OKUMURA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥151.30B
• Operating Income: ¥9.65B
• Net Income: ¥-3.53B
• EPS: ¥277.35

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

Okumura Corporation (1833) reported FY2026 Q2 consolidated results under JGAAP with solid topline growth but mixed quality of earnings. Revenue rose 8.6% year over year to ¥151.3bn, reflecting steady project execution and likely healthy order intake in prior periods. Gross profit was ¥11.5bn, implying a gross margin of 7.6%, which is relatively thin for a general contractor and suggests pressure on project margins or mix. Operating income was ¥9.7bn, down 87.7% YoY, indicating a sharp contraction in core profitability despite higher sales. Ordinary income of ¥13.0bn exceeded operating income, pointing to sizable non-operating gains (e.g., interest/dividend income or investment-related gains) supporting earnings. Net income surged 351.7% YoY to ¥9.95bn, implying that non-operating items and/or a more normalized tax burden offset weak operating performance. DuPont analysis shows a net margin of 6.58%, asset turnover of 0.391, and financial leverage of 2.14x, yielding an ROE of 5.51% for the period. Liquidity appears adequate with a current ratio of 137.8% and working capital of ¥66.2bn, though the quick ratio matches current ratio due to unreported inventories, so the true liquidity buffer may differ. Operating cash flow was negative at ¥16.2bn, resulting in an OCF/Net Income ratio of -1.63, indicating earnings were not backed by cash this period, likely due to working capital swings typical of construction. Interest coverage is comfortable at 29.6x on operating income, underscoring low near-term financial stress. The balance sheet shows total assets of ¥386.7bn and equity of ¥180.7bn, implying moderate leverage (liabilities/equity 1.22x). Reported equity ratio is 0.0% and cash/equivalents are 0, which reflect unreported items rather than economic zero; conclusions are therefore based on the non-zero disclosures. Dividend data (DPS and payout) were not disclosed, so distribution policy cannot be assessed from this dataset. Overall, the quarter demonstrates resilient revenue but a heavy reliance on non-operating income and working capital absorption, which dampens cash flow quality. Sustainability of margins and normalization of cash conversion are key to improving the quality of earnings in the second half.

Profitability Analysis

ROE_decomposition: Net margin 6.58% × Asset turnover 0.391 × Financial leverage 2.14 = ROE 5.51% (matches reported). The ROE is modest, driven more by leverage than by operating efficiency or margin. margin_quality: Gross margin 7.6% and operating margin ~6.4% (¥9.65bn / ¥151.30bn) indicate thin project margins consistent with general contracting but potentially pressured versus prior year given the -87.7% YoY drop in operating income. Ordinary income outpacing operating income suggests material non-operating gains bolstering overall profitability. operating_leverage: Revenue grew 8.6% YoY but operating income fell sharply, implying negative operating leverage this period, likely from project mix, cost overrun recognition, or timing of margin recognition on percentage-of-completion contracts.

Growth Assessment

revenue_sustainability: Topline growth of 8.6% is consistent with robust order execution; sustainability will depend on order backlog and the mix of civil engineering vs. building projects (not disclosed here). profit_quality: Profit growth at the net level (+351.7% YoY) is inconsistent with the steep decline in operating income (-87.7% YoY), indicating reliance on non-operating items; underlying quality is weak until operating margins stabilize. outlook: Near-term outlook hinges on margin recovery on ongoing projects, normalization of working capital, and the repeatability of non-operating income. If cost pressures ease and project margins normalize in H2, operating profit should improve; otherwise, earnings may remain volatile.

Financial Health

liquidity: Current assets ¥241.1bn vs current liabilities ¥175.0bn yield a current ratio of 137.8% and working capital of ¥66.2bn. Quick ratio equals current ratio due to unreported inventories; true quick liquidity may be lower but appears adequate. solvency: Total liabilities ¥221.0bn vs equity ¥180.7bn imply a debt-to-equity proxy of 1.22x. Interest coverage at 29.6x suggests comfortable debt service capacity. capital_structure: Assets ¥386.7bn and equity ¥180.7bn imply financial leverage of ~2.14x (assets/equity). The reported equity ratio of 0.0% is an unreported placeholder; based on disclosed totals, the economic equity ratio approximates 46.7%.

Cash Flow Quality

earnings_quality: OCF/Net Income of -1.63 indicates earnings did not convert to cash this period, consistent with construction working capital swings (e.g., receivables buildup, advances/payables timing). FCF_analysis: Operating CF was -¥16.2bn; investing CF was unreported; Free cash flow not derivable from incomplete data. Absent investing outflows, the negative OCF is a caution for cash coverage. working_capital: Given the business model, changes in contract assets/receivables and advances from customers likely drove OCF. With inventories unreported (typical for construction), focus should be on trade receivables, contract assets, and advances.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are unreported (values showing 0 are placeholders). With net income of ¥9.95bn, capacity exists in earnings terms, but sustainability assessment requires actual dividend policy and historical payouts. FCF_coverage: OCF was negative; without investing CF details, FCF coverage of dividends cannot be established. Near-term cash flow volatility suggests caution until OCF normalizes. policy_outlook: No formal guidance disclosed here. For Japanese general contractors, stable-to-progressive dividends are common when balance sheets are strong; confirmation requires management commentary and historical track record.

Risk Assessment

Business Risks:

• Project margin volatility due to input cost inflation and subcontractor availability
• Execution risk on large civil and building projects under percentage-of-completion accounting
• Order intake cyclicality tied to public works budgets and private capex cycles
• Competitive bidding pressure compressing margins
• Dependence on non-operating income to support profits in periods of weak operations

Financial Risks:

• Negative operating cash flow driven by working capital swings
• Potential increase in leverage if cash outflows persist
• Interest rate risk affecting financing costs and non-operating income from securities
• Tax rate volatility between periods affecting net income visibility

Key Concerns:

• Sharp YoY decline in operating income (-87.7%) despite revenue growth
• Earnings supported by non-operating gains (ordinary income > operating income)
• Weak cash conversion (OCF/NI -1.63) in the period

Investment Implications

Key Takeaways:

• Revenue growth of 8.6% indicates healthy execution/backlog conversion
• Core operating profitability is under pressure with operating margin ~6.4% and large YoY decline
• Ordinary income strength suggests non-operating contributions that may not be recurring
• Liquidity appears adequate (current ratio ~1.38x; working capital ¥66.2bn) and interest coverage is strong (29.6x)
• Cash flow quality is weak this period with OCF negative ¥16.2bn

Metrics to Watch:

• Order backlog and new orders (by segment) to gauge forward revenue visibility
• Gross and operating margin trends by project cohort
• Change in contract assets/receivables and advances from customers (cash conversion)
• Non-operating income components and sustainability
• Effective tax rate normalization and any extraordinary items
• Capex and investment CF to refine FCF outlook

Relative Positioning: Within Japanese general contractors, Okumura appears to maintain a solid balance sheet and strong interest coverage but shows weaker current-period operating momentum and cash conversion; closing the gap between operating and ordinary income and restoring cash generation are key to aligning with peers emphasizing stable core margins and consistent FCF.

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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