Mitsubishi Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥8.64T
• Net Income: ¥391.57B
• EPS: ¥91.87

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

Mitsubishi Corporation (8058) reported FY2026 Q2 consolidated (IFRS) results showing top-line contraction and a sharp decline in bottom-line profitability, offset by strong cash generation. Revenue was 86,378.43 (100M JPY), down 7.7% YoY, reflecting softer commodity-linked trading and normalization across resource and trading segments. Gross profit was 10,586.00 (100M JPY), with a gross margin of 12.3%, indicating resilient spread capture despite revenue pressure. SG&A expenses were 8,633.27 (100M JPY), equating to 81.6% of gross profit and roughly 10.0% of revenue, which limited operating leverage in the period. Operating income was unreported, but profit before tax came in at 4,584.72 (100M JPY), and net income was 3,557.96 (100M JPY), down 42.4% YoY, pointing to earnings headwinds in core operations and affiliates. Equity-method investment income was sizable at 2,304.14 (100M JPY), accounting for about 50% of profit before tax, underscoring the continued importance of affiliates to earnings. The effective tax rate was elevated at 45.3%, a potential drag on net profitability relative to pre-tax performance. DuPont analysis yields a net margin of 4.1%, asset turnover of 0.402x, and financial leverage of 2.24x, resulting in ROE of 3.7% for the period, a compressed level versus historical through-cycle returns. The balance sheet remains solid with total assets of 2,150,027.3 (100M JPY) and equity of 960,037.9 (100M JPY), translating to an equity ratio of 41.4% and a debt-to-equity ratio of 1.18x. Liquidity assessment is constrained by missing current liability data; however, current assets are 875,237.0 (100M JPY), including 416,785.0 (100M JPY) receivables and 176,349.6 (100M JPY) inventories, suggesting ample near-term resources. Cash flow quality is strong: operating cash flow (OCF) of 9,515.32 (100M JPY) was 2.67x net income, and free cash flow (FCF) was positive at 5,590.39 (100M JPY). Investing cash outflow of -3,924.93 (100M JPY) included capex of -2,217.64 (100M JPY), implying disciplined investment and some portfolio rebalancing. Financing cash flow was -9,804.00 (100M JPY), reflecting dividend payments of -1,434.28 (100M JPY) and likely debt repayments; buybacks were unreported. The calculated payout ratio is 113.2%, but FCF coverage of dividends was 1.39x, indicating that cash generation, not accounting earnings, supported shareholder returns. Book value per share is estimated at 2,549.89 JPY, with financial leverage remaining moderate for a general trading company. Overall, results depict cyclical profit normalization, strong affiliate contribution, robust cash conversion, and a conservatively financed balance sheet. Data gaps (notably operating income, interest expense, and current liabilities) limit the precision of margin and coverage assessments; analysis focuses on disclosed metrics.

Profitability Analysis

ROE_decomposition: ROE = Net Profit Margin x Asset Turnover x Financial Leverage = 4.1% x 0.402x x 2.24x ≈ 3.7% (matches reported). The primary drag is the low net margin amid a soft revenue environment and a high tax rate; asset turnover is structurally low for a sogo shosha due to large balance sheet intensity; leverage is moderate and not the key ROE driver. margin_quality: Gross margin was 12.3%, fairly resilient. SG&A consumed 81.6% of gross profit, leaving a thin implied operating spread. Profit before tax of 4,584.72 (100M JPY) benefited materially from equity-method income of 2,304.14 (100M JPY), indicating that associate/JV earnings were a major margin support while core operating margin likely compressed. The effective tax rate at 45.3% further reduced net margin to 4.1%. operating_leverage: With revenue down 7.7% YoY and SG&A at 8,633.27 (100M JPY), operating leverage was unfavorable; fixed cost absorption appears weaker, and the absence of reported operating income suggests cautious interpretation. The high SG&A-to-revenue ratio (~10%) and SG&A-to-gross profit ratio (~82%) indicate limited capacity to expand margins without top-line recovery or cost actions.

Growth Assessment

revenue_sustainability: Revenue declined 7.7% YoY to 86,378.43 (100M JPY), consistent with commodity normalization and softer trading volumes. The diversified portfolio should smooth volatility, but sensitivity to resource prices and global trade flows remains material. profit_quality: Net income fell 42.4% YoY to 3,557.96 (100M JPY), while equity-method income (2,304.14) comprised roughly half of PBT, signaling reliance on affiliates. Elevated tax rate (45.3%) compressed bottom-line growth. Cash conversion (OCF/NI 2.67x) suggests underlying earnings quality is supported by working capital discipline and non-cash items, but accounting profitability is subdued. outlook: Absent explicit guidance, near-term growth hinges on commodity price trends, shipping and logistics activity, and stability of affiliate earnings. Cost discipline and portfolio rotation may cushion earnings, but a meaningful ROE uplift likely requires revenue stabilization and normalization of the tax burden.

Financial Health

liquidity: Current assets total 87,523.70 (100M JPY), including 41,678.50 in receivables and 17,634.96 in inventories. Current liabilities are unreported, so current and quick ratios are not calculable. Cash and deposits are unreported, but cash and equivalents on the cash flow statement are 15,366.24 (100M JPY), indicating solid liquidity. solvency: Total liabilities are 113,417.82 (100M JPY) versus equity of 96,003.79 (100M JPY), yielding a debt-to-equity ratio of 1.18x and an equity ratio of 41.4%. Interest-bearing debt is unreported, preventing interest coverage analysis; however, overall leverage appears moderate for the sector. capital_structure: Financial leverage in DuPont at 2.24x and the reported equity ratio indicate a balanced capital structure. Financing CF of -9,804.00 (100M JPY) suggests net outflows to shareholders and creditors, consistent with prudent balance sheet management.

Cash Flow Quality

earnings_quality: OCF/Net Income at 2.67x indicates strong cash realization relative to accounting profit, likely aided by working capital inflows and non-cash items (e.g., depreciation unreported; equity-method earnings are largely non-cash). FCF_analysis: FCF was 5,590.39 (100M JPY) after capex of -2,217.64 (100M JPY), demonstrating capacity to self-fund investments and dividends in a weaker earnings environment. Investing CF of -3,924.93 suggests additional portfolio activity beyond maintenance capex. working_capital: Receivables (41,678.50) and inventories (17,634.96) are sizable relative to revenue, typical for a trading conglomerate. Without prior-period comparisons, the direction of working capital is unknown, but strong OCF implies net release or efficient turnover this period.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 113.2%, implying dividends exceeded period earnings on an accounting basis. This is not uncommon mid-year if dividends reflect full-year policy against half-year earnings or if earnings are temporarily depressed. FCF_coverage: FCF coverage of dividends is 1.39x, and dividends paid were -1,434.28 (100M JPY). On a cash basis, dividends appear covered by internally generated cash flow this period. policy_outlook: While DPS data are unreported, Mitsubishi has historically targeted stable and progressive dividends supported by diversified cash flows. Sustainability near-term rests on maintaining robust OCF and stable affiliate distributions; payout discipline may be required if earnings pressure persists.

Risk Assessment

Business Risks:

• Commodity price volatility impacting resource-related earnings and trading margins
• Global trade and logistics cycles affecting volume and spreads
• Execution risk in large projects and portfolio investments under IFRS
• Affiliate concentration risk given equity-method income significance
• Geopolitical and FX risks across diversified global operations

Financial Risks:

• Potential for higher effective tax rates depressing net margin
• Refinancing and interest rate risk (interest-bearing debt details unreported)
• Working capital swings inherent in trading businesses affecting OCF timing
• Exposure to equity-method dividend variability versus reported earnings

Key Concerns:

• Sharp YoY decline in net income (-42.4%) despite resilient gross profit
• High SG&A burden limiting operating leverage
• Elevated effective tax rate (45.3%) weighing on net profitability
• Dependence on affiliates (2,304.14 in equity-method income, ~50% of PBT)

Investment Implications

Key Takeaways:

• Revenue down 7.7% YoY with net income down 42.4%, indicating cyclical normalization
• ROE at 3.7% reflects thin margins and low asset turnover; leverage not the main driver
• Equity-method income is a critical profit pillar (~50% of PBT)
• Cash generation is strong (OCF/NI 2.67x) with positive FCF (5,590.39)
• Balance sheet remains conservative (equity ratio 41.4%, D/E 1.18x)
• Dividend cash coverage is adequate despite a >100% payout ratio on earnings
• Data gaps (operating income, interest, current liabilities) limit margin and coverage analysis

Metrics to Watch:

• Trend in equity-method income and affiliate cash distributions
• Gross profit and SG&A trajectory for operating leverage recovery
• Effective tax rate normalization path
• Working capital turns (receivables and inventories) and OCF consistency
• Commodity exposure sensitivities and segment mix
• Capital allocation: capex, M&A, and shareholder returns

Relative Positioning: Within the sogo shosha peer set, Mitsubishi retains a strong balance sheet and robust cash generation with diversified earnings, but current-period ROE and margin compression place it mid-cycle; sustained affiliate contributions and disciplined capital allocation remain key differentiators.

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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