MATSUDA SANGYO Co.,Ltd. FY2026 FY Earnings Report

Financial Highlights

• Net Sales: ¥687.84B
• Operating Income: ¥22.44B
• Net Income: ¥13.16B
• EPS: ¥647.59

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

Verdict: A strong full-year beat on growth and profit with solid ROE uplift, tempered by weak cash conversion and higher short-term funding reliance. Revenue rose 46.7% to 687.8bn yen, driven primarily by the Precious Metals Business, lifting operating income 77.0% to 22.4bn yen and net income 77.2% to 16.8bn yen. Gross profit increased to 48.1bn yen with gross margin at 7.0%, and operating margin expanded to 3.3%. Operating margin improved by roughly 56bps year over year (3.26% vs. 2.70%), reflecting favorable operating leverage as SG&A grew 13.8% against 46.7% revenue growth. Net margin increased by approximately 42bps to 2.4%, supported by higher ordinary income and a stable effective tax rate of 27.9%. ROE reached 14.1%, supported by a 2.4% net margin, 3.02x asset turnover, and 1.91x financial leverage. EBITDA rose to 26.2bn yen with a 3.8% margin, and interest coverage remained very strong at 37.6x, underpinned by modest interest expense. Balance sheet liquidity stayed healthy (current ratio 203% and quick ratio 149%), despite a larger working capital footprint. However, operating cash flow was negative at -8.96bn yen due to a significant working capital build (receivables +14.4bn yen and inventories +30.9bn yen offset partly by payables +9.5bn yen), resulting in FCF of -13.4bn yen. The company increased short-term borrowings (+14.3bn yen YoY) to fund growth and working capital, pushing the short-term debt ratio to 55.4% and cash/short-term debt to 0.56x. Segment-wise, Precious Metals contributed 82.9% of operating income with a 3.4% margin, while Food delivered steady growth with a 2.6% margin. Equity-method income was 1.37bn yen, adding resilience to ordinary income. Extraordinary items were immaterial, and comprehensive income was 21.5bn yen, reflecting positive hedging and currency translation effects. The dividend was raised to 100 yen per share (payout ~16%), well-covered by earnings but not by FCF this year due to working capital absorption. Looking ahead, the company’s guidance implies modest growth (sales 700bn yen, OP 24.0bn yen), broadly consistent with this year’s run-rate. Key forward watchpoints are normalization of working capital, sustaining margin gains amid low gross margins, and managing refinancing risk given the higher short-term debt share.

Profitability Analysis

ROE decomposition: ROE 14.1% = Net Profit Margin 2.4% × Asset Turnover 3.02 × Financial Leverage 1.91x. The largest YoY improvement came from net profit margin, which rose on the back of operating margin expansion (about +56bps) and higher ordinary income. The business driver was strong volume and value-add mix in Precious Metals recovery and refining, with disciplined SG&A growth delivering operating leverage. The improvement appears partly sustainable provided volumes remain healthy and procurement/pricing discipline holds, though the inherently thin gross margin profile limits upside. SG&A growth (13.8%) was well below revenue growth (46.7%), indicating positive operating efficiency momentum rather than cost underinvestment.

Growth Assessment

Top-line growth of 46.7% was led by the Precious Metals Business (+57.7%), with Food also expanding (+9.6%). Operating income increased 77.0%, outpacing sales on operating leverage, with ordinary income up 74.1% and net income up 77.2%. EBITDA rose to 26.2bn yen, and EBITDA margin improved to 3.8%. Equity-method income contributed 1.37bn yen to ordinary income, providing diversified earnings support. Guidance for the next year (sales 700bn yen, OP 24.0bn yen, OPI +7% YoY) is broadly aligned with current run-rate, suggesting growth normalization after a step-up year. The main sustainers of growth are continued volume in precious metals recycling/refining and stable demand in Food, while pricing and spread management remain critical given low gross margins.

Financial Health

Liquidity is strong with a current ratio of 203% and quick ratio of 149%, supported by 1.71tn yen in current assets against 0.84tn yen current liabilities (units in 100M converted). Debt metrics remain conservative to moderate: D/E 0.91x, Debt/EBITDA 1.78x, and interest coverage 37.6x, indicating ample servicing capacity. The short-term debt ratio is elevated at 55.4%, while cash/short-term debt is 0.56x, pointing to refinancing risk if credit conditions tighten. Maturity mismatch risk is mitigated by ample current assets, though working capital is inventory- and receivable-heavy. Advances received rose to 152.2 (100M yen), modestly offsetting receivable risk. No off-balance sheet obligations are noted in the provided data.

Notable B/S Changes

Short-term Loans: +142.6 (100M JPY, +123.5%) - Funding for working capital and growth; raises refinancing risk. Accounts Payable: +98.4 (100M JPY, +60.8%) - Higher procurement activity aligned with sales scale-up. Accounts Receivable: +146.7 (100M JPY, +43.0%) - Reflects increased sales; elevates collection risk if conditions tighten. Inventories: +109.1 (100M JPY, +31.8%) - Larger throughput and buffer in Precious Metals; ties up cash. Retained Earnings: +144.2 (100M JPY, +16.1%) - Profit retention strengthening equity base. Advances Received: +75.5 (100M JPY, +98.5%) - Customer prepayments partially offset working capital needs.

Cash Flow Quality

OCF/Net Income is -0.53x, indicating weak earnings-to-cash conversion this year. The primary driver is working capital investment: receivables increased by 14.4bn yen and inventories by 30.9bn yen, partially offset by a 9.5bn yen increase in payables. EBITDA/interest coverage is robust, but OCF/EBITDA is -0.34x, underscoring the WC drag. CapEx was 5.58bn yen versus depreciation of 3.79bn yen (CapEx/Depreciation 1.47x), consistent with growth investment. Free cash flow was -13.4bn yen, not covering dividends and CapEx this year; financing inflows (net short-term and long-term borrowings) bridged the gap. No clear signs of working capital manipulation emerge; the changes align with strong top-line growth and higher commodity throughput in precious metals.

Dividend Sustainability

DPS totaled 100 yen (50 yen interim + 50 yen year-end). The payout ratio is approximately 16.1% using reported EPS, providing a large earnings coverage buffer. However, FCF coverage is -4.98x due to a one-year working capital build, meaning dividends were effectively funded by balance sheet capacity this year. With Debt/EBITDA at 1.78x and ample equity, the dividend appears sustainable if working capital normalizes and EBITDA remains at current levels. Capital allocation remains growth-oriented (CapEx/Depreciation 1.47x) while maintaining a low payout policy.

Risk Assessment

Business risks include Concentration in Precious Metals Business (82.9% of operating income) exposes earnings to commodity price and spread volatility, Low gross margin model (7.0%) leaves limited cushion against price/mix or cost shocks, Volume sensitivity in recycling/refining operations tied to industrial activity.

Financial risks include Refinancing risk from a 55.4% short-term debt ratio and cash/short-term debt of 0.56x, Negative OCF and high working capital intensity in a rapid growth year, Exposure to interest rate normalization, albeit mitigated by high interest coverage.

Key concerns include OCF/Net Income at -0.53x and cash conversion at -0.34x highlight weak cash realization, Accruals ratio at 11.3% suggests higher accrual-driven earnings, Sustaining margin gains amid structurally low operating margin (3.3%).

Investment Implications

Key takeaways include Step-change in scale with revenue +46.7% and operating income +77.0%, ROE improved to 14.1% on better margins and strong asset turnover, Earnings quality mixed: strong EBITDA and coverage, but OCF negative on WC build, Short-term funding reliance increased to support growth, Dividend policy remains conservative and earnings-covered.

Metrics to watch include OCF/Net Income and inventory/receivables turnover for WC normalization, Short-term debt ratio and cash/short-term debt, Segment operating margins (Precious Metals vs. Food), Debt/EBITDA and interest coverage, Equity-method income stability.

Regarding relative positioning, The company combines high asset turnover and conservative payout with thin margins typical of precious metals and trading-like flows; profitability is improving versus its own history, but cash conversion and short-term funding reliance trail best-in-class industrial peers.