ROHM COMPANY LIMITED FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥244.23B
• Operating Income: ¥7.65B
• Net Income: ¥2.07B
• EPS: ¥26.73

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

ROHM Co., Ltd. (6963) delivered modest top-line growth in FY2026 Q2 with revenue of ¥244.2bn, up 5.3% YoY, but operating profit remained flat at ¥7.7bn, indicating weak operating leverage in the period. Gross profit reached ¥56.7bn, implying a gross margin of 23.2%, while the operating margin was a thin 3.1%, reflecting elevated SG&A/R&D and substantial depreciation drag. Ordinary income (¥13.4bn) notably exceeded operating income, suggesting meaningful non-operating gains (e.g., interest income, FX or other financial items) supporting the bottom line. Net income rose 398.9% YoY to ¥10.3bn, a jump likely driven by the rebound from a low base and the non-operating contributions rather than core operating improvement. The DuPont framework shows net margin of 4.22%, asset turnover of 0.170x, and financial leverage of 1.59x, yielding an ROE of 1.14%, which is subdued for a semiconductor company. ROA implied by NPM and ATO is around 0.72%, underscoring capital intensity and currently low efficiency. Cash generation was solid with operating cash flow (OCF) of ¥54.1bn, equating to 5.24x net income due to strong non-cash add-backs (notably ¥40.3bn depreciation) and likely working capital release. The balance sheet remains strong: total assets were ¥1,439.2bn and equity ¥904.4bn, implying an equity ratio of roughly 62.9% (despite the equity ratio field not being populated), and liabilities totaled ¥551.1bn (D/E by total liabilities of 0.61x). Liquidity appears robust with a current ratio of 2.56x and quick ratio of 2.36x, supported by ¥341.6bn in working capital and relatively modest inventories (¥43.1bn). Interest expense was only ¥0.38bn and interest coverage stood at 20.4x, indicating low financial risk. EBITDA of ¥48.0bn (19.6% margin) versus operating income of ¥7.7bn highlights heavy depreciation consistent with ongoing capacity investments. Free cash flow cannot be assessed due to the lack of disclosed investing cash flows this period, but OCF alone suggests ample internal funding capacity. Dividend data (DPS and payout) were not disclosed in the dataset; therefore, dividend sustainability cannot be directly evaluated, though current cash generation and a strong balance sheet point to capacity. Overall, the quarter shows healthy liquidity and balance sheet resilience, decent cash conversion, but lackluster core profitability and negative operating leverage dynamics. Outlook hinges on mix improvement (power semiconductors including Si/SiC), utilization recovery, and disciplined opex amid an industry demand normalization. Data gaps (e.g., investing CF, DPS, share counts) limit precision in FCF and per-share analyses; conclusions focus on disclosed non-zero items and computed ratios.

Profitability Analysis

ROE of 1.14% reflects a low net margin (4.22%), modest asset turnover (0.170x), and moderate financial leverage (1.59x). Operating margin is 3.13% (¥7.65bn/¥244.23bn), indicating that most of the gross margin (23.2%) is consumed by SG&A and high depreciation. EBITDA margin of 19.6% versus operating margin of 3.1% signals substantial non-cash depreciation (¥40.3bn), consistent with recent or ongoing capacity investments that depress near-term accounting profitability. Ordinary income of ¥13.42bn exceeds operating income by ¥5.77bn, implying supportive non-operating items (e.g., FX gains, interest income), which lifted net income. The effective tax burden computed from taxes (¥3.43bn) and ordinary income suggests roughly mid-20s percent on a pre-tax base; the 0.0% metric provided appears not populated. Operating leverage was negative this period: revenue rose 5.3% YoY but operating income was flat, meaning incremental gross profit did not translate to higher operating profit, likely due to mix, pricing, utilization, or higher opex. ROA implied by DuPont (NPM×ATO) is about 0.72%, which is low for the sector and tied to the current margin compression and slow asset turnover. Given the gap between EBITDA and EBIT, any recovery in utilization and pricing could flow through meaningfully to operating profit as depreciation is fixed in the near term. Interest coverage is strong at 20.4x (¥7.65bn EBIT/¥0.38bn interest), indicating minimal interest drag on profitability.

Growth Assessment

Revenue growth of 5.3% YoY to ¥244.2bn is modest and appears driven more by volume/mix than price, given limited flow-through to operating income. Operating income was flat YoY, signaling that near-term demand recovery has not yet translated into improved operating margins due to fixed-cost absorption, pricing pressure, or elevated R&D/SG&A to support strategic product areas. Net income surged 398.9% YoY to ¥10.3bn off a weak base, aided by non-operating gains; sustainability depends on the persistence of those items rather than on core operations alone. Ordinary income at ¥13.4bn versus operating income at ¥7.7bn suggests that FX tailwinds, interest income on cash, or other non-operating items played a meaningful role; these can be volatile. EBITDA of ¥48.0bn indicates healthy underlying cash earnings before depreciation, but the high depreciation burden reflects heavy investment and can depress reported profits until utilization improves. Asset turnover of 0.170x is low, implying that unlocking growth will require better utilization of a sizable asset base, particularly in power semiconductors (including SiC) and automotive/industrial end-markets. Near-term outlook depends on normalization of the semiconductor cycle, automotive demand stability, and execution in higher-value products that lift gross margins. If utilization and mix improve, operating leverage can turn positive due to a largely fixed depreciation base, but timing remains uncertain. Non-operating support is unlikely to be a reliable long-term driver; focus should be on reclaiming operating margin through pricing, mix, and cost control.

Financial Health

The balance sheet is strong with total assets of ¥1,439.2bn and equity of ¥904.4bn, implying an equity ratio of roughly 62.9%. Total liabilities are ¥551.1bn, yielding a total-liabilities-to-equity ratio of 0.61x; interest-bearing debt details are not provided, but interest expense is low (¥0.38bn), suggesting modest leverage. Liquidity is robust: current assets ¥561.2bn versus current liabilities ¥219.6bn results in a current ratio of 2.56x and quick ratio of 2.36x. Working capital stands at ¥341.6bn, and inventories of ¥43.1bn look contained relative to current assets (7.7%), which helps liquidity. Interest coverage at 20.4x indicates ample buffer against rate volatility or profit dips. The capital structure is conservative and provides flexibility to navigate the cycle and fund strategic investments. While the reported equity ratio field is unpopulated, the calculated equity-to-asset ratio underscores solvency strength.

Cash Flow Quality

Operating cash flow of ¥54.1bn is 5.24x net income (¥10.3bn), indicating strong cash conversion driven by sizable non-cash charges (¥40.3bn depreciation) and likely favorable working capital movements. EBITDA of ¥48.0bn is well above operating income, further explaining OCF resilience despite thin operating margins. Investing cash flows were not disclosed in the dataset (recorded as 0 per data note), so free cash flow cannot be reliably calculated; FCF is reported as 0 by placeholder, not as an economic outcome. Without capex data, we cannot assess reinvestment intensity or maintenance versus growth spend this period, though depreciation magnitude implies high ongoing investment needs. Working capital appears ample (¥341.6bn), and low inventories relative to current assets suggest limited inventory bloat, aiding cash conversion. Overall, earnings quality is acceptable given the strong OCF/NI ratio, but reliance on non-operating income for net profit and missing investing cash outflows temper conclusions on sustainable FCF.

Dividend Sustainability

Dividend information (DPS and payout ratio) is not disclosed in the dataset; the 0.00 figures should not be interpreted as actual zeros. As such, payout ratio and FCF coverage cannot be assessed for the period. From a capacity standpoint, the company generated ¥54.1bn in OCF and maintains a strong balance sheet (approx. 62.9% equity ratio and 2.56x current ratio), which would typically support dividends if policy permits. However, absent investing cash flows, true FCF and therefore dividend headroom cannot be determined. Given elevated depreciation and likely ongoing capex for power semiconductors, internal reinvestment needs may remain significant, influencing dividend policy. Outlook on dividends therefore remains indeterminate based on the provided data; monitoring official guidance, historical payout practices, and forthcoming capex disclosures is necessary.

Risk Assessment

Business Risks:

• Semiconductor cycle volatility affecting utilization, pricing, and lead times
• Automotive and industrial end-market exposure leading to demand cyclicality
• ASP and margin pressure amid competitive dynamics in power discretes and analog
• Execution risk in SiC and other next-generation power products (yield, scale-up, customer qualification)
• FX fluctuations (JPY volatility) impacting both non-operating income and cost competitiveness
• Supply chain and logistics disruptions affecting component availability and delivery
• Customer concentration risk in key verticals and potential inventory corrections downstream

Financial Risks:

• High depreciation and likely high capex needs could suppress near-term free cash flow
• Negative operating leverage if demand recovery lags or opex remains elevated
• Potential reversals in non-operating gains (e.g., FX) that supported ordinary/net income
• Working capital swings that can impact OCF in a downcycle
• Limited visibility on interest-bearing debt composition despite low interest expense

Key Concerns:

• Flat operating income despite 5.3% revenue growth indicates weak operating leverage
• Low ROE at 1.14% and ROA around 0.72% highlight subdued capital efficiency
• Reliance on non-operating items to bridge from operating to ordinary income
• Lack of disclosed investing cash flows prevents assessment of true free cash flow and capital intensity
• Uncertain dividend outlook due to missing DPS and payout details

Investment Implications

Key Takeaways:

• Top-line growth resumed (+5.3% YoY), but operating profit was flat, demonstrating margin pressure.
• EBITDA is solid (¥48.0bn; 19.6% margin), yet heavy depreciation depresses EBIT, pointing to latent operating leverage if utilization improves.
• Ordinary income outpaced operating income by ¥5.8bn, highlighting non-operating support that may be non-recurring or volatile.
• Cash generation is strong at the OCF level (¥54.1bn; OCF/NI 5.24x), supporting liquidity and investment flexibility.
• Balance sheet is conservative with an estimated 62.9% equity ratio and interest coverage of 20.4x.
• Capital efficiency remains low (ROE 1.14%), necessitating better mix, pricing, and asset utilization to enhance returns.
• FCF and dividend capacity cannot be validated without investing cash flow and DPS disclosures.

Metrics to Watch:

• Operating margin trajectory and SG&A/R&D intensity
• Book-to-bill, order backlog, and capacity utilization in power semiconductors (incl. SiC)
• Gross margin mix shifts (automotive/industrial vs. consumer; SiC vs. Si)
• Capex and investing cash flows; FCF after capex
• Inventory days and working capital movements
• FX impacts on ordinary income and hedging effectiveness
• ROE/ROIC progression and EBITDA-to-OCF conversion

Relative Positioning: Financially conservative with strong liquidity and low interest burden versus many peers, but currently weaker operating leverage and low ROE place it mid-to-lower tier on profitability until utilization and mix improvements materialize; success in higher-margin power/SiC can meaningfully re-rate margins and returns.

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