RICOH COMPANY,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.22T
• Operating Income: ¥35.45B
• Net Income: ¥25.72B
• EPS: ¥43.18

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

Verdict: Ricoh delivered a solid earnings recovery in FY2026 Q2, with sharply higher profitability despite only modest top-line growth. Revenue rose 1.7% YoY to 12,224.5, while operating income surged 420.6% YoY to 354.5, taking operating margin to 2.90%. Net income increased 165.2% YoY to 245.8, implying a 2.01% net margin. Gross profit reached 4,197.8 with a 34.3% gross margin, and SG&A was 3,873.8, or 31.7% of sales, indicating tighter cost control and some operating leverage. Based on the YoY growth rates, operating margin expanded by approximately 233 bps (from ~0.57% to 2.90%), and net margin expanded by about 124 bps (from ~0.77% to 2.01%). Profit before tax was 374.0 and the effective tax rate was 31.2%, consistent with normalized taxation. Operating cash flow of 294.4 exceeded net income (OCF/NI = 1.20x), which supports earnings quality this half. However, free cash flow, defined here as OCF + investing CF, was negative at -63.2 due to investment outflows (-357.6) including capex of -217.5. ROE stood at 2.2% via DuPont (2.0% net margin × 0.509x asset turnover × 2.18x leverage), reflecting thin profitability and modest asset utilization. ROIC at 2.2% remains well below a typical cost of capital and is flagged as a capital efficiency concern. The balance sheet is conservative with an equity ratio of 44.8% and D/E of 1.18x, but liquidity metrics like the current ratio are unreported, limiting visibility on short-term coverage. Equity-method income contributed 33.3 (8.9% of PBT), a supportive but not dominant profit source. Overall, margin repair and positive OCF are encouraging, but thin operating margins, sub-5% ROIC, and negative FCF temper the quality of the rebound. Forward-looking, sustaining SG&A discipline, further mix/pricing improvement, and turning FCF positive will be key to underpin dividends and raise capital efficiency.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 2.0% × Asset turnover 0.509 × Financial leverage 2.18x = ROE 2.2%. The most material driver this period is the net margin improvement: operating income rose 420.6% on only 1.7% revenue growth, taking operating margin to 2.90% (up ~233 bps YoY by our estimate), and net margin to 2.01% (up ~124 bps). Business reasons likely include tighter SG&A (31.7% of sales) and other operating income tailwinds (operating income exceeds gross profit minus SG&A by ~30, suggesting beneficial other operating items). Asset turnover at 0.509 indicates moderate utilization; without prior-period asset data, we assume limited change relative to the larger margin swing. Leverage of 2.18x is steady and not the main ROE driver. Sustainability: cost discipline can persist, but the magnitude of margin gains likely moderates unless mix/pricing and service-led growth continue; other operating items may be one-time or less repeatable. Flags: SG&A remains high relative to gross profit (SG&A is ~92% of gross profit), leaving a thin operating buffer; any revenue softness could compress margins quickly.

Growth Assessment

Top-line growth was modest (+1.7% YoY), while profits rebounded strongly (operating income +420.6%, net income +165.2%), indicating operating leverage and mix/efficiency gains. Gross margin at 34.3% versus a 31.7% SG&A ratio delivered a 2.9% operating margin; sustaining or expanding this requires continued mix shift to higher-margin services/solutions and disciplined costs. Equity-method income contributed 33.3 (8.9% of PBT), providing a secondary profit pillar but not a dominant driver. Revenue sustainability appears stable but not high-growth; key will be demand for office equipment/services and managed services amid secular print headwinds. Profit quality is supported by OCF/NI of 1.20x, but negative FCF (due to investment outflow) tempers the outlook for cash-based growth returns in the near term. Outlook hinges on execution of transformation initiatives, price/mix retention, and inventory/receivable management to keep OCF strong.

Financial Health

Liquidity: Current ratio cannot be calculated due to unreported current liabilities; thus no explicit warning. Working capital is shown equal to current assets (12,350.7), indicating limited visibility on net working capital. Solvency: D/E is 1.18x (within conservative range), equity ratio 44.8% shows a solid capital base. Maturity mismatch risk cannot be assessed as short-term borrowings and current liabilities are unreported; watch short-term debt vs. cash/receivables once disclosed. No off-balance sheet obligations are mentioned in the provided data.

Cash Flow Quality

OCF/Net Income of 1.20x indicates acceptable earnings quality with cash conversion above net profit. FCF (defined here as OCF + investing CF) was -63.2, driven by investing outflows (-357.6) including capex of -217.5; on a simple OCF - capex basis, implied FCF would be positive (~76.9), but the reported definition shows net cash outflow after broader investments. Dividend outflow was -108.1, exceeding reported FCF, hence not covered this half; seasonality may normalize this over the full year. No explicit signs of working capital manipulation can be diagnosed without detailed WC components, though OCF exceeding NI suggests either non-cash charges or a modest working capital release.

Dividend Sustainability

The calculated payout ratio is 88.1%, above the <60% benchmark for comfortable sustainability. FCF coverage (reported basis) is -0.29x, indicating dividends were not covered by free cash in the half due to investment outflows. On an OCF - capex view, coverage would be better, but broader investing remains a constraint. With D/E at 1.18x and equity ratio 44.8%, balance sheet capacity exists, but sustaining a high payout amid sub-5% ROIC and variable FCF poses medium risk unless OCF strengthens in H2 or capex/investing moderates. Policy outlook likely emphasizes stable dividends, but flexibility may be required if cash conversion weakens.

Risk Assessment

Business Risks:

• Secular decline in office printing volumes pressures top-line and margin sustainability.
• Execution risk in shifting mix toward services/solutions to defend margins.
• Competitive pressure from global peers (Canon, HP, Konica Minolta) affecting pricing and share.
• Supply chain and component cost volatility impacting gross margin.
• FX fluctuations (JPY volatility) affecting overseas revenue translation and component costs.

Financial Risks:

• Negative free cash flow on a reported OCF + investing basis, reducing dividend cover.
• High payout ratio (88.1%) relative to earnings and FCF introduces funding pressure if OCF weakens.
• ROIC at 2.2% below cost of capital, risking value dilution if investments do not improve returns.
• Liquidity metrics (current ratio, quick ratio) unreported, limiting visibility into short-term coverage.
• Potential interest rate exposure unknown due to unreported interest-bearing debt breakdown.

Key Concerns:

• Thin operating margin (2.9%) and high SG&A intensity (~31.7% of sales) leave limited shock absorption.
• Earnings reliant in part on other operating items (OI > GP - SG&A by ~30), which may be non-recurring.
• Working capital needs significant (AR 5,292.3; inventories 3,327.6), requiring disciplined management to sustain OCF.
• Capital efficiency flagged (ROIC 2.2%), below 5% warning threshold.

Investment Implications

Key Takeaways:

• Strong profit rebound on modest revenue growth signals effective cost/mix management.
• Operating and net margins expanded by ~233 bps and ~124 bps YoY, respectively.
• Earnings quality acceptable with OCF/NI at 1.20x, but reported FCF negative due to investing.
• Balance sheet remains solid (equity ratio 44.8%, D/E 1.18x).
• Capital efficiency low (ROIC 2.2%); improving returns is a priority.
• Dividend coverage tight this half (payout 88%, FCF coverage negative).
• Equity-method income supportive but not a major driver (8.9% of PBT).

Metrics to Watch:

• Operating margin trajectory and SG&A ratio
• Gross margin resilience vs. component and logistics costs
• OCF/NI and working capital turns (AR and inventory levels)
• Free cash flow after capex and broader investing
• ROIC progression vs. 7–8% target range
• Dividend coverage (FCF and payout ratio)
• FX sensitivity and pricing/mix in solutions/services

Relative Positioning: Within office equipment and services peers, Ricoh shows improving profitability and acceptable leverage but still lags on capital efficiency and free cash flow consistency; sustaining cost discipline and advancing the services mix are essential to narrow the gap with higher-ROIC competitors.

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