F.C.C.CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥126.38B
• Operating Income: ¥10.13B
• Net Income: ¥8.98B
• EPS: ¥185.13

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

FCC (7296) reported FY2026 Q2 (cumulative) results showing resilient profitability amidst a slight top-line decline. Revenue was 1,263.75, down 0.7% YoY, but operating income rose 1.1% to 101.35, indicating successful cost control and modest operating leverage. Gross profit was 237.51 with a gross margin of 18.8%, and SG&A held at 140.35, implying an SG&A ratio of roughly 11.1%. Operating margin improved to about 8.0%, and profit before tax reached 110.55, translating to an 8.8% pretax margin. Net income increased 16.4% YoY to 89.65, lifting net margin to 7.1%, aided by a relatively low effective tax rate of 22.8%. DuPont analysis shows ROE at 4.7%, with components of 7.1% net margin, asset turnover of 0.508x, and financial leverage of 1.31x, underscoring a capital-conservative balance sheet. Total assets were 2,487.00 and equity 1,905.46, resulting in a high equity ratio of 76.1% and a low liabilities-to-equity of 0.32x, reflecting strong solvency. Cash generation was solid: operating cash flow was 132.70 and investing cash outflow was 88.83, producing free cash flow (OCF + investing CF) of 43.87. Capex was 46.21, below D&A of 61.47, implying maintenance-level investment or efficiency gains. Cash and equivalents were 684.96, and short-term loans were modest at 30.00, suggesting a net cash position given the absence of reported long-term debt. Financing cash outflows of 68.47 included dividends (21.85) and share repurchases (13.00), pointing to active shareholder returns within cash flow capacity. Comprehensive income of 100.29 exceeded net income, likely reflecting favorable currency translation or valuation effects, strengthening equity. EPS (basic) was 185.13 yen on an average share count of 48.43 million, consistent with reported net income. While reported payout ratio (117.3%) and FCF coverage (0.42x) suggest tightness, cash flow data show dividends paid were covered by OCF and FCF; this discrepancy likely stems from differing definitions and timing. Data gaps remain material (e.g., non-operating items, DPS, current liabilities, interest expense, R&D), so interpretations emphasize available metrics and cash flows. Overall, FCC demonstrates margin discipline, strong balance sheet quality, and healthy cash conversion despite a soft revenue backdrop.

Profitability Analysis

ROE_decomposition: ROE 4.7% = Net margin 7.1% × Asset turnover 0.508 × Financial leverage 1.31x. The primary constraint on ROE is low asset turnover and intentionally modest leverage, while margins improved. margin_quality: Gross margin 18.8% and operating margin ~8.0% (101.35/1,263.75). SG&A ratio ~11.1% shows disciplined overhead. Pretax margin ~8.8% and net margin 7.1% benefited from a relatively low effective tax rate of 22.8%. EBITDA margin is 12.9%, consistent with OI + D&A (162.82 = 101.35 + 61.47), indicating non-cash charges are appropriately reflected. operating_leverage: Despite revenue down 0.7% YoY, operating income rose 1.1% YoY, demonstrating positive operating leverage through cost controls and mix/pricing. Capex below D&A may also support near-term margins via lower depreciation growth.

Growth Assessment

revenue_sustainability: Revenue declined slightly (-0.7% YoY) suggesting soft demand or mix headwinds, consistent with cyclical auto parts exposure and potentially EV-related product transition effects. profit_quality: Net income +16.4% YoY outpaced sales due to margin improvements and a favorable tax rate. OCF/Net income at 1.48x supports earnings quality and suggests limited accrual build. outlook: Short-term outlook hinges on auto production volumes, FX, and product mix. Maintaining gross margin near 19% and operating margin near 8% will be key; the high equity ratio provides stability to navigate demand fluctuations. Watch for evolution of EV-related product lines to offset potential structural declines in traditional clutches.

Financial Health

liquidity: Cash and equivalents of 684.96 and operating cash flow of 132.70 provide ample liquidity. Current assets are 1,629.13; current liabilities are unreported, so current/quick ratios are not calculable. solvency: Equity ratio is 76.1% and liabilities-to-equity is 0.32x (607.64/1,905.46), indicating strong solvency. Only 30.00 of short-term loans is disclosed; long-term loans are unreported, but balance sheet implies low leverage. capital_structure: Assets 2,487.00 vs equity 1,905.46 yields financial leverage of ~1.31x. The company appears to operate with net cash, though full interest-bearing debt is unreported.

Cash Flow Quality

earnings_quality: OCF/Net income is 1.48x, indicating solid cash conversion and limited reliance on working capital releases or non-cash items. FCF_analysis: Free cash flow (defined here as OCF + investing CF) was 43.87. Capex was 46.21, below D&A of 61.47, which may point to maintenance-level spend this period; sustainability depends on future capacity and technology investments. working_capital: Accounts receivable 434.73 and inventories 327.75 against accounts payable 272.58 suggest a relatively balanced working capital profile, though full current liability detail is missing. OCF strength indicates working capital did not materially constrain cash generation.

Dividend Sustainability

payout_ratio_assessment: Reported payout ratio (117.3%) likely reflects a definition mismatch (e.g., annualized DPS vs half-year EPS) and should be treated with caution. Using cash flow, dividends paid were 21.85 versus net income of 89.65 (~24%), implying a conservative cash payout in this period. FCF_coverage: Based on cash flows, FCF of 43.87 covers dividends of 21.85 about 2.0x. Management also executed share buybacks of 13.00; total shareholder returns of ~34.85 remain within period FCF and cash balances. The provided FCF coverage ratio (0.42x) conflicts with the cash flow statement and likely uses a different definition. policy_outlook: Given robust balance sheet and positive FCF, base dividend appears serviceable. Future progression will depend on sustaining OCF amid EV transition investments and capital allocation between buybacks and growth capex.

Risk Assessment

Business Risks:

• Auto cycle sensitivity and OEM production volatility
• Product transition risk as EV adoption reduces traditional clutch demand
• Pricing pressure from OEMs and competitive dynamics in friction materials
• Raw material and energy cost fluctuations affecting gross margin
• FX exposure across USD, CNY, and emerging market currencies impacting margins and OCI
• Customer concentration typical of Tier-1/2 suppliers

Financial Risks:

• Limited disclosure of interest-bearing debt and interest expense obscures coverage analysis
• Potential underinvestment risk if capex remains below D&A for extended periods
• Working capital swings given receivables/inventory levels could impact OCF
• Tax rate normalization risk from current 22.8% effective rate

Key Concerns:

• Structural demand headwinds for combustion-related components
• Sustaining mid-to-high single-digit operating margins amid cost inflation
• Clarity on dividend policy versus reported payout metrics discrepancies

Investment Implications

Key Takeaways:

• Resilient profitability despite slight revenue decline (-0.7% YoY)
• Operating margin ~8.0% and EBITDA margin 12.9% underscore cost discipline
• ROE 4.7% constrained by low leverage and modest asset turnover
• Strong balance sheet: equity ratio 76.1%, liabilities/equity 0.32x, sizeable cash
• Healthy cash conversion: OCF/NI 1.48x; FCF positive at 43.87
• Capex below D&A suggests maintenance phase; watch for future investment needs
• Shareholder returns ongoing: dividends 21.85 and buybacks 13.00 funded within cash flows
• Effective tax rate 22.8% supported net profit; normalization could pressure NI

Metrics to Watch:

• Revenue trajectory and order trends by region and EV-related products
• Gross and operating margin sustainability versus input costs
• OCF/NI ratio and working capital turns (AR, inventory, AP days)
• Capex versus D&A to assess reinvestment and growth readiness
• FX impacts on both P/L and OCI
• Dividend and buyback outlays relative to FCF and cash balances

Relative Positioning: Financially conservative supplier with strong equity buffer and consistent cash generation, but with structurally challenged legacy product exposure and below-cost-of-capital ROE, necessitating disciplined capital allocation and product transition execution.

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