FUKUVI CHEMICAL INDUSTRY CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.51B
• Operating Income: ¥719M
• Net Income: ¥503M
• EPS: ¥30.45

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

Fukubi Chemical Industry (TSE:7871) delivered resilient FY2026 Q2 (H1) results with top-line softness but clear margin and earnings improvement. Revenue declined slightly by 0.5% YoY to ¥19.5bn, yet operating income rose 13.3% to ¥0.72bn, demonstrating effective cost control and/or improved product mix. Net income increased 27.6% to ¥0.60bn, aided by stronger non-operating results as ordinary income (¥0.88bn) exceeded operating income. Gross profit of ¥5.75bn implies a gross margin of 29.5%, a healthy level for a building materials/plastics maker. Operating margin improved to roughly 3.7%, indicating early success in pricing discipline and SG&A efficiency despite a flat demand environment. EBITDA was ¥1.37bn (7.0% margin), providing a reasonable buffer for reinvestment. ROE, via DuPont, stands at 1.58% with net margin 3.08%, asset turnover 0.365x, and low financial leverage of 1.40x, suggesting a conservative balance sheet and scope to enhance returns mainly through margin and asset efficiency rather than leverage. Operating cash flow was robust at ¥2.60bn, exceeding net income by 4.3x, pointing to strong cash conversion and likely a favorable working capital swing in the half. Liquidity is strong with a current ratio of 264.7% and quick ratio of 238.8%, supported by sizable working capital of ¥22.1bn. Total liabilities are modest at ¥15.7bn against equity of ¥38.1bn, yielding a low debt-to-equity ratio of 0.41x and minimal interest burden (¥2m), reflected in a very high interest coverage of ~360x. The ordinary income uplift over operating income implies positive non-operating contributions (e.g., forex gains, interest income) that enhanced earnings quality this period. Revenues showed limited contraction, but profit resilience suggests progress on cost pass-through and disciplined expense management in a tough market. Interim income tax expense of ¥0.18bn suggests an implied tax rate around 20–21% on ordinary income, despite an “effective tax rate” metric shown as 0.0% (likely unreported). Several items are unreported (e.g., cash balance, capex/investing CF, DPS details), limiting full-cycle FCF and dividend sustainability analysis. Overall, Fukubi exhibits a sound financial position, strong cash generation in H1, and improving profitability despite flat demand—key positives heading into 2H. The outlook will hinge on sustaining margin gains, stabilizing volumes, and maintaining strong cash conversion as working capital normalizes.

Profitability Analysis

ROE_decomposition: Reported ROE 1.58% = Net margin 3.08% × Asset turnover 0.365 × Financial leverage 1.40. This indicates modest profitability, low asset intensity utilization, and conservative leverage. The largest levers for ROE improvement are margin expansion and better asset turnover rather than increasing leverage. margin_quality: Gross margin 29.5% is solid for the category and signals improved pricing/mix or raw material tailwinds. Operating margin ~3.7% (¥719m/¥19,514m) improved YoY with operating income +13.3% on slightly lower revenue, showing SG&A control. Net margin rose to 3.08% aided by positive non-operating items (ordinary income > operating income by ¥160m), which may not be fully recurring. operating_leverage: With revenue -0.5% YoY and operating income +13.3% YoY, incremental margins were favorable, implying positive operating leverage from cost discipline and procurement efficiencies. EBITDA margin at 7.0% vs operating margin ~3.7% suggests a reasonable depreciation load (¥648m D&A) and room for future operating leverage if volumes stabilize or grow.

Growth Assessment

revenue_sustainability: H1 revenue of ¥19.5bn declined 0.5% YoY, implying flattish end-market demand. Stability suggests core products maintained share, but top-line acceleration likely depends on construction and housing activity and success in higher-value product mix. profit_quality: Ordinary income (¥879m) exceeding operating income (¥719m) indicates non-operating tailwinds contributed to earnings. Core operating improvement was still evident, but the sustainability of non-operating gains should be monitored. outlook: Near-term growth hinges on volume recovery in housing/infrastructure materials, maintaining gross margin near ~30% via pricing and procurement, and continued SG&A control. If input costs remain benign and demand stabilizes, operating margin can trend higher; conversely, raw material inflation or demand softness could compress margins.

Financial Health

liquidity: Current ratio 264.7% and quick ratio 238.8% reflect strong short-term solvency and ample liquidity headroom. Working capital stands at ¥22.06bn, providing operational flexibility. solvency: Debt-to-equity of 0.41x (using total liabilities as a proxy for debt) and interest expense of only ¥2m produce an interest coverage ratio of ~359.5x, indicating very low financial risk from leverage. capital_structure: Total assets ¥53.53bn funded primarily by equity (¥38.12bn) with modest liabilities (¥15.72bn). Financial leverage of 1.40x is conservative, leaving optionality for selective investment without straining the balance sheet.

Cash Flow Quality

earnings_quality: OCF of ¥2.60bn vs net income of ¥0.60bn yields an OCF/NI ratio of 4.32x, indicating strong cash conversion in H1 and suggesting working capital release and/or prudent inventory and receivables management. FCF_analysis: Investing cash flow is unreported (0), so free cash flow cannot be reliably computed for the period. EBITDA of ¥1.37bn and high OCF imply capacity to fund maintenance capex, but lack of capex data limits full FCF assessment. working_capital: Inventories of ¥3.48bn vs H1 COGS ¥13.86bn imply a period-end inventory level equivalent to roughly 0.25x H1 COGS; detailed turns and DIO cannot be confirmed without average balances. The sizeable OCF suggests a favorable working capital swing this half that may not fully repeat.

Dividend Sustainability

payout_ratio_assessment: EPS is ¥30.45 for H1. Reported DPS and payout ratio are shown as 0 (likely unreported). Without actual dividend guidance, payout sustainability cannot be concluded from this dataset. FCF_coverage: Free cash flow is not computable due to unreported investing cash flows. Therefore, dividend coverage by FCF cannot be assessed from the provided numbers. policy_outlook: Given conservative leverage (0.41x liabilities/equity) and strong OCF in H1, the company appears to have capacity for shareholder returns in principle, but actual dividend policy and its prioritization versus reinvestment remain unknown from available data.

Risk Assessment

Business Risks:

• Exposure to construction/housing cycles affecting volumes and pricing.
• Raw material and energy cost volatility impacting gross margins.
• Potential non-operating income volatility (FX, financial income) influencing ordinary income.
• Competitive pressures in building materials and plastics markets.
• Product mix shifts; reliance on premium products to sustain margins.

Financial Risks:

• Working capital normalization could reduce cash conversion in 2H.
• Potential capex needs not visible due to unreported investing CF, which could pressure near-term FCF.
• Currency fluctuations if there is export exposure or imported materials.
• Concentration risk in specific end markets if demand weakens.

Key Concerns:

• Sustainability of margin gains with revenue slightly down YoY.
• Dependence on non-operating gains to lift ordinary income above operating income.
• Limited visibility on capex and FCF due to unreported investing cash flows and cash balance.

Investment Implications

Key Takeaways:

• Operational resilience: operating income +13.3% YoY on -0.5% revenue demonstrates cost control.
• Strong cash conversion: OCF/NI 4.32x in H1 provides financial flexibility.
• Conservative balance sheet: low leverage (financial leverage 1.40x) and high interest coverage (~360x).
• Margins healthy: gross margin 29.5%, EBITDA margin 7.0%, operating margin ~3.7%.
• Non-operating uplift: ordinary income ¥879m > operating income ¥719m; sustainability to be monitored.

Metrics to Watch:

• Gross margin trajectory relative to raw material costs.
• Operating margin and SG&A ratio as volumes fluctuate.
• Working capital movements (receivables, inventories, payables) and OCF sustainability.
• Capex levels and investing cash flows to assess true FCF.
• Revenue growth recovery and product mix improvements.
• Ordinary income composition (FX/financial items) versus core operating earnings.

Relative Positioning: Within Japan’s building materials/plastics cohort, Fukubi appears conservatively financed with solid gross margins and improving operating efficiency, though absolute profitability (ROE 1.58%) remains modest; upside hinges on sustained margin discipline, asset turnover improvement, and clearer FCF visibility.

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
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