SANKYO SEIKO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥10.70B
• Operating Income: ¥586M
• Net Income: ¥1.12B
• EPS: ¥-14.42

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, Sankyo Seiko Co., Ltd. reported revenue of ¥10.70bn, down 5.0% YoY, indicating a softer topline environment and/or weaker volumes/mix. Despite a relatively robust gross profit margin of 46.5%, operating income fell sharply to ¥586m (-49.2% YoY), highlighting significant operating deleverage and cost pressure. Ordinary income was ¥1.203bn, notably higher than operating income, suggesting sizable non-operating gains (e.g., investment income, FX gains, or other financial income). However, the company recorded a net loss of ¥551m (EPS: -¥14.42), implying the presence of large extraordinary losses and/or valuation losses that more than offset ordinary profits. EBITDA was ¥1.154bn (margin 10.8%), evidencing positive underlying cash earnings before non-cash charges and financial items. Interest expense was modest at ¥30m with a strong interest coverage ratio of 19.5x, indicating limited near-term interest burden. The balance sheet appears sound with total assets of ¥72.61bn and total equity of ¥52.83bn; based on reported totals, the implied equity ratio is approximately 72.8% despite the disclosed figure being 0.0% (unreported in XBRL). Liquidity is strong with a current ratio of 234.8% and quick ratio of 193.2%, backed by ¥9.31bn of working capital. Operating cash flow of ¥64m was weak relative to earnings capacity, implying working capital absorption and/or timing effects despite positive EBITDA. The DuPont breakdown shows a net margin of -5.15%, asset turnover of 0.147x, and financial leverage of 1.37x, resulting in a calculated ROE of -1.04%, consistent with the reported figure. This profile points to profitability headwinds primarily at the net level (driven by non-recurring losses) and subdued asset efficiency. Inventory stood at ¥2.87bn; continued attention to turnover is warranted given the weak OCF. No dividend was paid (DPS: ¥0), and payout ratio/FCF coverage were both 0, consistent with loss protection and cash preservation. Financing cash flow was an outflow of ¥2.53bn, indicating net shareholder returns and/or debt repayments despite limited OCF, but cash and equivalents were unreported. Overall, the company maintains a conservative capital structure and ample liquidity, but earnings volatility and cash conversion issues temper the quality of results. Near-term priorities likely include stabilizing margins, improving working capital efficiency, and reducing reliance on non-operating gains. Data limitations (e.g., unreported cash balance, investing cash flows, and share data) constrain full precision, but available figures suggest resilient balance sheet strength offset by pressured profitability.

Profitability Analysis

ROE_decomposition: DuPont shows Net Profit Margin -5.15% × Asset Turnover 0.147 × Financial Leverage 1.37 = ROE -1.04%. The negative margin is the dominant driver of weak ROE, with modest leverage providing limited amplification and low asset turnover constraining returns. margin_quality: Gross margin is high at 46.5%, but operating margin is only ~5.5% (¥586m/¥10,698m), indicating heavy SG&A and/or cost inflation that the company could not fully pass through. The swing from ordinary profit (¥1,203m) to net loss (¥551m) signals material extraordinary losses or valuation effects, pressuring net margin quality. operating_leverage: Revenue declined 5.0% YoY while operating income fell 49.2% YoY, evidencing negative operating leverage and a high fixed-cost base. EBITDA margin at 10.8% remains positive, but the compression versus the sharp decline in operating profit indicates limited flexibility in overhead containment.

Growth Assessment

revenue_sustainability: Topline declined to ¥10.70bn (-5.0% YoY), suggesting demand softness and/or pricing/mix pressure. Sustainability will depend on volume recovery, pricing power, and product mix stabilization. profit_quality: Operating profit fell disproportionately versus revenue, pointing to cost and mix headwinds. Ordinary income outperformed operating income, implying reliance on non-operating gains, while the net loss indicates one-off or extraordinary charges reducing profit quality. outlook: Near term, focus should be on cost control, selective price adjustments, and mix upgrades to rebuild operating margin. Normalization of extraordinary items could lift net profit, but demand uncertainty and cost volatility remain key constraints.

Financial Health

liquidity: Current ratio 234.8% and quick ratio 193.2% indicate strong short-term solvency, supported by ¥9.31bn in working capital. Operating CF was modest at ¥64m, highlighting a need to improve cash conversion despite ample balance-sheet liquidity. solvency: Debt-to-equity is 0.35x, implying conservative leverage. Interest expense is low at ¥30m with coverage of 19.5x, reducing refinancing and interest-rate risk in the near term. capital_structure: Total assets ¥72.61bn and total equity ¥52.83bn imply an equity ratio of roughly 72.8% (derived), underscoring balance-sheet resilience even amid earnings volatility.

Cash Flow Quality

earnings_quality: EBITDA of ¥1.154bn versus OCF of ¥64m signals weak cash conversion in the period, likely due to working capital build and timing of receipts/payments. The negative OCF/Net Income ratio (-0.12) reflects the net loss and limited OCF, highlighting volatility. FCF_analysis: Investing CF was unreported (0), so FCF cannot be precisely determined; reported FCF as 0 reflects missing capex data. If capex is non-trivial, true FCF would be below OCF. working_capital: Inventories are ¥2.87bn; given weak OCF, monitoring inventory turnover, receivables collection, and payables terms is essential to improve cash conversion going forward.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 with a payout ratio of 0.0%, consistent with a net loss and the need to preserve cash. FCF_coverage: FCF coverage is reported as 0.00x; with OCF at ¥64m and investing cash flows unreported, visibility on sustainable coverage is limited, and prudent retention appears appropriate given current results. policy_outlook: Resumption of dividends likely hinges on restoring stable operating profit, reducing extraordinary losses, and demonstrating consistent positive OCF/FCF.

Risk Assessment

Business Risks:

• Demand softness leading to continued revenue decline
• Input cost inflation and pricing pressure compressing margins
• Product mix deterioration affecting gross margin sustainability
• Dependence on non-operating gains to support ordinary income
• Execution risk in cost control and working capital management

Financial Risks:

• Earnings volatility from extraordinary losses or valuation effects
• Weak cash conversion despite positive EBITDA
• Potential inventory/receivables buildup impacting OCF
• Limited visibility on capex and cash balance due to unreported items

Key Concerns:

• Sharp YoY decline in operating income (-49.2%) on modest revenue drop
• Net loss (¥551m) despite ordinary profit (¥1,203m), implying material one-off charges
• Low OCF (¥64m) versus EBITDA (¥1,154m), highlighting working capital strain

Investment Implications

Key Takeaways:

• Topline contracted 5.0% YoY to ¥10.70bn amid a challenging demand backdrop
• Operating leverage turned adverse, driving operating income down 49.2% YoY
• Ordinary income exceeded operating income, but extraordinary items led to a net loss
• Balance sheet remains strong with low leverage (D/E 0.35x) and high liquidity
• Cash conversion was weak; OCF of ¥64m trails EBITDA materially

Metrics to Watch:

• Gross and operating margins (cost control, pricing power)
• Non-operating income and extraordinary gains/losses (quality of earnings)
• Operating cash flow and free cash flow (including capex disclosure)
• Inventory and receivables turnover (working capital efficiency)
• Debt metrics and interest coverage as rates and conditions evolve

Relative Positioning: Compared to domestic peers with similar scale, the company shows stronger balance-sheet conservatism and interest coverage but weaker profit stability and cash conversion, with elevated reliance on non-operating items and exposure to extraordinary-loss volatility.

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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