Tokai Carbon (5301) Q2 2024 earnings summary

Executive summary

• Net sales for Jan–Jun 2024 declined 4.2% year-over-year to ¥170.9 billion, with operating income down 61.2% to ¥8.4 billion and net income attributable to owners down 77.0% to ¥3.7 billion.

• EBITDA fell 24.4% to ¥29.7 billion, with the margin at 17.4%.

• Carbon Black and Fine Carbon segments performed well, while Smelting, Lining, and Graphite Electrodes saw significant declines due to weak demand and competition.

• Working capital improvements supported operating cash flow, but negative free cash flow increased due to continued investments.

• The company is executing its medium-term plan “T-2026” targeting ¥458 billion in net sales, ¥53 billion in operating income, 12% ROS, and ¥104 billion in EBITDA by 2026.

Financial highlights

• Net sales: ¥170.9 billion (–4.2% YoY); operating income: ¥8.4 billion (–61.2% YoY); net income: ¥3.7 billion (–77.0% YoY).

• EBITDA: ¥29.7 billion (–24.4% YoY); EBITDA margin: 17.4% (–4.6 pts YoY).

• Gross profit for H1 2024 was ¥38.6 billion, down from ¥50.5 billion in H1 2023; operating margin fell sharply.

• Ordinary income dropped 56.4% YoY to ¥10.5 billion; EPS was ¥17.17, down from ¥74.60.

• Interim dividend maintained at 15 yen per share; annual dividend forecast is ¥30.00 per share.

Outlook and guidance

• FY2024 forecast: net sales ¥370.0 billion, operating income ¥23.0 billion, EBITDA ¥65.0 billion, net income ¥15.0 billion.

• ROS expected at 6.2%, EBITDA margin at 17.6%, ROE at 4.8%, and adjusted ROIC at 7.5%.

• EPS forecast for FY2024 is ¥70.35.

• Impact of graphite electrode production restructuring on FY2024 results is under assessment.