Nakabohtec Corrosion Protecting Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.98B
• Operating Income: ¥-146M
• Net Income: ¥-86M
• EPS: ¥-35.33

Income Statement

Balance Sheet

Cash Flow Statement

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

Nakabohtec (17870) reported FY2026 Q2 single-entity results under JGAAP showing a modest top-line decline and a continued operating loss, offset by strong operating cash inflow. Revenue was ¥4,984 million, down 4.3% YoY, with gross profit of ¥1,142 million and a gross margin of 22.9%, indicating reasonable project-level profitability despite softer sales. Operating income was a loss of ¥146 million (operating margin -2.9%), and ordinary income was a loss of ¥109 million, with net loss at ¥86 million (net margin -1.7%). The DuPont framework yields an ROE of -1.07%, reflecting a combination of low asset turnover (0.476x) and modest financial leverage (1.31x) more than extreme margin pressure. Cash generation was notably strong relative to earnings: operating cash flow (OCF) of ¥357 million contrasted with the net loss, implying material working-capital inflows and/or favorable billing/collection dynamics in the quarter. The OCF/Net Income ratio of -4.15 underscores positive cash conversion amid accounting losses, but sustainability depends on order timing and working-capital cycles. The balance sheet appears strong: total equity is ¥8,013 million versus total assets of ¥10,463 million, implying an equity ratio near 76.6% despite the disclosed field showing 0.0% (noted as an unreported XBRL item). Liquidity is ample with a 413% current ratio and 388% quick ratio, supported by sizeable current assets and relatively low current liabilities. Total liabilities of ¥3,416 million imply conservative leverage (liabilities-to-equity ~0.43x), aligning with the reported debt-to-equity metric. EBITDA was -¥88 million, reflecting operating softness rather than heavy non-cash charges (D&A only ¥58 million), suggesting low operating leverage from a fixed-cost base and/or project mix issues. Financing cash outflow of ¥590 million likely indicates debt repayment and/or other stakeholder cash movements; dividend per share is reported as zero for the period (annual DPS 0.00), and share data are not disclosed. Inventory stood at ¥622 million, consistent with a project-driven business requiring materials staging, though the inventory level relative to revenue warrants monitoring of turnover. Effective tax analysis is not meaningful for the half given losses and the presence of ¥26 million tax expense; the reported 0.0% effective rate field should be treated as non-informative. Overall, the company exhibits solid balance sheet strength and liquidity but faces profitability headwinds and subdued asset turnover, with cash flows temporarily supported by working capital. Data limitations are present (e.g., cash balance, investing cash flows, equity ratio, interest expense, share counts disclosed as zero indicate unreported items), so conclusions emphasize the non-zero reported figures and logical derivations from them.

Profitability Analysis

ROE of -1.07% decomposes into a net profit margin of -1.73%, asset turnover of 0.476x, and financial leverage of 1.31x, indicating returns are primarily constrained by weak margins and modest utilization of the asset base. Gross margin of 22.9% suggests acceptable project-level pricing and cost control; the negative operating margin (-2.9%) points to overhead absorption challenges and/or SG&A pressure in a lower-revenue environment. EBITDA of -¥88 million shows that operating weakness is not solely a function of depreciation; underlying operating profitability is under pressure. Ordinary margin (-2.2%) implies limited non-operating support such as financial income. The presence of tax expense despite losses is likely due to non-deductible items or timing differences, not structural tax burden. Operating leverage appears unfavorable this quarter: a 4.3% revenue decline coincided with a swing to/continuation of operating losses, indicating fixed-cost intensity and sensitivity to volume/mix. Asset turnover at 0.476x is low for a contracting/engineering-type business on a semiannual basis, implying potential underutilized assets or high levels of current assets supporting future work. Overall margin quality is mixed: gross margin resilience contrasts with negative operating earnings, pointing to cost structure issues below gross profit (overheads, personnel, bid costs) or project timing effects that should be monitored.

Growth Assessment

Revenue declined 4.3% YoY to ¥4,984 million, indicating softer demand or project timing delays. The negative operating result despite a relatively stable gross margin suggests near-term growth challenges to restore scale efficiencies. Given the single-entity basis, topline can be volatile with order timing; sustainability depends on backlog conversion and new awards rather than broad market expansion alone. Profit quality is weaker than gross margin implies: SG&A and fixed costs are weighing on operating income, while ordinary income remains negative. Positive OCF alongside a net loss indicates growth is being supported by working-capital inflows (collections/advances), which may not be repeatable if order intake softens. Outlook hinges on pipeline visibility: if backlog is healthy and delivery normalizes, operating leverage could recover; if not, margins may remain compressed. There is insufficient disclosure on segment mix, backlog, or order book to refine the growth trajectory; watch for 2H seasonality in project completions typical in engineering/construction services.

Financial Health

Liquidity is strong: current ratio 413% and quick ratio 388% demonstrate ample near-term coverage, with working capital of ¥7,856 million. The balance sheet shows total equity of ¥8,013 million against total assets of ¥10,463 million, implying an equity ratio near 76.6% (the reported 0.0% field is unreported), reflecting conservative capitalization. Total liabilities are ¥3,416 million, yielding liabilities-to-equity of ~0.43x and liabilities-to-assets of ~32.7%. Interest expense is reported as zero (likely unreported), so interest coverage metrics are not meaningful this quarter. The capital structure appears lowly levered, with flexibility to absorb short-term losses and fund operations. Inventory at ¥622 million within current assets suggests manageable working capital tied to project execution, but efficiency should be monitored through turnover metrics when available.

Cash Flow Quality

OCF of ¥357 million versus net loss of ¥86 million (OCF/NI -4.15) indicates strong cash realization, likely from working-capital improvements such as receivables collection and/or customer advances. EBITDA was -¥88 million, so cash generation did not stem from operating profitability but from balance-sheet movements, which may be timing-related. D&A is modest at ¥58 million, reinforcing that earnings swings are operating rather than depreciation-driven. Investing cash flow is shown as zero (unreported), preventing a precise free cash flow assessment; the provided FCF figure of zero should be treated as a placeholder, not an actual result. Financing cash outflow of ¥590 million suggests debt repayment and/or other financing uses; with DPS reported at zero for the period, distributions likely did not drive the outflow. Overall, cash flow quality is mixed: cash inflows are positive but appear driven by working capital rather than recurring earnings, so persistence depends on order and billing cycles. Monitoring OCF-to-EBIT and working-capital days (DSO, DIO, DPO) will be important as more data becomes available.

Dividend Sustainability

Annual DPS is reported as 0.00 and payout ratio 0.0%, consistent with a loss-making period. Given positive operating cash flow but negative earnings and unreported investing cash flows, true free cash flow coverage cannot be reliably computed; the reported FCF coverage of 0.00x should be regarded as a data placeholder. With a strong equity base and low leverage, balance sheet capacity exists, but near-term dividend resumption would typically require restored profitability and clearer free cash flow visibility. Company policy is not disclosed here; absent policy guidance, sustainability analysis centers on earnings normalization and stable OCF beyond working-capital timing effects.

Risk Assessment

Business Risks:

• Order timing and backlog conversion risk affecting revenue visibility and operating leverage
• Project execution risk impacting gross margin and cost overruns
• Customer capital spending cycles in core end-markets (industrial/plant maintenance) affecting demand
• Input cost volatility (materials, subcontracting) compressing margins
• Seasonality and half-on-half variability typical of project-based businesses

Financial Risks:

• Sustained operating losses if revenue does not recover
• Working-capital volatility driving cash flow swings
• Low asset turnover reducing ROE and capital efficiency
• Limited visibility on interest-bearing debt and cash balances due to unreported items
• Potential tax cash outlays despite accounting losses due to non-deductible items or timing

Key Concerns:

• Negative operating and ordinary income despite acceptable gross margin
• Cash flow reliance on working-capital inflows rather than underlying profitability
• Data gaps (cash balance, investing CF, equity ratio, interest expense, share count) limit precision of analysis
• Asset turnover at 0.476x constraining returns

Investment Implications

Key Takeaways:

• Top line declined 4.3% YoY to ¥4.98bn; gross margin held at 22.9% but operating loss persisted
• ROE -1.07% driven by negative margin and low asset turnover; leverage remains modest at 1.31x
• OCF ¥357m was strong relative to net loss, implying favorable working-capital timing
• Balance sheet is conservative with implied equity ratio ~76.6% and liabilities/equity ~0.43x
• Financing outflow of ¥590m likely debt-related; dividends reported as zero

Metrics to Watch:

• Order intake and backlog/book-to-bill
• Operating margin and SG&A-to-sales ratio
• OCF-to-EBIT(DA) and working-capital days (DSO, DIO, DPO)
• Asset turnover and revenue per asset
• Gross margin stability by project mix
• Equity ratio and net cash/debt once disclosed

Relative Positioning: Compared with domestic mid-sized construction/engineering and plant maintenance peers, Nakabohtec currently shows weaker operating profitability and asset turnover but stronger balance sheet conservatism and near-term liquidity; cash generation benefited from working capital this quarter rather than recurring earnings.

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