KAJIMA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.37T
• Operating Income: ¥108.67B
• Net Income: ¥35.67B
• EPS: ¥165.29

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

Kashima Corporation (1812) reported FY2026 Q2 consolidated results under JGAAP showing a solid topline and a pronounced margin recovery. Revenue reached ¥1,372.9bn, up 3.9% YoY, indicating modest growth momentum in the order execution phase. Operating income surged to ¥108.7bn (+126.0% YoY), implying a sharp expansion in operating margin to approximately 7.9%. Ordinary income was ¥105.4bn, closely tracking operating income, suggesting limited non-operating drag relative to prior periods. Net income advanced 120.0% YoY to ¥77.3bn, translating to EPS of ¥165.29 for the period. Gross profit was ¥126.4bn, yielding a gross margin of 9.2%, up meaningfully versus typical construction cycle trough levels, and consistent with improved project mix and/or cost normalization. DuPont decomposition shows a 5.63% net margin, asset turnover of 0.409x, and financial leverage of 2.55x, producing an ROE of 5.88%, which matches the reported ROE. Interest coverage improved to 10.1x (operating income/interest expense), highlighting manageable financing costs given the current profit base. Liquidity appears adequate with a current ratio of 125.9% and working capital of ¥440.2bn; however, negative operating cash flow of ¥-157.8bn indicates significant working capital absorption typical of large-scale construction execution phases. Financing cash inflow of ¥149.5bn likely supported working capital needs, while investing cash flow was not disclosed (shown as 0, which should be treated as unreported). Balance sheet shows total assets of ¥3,358.0bn against total liabilities of ¥2,176.6bn and total equity of ¥1,316.0bn, equating to a debt-to-equity ratio of 1.65x. The effective tax rate shown as 0.0% is not reflective of the income tax expense disclosed (¥17.6bn), suggesting the tax rate metric is unreported rather than truly zero. Dividend and share data were largely not disclosed in this dataset (DPS 0.00, payout 0.0%, shares 0), so per-share metrics beyond EPS cannot be validated. Overall, profitability recovery and operating leverage are the key positives, while cash conversion and reliance on financing to bridge working capital are the key watchpoints. Data gaps (inventories, cash and equivalents, investing CF, equity ratio, share counts) limit granularity in certain aspects of analysis; conclusions are therefore based on the available non-zero data points.

Profitability Analysis

ROE of 5.88% is driven by a 5.63% net margin, 0.409x asset turnover, and 2.55x financial leverage, indicating that margin recovery, rather than balance-sheet leverage, is the principal contributor this period. Operating margin is approximately 7.9% (¥108.7bn/¥1,372.9bn), up substantially YoY, reflecting improved project profitability and/or normalization of input cost pressures. Gross margin of 9.2% (¥126.4bn/¥1,372.9bn) signals better cost discipline and mix; the spread between gross and operating margins (~130bps) suggests tight SG&A control. EBITDA is ¥123.5bn, implying an EBITDA margin of 9.0% and modest non-cash charges (D&A ¥14.8bn) relative to the operating base. Interest expense of ¥10.8bn is well covered at 10.1x by operating income, indicating limited near-term pressure from financing costs. The proximity of ordinary income (¥105.4bn) to operating income suggests limited non-operating volatility this half. The implied tax burden based on disclosed income tax (¥17.6bn) appears consistent with a mid-teens rate on pre-tax income, though the reported “effective tax rate” metric itself is not reliable due to data limitations. Overall operating leverage is evident: +3.9% revenue growth translated into +126% operating income growth, underscoring sensitivity of profit to small changes in revenue and cost execution.

Growth Assessment

Revenue growth of +3.9% YoY indicates steady execution of the order book in the first half, consistent with stable civil and building activity levels. The pronounced rebound in operating income (+126% YoY) and net income (+120% YoY) points to a quality-led recovery, likely from better project pricing, improved cost pass-through, and/or mix effects. Margin expansion across gross and operating lines suggests the recovery is not purely volume-driven. The sustainability of this profit step-up will depend on order intake quality, backlog mix, and continued stabilization of material and labor costs; these data are not included here, limiting forward visibility. Asset turnover at 0.409x is typical of asset-light contractors where revenue scales off working capital; sustaining turnover while maintaining higher margins would support ROE resilience. With operating cash outflows large this half, revenue growth quality hinges on whether cash conversion improves in H2 as milestones bill and receivables collect. Ordinary income closely following operating income reduces uncertainty around non-operating swings, supportive for earnings visibility. Outlook-wise, if current margins hold and cash conversion normalizes, full-year profitability could remain strong; if cost pressures or project delays re-emerge, operating leverage could reverse. No guidance or order/backlog data were provided, so the assessment relies on the current run-rate improvements.

Financial Health

Total assets are ¥3,358.0bn, liabilities ¥2,176.6bn, and equity ¥1,316.0bn, yielding a debt-to-equity ratio of 1.65x, which is reasonable for a large general contractor with substantial working capital needs. Liquidity is adequate with a current ratio of 125.9% and working capital of ¥440.2bn (¥2,137.1bn current assets minus ¥1,697.0bn current liabilities). The quick ratio equals the current ratio (125.9%) because inventories are unreported in this dataset; thus, the true quick ratio may be slightly lower. Financial leverage per DuPont is 2.55x (assets/equity), consistent with the capital intensity of long-duration projects and off-balance working capital financing. Interest coverage at 10.1x suggests comfortable solvency in the current earnings environment. Equity ratio is shown as 0.0%, which is not reflective of the disclosed balance sheet totals and should be treated as unreported rather than zero. Absence of cash and equivalents data (shown as 0) limits the assessment of immediate liquidity buffers and net debt. Overall, the balance sheet appears sound, but visibility on cash and the tenor of liabilities is limited.

Cash Flow Quality

Operating cash flow was ¥-157.8bn versus net income of ¥77.3bn, yielding an OCF/Net Income ratio of -2.04, indicative of heavy working capital outflows in the period. This is not uncommon in construction due to milestone billing, advances, and receivables timing, but it elevates execution and funding risk until collections normalize. Investing cash flow is shown as 0 (unreported), preventing a precise free cash flow calculation; however, with OCF negative, economic FCF is likely negative for the half. Financing cash inflow of ¥149.5bn appears to have bridged the operating cash deficit, consistent with drawdowns aligned to project execution. EBITDA of ¥123.5bn and D&A of ¥14.8bn indicate that earnings quality at the operating level is supported by cash-generative operations, but the period’s cash conversion was weak due to working capital. Without detailed working capital line items (receivables, payables, advances from customers, inventories), we infer that collections and/or build-up in unbilled work drove the outflow. Monitoring second-half OCF normalization will be key to validating earnings quality.

Dividend Sustainability

Dividend data in this dataset show Annual DPS of ¥0.00 and a payout ratio of 0.0%, which should be interpreted as not disclosed rather than an actual suspension. With net income at ¥77.3bn in H1, earnings capacity appears sufficient to support ordinary dividends under typical policies; however, negative OCF in the period would not support dividends from free cash flow if sustained. FCF coverage cannot be computed reliably due to unreported investing cash flows; given negative OCF, implied FCF coverage would be weak for the half. Capital structure at 1.65x D/E and solid interest coverage provide flexibility, but dividend capacity ultimately depends on cash conversion in H2 and full-year results. Policy outlook cannot be assessed from the provided data; any assessment should be deferred until official guidance or payout targets are disclosed.

Risk Assessment

Business Risks:

• Project execution risk on large-scale construction (cost overruns, delays, penalties)
• Input cost inflation (materials, labor) and subcontractor availability
• Order intake and backlog quality fluctuations affecting future revenue visibility
• Change-order recoverability and pricing discipline
• Safety, environmental, and compliance risks inherent to construction operations
• Geographic/project mix risks (including overseas projects and JV coordination where applicable)
• Macroeconomic slowdown impacting private investment and public works budget timing
• Natural disaster exposure (earthquakes, typhoons) disrupting sites and supply chains

Financial Risks:

• Negative operating cash flow driven by working capital build, necessitating external funding
• Reliance on short-term financing to bridge project cash cycles; interest rate risk on floating debt
• Margin volatility due to fixed-price contracts in a changing cost environment
• Potential impairment or provisioning needs on problematic projects (not visible in current data)
• Limited visibility on liquidity buffers due to unreported cash and equivalents
• Data gaps on inventories and investing cash flows obscure full FCF picture

Key Concerns:

• OCF/Net Income at -2.04 indicates weak cash conversion in H1
• Financing inflow of ¥149.5bn used to fund operating outflows; sustainability depends on H2 cash normalization
• Equity ratio and cash balances not disclosed, limiting solvency and liquidity assessment precision
• Effective tax rate metric reported as 0.0% is not consistent with disclosed tax expense, indicating reporting limitation

Investment Implications

Key Takeaways:

• Strong margin-led profit recovery: operating income +126% YoY on +3.9% revenue growth, operating margin ~7.9%
• ROE at 5.88% supported by improved net margin (5.63%) and moderate leverage (2.55x assets/equity)
• Interest coverage at 10.1x indicates manageable financial burden in the current earnings environment
• Working capital absorption drove OCF to ¥-157.8bn; funding bridged by ¥149.5bn financing inflow
• Liquidity appears adequate (current ratio 125.9%, working capital ¥440.2bn), but cash balance unreported
• Data limitations (cash, investing CF, inventories, equity ratio, share count) constrain full valuation analytics

Metrics to Watch:

• Order intake and backlog composition (public vs. private, fixed-price vs. cost-plus)
• Operating margin sustainability and gross-to-operating spread
• OCF/Net Income and working capital movements (receivables, unbilled, advances from customers)
• Net debt and cash balance disclosure; interest coverage trajectory as rates evolve
• Debt-to-equity ratio and financial leverage versus profit volatility
• Dividend policy disclosures and full-year payout intentions

Relative Positioning: Within domestic general contractors, the company appears to be in an improving phase with margins and ROE recovering to mid-single digits while maintaining reasonable leverage; sustained cash conversion and backlog quality will determine whether the current profitability step-up is durable relative to peers.

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