Sanyo Homes Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.08B
• Operating Income: ¥-52M
• Net Income: ¥-142M
• EPS: ¥-12.69

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

FY2026 Q2 was a mixed quarter: revenue growth was strong, but profitability remained negative and cash flow deteriorated materially, pointing to execution and working-capital stress despite a narrowing loss on the P&L. Revenue rose 20.6% YoY to 190.8, while gross profit reached 40.47 with a gross margin of 21.2%. Operating income was -0.52, translating to an operating margin of -0.27%, indicating that SG&A of 41.00 slightly exceeded gross profit. Non-operating income of 0.65 was more than offset by non-operating expenses of 1.63 (including interest expense of 1.22), driving ordinary income to -1.50. Net income was -1.42 (EPS -12.69 JPY), an improvement in loss magnitude YoY (+78.3% YoY), but still a bottom-line loss. Gross margin held at 21.2%, while operating margin at -27 bps and net margin at -74 bps indicate limited operating leverage; lack of prior-period margin disclosure prevents precise basis-point YoY comparisons, but directionally margins improved as losses narrowed. EBITDA was barely positive at 0.21 (margin ~0.1%), underscoring a thin earnings buffer against fixed costs and interest. Earnings quality is weak: operating cash flow was a large outflow of -73.98 versus net income of -1.42, indicating cash burn far in excess of the accounting loss (both negative, OCF/NI metric mechanically reads 52.1x but reflects significant cash strain, not strength). Financing cash inflow of 51.13 suggests reliance on external funding to bridge operating cash shortfalls. The balance sheet shows total assets of 511.64 and equity of 149.41 (BVPS ~1,324 JPY), with current assets of 459.09 versus current liabilities of 264.43 (current ratio 173.6%), providing liquidity on paper, but leverage is high (D/E 2.42x) and interest coverage is negative (-0.43x). ROE is -0.9% per DuPont (net margin -0.7%, asset turnover 0.373x, financial leverage 3.42x), with profitability the key drag. ROIC is reported at -0.3%, well below the 7–8% target range for value creation, signaling that capital remains under-earning. Forward-looking, the order pipeline, conversion of inventories to cash, and disciplined SG&A will be critical to restore operating leverage. Near-term priorities include stabilizing gross margin amid cost inflation, improving project execution to reduce WIP days, and deleveraging to reduce interest burden. Absent a turnaround in working capital and EBITDA, dividend capacity (unreported) is likely constrained. Overall, the top-line momentum is encouraging, but negative cash flow, thin EBITDA, and elevated leverage keep risk skewed to the downside until operational cash generation normalizes.

Profitability Analysis

ROE decomposition (DuPont): ROE (-0.9%) = Net Profit Margin (-0.7%) × Asset Turnover (0.373x) × Financial Leverage (3.42x). The principal drag is the negative net margin, as asset turnover is modest and leverage is already high. The operating loss (-0.52) despite a 21.2% gross margin indicates SG&A absorption challenges; SG&A (41.00) slightly exceeded gross profit (40.47), leaving no room for operating profit. Non-operating costs, particularly interest expense (1.22), further depress ordinary income (-1.50). The most meaningful component change vs last year is inferred to be the net margin (loss narrowing), given reported YoY improvements in operating, ordinary, and net income, while asset base growth tied to higher working capital likely capped improvements in asset turnover. Business drivers: price/cost spread remains tight in housing/construction, and fixed-cost absorption is limited by project timing and mix; higher interest costs weigh on below-the-line. Sustainability: the margin improvement appears partially cyclical and timing-related (project handovers and mix), not yet structurally secured, as EBITDA margin is only 0.1% and interest coverage is negative. Watch for concerning trends: SG&A outpaced gross profit in the period (41.00 vs 40.47), and interest expense (1.22) is sizable relative to EBITDA, limiting operating leverage realization.

Growth Assessment

Revenue grew 20.6% YoY to 190.8, signaling solid order conversion and/or increased handovers. However, the growth did not translate into profits: operating margin was -0.27% and net margin -0.74%. Gross margin at 21.2% is adequate for housing-related businesses but needs better SG&A efficiency to drop through to operating profit. Ordinary income (-1.50) reflects the drag from interest and other non-operating costs. The quality of growth is questionable given OCF of -73.98; growth appears working-capital intensive (likely inventory/WIP build and receivable timing). Outlook hinges on: (1) ability to convert WIP to cash in 2H; (2) stabilizing input costs (materials/labor) and maintaining pricing; (3) managing SG&A to below revenue growth; and (4) easing financing burden. Without improvement in EBITDA and working capital turnover, revenue growth alone may not enhance shareholder value.

Financial Health

Liquidity: current ratio 173.6% and cash/deposits 81.71 provide near-term coverage; quick ratio is reported as 173.6% based on available data (note: detailed receivables/inventories unreported). Solvency: D/E is elevated at 2.42x (warning >2.0) and interest coverage is -0.43x (warning <2.0). Total liabilities 362.23 vs equity 149.41 implies financial leverage of ~3.4x at the asset level. Debt structure: short-term loans 46.60 and long-term loans 78.24; current liabilities 264.43 vs current assets 459.09 suggests no immediate maturity mismatch, but sustained cash burn could erode this buffer. Interest burden is significant relative to EBITDA (0.21), amplifying refinancing risk if rates rise. Off-balance-sheet obligations were not disclosed in the provided data.

Cash Flow Quality

OCF was a large outflow of -73.98 versus net income of -1.42; the OCF/NI ratio of 52.1x is not a sign of quality here because both figures are negative—this indicates cash losses far exceed accounting losses. The gap likely stems from working capital: higher WIP/inventories and/or receivable builds associated with revenue growth; exact components are unreported. Financing inflow of 51.13 partially offset the operating drain, pointing to reliance on external funding in the period. Free cash flow and capex were unreported; however, given OCF negative and limited EBITDA, FCF is likely negative absent asset sales. No overt signs of working-capital manipulation can be concluded from the limited data, but the scale of OCF outflow vs modest P&L loss warrants scrutiny of project timing, advance receipts, and payment terms.

Dividend Sustainability

Dividend details (DPS, total cash dividends) were unreported, and the calculated payout ratio (-222.2%) is not meaningful due to negative earnings. With OCF at -73.98 and EBITDA at 0.21, internal cash generation is insufficient to fund distributions without balance-sheet support. Until operating cash flow normalizes and EBITDA coverage of interest improves, dividend capacity is likely constrained. Policy outlook cannot be assessed from the data provided; key determinants will be 2H cash conversion, leverage trajectory, and profitability restoration.

Risk Assessment

Business Risks:

• Housing market demand volatility affecting order intake and handover timing
• Input cost inflation (materials/labor) compressing gross margin
• Project execution and timing risk leading to revenue/cash flow lumpiness
• Competitive pricing pressure in residential development/renovation
• Supply chain and subcontractor capacity constraints

Financial Risks:

• High leverage (D/E 2.42x) and negative interest coverage (-0.43x)
• Large operating cash outflow (-73.98) necessitating external funding
• Refinancing risk amid potential interest rate increases
• Working-capital intensity (WIP/inventory build) stressing liquidity

Key Concerns:

• EBITDA margin only 0.1%, leaving minimal cushion against cost shocks
• SG&A exceeding gross profit in the period (41.00 vs 40.47)
• Ordinary loss (-1.50) driven by interest expense (1.22)
• ROIC at -0.3%, well below cost of capital
• Data gaps (no detailed WC breakdown, capex, dividends) limit visibility

Investment Implications

Key Takeaways:

• Strong top-line growth (+20.6% YoY) did not translate into positive operating profit
• Operating margin -0.27% and net margin -0.74% highlight weak operating leverage
• OCF (-73.98) far worse than NI (-1.42), implying heavy working-capital drag
• Leverage high (D/E 2.42x) with negative interest coverage (-0.43x)
• EBITDA minimal (0.21), limiting resilience to cost or demand shocks

Metrics to Watch:

• Order backlog and new orders (volume, ASP, cancellation rates)
• Gross margin by segment and input cost trends
• SG&A ratio vs revenue and cost control initiatives
• Working-capital days (WIP/inventory, receivables, advance receipts)
• OCF trajectory and debt maturities/average interest rate
• ROIC recovery toward >5% as a minimum threshold

Relative Positioning: Relative to domestic mid-sized homebuilders, the company shows healthy reported liquidity but weaker earnings quality and higher leverage; near-term performance is constrained by thin margins, negative OCF, and interest burden until project cash conversion improves.

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