HAZAMA ANDO CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥201.02B
• Operating Income: ¥12.08B
• Net Income: ¥6.54B
• EPS: ¥49.45

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

Ando Hazama (TSE:1719) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥201.0bn, up 7.6% YoY, demonstrating healthy top-line momentum in the first half. Gross profit was ¥21.5bn, implying a gross margin of 10.7%, which is reasonable for a domestic general contractor given ongoing input cost normalization and project mix. Operating income rose 24.2% YoY to ¥12.1bn, lifting the operating margin to roughly 6.0%, indicating improved execution and/or favorable project closeouts versus the prior year. Ordinary income came in at ¥11.3bn, and net income increased 18.3% YoY to ¥7.75bn, translating into a net margin of 3.86%. The DuPont decomposition indicates a calculated ROE of 4.21% with asset turnover of 0.568x and financial leverage of 1.92x, reflecting a moderate efficiency profile and conservative balance sheet leverage for the sector. Interest expense was ¥0.20bn, yielding an interest coverage ratio of 61.3x based on EBIT, suggesting very strong debt-servicing capacity. Liquidity appears robust with a current ratio of 154.3% and working capital of ¥101.34bn, providing ample cushion for project cash flow swings typical in construction. Despite these positive earnings and balance sheet indicators, operating cash flow was negative ¥0.95bn in the period, resulting in an OCF/Net Income ratio of -0.12, which highlights timing effects or working capital investment. Depreciation and amortization totaled ¥1.45bn, and EBITDA was ¥13.52bn (6.7% EBITDA margin), underscoring manageable non-cash charges and reasonable operating profitability. The reported effective tax rate shows as 0.0% in the summary, but taxes paid were ¥3.07bn; therefore, the reported 0% is a data artifact rather than an economic rate. The reported equity ratio of 0.0% and several zero line items (e.g., inventories, cash and equivalents, investing CF, DPS, shares) should be treated as undisclosed rather than actual zeros. On capital structure, a debt-to-equity ratio of 1.08x (likely based on total liabilities to equity) suggests modest leverage, though the figure may overstate interest-bearing debt since it includes non-debt liabilities typical of construction (advances, payables, provisions). Dividend metrics show 0 due to non-disclosure in this dataset; they should not be interpreted as a suspension. Overall, performance shows improved profitability and adequate solvency, but weaker OCF in the half warrants monitoring given the sector’s working capital seasonality. Outlook hinges on order intake quality, cost pass-through in new bids, and disciplined risk management on large and overseas projects (if applicable). Given the partial disclosures, conclusions focus on the non-zero reported metrics and may be refined with full interim report details.

Profitability Analysis

roe_decomposition: ROE 4.21% = Net margin 3.86% × Asset turnover 0.568 × Financial leverage 1.92. The improvement in operating income (+24.2% YoY) relative to revenue (+7.6% YoY) implies better operating efficiency and supports the ROE, though overall ROE remains modest for the cycle. margin_quality: Gross margin at 10.7% and operating margin around 6.0% indicate sound project execution and possibly favorable closeouts. Net margin at 3.86% is typical for a general contractor, with a light interest burden (¥197m) and evident tax expense (¥3.07bn). The reported 0% effective tax rate is a dataset limitation; actual taxation is reflected in the income statement. operating_leverage: Operating income growth outpaced revenue (24.2% vs 7.6%), suggesting positive operating leverage from mix, overhead absorption, and/or cost normalization. EBITDA margin of 6.7% vs operating margin ~6.0% shows limited D&A intensity, consistent with an asset-light contracting model.

Growth Assessment

revenue_sustainability: Top-line growth of 7.6% YoY to ¥201.0bn indicates solid order execution in H1. Sustainability will depend on the order backlog, bid discipline, and public/private project pipelines; these data are not disclosed here. profit_quality: Operating income rose 24.2% YoY to ¥12.1bn, and interest costs remain minimal, supporting earnings quality. However, negative OCF (¥-0.95bn) versus positive net income (¥7.75bn) suggests timing differences/working capital absorption; conversion from accrual profits to cash should be monitored. outlook: With improved margins and strong coverage metrics, near-term profitability appears resilient if cost inflation remains manageable and project risk is controlled. Key swing factors include material/labor cost trends, change order recoveries, and the mix of lump-sum vs cost-plus contracts. Limited disclosure on backlog/orders constrains forward visibility.

Financial Health

liquidity: Current assets ¥287.8bn vs current liabilities ¥186.5bn implies a current ratio of 154.3% and working capital of ¥101.34bn, indicating ample short-term buffer. Quick ratio equals current ratio due to non-disclosure of inventories; actual quick ratio could be lower if inventories/retentions exist. solvency: Total liabilities ¥199.8bn versus equity ¥184.3bn yields a debt-to-equity of 1.08x (using total liabilities). Interest coverage is very strong at 61.3x, implying low financial risk from debt-servicing. The reported equity ratio of 0.0% is an undisclosed placeholder, not an indicator of insolvency. capital_structure: Leverage appears moderate with significant non-interest-bearing liabilities typical of construction (advances, payables). Equity base of ¥184.3bn provides a stable foundation for bonding and project bidding capacity.

Cash Flow Quality

earnings_quality: Net income of ¥7.75bn against OCF of ¥-0.95bn yields an OCF/Net Income ratio of -0.12, indicating weak cash conversion in the half, likely due to working capital outflows (receivables, unbilled revenue, or advances to subcontractors). fcf_analysis: Investing CF is shown as 0 and FCF as 0 due to non-disclosure. With EBITDA of ¥13.52bn and low D&A (¥1.45bn), underlying cash generation capacity appears reasonable, but working capital dominated the reported OCF. working_capital: High working capital (¥101.34bn) and sector seasonality suggest cash flows can be volatile quarter-to-quarter. Key drivers likely include progress billings, retention money, and change order settlements.

Dividend Sustainability

payout_ratio_assessment: Reported payout ratio and DPS are 0 due to non-disclosure; they should not be interpreted as actual policy. Based on current profitability (net income ¥7.75bn in H1), capacity for distributions would depend on full-year earnings and cash conversion. fcf_coverage: FCF is undisclosed. Given negative OCF in the half, coverage of any hypothetical dividend from internally generated cash would be weak in H1 but could normalize with collection of receivables in H2. policy_outlook: No dividend policy details provided here. For contractors, policies typically target stability with consideration of earnings level, cash flow, and capital needs for risk buffers and strategic investments.

Risk Assessment

Business Risks:

• Order intake volatility and competitive bidding pressure affecting margins
• Cost inflation in materials and labor compressing project profitability
• Project execution risk including delays, penalties, and change-order recovery
• Fixed-price/lump-sum contract exposure increasing downside risk on cost overruns
• Concentration risk in large projects or specific regions/clients
• Supply chain constraints impacting schedules and costs
• Regulatory/compliance requirements and safety/environment incidents

Financial Risks:

• Working capital swings leading to negative interim OCF
• Credit risk from client receivables and retention money
• Potential increase in interest rates affecting future financing costs
• Off-balance commitments (guarantees, JV obligations) typical in the sector
• Forex risk if overseas projects exist (not disclosed here)

Key Concerns:

• Negative OCF (¥-0.95bn) vs positive earnings in H1 indicates weak cash conversion
• Reliance on non-disclosed items (cash, inventories, investing CF) limits analysis precision
• Margin sustainability as cost environment and project mix evolve into H2

Investment Implications

Key Takeaways:

• Revenue grew 7.6% YoY to ¥201.0bn with operating income up 24.2% YoY to ¥12.1bn
• Margins improved: gross 10.7%, operating ~6.0%, net 3.86%
• ROE at 4.21% reflects modest profitability with moderate leverage (1.92x financial leverage)
• Interest coverage strong at 61.3x; balance sheet appears conservative
• Liquidity solid with current ratio 154.3% and working capital ¥101.34bn
• OCF negative at ¥-0.95bn; cash conversion is a watch point
• Several metrics (equity ratio, cash, DPS, investing CF) are undisclosed and shown as zero in the dataset

Metrics to Watch:

• Order backlog and order intake (book-to-bill)
• Working capital movements (receivables, unbilled revenue, advances, retentions)
• Gross and operating margin trajectory on new awards
• OCF to net income conversion and FCF in H2
• Interest-bearing debt levels vs total liabilities and net cash position
• Tax rate normalization vs reported tax expense

Relative Positioning: Within Japan’s general contractor peer set, the company exhibits improved H1 profitability, strong interest coverage, and ample liquidity, consistent with a disciplined risk posture; however, cash conversion lag in the half and limited disclosure on backlog and dividend policy temper visibility versus peers with fuller disclosures.

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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