The Furukawa Battery Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥35.60B
• Operating Income: ¥407M
• Net Income: ¥-780M
• EPS: ¥7.39

Income Statement

Balance Sheet

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

For FY2026 Q2, Furukawa Battery (69370) reported revenue of ¥35.60bn, down 4.8% YoY, indicating soft top-line momentum. Gross profit was ¥7.02bn, translating to a gross margin of 19.7%, which suggests limited pricing power and/or elevated input costs. Operating income fell sharply to ¥0.41bn (-67.9% YoY), compressing the operating margin to 1.1% and highlighting pronounced operating leverage and cost pressure. Ordinary income of ¥0.49bn exceeded operating income, implying some support from non-operating items (e.g., financial income or other non-core gains) despite ¥0.11bn in interest expense. Net income rose 80.9% YoY to ¥0.24bn, an unusual outcome given the steep decline in operating profit, and likely driven by non-operating and/or prior-period effects; sustainability appears uncertain. DuPont metrics point to modest efficiency and low profitability: net margin of 0.68%, asset turnover of 0.546x, and financial leverage of 1.60x yield an ROE of 0.59%. ROA is roughly 0.37%, underscoring subdued returns on assets at mid-year. Liquidity is a clear strength with a current ratio of 189% and quick ratio of 174%, supported by substantial working capital of ¥18.45bn. The balance sheet appears conservatively capitalized: liabilities of ¥27.51bn against equity of ¥40.67bn imply a debt-to-equity ratio of 0.68x and an equity ratio near the low 60% range based on reported totals. Interest coverage at 3.6x is adequate but has tightened due to the drop in operating income. Cash flow data were not disclosed this period, limiting assessment of earnings quality and free cash flow. Depreciation and EBITDA were also not disclosed, constraining a deeper view of non-cash cost structure and underlying cash profitability. The reported effective tax rate metric shows 0.0%, but income tax expense of ¥0.21bn versus ordinary income suggests a materially positive tax burden; therefore the reported 0% is likely a placeholder. The company did not disclose dividends (DPS 0) for the period, which, paired with weak operating profitability, indicates a conservative capital allocation posture. Overall, the quarter reflects resilient balance sheet strength but pressured operating performance and thin margins, with net income supported by non-operating items and/or one-offs—calling for caution on earnings sustainability. Data gaps, especially on cash flows and depreciation, necessitate a conservative interpretation of profitability and dividend capacity.

Profitability Analysis

DuPont decomposition: ROE of 0.59% = net margin (0.68%) × asset turnover (0.546x) × financial leverage (1.60x). This indicates that the low ROE is primarily due to thin net margins rather than efficiency or leverage. Gross margin was 19.7%, but the operating margin dropped to 1.1% (¥407m/¥35,599m), pointing to elevated SG&A and/or cost inflation not fully passed through to prices. Ordinary margin was 1.37% and exceeded operating margin, implying non-operating support. Interest coverage is 3.6x (¥407m/¥113m), adequate but deteriorated versus a year ago given the 67.9% YoY fall in operating income. The sharp OI decline against a modest 4.8% revenue drop indicates high operating leverage; small revenue changes are translating into outsized profit swings. With depreciation not disclosed, EBITDA cannot be assessed; absent that, we treat operating income as a conservative proxy for core profitability. ROA (≈0.37%) is subdued, reinforcing that returns are below typical cost of capital thresholds for industrial manufacturers. Overall margin quality is weak this half and reliant on non-operating items to bridge from operating to net income.

Growth Assessment

Revenue declined 4.8% YoY to ¥35.60bn, suggesting demand softness or pricing pressure in key end markets. Operating income fell 67.9% YoY, which is significantly worse than the revenue contraction, underscoring unfavorable mix and cost absorption challenges. Net income increased 80.9% YoY to ¥242m, which is incongruent with the operating trend and likely reflects non-operating factors and/or prior-period comparatives with losses or one-time items; durability of this growth is questionable. Asset turnover of 0.546x is modest and consistent with slower top-line velocity relative to the asset base. Without order backlog or segment disclosure, visibility into second-half recovery is limited. If cost pressures (e.g., raw materials, logistics, energy) ease or pricing improves, operating leverage could support a rebound, but current margins suggest limited buffer. Absent disclosed capex and D&A, we cannot gauge reinvestment intensity or capacity-driven growth. Outlook hinges on H2 seasonality, price adjustments, and cost normalization; based on the half, momentum appears muted and earnings quality mixed.

Financial Health

Liquidity is strong: current ratio 189%, quick ratio 174%, and working capital of ¥18.45bn provide ample near-term coverage. Solvency appears solid: total liabilities of ¥27.51bn vs equity of ¥40.67bn yield a debt-to-equity ratio of 0.68x. Based on total equity and total assets, the implied equity ratio is approximately 62% (vs the reported placeholder of 0.0%), indicating a conservative capital structure. Interest coverage at 3.6x is adequate but leaves less headroom if operating profit weakens further. Cash and equivalents were not disclosed; therefore, net debt cannot be determined. Inventory of ¥3.14bn is modest relative to current assets and quick ratio implies low inventory dependence for liquidity. Overall, the balance sheet can support operations through a weaker margin phase, but sustained profit compression would pressure coverage metrics.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed for the period, so we cannot triangulate earnings with cash conversion. The OCF/Net income ratio is shown as 0.00 only due to non-disclosure and should not be interpreted as zero cash generation. Free cash flow is similarly undisclosed. With depreciation and capex absent, we cannot assess non-cash charges or capital intensity. Working capital appears ample (¥18.45bn), and the quick ratio suggests manageable inventory risk; however, without cash flow detail, we cannot judge whether receivables or inventories absorbed or released cash. Given operating income weakness and reliance on non-operating items, near-term earnings quality risk is elevated pending evidence of cash conversion in H2.

Dividend Sustainability

DPS is reported as ¥0.00 for the period, and the payout ratio is 0.0%, indicating either no interim dividend or non-disclosure at this stage. With net income of ¥242m and insufficient cash flow disclosure, FCF coverage cannot be assessed. Given a conservative balance sheet but thin operating margins and tighter interest coverage, a cautious dividend stance is understandable. Sustainability of future dividends will depend on restoring operating margins and demonstrating positive OCF. Policy outlook remains uncertain in the absence of guidance; retention of earnings to strengthen resilience and fund potential capex appears prudent given current profitability.

Risk Assessment

Business Risks:

• Input cost inflation (e.g., metals, energy) compressing margins
• Pricing power limitations in batteries and industrial power markets
• Demand cyclicality in automotive/industrial end markets
• Product mix shifts toward lower-margin offerings
• Technological substitution risk (e.g., shift from lead-acid to alternative chemistries)
• Supply chain and logistics disruptions impacting cost and delivery
• Foreign exchange volatility impacting export competitiveness and material costs

Financial Risks:

• Operating leverage amplifying profit swings on small revenue changes
• Tightening interest coverage if operating income weakens further
• Uncertain cash generation due to undisclosed OCF and capex
• Potential working capital build weighing on cash in a downturn
• Tax burden variability affecting net income visibility

Key Concerns:

• Large YoY decline in operating income despite modest revenue contraction
• Net income growth driven by non-operating items and not clearly sustainable
• Lack of cash flow and depreciation disclosure impairs earnings quality assessment
• Thin operating margin (≈1.1%) leaves limited buffer for shocks

Investment Implications

Key Takeaways:

• Top line declined 4.8% YoY to ¥35.60bn; demand/pricing likely soft
• Operating margin compressed to 1.1%, with OI down 67.9% YoY
• Net margin at 0.68% and ROE at 0.59% indicate weak profitability
• Ordinary income exceeded OI, implying non-operating support
• Liquidity robust (current 189%, quick 174%), balance sheet conservative (D/E 0.68x)
• Interest coverage 3.6x is adequate but trending tighter
• Cash flow data absent; earnings quality and FCF cannot be verified
• Dividend undisclosed/zero; conservative stance aligns with weak margins

Metrics to Watch:

• Second-half operating margin trajectory and price-cost spread
• OCF and FCF disclosure in FY2026 to validate cash conversion
• Interest coverage and any changes in borrowing costs
• Inventory and receivables trends for working capital discipline
• Any guidance on capex and depreciation to assess capital intensity
• Non-operating gains/losses volatility affecting ordinary vs operating income

Relative Positioning: Within industrial battery and power solutions peers, the company exhibits stronger-than-average liquidity and a conservative balance sheet but currently weaker operating profitability and ROE, with earnings more reliant on non-operating items this half.

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