HEIWA PAPER CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥7.57B
• Operating Income: ¥-6M
• Net Income: ¥38M
• EPS: ¥0.00

Income Statement

Balance Sheet

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

Heiwa Paper Co., Ltd. (TSE: 9929) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥7.573bn, down 1.9% YoY, reflecting a modest top-line contraction. Gross profit was ¥1.560bn, implying a gross margin of 20.6%, which remains decent for a trading/distribution-heavy paper business. Operating income was a slight loss at ¥-6m (down 7.8% YoY), indicating break-even level profitability at the operating line and suggesting limited operating leverage in the half. Ordinary income, however, was positive at ¥36m, implying net non-operating gains of roughly ¥42m versus operating loss, and more than offsetting interest expense of ¥12.0m; this highlights reliance on non-operating items in the period. Reported net income was undisclosed (shown as zero), and EPS was not available; therefore, bottom-line returns cannot be evaluated from the disclosed set. Asset turnover is 0.433x on a trailing basis, consistent with a trading-oriented model and highlighting capital efficiency constraints in a soft demand environment. Financial leverage (assets/equity) stands at 1.72x, a moderate level that helps stabilize ROE potential when profitability improves. Total assets were ¥17.49bn and total equity ¥10.161bn, implying an inferred equity ratio of approximately 58% (the disclosed equity ratio figure of 0.0% appears unreported). Liquidity looks comfortable, with current assets of ¥11.807bn and current liabilities of ¥7.142bn, yielding a current ratio of 165% and working capital of ¥4.666bn. Interest expense of ¥12.0m versus slightly negative operating income translates to a negative EBIT-based interest coverage ratio, though ordinary income coverage is positive due to non-operating gains. Cash flow statements, depreciation, inventories, DPS, and share count were not disclosed in this dataset, limiting detailed assessments of free cash flow, capex intensity, and per-share metrics. Despite limited disclosures, the core picture shows stable gross margin, near break-even operating income, and adequate balance sheet strength. The principal swing factor to watch is whether operating income turns sustainably positive without reliance on non-operating items. Given cyclicality in paper demand and pricing, maintaining gross margin resilience and controlling SG&A will be key. Overall, the company appears operationally resilient but needs improved operating leverage to translate modest sales into sustainable earnings, while its balance sheet provides a buffer. Data limitations constrain conclusions on cash generation and dividend capacity this quarter.

Profitability Analysis

ROE decomposition is constrained by an undisclosed net profit figure (reported as 0). Using available DuPont inputs: net margin is shown as 0.00% (unreported), asset turnover 0.433x, and financial leverage 1.72x, resulting in an indicated ROE of 0% in the dataset. In practice, ordinary income of ¥36m versus operating loss of ¥6m suggests non-operating gains (roughly +¥54m pre-interest) offset interest expense of ¥12.0m, lifting ordinary results into the black; however, taxes of ¥35.9m cloud bottom-line inference, and net income is undisclosed. Margin quality: gross margin is 20.6% (¥1.560bn GP on ¥7.573bn sales), reasonable for a paper distributor; the inability to convert gross profit into positive operating income points to SG&A pressure and limited operating leverage at current volumes. Operating leverage: revenue fell 1.9% YoY and operating income deteriorated to a slight loss; this indicates that fixed-cost absorption remains a challenge around current run-rate sales. Interest burden: EBIT-based coverage is negative (about -0.5x per dataset), highlighting that, absent non-operating gains, financing costs would weigh on profits. Without depreciation disclosure, EBITDA and margin analysis are not meaningful here.

Growth Assessment

Revenue declined 1.9% YoY to ¥7.573bn, signaling mild softness likely tied to paper demand normalization and pricing dynamics. Gross profit of ¥1.560bn still supports a 20.6% margin, suggesting pricing/mix discipline or stable supplier terms in the half. Operating income remained slightly negative at ¥-6m, showing muted scalability and indicating that near-term growth must either come from volume recovery or cost optimization to lift margins. Ordinary income at ¥36m was supported by non-operating factors; this is not a substitute for sustainable operating improvement. With taxes recorded at ¥35.9m and net income undisclosed, profit quality cannot be validated from the XBRL set. Outlook drivers include domestic paper consumption trends, price pass-through to offset input costs, and SG&A containment. Sustaining the gross margin while improving utilization and reducing fixed overheads would restore operating profitability even in a flat revenue scenario. In the absence of capex and depreciation data, capacity-driven growth visibility is limited. Overall, near-term growth sustainability hinges more on cost efficiency and mix management than on top-line expansion.

Financial Health

Total assets are ¥17.49bn, liabilities ¥8.054bn, and equity ¥10.161bn, implying an equity ratio of ~58% (calculated) and leverage of 1.72x assets/equity—both conservative. Current assets of ¥11.807bn against current liabilities of ¥7.142bn yield a current ratio of 165% and working capital of ¥4.666bn, indicating solid short-term liquidity. The quick ratio equals the current ratio in the provided metrics due to undisclosed inventories, so true quick liquidity may be lower; still, current liquidity appears healthy. Debt-to-equity is 0.79x, reasonable for a trading-centric business. Interest expense was ¥12.0m; with negative operating income, EBIT-based interest coverage is weak, but ordinary income was positive, suggesting some buffer from non-operating sources. Absent cash and cash equivalents disclosure, we cannot assess cash buffers or net debt precisely. Overall solvency is comfortable given equity strength, but interest coverage should improve via operating profit normalization.

Cash Flow Quality

Operating, investing, and financing cash flows were undisclosed in this dataset, preventing an assessment of cash conversion, free cash flow, or working capital trends. Depreciation was also undisclosed, so non-cash add-backs cannot be analyzed. With net income unreported, OCF/NI and FCF indicators shown as zero are not meaningful. Working capital appears ample (¥4.666bn), but without period-over-period movements in receivables, payables, and inventories, we cannot judge cash conversion cycle dynamics. Given the business model, working capital swings can materially affect OCF; monitoring AR collection days, supplier terms, and inventory turnover (once disclosed) will be critical. In summary, cash flow quality cannot be concluded from the current disclosure set.

Dividend Sustainability

Dividend per share and payout ratio were not disclosed (zeros indicate unreported), and free cash flow is undisclosed, so dividend capacity cannot be quantified for the period. Balance sheet strength (calculated equity ratio ~58% and D/E 0.79x) suggests room for a basic dividend in principle, but the lack of positive operating income and absent cash flow data argues for caution in assessing sustainability. Policy outlook cannot be inferred without management guidance or historical payout trends. FCF coverage and payout ratios should be reassessed when cash flow and profit data are available.

Risk Assessment

Business Risks:

• Demand cyclicality in printing and communication paper impacting volumes and pricing
• Input cost volatility (pulp, energy, logistics) affecting gross margins
• Limited operating leverage at current sales run-rate leading to break-even operating results
• Competitive pressures from domestic distributors and digital substitution reducing paper demand
• Customer concentration risk typical of B2B distribution (not disclosed, but relevant for the sector)

Financial Risks:

• Negative EBIT-based interest coverage despite moderate leverage
• Cash flow uncertainty due to undisclosed OCF and working capital movements
• Potential inventory valuation risks in a deflationary price environment (inventory data not disclosed)
• Exposure to non-operating income to support profitability in the period

Key Concerns:

• Sustainability of ordinary income support from non-operating items
• Ability to convert 20.6% gross margin into positive operating income through cost control
• Lack of cash flow and depreciation disclosures limits visibility on earnings quality and capex needs

Investment Implications

Key Takeaways:

• Top line declined modestly (-1.9% YoY), with gross margin resilient at 20.6%
• Operating income is slightly negative (¥-6m), indicating limited operating leverage
• Ordinary income positive (¥36m) due to non-operating gains offsetting interest
• Balance sheet is solid with an inferred equity ratio of ~58% and current ratio of 165%
• Cash flow, depreciation, inventories, DPS, and share count were not disclosed, constraining analysis

Metrics to Watch:

• Operating income trajectory and SG&A ratio to sales
• Gross margin stability versus input cost trends
• Interest coverage using EBIT and ordinary income
• Working capital turnover (AR, AP, inventory days) once disclosed
• OCF and FCF generation and consistency over subsequent quarters
• Inventory levels and valuation (when available) given price movements in paper

Relative Positioning: Within Japan’s paper distribution sector, the company exhibits a conservative balance sheet and acceptable gross margin, but currently lags on operating profitability and interest coverage, relying more on non-operating items to sustain ordinary income.

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