Nippon Tungsten Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.05B
• Operating Income: ¥297M
• Net Income: ¥354M
• EPS: ¥62.69

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

Japan Tungsten Co., Ltd. (Consolidated, JGAAP) reported FY2026 Q2 results showing modest topline softness and a sharper contraction in operating profit, indicative of negative operating leverage in the half. Revenue was ¥6.05bn, down 4.1% YoY, while operating income declined 25.1% YoY to ¥297m, compressing the operating margin to roughly 4.9%. Net income was ¥304m (-14.2% YoY), with an implied net margin of about 5.0%, supported by non-operating income that lifted ordinary income to ¥440m. Gross profit is disclosed at ¥1.519bn, implying a gross margin of 25.1%, although the reported cost of sales (¥4.79bn) points to an internal discrepancy; for analysis, we rely on the disclosed gross profit and margin. DuPont analysis shows ROE of 2.37%, driven by a 5.02% net margin, asset turnover of 0.336x, and modest financial leverage of 1.40x, underscoring that the principal constraint on returns is margin/turnover rather than leverage. Liquidity is strong with a current ratio of 222.6% and a quick ratio of 215.4%, and solvency is solid with debt-to-equity of 0.39x. Based on total equity of ¥12.839bn versus total assets of ¥18.0bn, we infer an equity ratio around 71%, despite the equity ratio line item showing 0.0% (unreported). Operating cash flow was resilient at ¥555m, 1.83x net income, indicating healthy earnings quality and limited working capital drag in the period. EBITDA was ¥589m (9.7% margin), and interest coverage was a comfortable 33x, reflecting very low financial risk. Investing cash flows were not disclosed (0 placeholder), so free cash flow cannot be precisely determined, although operating cash generation appears solid. The company reported no dividend (DPS ¥0, payout 0%), suggesting a conservative capital allocation stance pending visibility on demand recovery or reinvestment needs. The revenue decline and disproportionate drop in operating income indicate margin headwinds and cost absorption issues, likely tied to end-market softness or pricing pressure in tungsten-related products. While balance sheet strength and cash conversion are clear positives, the weak ROE and negative operating leverage highlight the need for either volume recovery, mix improvement, or cost actions to restore return metrics. Outlook hinges on cyclical demand in key applications (e.g., electronics, tooling, automotive) and raw material price dynamics. Overall, financial health is strong, cash flow quality is good, but profitability momentum is subdued, and returns remain below likely cost of equity. Data limitations exist around cash balances, investing cash flow, and share counts; conclusions emphasize the disclosed non-zero items and inferred metrics.

Profitability Analysis

ROE_decomposition: ROE 2.37% = Net margin 5.02% × Asset turnover 0.336 × Financial leverage 1.40. Returns are primarily constrained by low turnover and modest margins rather than capital structure. margin_quality: Gross margin appears to be 25.1% based on disclosed gross profit (¥1,519m), though cost of sales disclosure implies discrepancy; operating margin is ~4.9% (¥297m/¥6,050m), net margin 5.02%. Ordinary income margin of ~7.3% indicates non-operating gains helped offset operating pressure. operating_leverage: Revenue declined 4.1% YoY, but operating income fell 25.1% YoY, evidencing negative operating leverage. Fixed cost absorption and/or pricing pressure likely drove the outsized EBIT compression. EBITDA margin at 9.7% provides some cushion, but operating deleveraging is evident.

Growth Assessment

revenue_sustainability: Topline contracted 4.1% YoY to ¥6.05bn. The magnitude suggests cyclical softness rather than structural loss, but sustained pressure in end-markets could weigh on the near term. profit_quality: Ordinary income (¥440m) exceeded operating income due to non-operating items, tempering the decline in net income; however, core profitability weakened with a ~4.9% operating margin. Interest burden is minimal, so bottom-line sensitivity is mainly operational. outlook: Recovery hinges on demand normalization across tungsten-related applications (electronics, precision tooling, automotive) and raw material price dynamics. Mix/pricing improvements and cost control are required to restore operating leverage. Absent a demand rebound, margins may remain compressed in the near term.

Financial Health

liquidity: Current ratio 222.6%, quick ratio 215.4%, and working capital of ¥5.588bn indicate ample liquidity. Cash and equivalents are not disclosed (0 placeholder), but liquidity ratios imply sufficient near-term coverage. solvency: Debt-to-equity 0.39x and interest coverage 33x reflect low financial risk. Using disclosed equity and assets, the inferred equity ratio is ~71% (¥12.839bn/¥18.0bn). capital_structure: Leverage is conservative (financial leverage 1.40x). The balance sheet can support investment needs or absorb cyclicality without stressing covenants.

Cash Flow Quality

earnings_quality: OCF/Net income is 1.83x (¥555m/¥304m), indicating solid cash realization of earnings and limited accrual risk in the period. FCF_analysis: Investing cash flow is not disclosed (0 placeholder), so FCF cannot be calculated reliably. EBITDA of ¥589m and positive OCF suggest capacity to self-fund maintenance capex; precise capex intensity remains unknown. working_capital: With OCF strong relative to EBITDA, working capital movements likely did not materially constrain cash generation this half. Inventories are disclosed at ¥328m, relatively modest versus revenue scale, but broader WC details (receivables/payables) are not provided.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 with a payout ratio of 0%. Given ROE of 2.37% and compressed operating margins, retaining earnings to reinforce competitiveness may align with current fundamentals. FCF_coverage: FCF is unobservable due to missing investing CF disclosure; OCF of ¥555m would typically cover a modest dividend if policy permitted. Without capex data, coverage cannot be assured. policy_outlook: With conservative leverage and strong liquidity, the capacity for dividends exists, but current results suggest management may prioritize reinvestment and balance sheet strength until profitability recovers.

Risk Assessment

Business Risks:

• Cyclical demand in end-markets for tungsten-related products (electronics, precision tooling, automotive).
• Raw material price volatility (tungsten, energy) affecting input costs and pricing dynamics.
• Pricing pressure and mix shifts leading to margin compression.
• Customer concentration risk typical in specialty materials/components.
• Supply chain disruptions and lead-time variability impacting deliveries and inventory.
• Regulatory and environmental compliance costs for specialty materials processing.

Financial Risks:

• Negative operating leverage amplifying profit declines during demand softness.
• Uncertain capex needs (investing CF undisclosed), potentially elevating cash outflows.
• FX exposure if procurement or sales are materially non-JPY.
• Potential working capital swings given project/order timing.
• Limited visibility on cash balances due to non-disclosure in this snapshot.

Key Concerns:

• ROE at 2.37% is low and below typical cost of equity, requiring margin or turnover improvement.
• Operating income down 25.1% YoY versus a 4.1% revenue decline, signaling pressure on cost absorption.
• Discrepancy between reported gross profit and cost of sales lines complicates precise margin analysis.
• Investing cash flow (and thus FCF) not disclosed, obscuring reinvestment intensity.

Investment Implications

Key Takeaways:

• Topline declined 4.1% YoY; operating income fell 25.1% YoY, evidencing negative operating leverage.
• ROE is 2.37%, constrained by modest margins and low asset turnover rather than leverage.
• Liquidity and solvency are strong (current ratio 223%, D/E 0.39x, interest coverage 33x).
• OCF is robust at ¥555m (1.83x net income), signaling good earnings quality.
• FCF not determinable due to missing investing CF; capex intensity remains a key blind spot.
• No dividend currently; capacity exists but policy appears conservative amid margin compression.

Metrics to Watch:

• Revenue growth trajectory and order backlog across key end-markets.
• Operating margin recovery (targeting >6–7% would materially lift ROE).
• Gross margin stability and pricing/mix trends (validate against cost inputs).
• Capex and investing cash flows to assess true FCF and reinvestment needs.
• Working capital turns (DSO/DIO/DPO) and asset turnover improvement.
• Non-operating income components sustaining ordinary income versus core EBIT.

Relative Positioning: Financially conservative with a strong balance sheet and good cash conversion, but currently lagging on profitability and ROE versus quality specialty materials peers; improvement depends on demand normalization and cost/mix actions.

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