-than-average balance sheet conservatism and liquidity but currently weaker reported bottom-line profitability due to below-the-line impacts; operating-level profitability and cash generation are comparatively steadier.

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
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