FUJITA ENGINEERING CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥11.46B
• Operating Income: ¥826M
• Net Income: ¥987M
• EPS: ¥54.74

Income Statement

Balance Sheet

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

Fujita Engineering Co., Ltd. (17700) reported FY2026 Q2 (cumulative) revenue of ¥11,455 million, down 26.7% YoY, indicating a material top-line contraction likely driven by project timing and a softer order environment. Gross profit was ¥2,586 million, implying a gross margin of 22.6%, which remains solid for an engineering/construction profile but likely benefited from project mix amid lower volumes. Operating income declined 38.7% YoY to ¥826 million, evidencing negative operating leverage as fixed costs weighed on profitability during the revenue downturn. Ordinary income of ¥934 million exceeded operating income, implying positive net non-operating contributions (e.g., financial income), while interest expense remained minimal at ¥3.6 million. Net income fell 49.1% YoY to ¥502 million, with a calculated net margin of 4.38%. DuPont metrics point to a calculated ROE of 2.59%, driven by a 4.38% net margin, asset turnover of 0.415x, and modest financial leverage of 1.42x. Based on non-zero balance sheet data, total equity of ¥19,403 million and total assets of ¥27,590 million indicate an equity ratio around 70.3%, signaling a very strong capital base (note: the 0.0% equity ratio shown is an unreported metric, not an actual zero). Liquidity appears robust with a current ratio of 214.7% (¥20,575.9 million current assets vs ¥9,585.1 million current liabilities), and working capital of approximately ¥10,990.8 million. Debt-to-equity measured as total liabilities to equity is 0.58x, though a breakdown of interest-bearing debt is not disclosed, and interest burden is negligible given the 231x interest coverage. The effective tax burden calculated from disclosed items is high at roughly 48% (¥468 million tax on an estimated ~¥970 million pre-tax), contributing to the steep decline in net income. Cash flow statements are not disclosed (all zeros indicate unreported), which limits assessment of earnings-to-cash conversion and free cash flow. Dividend information is unreported (DPS 0.00 shown), so payout policy and sustainability cannot be confirmed from this dataset. Overall, the company retains strong balance sheet resilience and solid gross profitability, but faces pressure from lower volumes and operating leverage, and the lack of cash flow data constrains visibility on near-term cash generation.

Profitability Analysis

ROE_decomposition: ROE 2.59% = Net margin 4.38% × Asset turnover 0.415 × Financial leverage 1.42. The primary drag is lower net margin due to weaker operating income and a high effective tax burden, while leverage remains modest and asset turnover subdued on lower revenue. margin_quality: Gross margin of 22.6% suggests healthy project economics and/or favorable mix. Operating margin is ~7.2% (¥826m / ¥11,455m), down YoY given the sharper decline in operating income vs sales. Ordinary margin of ~8.2% benefits from positive non-operating items. Net margin of 4.38% is compressed by taxes. operating_leverage: Revenue declined 26.7% YoY while operating income fell 38.7% YoY, implying adverse operating leverage (elasticity ~1.45x). This points to a relatively fixed cost base and/or SG&A inefficiencies when volumes contract.

Growth Assessment

revenue_sustainability: The 26.7% YoY revenue decline indicates cyclical/timing headwinds, typical for contract recognition in engineering and construction. Without order backlog data, sustainability of the top line into 2H is uncertain. profit_quality: Gross margin resilience is positive, but the decline in operating income suggests margin pressure from fixed costs and possibly project timing. The high calculated effective tax rate (~48%) further depresses bottom-line growth. outlook: With limited visibility on backlog, book-to-bill, and 2H project starts, near-term growth is uncertain. Recovery hinges on order intake, execution pace, and maintaining gross margin discipline amid cost inflation pressures.

Financial Health

liquidity: Current assets ¥20,575.9m vs current liabilities ¥9,585.1m yields a current ratio of 214.7% and working capital of ~¥10,990.8m, indicating strong short-term liquidity. Quick ratio equals current ratio due to unreported inventories; true quick ratio may be lower if inventories/unbilled are present. solvency: Total liabilities ¥11,309.6m vs equity ¥19,403.0m implies an equity ratio around 70.3% and a liabilities-to-equity ratio of 0.58x. Interest expense is low (¥3.6m), and interest coverage is strong at ~231x, suggesting minimal solvency risk. capital_structure: Leverage is conservative (Assets/Equity ~1.42x). Lack of breakdown between interest-bearing and non-interest-bearing liabilities limits precision, but overall balance sheet strength is evident.

Cash Flow Quality

earnings_quality: Operating, investing, and financing cash flows are unreported, preventing direct assessment of earnings-to-cash conversion. With construction-type businesses, working capital swings (receivables, unbilled/advance receipts) can materially affect OCF. FCF_analysis: Free cash flow cannot be computed due to unreported OCF and capex/depreciation (D&A shown as 0 is unreported). The sustainability of earnings hinges on converting profits to cash as projects progress and close. working_capital: Reported current metrics are strong, but the composition (receivables, contract assets, advances) is undisclosed. Monitoring collection cycles and advance billings will be key to assessing underlying cash generation.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are unreported (displayed zeros are placeholders), so distribution levels cannot be assessed. EPS is ¥54.74 for the period, indicating capacity exists, but policy details are unknown. FCF_coverage: FCF coverage cannot be evaluated without OCF/capex data. Balance sheet strength suggests flexibility, but cash generation through the cycle is the primary constraint. policy_outlook: No explicit policy is provided. Given modest leverage and minimal interest burden, the company could sustain dividends if earnings and cash conversion normalize; confirmation requires disclosures on OCF and capital allocation.

Risk Assessment

Business Risks:

• Order backlog and book-to-bill visibility (timing of project wins and revenue recognition).
• Project execution risk, including delays, change orders, and acceptance timing.
• Cost inflation in materials and labor affecting fixed-price contracts.
• Subcontractor availability and cost pass-through limitations.
• Customer mix exposure (public vs private) and concentration risk.
• Weather and seasonality impacting construction progress.
• Competitive bidding pressure compressing margins.

Financial Risks:

• Working capital volatility (receivables, unbilled contract assets, advance receipts).
• Cash conversion uncertainty due to unreported cash flow statements.
• High effective tax burden (~48%) reducing net income.
• Potential exposure to retention money and payment milestones.
• Limited visibility on interest-bearing debt composition despite low interest expense.

Key Concerns:

• Sharp YoY decline in revenue (-26.7%) and operating income (-38.7%).
• Net income down 49.1% with elevated tax burden pressuring ROE (2.59%).
• Lack of disclosed cash flow data (OCF/FCF) impedes assessment of earnings quality.
• Inventory/contract asset details unreported, limiting quick ratio interpretation.
• Dividend policy and payout trajectory not disclosed.

Investment Implications

Key Takeaways:

• Strong balance sheet with an estimated ~70% equity ratio and ample liquidity (current ratio ~215%).
• Profitability compressed by negative operating leverage amid a 26.7% revenue drop.
• Gross margin remains solid at 22.6%, supporting project economics despite lower volumes.
• ROE of 2.59% is modest, constrained by low asset turnover and high tax burden.
• Interest burden is negligible (coverage ~231x), indicating low financial risk.
• Cash flow visibility is the main analytical gap; OCF and capex not disclosed.

Metrics to Watch:

• Order backlog and book-to-bill ratio.
• OCF/Net income conversion and free cash flow.
• Receivables days, contract assets/liabilities, and advance billings.
• Gross margin by project/segment and SG&A ratio.
• Effective tax rate normalization and any one-offs.
• Interest-bearing debt levels and cash balance disclosure.
• Progress versus full-year guidance and win rate on new bids.

Relative Positioning: Within TSE-listed construction/engineering peers, the company exhibits stronger-than-average balance sheet strength and low financial risk, but current-period profitability and ROE are mid-to-lower tier due to volume-driven operating deleverage and subdued asset turnover.

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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