ZACROS Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥78.33B
• Operating Income: ¥5.57B
• Net Income: ¥4.15B
• EPS: ¥53.17

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

For FY2026 Q2, ZACROS (7917, JGAAP, consolidated) delivered steady topline growth with revenue of ¥78.33bn, up 3.8% YoY, while operating income declined modestly by 1.0% to ¥5.57bn, indicating mild negative operating leverage in the period. Gross profit was ¥17.57bn for a gross margin of 22.4%, suggesting mixed margin dynamics likely from input cost or product mix shifts. Operating margin was 7.1%, and ordinary income of ¥6.08bn exceeded operating income by ¥0.51bn, pointing to positive non-operating contributions. Net income rose 7.5% YoY to ¥3.89bn, lifting net margin to 4.97%, supported by minimal interest expense and a normalizing tax burden. EPS was ¥53.17. On the balance sheet, total assets were ¥147.21bn and total equity ¥100.76bn, implying an equity ratio of roughly 68.5% despite the reported equity ratio field showing 0.0% (unreported). Total liabilities stood at ¥53.23bn, with a debt-to-equity ratio of 0.53x, indicating a conservative capital structure. Liquidity appears robust with a current ratio of 203.9% and quick ratio of 185.3%, underpinned by ¥86.78bn of current assets against ¥42.57bn of current liabilities. Working capital remains ample at ¥44.22bn. Cash flow from operations was ¥4.08bn, modestly exceeding net income (OCF/NI of 1.05), which is a positive indicator for earnings quality. EBITDA reached ¥8.34bn (10.6% margin), and interest coverage is exceptionally strong at 192x given negligible interest expense of ¥29m. The effective tax rate calculated from reported income tax and net income appears around the mid‑20% range, though the automated “effective tax rate” field shows 0.0% due to unreported components. Dividend per share was reported as ¥0.00 and payout ratio 0%, signaling either a period of retention or missing disclosure on interim dividends; FCF could not be derived because investing cash flows were unreported. Overall, the company shows solid financial health, resilient cash generation relative to earnings, and low financial risk, but faces short-term operating margin pressure. Non-operating gains contributed to ordinary income, cushioning the slight operating profit decline. Data limitations (e.g., equity ratio, C&CE, investing CF, share counts) constrain some ratio precision, but available figures support a view of durable balance sheet strength with stable, if slightly pressured, operating profitability.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 4.97%
• asset_turnover: 0.532x
• financial_leverage: 1.46x
• calculated_ROE: 3.86%
• interpretation: ROE of 3.86% reflects modest profitability (sub-5% net margin) and moderate asset utilization (0.53x), with limited leverage (1.46x) tempering return amplification. The ROE is primarily margin-driven rather than leverage-driven. margin_quality:
• gross_margin: 22.4%
• operating_margin: 7.1%
• ordinary_income_margin: 7.8%
• net_margin: 4.97%
• drivers_commentary: Operating margin softness versus revenue growth suggests cost pressures (raw materials, energy, logistics) and/or adverse mix, partially offset at the ordinary income level by non-operating gains. Minimal interest burden supports clean pass-through from ordinary to net profit. operating_leverage: Revenue grew +3.8% YoY while operating income fell -1.0% YoY, indicating negative operating leverage this half. EBITDA of ¥8.34bn vs. D&A of ¥2.77bn shows reasonable coverage of fixed costs; however, SG&A or gross margin compression likely outweighed scale benefits. Monitoring pricing pass-through and utilization rates is key to restoring positive leverage.

Growth Assessment

revenue_sustainability: Topline growth of 3.8% YoY appears steady and broadly in line with modest end-market recovery. Given ZACROS’s exposure to packaging and functional materials, sustainability hinges on consumer demand stability, industrial activity, and price pass-through of petrochemical inputs. profit_quality: Net income growth (+7.5% YoY) outpaced operating profit (-1.0% YoY), implying non-operating tailwinds (e.g., FX, investment income) rather than purely core margin expansion. Interest expense is immaterial (¥29m), so ordinary-to-net translation is clean; tax expense (¥1.26bn) appears consistent with a mid‑20% effective rate. outlook: Assuming stable raw material costs and gradual recovery in downstream markets (including electronics-related), operating margins could normalize in H2. Key swing factors include resin price trends, demand in high-value films, and the sustainability of non-operating gains observed in H1.

Financial Health

liquidity: Current ratio 203.9% and quick ratio 185.3% reflect strong short-term liquidity. Working capital of ¥44.22bn provides a sizable buffer to absorb demand and input cost volatility. solvency: Total liabilities of ¥53.23bn vs. equity of ¥100.76bn yield a debt-to-equity ratio of 0.53x, indicating low leverage. Interest coverage of 192x underscores minimal financial risk. capital_structure: Implied equity ratio is approximately 68.5% (¥100.76bn/¥147.21bn), despite the reported equity ratio field being unreported. Balance sheet conservatism supports flexibility for capex and strategic investments.

Cash Flow Quality

earnings_quality: OCF of ¥4.08bn vs. net income of ¥3.89bn (OCF/NI 1.05) suggests acceptable earnings cash conversion. EBITDA of ¥8.34bn provides healthy non-cash addbacks relative to D&A of ¥2.77bn. FCF_analysis: Free cash flow cannot be reliably computed due to unreported investing cash flows (shown as 0). As a proxy, operating cash generation appears sufficient to cover typical maintenance capex, but growth capex needs cannot be assessed from the data. working_capital_dynamics: Current assets ¥86.78bn and inventories ¥7.93bn indicate manageable inventory exposure relative to scale; however, the absence of receivables/payables detail limits turnover analysis. The positive OCF suggests working capital was not a material drag in the period.

Dividend Sustainability

payout_ratio_assessment: Reported DPS is ¥0.00 with a payout ratio of 0.0%, which could reflect either non-payment in the interim or missing disclosure. With net income of ¥3.89bn and low leverage, there is theoretical capacity for distributions subject to policy and capex needs. FCF_coverage: FCF coverage cannot be determined because investing cash flows are unreported (0 indicates not disclosed). Using OCF alone, the company could potentially fund dividends and maintenance capex, but visibility is insufficient for coverage analysis. policy_outlook: Given the robust balance sheet and modest OCF/NI >1x, dividend policy likely balances reinvestment (e.g., capacity upgrades, functional materials) with returns to shareholders. Confirmation requires management guidance and full-year capex plans.

Risk Assessment

Business Risks:

• Raw material price volatility (petrochemical resins, films) affecting gross margins and pricing lag.
• Demand cyclicality in packaging and electronics-related materials, including semiconductor/electronics end-markets.
• Product mix shifts that can compress margins if value-added segments underperform.
• Customer pricing pressure and contract timing affecting pass-through of costs.
• FX fluctuations impacting non-operating income and import material costs.
• Environmental regulatory changes and sustainability requirements potentially driving capex and cost.

Financial Risks:

• Working capital swings affecting OCF despite reported strength this half.
• Potential increase in capex for growth or compliance, with unreported investing CF limiting visibility.
• Non-operating income variability influencing ordinary income stability.
• Pension or other long-term obligations not detailed in the data set.

Key Concerns:

• Negative operating leverage in H1 despite revenue growth.
• Limited transparency on investing cash flows and cash balances (reported as 0 due to non-disclosure).
• Reliance on non-operating gains to sustain ordinary income above operating income.

Investment Implications

Key Takeaways:

• Topline grew 3.8% YoY to ¥78.33bn, but operating income declined 1.0% to ¥5.57bn, signaling margin pressure.
• Net income increased 7.5% to ¥3.89bn, supported by non-operating gains and minimal interest burden.
• Balance sheet is strong with implied equity ratio ~68.5% and D/E of 0.53x.
• OCF/NI of 1.05 indicates acceptable cash conversion; FCF not assessable due to unreported investing CF.
• Liquidity is ample (current ratio ~204%, quick ratio ~185%), reducing near-term financial risk.

Metrics to Watch:

• Gross and operating margins (price pass-through vs. input cost trends).
• Ordinary income composition (sustainability of non-operating gains).
• OCF/NI and working capital turns (inventory and receivables).
• Capex and investing cash flows (timing and scale).
• EBITDA margin and interest coverage as indicators of operating resilience.
• Revenue growth in high-value functional materials vs. commodity segments.

Relative Positioning: Financially conservative with strong liquidity and low leverage compared to typical materials/packaging peers, but experiencing short-term operating margin pressure; resilience at the net level benefits from non-operating items and low interest costs.

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