SONOCOM CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.29B
• Operating Income: ¥161M
• Net Income: ¥137M
• EPS: ¥37.84

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

Sonocom Co., Ltd. (TSE: 79020) reported FY2026 Q2 single-entity results with solid top-line and strong operating leverage, alongside weaker operating cash flow. Revenue rose 13.4% year on year to ¥1,287 million, supported by improved profitability as operating income increased 51.9% to ¥161 million. Ordinary income outpaced operating income at ¥208 million, indicating meaningful non-operating gains in the period. Net income was ¥137 million (+23.2% YoY), translating to EPS of ¥37.84. Gross profit was ¥357 million, equating to a gross margin of 27.7% and an EBITDA of ¥230 million, or a 17.9% EBITDA margin, indicating healthy cost control and operating efficiency. The operating margin of roughly 12.5% reflects favorable operating leverage from the double-digit revenue growth. DuPont analysis shows ROE of 1.51%, driven by a 10.64% net margin, low asset turnover of 0.132, and modest financial leverage of 1.07. The low turnover reflects a very asset-heavy balance sheet relative to half-year revenue; annualizing revenue would still imply subdued asset utilization. Balance sheet strength appears robust with total assets of ¥9,717 million and total equity of ¥9,083 million; although the equity ratio is shown as 0.0% (unreported), the implied equity ratio is approximately 93.5%, underscoring conservative capitalization. Liquidity is very strong with current assets of ¥5,068 million against current liabilities of ¥377 million, yielding a current ratio of 1,343.8% and working capital of ¥4,691 million. Despite solid profits, operating cash flow was negative at ¥-244 million, implying a sizable working capital outflow or timing effects in receivables/payables. Financing cash flow was an outflow of ¥-43 million, while investing cash flow was unreported (0 placeholder). Dividend data show 0 DPS and 0% payout, which may reflect a policy decision or unreported interim dividends; share count and book value per share are unreported. There is a numerical mismatch between reported cost of sales (¥778 million) and the implied cost of sales derived from revenue minus gross profit (about ¥930 million); we rely on the provided margins for analysis and acknowledge potential mapping differences in accounts. The effective tax rate displayed as 0.0% is not reflective of actual tax; using net income and tax expense suggests an implied tax burden in the low-30% range. Overall, profitability momentum is positive and the balance sheet is conservative, but cash conversion in the half was weak. Sustainability of the operating improvement will hinge on revenue durability, non-operating items normalization, and working capital management. Data gaps (notably cash, investing flows, equity ratio, and share data) limit precision, but available figures support the view of a financially sound issuer with improving earnings power and short-term cash flow pressure.

Profitability Analysis

ROE_decomposition: ROE 1.51% = Net Profit Margin 10.64% × Asset Turnover 0.132 × Financial Leverage 1.07. The margin contribution is strong, turnover is low, and leverage is minimal, yielding a modest ROE for the half-year period. margin_quality: Gross margin 27.7% and EBITDA margin 17.9% indicate healthy cost discipline. Operating margin is approximately 12.5% (¥161m OI on ¥1,287m revenue), benefitting from operating leverage. Ordinary income (¥208m) exceeding operating income suggests non-operating gains, which may not be recurring; core margin quality remains solid but should be evaluated excluding such items. operating_leverage: Operating income growth (+51.9% YoY) outpaced revenue growth (+13.4% YoY), evidencing positive operating leverage. D&A of ¥69.5m (about 5.4% of revenue) supports EBITDA uplift. Continued scale effects could sustain margins if revenue growth persists.

Growth Assessment

revenue_sustainability: Revenue reached ¥1,287m (+13.4% YoY). The breadth and repeatability of drivers are not disclosed; sustainability depends on order backlog, customer concentration, and end-market conditions, which are not provided. profit_quality: Net income of ¥137m (+23.2% YoY) benefitted from both margin expansion and non-operating contributions (ordinary income > operating income). Profit quality is good at the operating level but partly supported by non-operating items. outlook: If revenue momentum continues into H2, full-year margins could remain elevated. However, negative OCF (¥-244m) signals working capital strain that could temper near-term earnings-to-cash conversion. Monitoring the normalization of non-operating gains will be key to the earnings trajectory.

Financial Health

liquidity: Current assets ¥5,067.9m vs current liabilities ¥377.1m yields a current ratio of 1,343.8% and working capital of ¥4,690.8m. Quick ratio 1,342.8% reflects minimal inventories (¥3.9m) relative to current assets. Liquidity is very strong. solvency: Total equity ¥9,083m versus total liabilities ¥615.0m implies low leverage; debt-to-equity is 0.07x. The reported equity ratio is 0.0% (unreported), but the implied equity ratio is roughly 93.5% (¥9,083m/¥9,717m). capital_structure: Financial leverage of 1.07 is low, consistent with a conservative balance sheet. Interest expense is shown as 0 (unreported), so interest coverage cannot be meaningfully calculated; however, operating earnings capacity appears ample relative to the small liability base.

Cash Flow Quality

earnings_quality: OCF/Net Income ratio of -1.78 indicates poor cash conversion in the half, likely driven by working capital outflows and/or timing effects. The presence of non-operating gains (ordinary > operating) also suggests part of earnings may not translate into OCF. FCF_analysis: Free cash flow is shown as 0 (unreported). Using available data, OCF is ¥-243.6m and investing CF is unreported; absent capex detail, FCF cannot be precisely assessed, but OCF negativity implies FCF pressure in the period. working_capital: Inventories are minimal (¥3.9m). The OCF shortfall likely stems from receivables increases and/or payables decreases; detailed movements are not disclosed, so we attribute the gap to working capital timing rather than core profitability.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is shown as 0.0% with annual DPS 0.00, which may reflect either no interim dividends or unreported data. With net income of ¥137m, capacity exists for distributions under a strong equity base, but policy details are not disclosed. FCF_coverage: FCF coverage is shown as 0.00x (unreported). Given OCF was negative and investing CF is undisclosed, near-term FCF coverage of dividends (if any) appears constrained for the half. policy_outlook: Absent explicit policy, we assume a conservative stance consistent with the low leverage and strong equity position; clarity on full-year cash generation and capital allocation would inform dividend outlook.

Risk Assessment

Business Risks:

• Revenue concentration risk (customers/sectors not disclosed).
• Cyclicality or order volatility impacting operating leverage.
• Dependence on non-operating income to lift ordinary profit.
• Input cost fluctuations affecting gross margin.
• Supply chain or receivables collection timing leading to OCF volatility.

Financial Risks:

• Negative operating cash flow in the half (¥-244m) raises cash conversion risk.
• Potential working capital build requiring cash despite low debt levels.
• Limited visibility on capex due to unreported investing CF.
• Interest expense and cash balance not disclosed, reducing transparency on liquidity buffers.

Key Concerns:

• Cash flow conversion lag versus earnings (OCF/NI -1.78).
• Reliance on non-operating items to bridge ordinary income above operating income.
• Data gaps (equity ratio, cash, investing CF, share data) limit precision in assessing capital allocation and per-share metrics.

Investment Implications

Key Takeaways:

• Top-line growth of 13.4% YoY with strong operating leverage (OI +51.9% YoY).
• Healthy profitability: gross margin 27.7%, EBITDA margin 17.9%, operating margin ~12.5%.
• Low leverage and strong implied equity ratio (~93.5%) provide balance sheet resilience.
• Operating cash flow was negative (¥-244m), indicating working capital headwinds.
• Ordinary income exceeded operating income, suggesting non-operating support that may normalize.

Metrics to Watch:

• Order intake/backlog and revenue run-rate into H2.
• Operating cash flow trajectory and working capital movements.
• Core operating margin excluding non-operating items.
• Capex and investing cash flows (currently unreported).
• Effective tax rate on a pre-tax basis versus displayed metric.

Relative Positioning: Within a conservative-capital Japanese small-cap cohort, Sonocom exhibits above-peer balance sheet strength and improving margins but lags on cash conversion in the latest half; sustained revenue growth with normalized non-operating items and improved OCF would enhance its relative standing.

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