MITSUI & CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.76T
• Net Income: ¥436.88B
• EPS: ¥147.41

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

Mitsui & Co., Ltd. (8031) reported FY2026 Q2 consolidated IFRS results with revenue of 67,591.15 (100M JPY), declining 7.8% YoY, while net income increased 2.9% YoY to 4,237.33 (100M JPY). Gross profit was 6,124.21 (100M JPY), implying a gross margin of 9.1%, consistent with a trading-heavy mix. SG&A expenses were 4,447.45 (100M JPY), suggesting a core gross profit after SG&A of roughly 1,676.76 (100M JPY) before other operating items, though operating income was unreported and IFRS classification could materially affect this inference. Profit before tax reached 5,466.36 (100M JPY), buoyed by sizable equity-method investment income of 2,563.25 (100M JPY), underscoring the importance of associates and JVs in the earnings mix. The effective tax rate was 20.8%, broadly stable for a global portfolio with resource exposure. DuPont metrics indicate ROE of 5.1%, derived from a 6.3% net margin, 0.389x asset turnover, and 2.11x financial leverage. Total assets stood at 173,936.71 (100M JPY) and total equity at 82,551.08 (100M JPY), producing an equity ratio of 46.1% and financial leverage consistent with the DuPont decomposition. Operating cash flow was strong at 5,957.58 (100M JPY), with investing cash outflow modest at -411.74 (100M JPY) and financing cash outflow of -5,718.09 (100M JPY), leading to ending cash and equivalents of 9,773.56 (100M JPY). Free cash flow was robust at 5,545.84 (100M JPY), comfortably covering dividends paid of 1,272.77 (100M JPY). The payout ratio is 68.6% and FCF coverage is 1.91x, indicating solid near-term dividend safety. Despite the revenue contraction, profitability was supported by associate contributions and cost discipline, evidenced by the modest rise in net income and strong OCF/NI of 1.41x. Balance sheet strength remains a key support, with a reported debt-to-equity ratio of 1.10x and a high equity ratio, though detailed current liability data were unreported. The earnings mix is more weighted to non-operating/associate income than pure trading margins, creating sensitivity to commodity prices, equity-method investee performance, and FX. Capex of -1,651.70 (100M JPY) suggests disciplined investment intensity relative to OCF this period, enhancing FCF resiliency. Data limitations include unreported operating income, current liability details, and several line items (e.g., interest expense), which constrain certain ratio analyses (e.g., current ratio, interest coverage). Overall, cash generation, balance sheet resilience, and associate-driven earnings helped offset top-line pressure, but sustainability hinges on commodity cycles, portfolio execution, and maintaining cost and capital discipline.

Profitability Analysis

ROE of 5.1% is explained by a 6.3% net profit margin, 0.389x asset turnover, and 2.11x financial leverage (Assets/Equity), consistent with the DuPont-calculated and reported ROE. The gross margin of 9.1% reflects a trading-oriented revenue base, with SG&A of 4,447.45 (100M JPY) absorbing a large share of gross profit. Implied core operating surplus (gross profit minus SG&A) is about 1,676.76 (100M JPY), but operating income is unreported under IFRS and may differ due to other operating income/expenses and fair value effects. Profit before tax of 5,466.36 (100M JPY) greatly exceeds the implied operating surplus, highlighting significant contributions from associates/JVs (equity-method income of 2,563.25 (100M JPY)) and potentially other non-operating items. The effective tax rate of 20.8% is in line with diversified multinational exposure. Operating leverage appears moderate to positive this quarter: revenue fell 7.8% YoY while net income rose 2.9%, implying mix improvements, associate strength, and cost control offsetting gross profit pressure. Margin quality is mixed—core trading margins remain thin, but higher-quality cash earnings are evidenced by OCF/NI of 1.41x. Given the material share of equity-method income, overall profitability is sensitive to investee performance and commodity/FX cycles.

Growth Assessment

Revenue declined 7.8% YoY to 67,591.15 (100M JPY), suggesting headwinds from commodity price normalization, volume softness, or portfolio rebalancing. Despite the top-line contraction, net income increased 2.9% YoY to 4,237.33 (100M JPY), implying improved earnings mix and strong associate/JV contributions (equity-method income: 2,563.25 (100M JPY)). Gross profit of 6,124.21 (100M JPY) and SG&A of 4,447.45 (100M JPY) indicate stable cost management. Profit before tax of 5,466.36 (100M JPY) points to non-operating drivers supporting growth versus core trading activities. EPS (basic) of 147.41 JPY on average shares of 2.8745 billion is consistent with the reported net income, indicating limited dilution (diluted EPS 147.29 JPY). Outlook-wise, sustainability depends on continued equity-method performance and commodity trends; revenue growth may remain subdued near term if trading volumes and prices stay soft. Capex discipline (-1,651.70 (100M JPY)) and strong OCF provide capacity for selective growth investments without pressuring leverage. With total comprehensive income of 6,337.29 (100M JPY), OCI tailwinds (e.g., FX/valuation) augmented underlying profit, though such items are volatile. Overall, profit quality is acceptable due to cash conversion, but growth visibility is tied to external macro variables and portfolio execution.

Financial Health

Total assets: 173,936.71 (100M JPY); total equity: 82,551.08 (100M JPY); equity ratio: 46.1%, indicating a strong capital base. Financial leverage (assets/equity) is 2.11x, consistent with DuPont input. Reported debt-to-equity ratio is 1.10x; interest-bearing debt was unreported, limiting net debt analysis. Current assets are 56,869.41 (100M JPY), but current liabilities were unreported, so current and quick ratios cannot be computed; reported working capital equals current assets due to missing current liabilities data. Accounts receivable of 22,249.53 (100M JPY) and inventories of 9,604.59 (100M JPY) indicate meaningful working capital intensity typical of a general trading company. The balance between long-duration investments (noncurrent assets: 111,245.68 (100M JPY)) and equity is conservative, supporting solvency. Cash and equivalents were 9,773.56 (100M JPY), offering adequate liquidity buffer, though exact coverage of short-term obligations cannot be quantified given unreported current liabilities. Overall solvency appears sound, but the absence of detailed liability maturities and interest expense data constrains coverage assessment.

Cash Flow Quality

OCF was 5,957.58 (100M JPY), equating to 1.41x net income (4,237.33 (100M JPY)), signaling solid cash conversion and earnings quality. Investing cash flow was a modest outflow of -411.74 (100M JPY), reflecting net proceeds from disposals or distributions partly offsetting capex of -1,651.70 (100M JPY). Free cash flow (OCF - capex) was strong at 5,545.84 (100M JPY), providing ample internal funding capacity. Financing cash flow of -5,718.09 (100M JPY) includes dividends of -1,272.77 (100M JPY) and likely net debt reduction or buybacks (share repurchases unreported), driving a small net decrease in cash. Working capital management appears effective given positive OCF despite trading revenue softness; however, without detailed breakdowns of payables and inventory movements, the durability of working capital gains cannot be fully assessed. Non-cash items (e.g., equity method income, fair value changes) support accounting earnings, but cash realization is validated by OCF outperformance versus net income.

Dividend Sustainability

The calculated payout ratio is 68.6%, comfortably covered by free cash flow (FCF coverage 1.91x). Dividends paid totaled 1,272.77 (100M JPY) in the period. With OCF at 5,957.58 (100M JPY) and capex at -1,651.70 (100M JPY), internal cash generation supports current distributions without leverage reliance. DPS figures were unreported, limiting per-share trend analysis, but basic and diluted EPS around 147 JPY indicate adequate earnings per share coverage. Balance sheet strength (equity ratio 46.1%) provides additional buffer against cyclical downturns. Key sensitivities are equity-method income variability and commodity/FX cycles; dividend capacity could tighten if associate earnings revert or working capital normalizes unfavorably. Assuming stable OCF/NI and steady capex, the current payout level appears maintainable within policy norms; any escalation would require continued robust OCF or portfolio monetizations.

Risk Assessment

Business Risks:

• Commodity price volatility affecting trading margins and associate earnings
• FX fluctuations impacting translated profits and OCI
• Dependence on equity-method investees (2,563.25 (100M JPY) contribution) for a large share of PBT
• Geopolitical and supply chain disruptions across resource and industrial projects
• Counterparty and credit risk in large receivables (22,249.53 (100M JPY))
• Execution risk in capital projects and M&A portfolio rotation
• Regulatory and environmental policy shifts affecting resource businesses

Financial Risks:

• Working capital swings inherent to trading activities affecting OCF
• Interest rate risk and refinancing needs (interest expense unreported, limiting coverage analysis)
• Potential fair value and impairment volatility under IFRS impacting earnings and OCI
• Limited visibility on current liabilities, short-term debt, and liquidity coverage ratios
• Associate concentration risk and potential distribution variability

Key Concerns:

• Revenue decline (-7.8% YoY) amid reliance on non-operating drivers for profit resilience
• Unreported operating income and interest expense obscure core operating performance and coverage
• High dependence on equity-method income for overall profitability

Investment Implications

Key Takeaways:

• Net income resilience (+2.9% YoY) despite a 7.8% revenue decline underscores mix shift and associate strength
• ROE of 5.1% reflects modest net margin (6.3%), low asset turnover (0.389x), and moderate leverage (2.11x)
• Strong cash conversion (OCF/NI 1.41x) and robust FCF (5,545.84 (100M JPY)) support capital returns
• Equity-method income (2,563.25 (100M JPY)) is a pivotal profit driver, elevating sensitivity to external cycles
• Balance sheet remains conservative (equity ratio 46.1%, D/E 1.10x), providing shock absorption
• Capex discipline (-1,651.70 (100M JPY)) preserves FCF while maintaining investment capacity

Metrics to Watch:

• Equity-method income trajectory and underlying commodity price exposure
• OCF/NI ratio and working capital movements (receivables and inventories)
• Capex pipeline versus OCF to gauge FCF sustainability
• Revenue momentum and gross profit trends as commodity/trading conditions evolve
• Leverage and liquidity metrics once interest-bearing debt and current liabilities are disclosed
• EPS and payout ratio alignment with cash generation

Relative Positioning: Within the Japanese general trading company peer set, Mitsui exhibits strong balance sheet metrics and solid cash generation with outsized contributions from associates/JVs, positioning it as a diversified, resource-levered player with resilient FCF but earnings sensitivity to commodity and FX cycles.

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