Kyodo Printing Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥47.60B
• Operating Income: ¥612M
• Net Income: ¥867M
• 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 Integrated Analysis

Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)

Executive Summary

Kyodo Printing (TSE: 7914) reported FY2026 Q2 (cumulative) consolidated results under JGAAP showing modest top-line softness but improved bottom-line performance. Revenue was ¥47.6bn, down 1.2% YoY, with gross profit of ¥9.5bn and a gross margin of 20.0%, indicating a maintained value-add despite sales contraction. Operating income was ¥0.61bn, down 1.8% YoY, suggesting limited operating leverage and continued cost pressures. Ordinary income reached ¥1.00bn, and net income rose sharply to ¥1.35bn (+55.3% YoY), implying meaningful contributions from non-operating factors and/or improved below-the-line items. EBITDA was ¥3.54bn (7.4% margin), evidencing modest cash earnings capacity relative to sales. DuPont analysis yields ROE of 2.08% based on a net margin of 2.84%, asset turnover of 0.376x, and financial leverage of 1.95x; this ROE remains subdued versus typical Japanese cost of equity. The OCF/Net Income ratio of 1.77 indicates earnings quality is solid this period, with operating cash flow exceeding accounting profits. Liquidity is comfortable with a current ratio of 181.9% and quick ratio of 168.5%, and working capital of ¥21.5bn provides a buffer against cyclical fluctuations. Reported debt-to-equity of 0.98x indicates a moderate leverage profile, though interest coverage of 7.1x suggests manageable debt service. Reported equity ratio is 0.0%, but per instruction zeros indicate unreported, not actual, so solvency should be assessed using the provided liabilities and equity balances. Cash and equivalents, investing cash flows, and free cash flow are shown as zero/unreported, limiting visibility on cash reserves and capex intensity. Dividend per share and payout ratio are marked at zero/unreported; dividend policy therefore cannot be inferred from the dataset. Tax expense is disclosed (¥0.62bn) but the computed effective tax rate field shows 0.0%, highlighting disclosure limitations in derived metrics. Overall, the company shows resilient gross margin and improved net income despite lower sales, but operating leverage remains weak and ROE is low. The balance sheet appears stable with moderate leverage and strong liquidity, while cash flow quality is favorable based on OCF/NI. Strategic execution on higher-margin niches (e.g., packaging, security/functional printing) and cost control remain key to lifting structural profitability. Data omissions (notably cash, capex, and dividends) constrain the depth of conclusion; the analysis focuses on the available non-zero data per instructions.

From Earnings Presentation: Kyodo Printing's H1 FY2026/3 results showed slight declines with revenue of ¥47.6bn (-1.2% YoY) and operating profit of ¥612mn (-1.8%), but net profit for the interim period surged significantly to ¥1,351mn (+55.3%) mainly due to the sale of policy shareholdings. Full-year guidance remains unchanged. The Information & Communication segment underperformed due to a faster-than-expected contraction in the publishing print market, though operating loss remained flat thanks to selective order intake and price revisions. The Information Security segment saw profit decline due to some products shifting to H2 and failure to secure existing BPO contracts, though information services BPO remained strong. The Living & Industrial Materials segment achieved higher revenue and profit driven by price revisions and growth in flexible packaging and paperboard (wrap cartons). The main driver of operating margin improvement was selective order intake and price revisions (+¥112mn), offsetting increased personnel costs (-¥259mn). Dividend policy of ¥76 per share (targeting DOE of 3.5%) is maintained. Medium-term focus is on securing orders in priority areas (IR, in-store promotion, information services BPO, etc.) and improving profitability through operational efficiency.

Financial Analysis

Profitability

ROE decomposes to 2.08% = 2.84% net margin × 0.376x asset turnover × 1.95x financial leverage, indicating profitability is constrained more by low asset turnover and margin than by insufficient leverage. Gross margin at 20.0% is stable for the printing sector, suggesting adequate pricing and mix, potentially supported by higher-value segments. Operating margin is 1.3% (¥0.612bn/¥47.601bn), reflecting cost inflation (materials, energy) and limited operating leverage; small revenue declines translate into outsized operating profit pressure. EBITDA margin at 7.4% indicates reasonable cash operating profitability, but depreciation (¥2.93bn) is sizable relative to EBITDA, reflecting asset intensity and constraining EBIT. The YoY increase in net income (+55.3%) despite slight revenue and operating income declines suggests non-operating gains or improved financial income/expenses and/or lower minority interest; ordinary income exceeds operating income by ¥0.39bn. Interest expense is modest (¥86m) with interest coverage of 7.1x, implying limited drag from financing costs. Margin quality appears mixed: gross margin resilience is positive, but low operating margin and dependence on non-operating items temper quality. Operating leverage is weak in the period, as small top-line changes produced almost proportional changes in operating profit (−1.8% YoY OI vs −1.2% YoY sales), pointing to a largely fixed-cost base. The effective tax burden cannot be reliably interpreted from the provided derived metric (0.0% reported), although income tax of ¥0.618bn is disclosed. Overall profitability remains below peers with higher-value-added portfolios, with ROE at 2.08% underscoring the need for structural profit improvement.

Growth

Revenue declined 1.2% YoY to ¥47.6bn, indicating a soft demand environment or portfolio rationalization. The stable gross margin suggests product mix and pricing efforts helped defend value-add despite lower volumes. Operating income declined 1.8% YoY, reflecting limited ability to flex costs near-term; ongoing efficiency measures will be key to restoring operating leverage. Net income rose 55.3% YoY to ¥1.35bn, driven by non-operating improvements (ordinary income > operating income), which may not be fully repeatable. EBITDA of ¥3.54bn provides a base for reinvestment, but depreciation intensity implies continued capex needs to sustain competitiveness; investing cash flows are unreported this period, limiting visibility on growth investment. Near-term growth outlook likely hinges on recovery in packaging/functional materials, stabilization in commercial printing, and continued cost pass-through for materials and energy. With asset turnover at 0.376x, capital efficiency is low; portfolio optimization and asset-light growth could support medium-term growth. Given the low operating margin base, even modest revenue growth could lift profits if cost control persists, but downside risk exists if price competition intensifies. Data limitations (no segment detail, no order backlog) constrain an assessment of revenue sustainability; conclusions are based solely on consolidated disclosed figures.

Financial Health

Total assets are ¥126.5bn, liabilities ¥63.3bn, and equity ¥64.8bn, implying an equity base roughly half of total assets (i.e., a balanced capital structure) despite the equity ratio field showing 0.0% (unreported). Current assets are ¥47.8bn versus current liabilities of ¥26.3bn, yielding a current ratio of 181.9% and quick ratio of 168.5%, indicating strong liquidity. Working capital stands at ¥21.5bn, providing ample short-term funding buffer. Debt-to-equity is reported at 0.98x, suggesting moderate leverage; specific interest-bearing debt and cash balances are unreported, preventing net debt calculation. Interest expense of ¥86m and 7.1x coverage indicate manageable interest burden. No data on contingent liabilities, pensions, or guarantees is provided; solvency assessment is therefore based on the liability/equity snapshot only. Overall, the balance sheet appears stable with adequate liquidity and moderate leverage, but lack of cash and detailed debt disclosure limits precision.

Cash Flow

Operating cash flow is ¥2.39bn against net income of ¥1.35bn, for an OCF/NI ratio of 1.77, indicating good cash conversion and limited accrual risk in the period. Depreciation and amortization of ¥2.93bn are substantial relative to EBIT, supporting non-cash add-backs and cash earnings. Investing cash flow is unreported (shown as 0), so we cannot assess capex or acquisition activity; consequently free cash flow cannot be reliably computed despite a reported FCF of 0. Working capital details are limited, but strong liquidity and positive OCF imply no material adverse working capital drain in the period; inventories are ¥3.52bn, relatively small compared to revenue, which may help cash conversion. With incomplete cash and capex data, conclusions focus on the favorable OCF-to-earnings relationship and manageable interest burden.

Dividend Sustainability

Dividend per share and payout ratio are shown as 0.00, which per instructions indicates unreported rather than actual zero. Therefore, dividend sustainability cannot be directly assessed from payout or FCF coverage. From earnings capacity, H1 net income of ¥1.35bn and positive OCF of ¥2.39bn suggest capacity to fund distributions if policy permits, but capex requirements (unreported) and low ROE (2.08%) argue for cautious capital returns until profitability improves. Historically, Japanese printing companies often maintain conservative payout policies; absent explicit guidance, we assume a conservative stance. Without investing cash flow and cash balance details, we cannot compute FCF coverage, so any dividend outlook remains tentative and policy-driven.

Business Outlook

Full-year guidance remains unchanged at revenue ¥103.5bn (+3.6%), operating profit ¥2.8bn (+20.1%), and net profit ¥3.85bn (+16.3%). H2 is expected to see recovery in the Information Security segment from the return of transport IC cards and securities products that shifted, continued strength in information services BPO, and secure acquisition of existing BPO contracts. Living & Industrial Materials segment is anticipated to maintain generally steady progress in H2. Information & Communication segment will focus on securing orders in priority areas such as IR and in-store promotion and high-margin projects from Q3 onwards, improving profitability through operational efficiency. Overall, considering H1 revenue progress of 46.0% and operating profit progress of 21.9% with H2 seasonality weighting, H2 plan includes approximately ¥55bn in revenue and just under ¥2.2bn in operating profit. Progress in price revisions and selective order intake is key to margin improvement, with achievement of full-year targets premised on management of fixed costs (personnel, outsourcing) and progress in high-value-added mix (packaging, security BPO).

Management Guidance

Management confirms that price revision and selective order intake initiatives are achieving certain results and will continue in H2. While accepting structural cost increases from personnel expenses (wage increases), they will offset these through operational efficiency (DX, productivity improvements). In response to the faster-than-expected contraction in the publishing print market, they will concentrate resources on priority areas (IR, in-store promotion, information services BPO). The H2 shift of some Information Security products is positioned as a temporary factor with recovery expected for the full year. Maintaining strength in Living & Industrial Materials segment and narrowing losses in Information & Communication segment are pillars of full-year operating profit growth. Dividends are calculated based on DOE of 3.5% target against the average of prior fiscal year-end and current fiscal year-end equity, maintaining ¥76. While basic policy is to pay as initially forecast, adjustments will be made considering business performance and financial conditions to ensure DOE does not fall significantly below 3.5%. Annual dividend of ¥76 (interim ¥38, year-end ¥38) remains unchanged.

Strategic Initiatives

• Thorough selective order intake and price revisions: Suppress unprofitable projects and concentrate resources on high-margin projects. Confirmed effect of +¥112mn in H1 to continue in H2
• Strengthening priority areas: Focus on high-value-added areas such as IR, in-store promotion, and DX consulting in Information & Communication segment, and expansion of information services BPO in Information Security segment
• Operational efficiency and cost reduction: Address increased personnel and outsourcing costs through productivity improvements (equipment automation, DX utilization) and fixed cost management. Workforce optimization through Tomakomai plant closure already implemented
• Growth in packaging-related business: Capture growth in wrap cartons (paperboard) and flexible packaging for instant noodles in Living & Industrial Materials segment, while advancing price revisions in parallel
• Expansion of information services BPO: Further strengthen strong-performing information services BPO and ensure secure acquisition of existing BPO contracts (filling the gap from prior-year one-time project decline)
• Promotion of policy shareholding sales: Posted gains on sales in H1, contributing to net profit increase. Continue to reduce cross-holdings and improve capital efficiency
• Stable dividends targeting DOE of 3.5%: Continue shareholder returns based on dividend on equity ratio, maintaining initial forecast as baseline while adjusting flexibly according to performance

Risk Assessment

Business Risks:

• Structural decline in legacy commercial printing due to digitalization
• Raw material (paper, ink, film) and energy cost volatility affecting margins
• Price competition and weak pricing power in commoditized segments
• Customer concentration risk with large corporate clients
• Execution risk in shifting to higher-margin packaging and functional materials
• Demand cyclicality tied to advertising, retail, and industrial activity
• Technological obsolescence and need for ongoing capex to maintain competitiveness
• Supply chain disruptions impacting materials availability and lead times

Financial Risks:

• Moderate leverage (D/E ~0.98x) with potential sensitivity to interest rate increases
• Limited visibility on cash balance and capex; risk of negative FCF in investment cycles
• Asset impairment risk given asset-intensive operations and low ROE
• Working capital swings (receivables collection, inventory management) affecting OCF
• Pension and other long-term liabilities not disclosed in the dataset

Key Concerns:

• Low structural ROE at 2.08% below cost of equity
• Operating margin of ~1.3% indicates thin buffer against cost shocks
• Non-operating items supporting net income; earnings quality partly dependent on below-the-line factors
• Data gaps for cash, capex, and dividends constrain full assessment

Risk Factors from Presentation:

• Faster-than-expected acceleration of publishing print market contraction (downside risk factor for Information & Communication segment performance)
• Uncertainty in securing existing BPO contracts (Information Security segment saw decline in prior-year one-time projects, failure to secure other contracts)
• Impact on H1 performance from H2 shift of some products (transport IC cards, securities-related)
• Continued increase in personnel costs (wage increases) and rising outsourcing costs leading to heightened fixed cost pressure
• Risk of fluctuations in material costs such as paper and energy (H1 was supported by material cost reduction, but depends on future market conditions)
• Sluggish growth in overseas markets for tube products (Living & Industrial Materials segment)

Investment Implications

Key Takeaways:

• Sales declined 1.2% YoY to ¥47.6bn, but gross margin held at 20.0%
• Operating income decreased 1.8% YoY to ¥0.61bn, highlighting weak operating leverage
• Net income rose 55.3% YoY to ¥1.35bn, implying support from non-operating items
• ROE is low at 2.08%, constrained by low margin and asset turnover
• OCF/NI of 1.77 indicates solid cash conversion
• Liquidity is strong (current ratio 181.9%, quick ratio 168.5%); leverage moderate (D/E ~0.98x)
• Capex and cash balances are unreported, preventing FCF assessment and limiting dividend analysis

Metrics to Watch:

• Operating margin trajectory and cost pass-through to protect EBIT
• Ordinary vs operating income gap to gauge reliance on non-operating gains
• Capex and investing cash flows to assess FCF and capital intensity
• Asset turnover improvements via portfolio optimization
• Working capital efficiency (DSO/DIO/DPO) and OCF sustainability
• Material and energy cost trends and pricing actions
• Segment mix shift toward higher-margin packaging/functional products

Relative Positioning: Within Japan’s printing sector, Kyodo Printing appears smaller and less profitable than mega-cap peers with diversified high-value-added portfolios, resulting in lower ROE and thinner operating margins; strategic emphasis on packaging and functional materials is likely necessary to close the profitability gap.

Supplementary Insights (Key Highlights)

• Interim net profit increased 55.3% to ¥1,351mn, but this was mainly due to the sale of policy shareholdings, with limited improvement at the operating level (supporting the GPT analysis hypothesis of non-operating contributions)
• Selective order intake and price revision initiatives delivered a ¥112mn profit enhancement effect, maintaining operating profit at prior-year levels despite revenue decline (qualitative improvement)
• Personnel costs increased by ¥259mn due to wage increases despite workforce reduction from Tomakomai plant closure, indicating fixed cost pressure
• Information & Communication segment saw business forecast miss due to accelerating contraction in the publishing print market, with increased outsourcing costs for planning and production in priority areas (in-store promotion, IR)
• Information Security segment experienced profit decline as some products in transport IC cards and securities shifted to H2, coupled with loss of prior-year one-time projects and failure to secure new BPO contracts
• Living & Industrial Materials segment performed strongly with operating profit of +¥216mn (+46.4%), driven by growth in flexible packaging (instant noodles) and paperboard (wrap cartons), with successful price revisions
• Operating profit variance analysis quantified materials, personnel, and other costs, clearly demonstrating the impact of price revisions and increased outsourcing costs (not captured in GPT analysis)
• Full-year guidance unchanged, but H1 progress rates of 46.0% for revenue and 21.9% for operating profit indicate H2-weighted structure, assuming recovery in Information Security and Living & Industrial Materials in H2
• Dividend policy maintains DOE of 3.5% target, keeping full-year ¥76 (interim ¥38, year-end ¥38) even after H1 results (GPT analysis incorrectly stated zero dividend; actual forecast is ¥76 annually)
• Detailed segment operating profit breakdown disclosed: Information & Communication at -¥442mn loss, Information Security ¥628mn, Living & Industrial Materials ¥681mn

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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