Kyodo Printing Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥47.60B
• Operating Income: ¥612M
• Net Income: ¥1.35B
• EPS: ¥47.97

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 mixed but improving quarter—top line slightly down, operating profit flat, and bottom-line strength driven by non-operating gains and a lower base last year. Revenue declined 1.2% YoY to 476.01, while operating income dipped 1.8% YoY to 6.12, implying operating margin of roughly 1.29%. Ordinary income rose 9.3% YoY to 10.03, aided by 5.47 of non-operating income (notably 2.05 of dividend income) and modest non-operating expenses of 1.55. Net income jumped 55.3% YoY to 13.51, pushing net margin to about 2.84% and EPS to 47.97 JPY on 28.18 million average shares. Gross profit was 98.91, translating to a gross margin of 20.8%, but SG&A of 92.79 consumed 93.8% of gross profit, keeping core margins thin. Margin dynamics: operating margin was essentially flat YoY (c. -1 bp), ordinary margin expanded by roughly 21 bps (from about 1.90% to 2.11%), and net margin expanded by about 103 bps (from about 1.81% to 2.84%). Earnings quality is acceptable with OCF/NI at 1.11x (OCF 15.00 vs NI 13.51), indicating profits are largely cash-backed this half. Liquidity is healthy (current ratio 147.2%, quick ratio 134.7%) with ample cash of 108.48 against short-term loans of only 1.69. Leverage appears moderate with reported D/E at 0.95x, and interest coverage is sound at 7.29x; calculated equity ratio stands near 51% (648.19/1,264.54). However, capital efficiency remains a key concern: ROE is 2.1% and ROIC is only 0.7%, far below a typical 7–8% target. Profit structure remains reliant on non-operating drivers, with a non-operating income ratio of about 40.5%, indicating ordinary income is meaningfully supported by items like dividends. Working capital is manageable but receivables are sizeable (AR 253.61), consistent with c. ~95–100 days AR on an annualized basis. Reported payout ratio of 346.9% suggests potential pressure on dividend sustainability, but dividend details are unreported and should be treated with caution. Forward-looking, sustaining profit improvement will require improving core operating margin via mix, pricing, and cost discipline; reliance on non-operating income is not a durable strategy. Overall, the quarter shows stabilization in core earnings and a strong rebound at the net level, but structural profitability and capital efficiency remain the main hurdles.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.1% = Net Profit Margin 2.8% × Asset Turnover 0.376 × Financial Leverage 1.95x. The largest change driver YoY is net profit margin, which expanded roughly 103 bps as net income rose 55.3% YoY despite a 1.2% revenue decline. Business reason: improved ordinary income from higher non-operating income (dividend income 2.05 and total non-operating income 5.47) and likely a lower comparative tax/extraordinary impact last year, while core operations remained thin (operating income down 1.8% YoY). Asset turnover likely edged down due to lower revenue against a broadly stable asset base (assets 1,264.54), keeping utilization modest at 0.376. Financial leverage at 1.95x is moderate and not a key driver of ROE. Sustainability: the margin lift is partially one-time/non-core given the 40.5% non-operating income ratio; absent persistent cost takeout or pricing, operating margin (c. 1.29%) leaves little buffer. Concerning trends: SG&A of 92.79 absorbed 93.8% of gross profit (98.91), indicating limited operating leverage; any SG&A growth above revenue would immediately compress margins. Maintaining or expanding margins will require either revenue mix upgrades or structural cost reductions across SG&A.

Growth Assessment

Top-line: Revenue decreased 1.2% YoY to 476.01, reflecting a soft demand backdrop and/or price pressure typical in legacy printing segments. Profit: Operating income fell 1.8% YoY to 6.12 (operating margin ~1.29%), while ordinary income rose 9.3% YoY to 10.03 and net income rose 55.3% to 13.51, largely due to non-operating gains and potentially favorable below-the-line items. Quality: Operating profit contribution is modest relative to total profit; non-operating income of 5.47 is a sizable driver, including 2.05 of dividend income. Outlook: Near-term earnings sustainability hinges on maintaining non-operating gains and stabilizing core margins; with SG&A high relative to gross profit, operational initiatives (pricing, product mix, efficiency) are critical. Given ROIC at 0.7%, growth investment hurdle rates are not being met; management may prioritize restructuring, asset optimization, and selective high-ROIC niches over scale expansion. Revenue sustainability will likely depend on defensive segments, packaging, security/functional printing, and services rather than commoditized offset printing.

Financial Health

Liquidity: Current ratio 147.2% and quick ratio 134.7% indicate adequate short-term coverage; both are above warning thresholds (no alert), though current ratio is slightly below a 1.5x comfort benchmark. Cash and deposits of 108.48 comfortably exceed short-term loans of 1.69. Working capital of 152.17 supports operations; AR 253.61 is sizeable but consistent with industry credit terms. Solvency: Reported D/E 0.95x is moderate; debt/EBITDA at 0.43x and interest coverage at 7.29x indicate low balance sheet risk. Calculated equity ratio is approximately 51.3% (648.19/1,264.54), suggesting a solid capital base. Maturity mismatch risk appears low: current assets 474.73 vs current liabilities 322.56; long-term loans of 13.00 are modest. Off-balance sheet obligations: none disclosed in the data. No explicit warnings on Current Ratio (<1.0) or D/E (>2.0).

Cash Flow Quality

OCF/NI is 1.11x (OCF 15.00 vs NI 13.51), which is above the 1.0 threshold and points to acceptable earnings quality this half. Free cash flow cannot be assessed as investing CF and capex are unreported. Financing cash outflow of -19.22 suggests dividends and/or debt repayments exceeded OCF, implying a net cash decrease unless offset by positive investing inflows (not disclosed). Working capital: Receivables are high relative to annualized sales (~97 days), but inventory looks lean (~20 days on annualized COGS). No evident signs of aggressive working capital manipulation given positive OCF despite revenue softness. Sustainability: Without capex data, recurring FCF coverage of dividend and debt service cannot be confirmed.

Dividend Sustainability

Dividend data are largely unreported (DPS, total dividends paid, capex, FCF unavailable). The provided calculated payout ratio of 346.9% appears inconsistent with the lack of dividend disclosures and likely reflects a different basis or timing; treat this figure with caution. With NI at 13.51 and OCF at 15.00, the capacity to fund ordinary dividends exists in principle, but sustainability depends on actual cash dividends, maintenance capex, and the persistence of non-operating income. Given ROIC at 0.7% and thin operating margins, a conservative payout policy would be prudent to preserve balance sheet flexibility. Until DPS is disclosed, we cannot assess FCF coverage or adherence to any stated payout policy.

Risk Assessment

Business Risks:

• Structural decline and digitization in traditional printing leading to persistent revenue pressure
• Pricing pressure and competitive intensity compressing operating margins (operating margin ~1.29%)
• Input cost volatility (paper, ink, energy) potentially outpacing pricing power
• High SG&A burden (93.8% of gross profit), limiting operating leverage
• Execution risk in shifting portfolio to higher value-added segments (packaging, security)

Financial Risks:

• Low ROIC (0.7%) well below cost of capital, risking value dilution on incremental investment
• Profit reliance on non-operating income (non-operating income ratio ~40.5%), increasing earnings volatility
• Receivables concentration and elongated collection cycle (~97 days) can pressure cash conversion in downturns
• Effective tax rate at 37.7% reduces net profitability buffer
• Potential dividend pressure if actual payouts are high relative to cash generation (dividend details unreported)

Key Concerns:

• Sustainability of net margin improvement given flat core operating margin
• Need for structural cost reduction to lift operating margin above ~1–2%
• Ordinary income sensitivity to market-dependent dividend income (2.05) and other non-operating items
• Capital allocation discipline required given sub-par capital efficiency
• Data gaps (capex, investing CF, DPS) limit full assessment of FCF and payout sustainability

Investment Implications

Key Takeaways:

• Headline improvement at the net level (+55.3% YoY NI) masks flat core operating performance (-1.8% YoY OI).
• Non-operating income (5.47) significantly supported ordinary income (10.03), lifting net margin to 2.84%.
• Liquidity is sound (current ratio 147.2%, cash 108.48) and leverage low (debt/EBITDA 0.43x, interest cover 7.29x).
• Capital efficiency is weak (ROE 2.1%, ROIC 0.7%), highlighting the need for margin and asset utilization improvements.
• SG&A intensity remains the core profitability bottleneck (93.8% of gross profit).

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio (target sustained improvement above ~2% operating margin)
• Non-operating income ratio and dividend income volatility
• ROIC trend vs 7–8% benchmark and asset turnover improvement
• OCF/NI and working capital days (AR days and inventory days)
• Capex and investing CF disclosures to assess FCF and payout coverage
• Order backlog and mix shift toward higher value-added printing/packaging

Relative Positioning: Relative to domestic printing peers, the company maintains a solid balance sheet and liquidity but operates with thinner margins and notably low ROIC, implying weaker capital efficiency and higher reliance on non-operating income for total profit contribution.

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