SHIMOJIMA Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥30.71B
• Operating Income: ¥1.36B
• Net Income: ¥1.05B
• EPS: ¥45.00

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Verdict: A solid quarter with healthy top-line growth and notable margin expansion, translating into double-digit profit growth and stronger cash conversion. Revenue rose 4.9% YoY to 307.07, while operating income increased 27.5% YoY to 13.57 and ordinary income climbed 32.3% to 15.60. Net income advanced 28.0% YoY to 10.51, with EPS of 45.00 JPY. Gross profit was 99.47, implying a gross margin of 32.4%. Operating margin improved to 4.4%, and net margin reached 3.4%. Using the YoY growth disclosures, operating margin expanded by approximately 78 bps YoY (from ~3.64% to ~4.42%). Net margin expanded by roughly 61 bps YoY (from ~2.81% to ~3.42%). Earnings quality was solid: operating cash flow of 13.54 exceeded net income (OCF/NI 1.29x), indicating good cash conversion and limited accrual risk. SG&A was 85.89, about 28.0% of sales, suggesting operating leverage contributed materially to profit growth; detailed SG&A line items were not disclosed. The balance sheet is very conservative with net cash (cash 80.68 vs interest-bearing debt ~0.98) and a very high current ratio of 412%. ROE stands at 2.9% on a DuPont basis (NPM 3.4%, asset turnover 0.719x, leverage 1.20x), reflecting low capital efficiency despite improved margins. ROIC is reported at 3.3%, below the 5% warning threshold, highlighting a structural efficiency gap relative to typical targets. The effective tax rate was 32.7%, broadly in line with Japan’s statutory range. Reported payout ratio is 121.5%, which appears high relative to earnings, though cash generation this half was sufficient to support dividends and capex; sustainability will depend on full-year FCF. Forward-looking, margin improvements from cost control and mix/pricing appear to be driving results, but sustaining this requires continued SG&A discipline and stable input costs. Given strong liquidity and low leverage, financial risk is low; the main challenge is raising ROIC/ROE through higher asset utilization or portfolio optimization.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 3.4% × 0.719 × 1.20 ≈ 2.9%. The largest positive change YoY appears to be Net Profit Margin, evidenced by operating income (+27.5%) and net income (+28.0%) growing much faster than revenue (+4.9%). Business driver: improved operating leverage (SG&A at ~28.0% of sales) and likely better gross-to-operating margin conversion, pointing to cost discipline and/or pricing/mix benefits. Sustainability: partially sustainable if cost controls and pricing power persist; however, further gains may moderate as easy comps roll off and wage/utility cost pressures re-emerge. Asset turnover at 0.719x remains modest for a wholesaler/distributor and likely changed little given similar-scale balance sheet; improving AT will be key to lifting ROE. Financial leverage is low at 1.20x (equity-heavy balance sheet), limiting ROE amplification; leverage is unlikely to increase given net cash and conservative policy. Watch for any sign of SG&A growth outpacing revenue; current quarter shows no such red flag, but detailed SG&A YoY was not disclosed, so we cannot confirm line-item trends.

Growth Assessment

Top-line growth of 4.9% YoY to 307.07 indicates steady demand in core packaging/wholesale channels. Profit growth outpaced sales (OP +27.5%, NI +28.0%), underscoring improved cost efficiency and/or pricing/mix effects. Operating margin expanded to 4.4% (+78 bps YoY), and net margin to 3.4% (+61 bps YoY), suggesting earnings quality improvements beyond one-off items (non-operating income was modest at 2.25). With ordinary margin at ~5.1%, the profit structure remains primarily operating-driven, not reliant on financial or investment gains. Near-term outlook hinges on maintaining SG&A discipline and managing input costs (paper/plastics) amid potential commodity and wage inflation. Sales sustainability appears reasonable given diversified B2B demand, but growth likely mid-single-digit absent new categories or M&A. Mix upgrades (value-added packaging, private brand) and selective price pass-through can support margins, though competitive intensity in wholesale channels caps pricing power. With limited leverage and strong cash, the company has capacity for selective investments; execution on ROIC-accretive projects will be critical to lift structural returns.

Financial Health

Liquidity is very strong: current assets 237.09 vs current liabilities 57.57 (current ratio 411.8%, quick ratio 313.8%). No warning triggers (Current Ratio >> 1.0). Solvency is conservative: total equity 356.98 vs total liabilities 70.16 (D/E 0.20x as reported). Interest-bearing debt is minimal at ~0.98 (ST 0.35, LT 0.63) against cash of 80.68, yielding a net cash position. Equity ratio (calculated) is approximately 83.6% (356.98/427.15), indicating a very strong capital base. Maturity mismatch risk is low: current assets exceed current liabilities by 179.52 of working capital; short-term loans are negligible. No off-balance sheet obligations were disclosed; data limitations prevent assessment of leases/guarantees if any. Overall financial resilience is high, enabling ongoing operations and investment without external funding pressure.

Cash Flow Quality

OCF was 13.54, exceeding net income of 10.51 (OCF/NI = 1.29x), a positive quality indicator with limited accrual reliance. Capex was 1.54; a proxy for core FCF (OCF – Capex) is about 12.0 this period, though full investing CF (e.g., M&A, asset sales) was unreported. Working capital movements are not disclosed in detail; however, strong cash vs low debt and positive OCF suggest no aggressive working capital pull-forward. With modest maintenance capex needs implied, recurring FCF should support ordinary investments and dividends, barring a sharp downturn. There are no signs of cash flow manipulation in reported figures, but absence of investing CF detail is a data gap.

Dividend Sustainability

The reported payout ratio is 121.5%, implying dividends exceed period earnings on the chosen basis; this is elevated relative to a <60% benchmark. Cash generation this half (proxy FCF ~12.0) appears sufficient to fund dividends and capex near term, and the company holds substantial net cash. However, without full-year DPS guidance or total dividends paid disclosure, structural sustainability cannot be confirmed. If the payout reflects a policy anchored to prior-year earnings or includes special distributions, it may normalize; if it reflects a higher ordinary payout, sustainability will depend on maintaining margin gains and stable FCF. Policy outlook likely prioritizes stable to gradually rising dividends given balance sheet strength, but improving ROIC/ROE would strengthen long-term coverage.

Risk Assessment

Business Risks:

• Input cost volatility (paper, plastics) could pressure gross margins if price pass-through weakens.
• Competitive pricing in wholesale/distribution may limit sustained margin expansion.
• Demand sensitivity to domestic retail and foodservice activity, including macro slowdowns.
• Product mix risk: slower growth in higher-margin value-added packaging could dilute margins.
• Supply chain disruptions affecting inventory availability and logistics costs.

Financial Risks:

• Low ROIC (3.3%) and ROE (2.9%) indicate capital efficiency risk versus cost of capital.
• Potential dividend overcommitment (payout 121.5%) relative to earnings if FCF weakens.
• Inventory holding risk (56.46) if demand softens, tying up cash and raising obsolescence risk.
• Limited leverage reduces risk but also constrains ROE uplift; pressure to deploy cash efficiently.

Key Concerns:

• Structural capital efficiency below benchmarks (ROIC <5%, ROE ~3%).
• Sustainability of recent margin gains amid potential wage and utility cost inflation.
• Data gaps on detailed SG&A trends and investing cash flows impede full-quality assessment.

Investment Implications

Key Takeaways:

• Healthy revenue growth (+4.9%) with strong operating leverage (OP +27.5%).
• Meaningful margin expansion (~+78 bps operating, ~+61 bps net) supports earnings quality.
• Cash conversion is solid (OCF/NI 1.29x) and balance sheet is net cash with very high liquidity.
• Capital efficiency remains the main weakness (ROIC 3.3%, ROE 2.9%).
• Reported payout ratio (121.5%) looks high; watch full-year FCF coverage.

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio for continued operating leverage.
• Working capital turns (inventory and receivables days) to lift asset turnover.
• ROIC trajectory versus 5–8% benchmarks.
• OCF and free cash flow coverage of dividends and capex.
• Input cost trends (paper/plastics) and price pass-through effectiveness.

Relative Positioning: Within Japanese packaging/wholesale peers, the company stands out for balance sheet strength and cash generation but lags on capital efficiency (ROIC/ROE). Near-term profitability momentum is favorable, yet medium-term value creation hinges on improving asset turnover and maintaining margin discipline.

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