Harima-Kyowa Co.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥30.42B
• Operating Income: ¥1.14B
• Net Income: ¥768M
• EPS: ¥183.88

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

Harima Kyowa Bussan (74440) reported FY2026 Q2 consolidated results under JGAAP showing resilient profitability despite a topline contraction. Revenue was ¥30.421bn, down 8.9% YoY, indicating demand softness and/or pricing pressure in the period. Gross profit was ¥3.863bn, implying a gross margin of 12.7%, which appears stable and supportive of operating earnings. Operating income rose 3.7% YoY to ¥1.140bn, demonstrating effective cost control and operating leverage despite lower revenue. Ordinary income reached ¥1.478bn, exceeding operating income and suggesting sizable non-operating gains (e.g., financial income, equity-method or FX effects). Net income increased 29.0% YoY to ¥0.989bn, highlighting margin expansion at the bottom line aided by non-operating factors. DuPont metrics show a net margin of 3.25%, asset turnover of 0.807x, and financial leverage of 1.46x, yielding an ROE of 3.84% on the provided basis. Liquidity appears strong with a current ratio of 204.5% and working capital of ¥9.061bn, supported by low reported interest expense and very high interest coverage (651.8x). Operating cash flow of ¥2.092bn was more than double net income (OCF/NI 2.12x), indicating robust cash conversion likely driven by working capital release. Balance sheet strength is underscored by total equity of ¥25.751bn against total assets of ¥37.703bn, implying an equity ratio around the high-60% range (despite a reported 0.0% due to disclosure limitations). Reported cash and equivalents are zero, which is an undisclosed item rather than a true absence of cash; similarly, inventories are unreported. Dividend per share is reported as zero, suggesting retained earnings deployment or timing differences, with a 0% payout ratio for the period. There is a data inconsistency between cost of sales and gross profit (COGS would imply a much lower GP), so we rely on the stated gross profit and margin as primary references. The effective tax rate shown as 0.0% in the metrics is not reflective of the tax expense disclosed; a rough calculation suggests a normal mid-20s tax burden. Overall, the company exhibits solid profitability and cash generation with conservative leverage, but heavy reliance on non-operating income and data gaps warrant caution in interpreting the sustainability of the earnings mix.

Profitability Analysis

ROE_decomposition: Net profit margin 3.25% × Asset turnover 0.807 × Financial leverage 1.46 = ROE 3.84% (as reported in DuPont metrics). On our reading, the ROE is constrained primarily by modest net margins rather than asset utilization or leverage. margin_quality: Gross margin is 12.7% (GP ¥3.863bn on revenue ¥30.421bn). Operating margin is approximately 3.7% (OI ¥1.140bn), indicating a meaningful SG&A burden but acceptable conversion from gross to operating profit. Net margin improved to 3.25%, aided by non-operating gains (ordinary income exceeds operating income by ~¥0.338bn). operating_leverage: Operating income grew 3.7% YoY despite an 8.9% YoY revenue decline, evidencing positive operating leverage from cost controls and mix. EBITDA of ¥1.397bn (margin 4.6%) vs OI of ¥1.140bn indicates moderate non-cash costs (D&A ~¥257m) and reasonable operating efficiency.

Growth Assessment

revenue_sustainability: Revenue contracted by 8.9% YoY to ¥30.421bn. Without segment detail, this likely reflects weaker volumes and/or lower selling prices; sustainability depends on end-market recovery and pricing discipline. profit_quality: Operating profit grew YoY and is underpinned by a 12.7% gross margin. However, ordinary income materially above operating income suggests non-operating contributions that may not be recurring, so the quality of profit at the ordinary and net levels is somewhat mixed. outlook: If cost discipline persists, the company can defend operating margins even in a soft demand environment. Recovery in top-line volumes or price could translate into outsized earnings growth given demonstrated leverage. That said, reliance on non-operating items to bridge OI to NI introduces volatility to the outlook.

Financial Health

liquidity: Current ratio 204.5% and quick ratio 204.5% reflect ample short-term liquidity; inventories are unreported, so quick ratio may be overstated but is still likely strong. Working capital is ¥9.061bn. solvency: Interest expense is minimal at ¥1.749m with an interest coverage of 651.8x, indicating very low financial risk from debt service. Total liabilities of ¥11.491bn versus total equity of ¥25.751bn imply conservative leverage. capital_structure: Debt-to-equity is shown as 0.45x (likely using total liabilities), and the implied equity ratio from reported totals is approximately 68.3% (25.751/37.703), versus a reported 0.0% due to disclosure limitations. Overall capital structure appears robust.

Cash Flow Quality

earnings_quality: OCF/Net income is 2.12x (¥2.092bn / ¥0.989bn), a strong indicator of earnings backed by cash, likely aided by favorable working capital movements. FCF_analysis: Free cash flow is reported as 0 due to missing investing cash flow/capex disclosure. Without capex, we cannot compute FCF accurately; however, positive OCF suggests room for reinvestment and/or distributions. working_capital: Given the OCF strength in a down-revenue environment, working capital likely released cash (e.g., receivables collection or payables management). Inventories are unreported, limiting deeper analysis of inventory turns or mix.

Dividend Sustainability

payout_ratio_assessment: DPS is reported at ¥0.00 and payout ratio 0.0%, indicating no distribution for the period. With net income of ¥0.989bn, there is capacity for payout, but policy preference may be for retention or timing differences in interim dividends. FCF_coverage: Unable to assess due to unreported capex/investing cash flows; OCF of ¥2.092bn would typically support dividends, but lack of FCF data prevents a coverage conclusion. policy_outlook: Given strong balance sheet and OCF, the company appears positioned to consider distributions; however, reliance on non-operating income and revenue headwinds could bias policy toward prudence. No explicit policy details are available from the provided data.

Risk Assessment

Business Risks:

• Demand cyclicality in key end-markets leading to revenue volatility
• Pricing pressure and mix shifts compressing gross margins
• Dependence on non-operating income to support ordinary and net income
• Supply chain disruptions affecting procurement and delivery
• Potential customer concentration risk in trading-oriented business models

Financial Risks:

• Data gaps on cash balances and inventories limit visibility into liquidity buffers
• Potential working capital volatility as a driver of OCF
• Exposure to interest rate and FX movements (given ordinary income sensitivity)
• Reinvestment needs (capex) unknown due to unreported investing cash flows

Key Concerns:

• Inconsistency between reported cost of sales and gross profit figures
• Unreported cash, inventories, and investing cash flows constrain analysis of FCF and liquidity granularity
• Sustainability of non-operating gains that boost ordinary income

Investment Implications

Key Takeaways:

• Revenue declined 8.9% YoY, but operating income increased 3.7% YoY, evidencing cost control and operating leverage.
• Gross margin at 12.7% and EBITDA margin at 4.6% indicate stable core profitability.
• Net income rose 29.0% YoY to ¥0.989bn, aided by non-operating income (ordinary income > operating income).
• Strong liquidity with a current ratio of 204.5% and minimal interest burden (651.8x coverage).
• Cash conversion is robust (OCF/NI 2.12x), likely from working capital release.
• Capital structure is conservative; implied equity ratio ~68% despite reported 0.0% due to disclosure.
• Data limitations (cash, inventories, investing CF) restrict visibility on FCF and balance sheet detail.

Metrics to Watch:

• Revenue trajectory and order backlog/booking trends
• Gross margin sustainability and SG&A ratio to sales
• Gap between operating and ordinary income (quality and recurrence of non-operating gains)
• OCF/NI ratio and working capital movements (DSO, DPO, inventory turns when available)
• Capex and investing cash flows to assess FCF and reinvestment intensity
• Effective tax rate normalization relative to pretax profit

Relative Positioning: Within trading/manufacturing-oriented peers, the company exhibits stronger-than-average liquidity and interest coverage with moderate profitability and conservative leverage; earnings quality is solid at the operating level but partially reliant on non-operating items at the ordinary/net levels.

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