FURUYA METAL CO.,LTD. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥23.20B
• Operating Income: ¥3.41B
• Net Income: ¥1.62B
• EPS: ¥94.76

Income Statement

Balance Sheet

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: A strong top-line-driven quarter with solid operating profitability, but capital efficiency remains subdued and non-operating items were a net drag, warranting caution on quality and sustainability. Revenue rose 66.9% YoY to 232.01, demonstrating robust demand and/or favorable price effects. Operating income increased 23.1% YoY to 34.10, while ordinary income climbed 42.0% YoY to 33.56 and net income rose 43.1% YoY to 23.28. Gross margin stood at 16.2% and implied operating margin was approximately 14.7%, indicating healthy cost discipline relative to sales growth. Non-operating income was 20.84 but was more than offset by non-operating expenses of 24.91, making the non-operating line a net headwind to profit before tax. Interest expense was 2.78, yielding a strong interest coverage ratio of 12.27x, so solvency risk is low near term. Liquidity is ample with a current ratio of 227.7% and quick ratio of 215.1%, and working capital of 520.77 provides a cushion against volatility. ROE calculated via DuPont is 3.6% (Net margin 10.0%, Asset turnover 0.198x, Leverage 1.81x), reflecting low asset turnover despite improved earnings. ROIC stands at 2.9%, below a typical 5% warning threshold, highlighting capital efficiency constraints even in a good revenue quarter. Margin expansion or compression versus last year cannot be quantified in basis points due to lack of prior-period margin disclosure. Earnings quality cannot be fully assessed because operating cash flow was not reported; OCF/NI and FCF coverage are therefore not calculable. The reported payout ratio of 104.7% suggests potential tension between shareholder returns and reinvestment if maintained, especially absent cash flow visibility. Balance sheet leverage is moderate (D/E 0.81x) and net debt is manageable relative to equity and EBIT capacity. Forward-looking, maintaining double-digit margins will likely depend on sustaining the current sales mix and managing non-operating volatility (e.g., FX, valuation, and financing costs). Key watchpoints are cash conversion, inventory discipline, capital allocation to lift ROIC, and the trajectory of non-operating items.

Profitability Analysis

ROE decomposition: 3.6% = Net Profit Margin (10.0%) × Asset Turnover (0.198x) × Financial Leverage (1.81x). The weakest link is asset turnover at 0.198x, which materially suppresses ROE despite a respectable net margin and moderate leverage. Operating margin is approximately 14.7% (Operating income 34.10 / Revenue 232.01), supported by good gross margin capture (16.2%) and SG&A control (SG&A 9.99). The non-operating line was a net negative (income 20.84 vs expenses 24.91), implying headwinds from items such as FX losses, valuation losses, or other costs beyond interest (2.78). The main driver of YoY improvement in bottom line appears to be sales scale-up rather than margin expansion, given revenue outpaced operating income growth. This operating leverage is partly offset by non-operating drag, which can be volatile; sustainability depends on stabilizing those items. There are no disclosed red flags in SG&A composition, but we note that we cannot test whether SG&A grew faster than revenue due to lack of prior-period SG&A. Effective tax rate is 31.2%, within a normal range. Overall, profitability quality is good at the operating level but diluted by low asset turnover and non-operating volatility.

Growth Assessment

Top-line growth was strong at +66.9% YoY, indicating robust demand and/or favorable pricing. Operating income grew +23.1% YoY, lagging revenue growth, implying either pricing/mix normalization, cost increases, or deliberate investment in capacity/overheads. Ordinary income grew +42.0% and net income +43.1% YoY, aided by scale effects but partially weighed down by non-operating expenses. Without segment disclosure, we cannot isolate the contribution from specific product lines or markets. The current profitability profile suggests positive operating leverage but not fully translating to ordinary income due to non-operating headwinds. Sustainability hinges on maintaining sales momentum and managing input costs for precious metals, as well as stabilizing non-operating factors. With ROIC at 2.9%, incremental growth should prioritize capital-light or higher-return projects to improve capital efficiency. Absent cash flow data, we cannot confirm whether the growth is translating into cash (e.g., through improved working capital turnover). Near-term outlook depends on order visibility, inventory turns, and pricing power; these are not disclosed here.

Financial Health

Liquidity is strong: current ratio 227.7% and quick ratio 215.1%, comfortably above benchmarks. No warning on current ratio (<1.0) or D/E (>2.0); D/E stands at 0.81x, indicating moderate leverage. Total assets are 1,170.47 vs equity 645.61 (leverage 1.81x), a conservative balance sheet for the earnings level. Short-term loans are 144.00 versus ample current assets of 928.58; maturity mismatch risk appears low. Cash and deposits are 76.80; together with receivables (41.23) and inventories (51.37), liquid resources cover short-term loans but must also service payables (167.19); overall, the strong current asset base mitigates this. Long-term loans are 98.49; refinancing risk appears manageable given interest coverage of 12.27x. No off-balance sheet obligations were reported in the provided data. Net debt (approx. interest-bearing debt minus cash) is not explicitly disclosed due to unreported interest-bearing debt totals, but based on short- and long-term loans, net debt is roughly 165–170. Leverage and liquidity positions support operational flexibility.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be assessed and earnings quality cannot be validated. Free cash flow and capex are also unreported, limiting visibility into reinvestment intensity and cash conversion. With inventories and receivables sizable relative to sales, working-capital dynamics could materially affect cash conversion, but no period-over-period movement data is available to test for build-ups or releases. Interest coverage is strong at 12.27x, implying sufficient EBITDA/EBIT support for financing costs even without OCF disclosure. Dividend and buyback coverage by FCF cannot be determined. No signs of working capital manipulation can be inferred or ruled out without cash flow statements and turnover metrics.

Dividend Sustainability

The calculated payout ratio is 104.7%, which, if accurate and sustained, would be above a prudent benchmark (<60%) and could pressure balance sheet resources or limit reinvestment. However, DPS and dividends paid are unreported for the quarter, and the payout ratio source basis is unclear; treat this as indicative rather than definitive. Without OCF or FCF data, coverage of dividends by internally generated cash cannot be evaluated. Given ROIC at 2.9%, management may face a trade-off between shareholder returns and funding projects to raise capital efficiency. Policy outlook: if the company targets stable or progressive dividends, maintaining payout may require continued earnings momentum and improved cash conversion.

Risk Assessment

Business Risks:

• Revenue volatility tied to end-market demand and pricing for precious metal-based products
• Input cost volatility for precious metals impacting gross margin
• Potential FX exposure affecting both operating costs and non-operating items
• Execution risk in scaling operations while maintaining margins

Financial Risks:

• Non-operating expenses exceeding non-operating income, creating volatility at the ordinary income level
• Moderate leverage (D/E 0.81x) combined with net debt ~165–170 may amplify downside if earnings soften
• Low ROIC (2.9%) indicating capital efficiency risk and potential dilution of value if capex is heavy
• Dividend sustainability risk if the >100% payout ratio persists without strong cash generation

Key Concerns:

• Earnings quality cannot be validated due to unreported operating cash flow
• Asset turnover is low (0.198x), constraining ROE despite decent margins
• Interest rate and refinancing risk if rates rise, though current coverage is strong
• Sensitivity to inventory valuation and turnover amid price volatility

Investment Implications

Key Takeaways:

• Strong revenue growth (+66.9% YoY) with solid operating margin (~14.7%)
• Non-operating line is a net drag (expenses 24.91 > income 20.84), adding earnings volatility
• Capital efficiency weak: ROIC 2.9% and asset turnover 0.198x cap ROE at 3.6%
• Balance sheet resilience with current ratio 2.28x and interest coverage 12.27x
• Dividend sustainability uncertain given a calculated payout ratio >100% and missing cash flow data

Metrics to Watch:

• Operating cash flow and OCF/NI ratio (target >1.0)
• Free cash flow after capex and dividend coverage
• Inventory and receivable turnover to track cash conversion
• Non-operating items breakdown (FX gains/losses, valuation, other) and interest expense trend
• ROIC progression and capital allocation to higher-return projects
• Operating margin trajectory and pricing power

Relative Positioning: Operational profitability is competitive this quarter, but capital efficiency trails benchmarks; liquidity is strong versus many peers, while earnings quality and dividend coverage are less certain due to absent cash flow disclosure.

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