FUJI P.S CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥16.29B
• Operating Income: ¥907M
• Net Income: ¥558M
• EPS: ¥31.64

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

Verdict: Solid improvement at the operating line with clear margin expansion, but headline net income fell sharply YoY due to non-recurring factors, and capital efficiency remains weak. Revenue increased 5.4% YoY to 162.91, while operating income rose 56.9% YoY to 9.07, signaling stronger project economics and/or better cost control. Gross profit reached 25.87, implying a gross margin of 15.9%, and operating margin improved to 5.6% (9.07/162.91). Ordinary income grew 51.5% YoY to 8.58, but net income declined 64.3% YoY to 5.58, indicating unusual items or a tough comparison base at the below-ordinary line in the prior year. Using the growth rates, we estimate prior-year operating income at roughly 5.78 and revenue at 154.55, implying an operating margin of about 3.7% last year versus 5.6% this year—an expansion of approximately 180 bps. Ordinary margin similarly rose from about 3.7% to 5.3%, an expansion of roughly 160 bps. Net margin now stands at 3.4%, restrained by a 32.1% effective tax rate and higher non-operating expenses (0.67) than non-operating income (0.18). Earnings quality is acceptable: operating cash flow of 7.62 exceeds net income (OCF/NI 1.37x), and OCF covers capex of 5.07, implying positive, albeit modest, free cash flow. Liquidity is adequate but not robust (current ratio 118%), with a reliance on short-term loans (93.63) that merits monitoring. Leverage is moderate-to-high (D/E 1.84x) but interest coverage is strong at 17.1x, reflecting healthy operating cash generation relative to interest costs. ROE is 4.4% and ROIC is only 3.0%, well below a typical 7–8% hurdle, underscoring capital efficiency challenges. Book value per share is about 714.5 JPY, and EPS was 31.64 JPY for the period; the calculated payout ratio is 43.3%, suggesting flexibility if profits normalize. With operating momentum improving and cash conversion solid, the near-term outlook depends on sustaining margin gains and managing short-term funding concentration. The sharp YoY decline in net income appears more optical than operational, given strong operating trends; we suspect prior-year one-offs at the extraordinary line. Key forward focus areas are order backlog quality, cost pass-through on materials, and refinancing/tenor management of short-term debt. Overall, the quarter shows operational progress against a backdrop of subpar capital efficiency and funding structure considerations.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 3.4% × Asset Turnover 0.454 × Financial Leverage 2.84x = ROE 4.4% (matches reported). Change driver: The largest positive shift came from Net Profit Margin at the operating/ordinary level—operating margin expanded from an estimated ~3.7% in the prior period to ~5.6% (+~180 bps), and ordinary margin from ~3.7% to ~5.3% (+~160 bps). Business reasons: better project mix, improved cost control, or pricing pass-through in a tight construction market likely lifted operating profitability; non-operating balance was a drag (expenses 0.67 > income 0.18), and taxes normalized, depressing bottom-line margin. Sustainability: Operating margin gains are partially sustainable if bid discipline and material cost pass-through hold; however, construction cyclicality and input cost volatility (cement, rebar, labor) make full retention uncertain. Asset turnover of 0.454 is modest for a contractor, reflecting a working-capital-intensive model; improvement hinges on faster collection and disciplined WIP management. Financial leverage at 2.84x supports ROE but raises risk if earnings soften; deleveraging would likely pressure ROE unless margins/turnover improve further. Watchpoints: SG&A rose to 16.80, but we lack YoY detail—given revenue +5.4% and operating income +56.9%, operating leverage was positive this period. Risk flags: capital efficiency remains weak (ROIC 3.0% < 5% warning), and a large share of liabilities are short-term, potentially constraining longer-term profitability via funding costs.

Growth Assessment

Top-line growth of 5.4% YoY is steady, likely driven by stable public/private demand and order execution. Operating profit growth of 56.9% YoY far outpaced sales, evidencing operating leverage and improved project margins. Ordinary income growth of 51.5% corroborates that the improvement is not solely accounting-driven at the operating level. Net income declined 64.3% YoY despite stronger operations, implying prior-year one-offs (e.g., extraordinary gains or tax effects) or current-year one-time costs below the ordinary line; detailed extraordinary items were not disclosed. EBITDA was 12.89 (7.9% margin), supporting the narrative of stronger underlying operations. With OCF exceeding NI and capex disciplined (5.07), the business is generating positive internal funds to support moderate growth. However, ROIC at 3.0% signals that incremental growth must be more selective to meet cost of capital. Outlook hinges on backlog quality, pricing, and continued cost normalization; if operating margin retention persists near mid-5% levels, full-year profit momentum can continue, but seasonality and project timing remain variables.

Financial Health

Liquidity: Current ratio 118.3% is adequate but below the 1.5x comfort benchmark; explicit warning triggers (<1.0x) not met, but cushion is thin. Quick ratio is reported as 118.3%, though inventories were unreported; actual quick liquidity could be lower—monitor. Working capital is 39.99, providing some buffer against execution and collection timing. Leverage: Debt-to-equity is 1.84x (moderate-to-high but below the 2.0x explicit warning threshold); equity ratio is approximately 35.2% (126.22/358.68). Interest coverage is strong at 17.11x, reducing near-term solvency concerns. Maturity profile: Short-term loans total 93.63 versus current assets of 258.71 and current liabilities of 218.72, indicating reliance on short-term funding but not an immediate mismatch; refinancing/tenor extension would lower risk. Long-term loans are modest at 4.64, implying limited duration of funding. Off-balance sheet obligations: Not disclosed; none identified in the provided data.

Cash Flow Quality

OCF/Net Income is 1.37x, indicating healthy cash conversion and low accrual risk this period. Operating cash flow of 7.62 covers capex of 5.07, implying positive free cash flow of roughly 2.55 (estimate; official FCF unreported). Financing cash flow was -11.40, likely reflecting debt repayments and possibly dividends; given strong interest coverage, deleveraging appears manageable. No clear signs of working capital manipulation are evident from the limited disclosure; however, receivables and inventories were unreported, limiting a deeper assessment. Sustainability: If OCF remains above NI and capex stays disciplined, cash generation should cover maintenance needs and a moderate dividend, though reliance on short-term borrowing adds refinancing sensitivity.

Dividend Sustainability

Payout ratio is calculated at 43.3%, within a conservative range (<60%), suggesting room to sustain distributions, assuming earnings normalize. With estimated positive free cash flow (OCF 7.62 minus capex 5.07), dividends appear covered this period, though total dividends paid were unreported. Balance sheet flexibility is moderate (equity ratio ~35%, D/E 1.84x); any move to reduce short-term debt could compete with shareholder returns. Policy outlook: If management targets stable dividends, current payout looks maintainable provided operating margin gains persist and order execution remains smooth. Key swing factors are net income volatility (given non-operating/tax effects) and working capital needs in the second half.

Risk Assessment

Business Risks:

• Project execution and timing risk impacting revenue recognition and margins
• Input cost inflation (cement, steel rebar, labor) affecting gross margins
• Pricing/bid discipline risk in competitive public/private tenders
• Order backlog visibility not disclosed; potential demand cyclicality
• Subcontractor availability and labor shortages affecting delivery

Financial Risks:

• Reliance on short-term loans (93.63) elevates refinancing/rollover risk
• Moderate-to-high leverage (D/E 1.84x) amid low ROIC (3.0%)
• Thin liquidity buffer (current ratio 1.18x) versus construction cyclicality
• Non-operating expense burden (0.67) exceeding non-operating income (0.18)
• Potential cash flow variability from working capital swings

Key Concerns:

• Net income down 64.3% YoY due to non-recurring factors despite stronger operations
• ROIC at 3.0% below typical 7–8% target, risking value dilution
• Concentration in short-term funding structure, limited long-term debt
• Limited disclosure on receivables, inventories, and extraordinary items

Investment Implications

Key Takeaways:

• Operating momentum strong: operating income +56.9% on revenue +5.4%, with ~180 bps operating margin expansion
• Earnings quality acceptable: OCF/NI 1.37x and OCF covers capex
• Headline net income decline (-64.3% YoY) likely driven by one-offs, not core deterioration
• Leverage moderate-to-high (D/E 1.84x) with heavy short-term loans; interest coverage strong (17.1x)
• Capital efficiency weak: ROE 4.4%, ROIC 3.0% below hurdle

Metrics to Watch:

• Order backlog volume and mix (public vs private) and win rates
• Operating margin trajectory and gross margin resilience vs material/labor costs
• Working capital turns (DSO/DPO/WIP) and OCF/NI ratio
• Short-term loan balance and average debt tenor/refinancing activities
• ROIC progression toward >5% near-term and 7–8% medium-term

Relative Positioning: Within Japanese construction/materials contractors, the company shows improving operating profitability and strong interest coverage, but sits below peers on capital efficiency (ROIC/ROE) and carries a relatively higher reliance on short-term funding. Sustained margin retention and improved asset turns are needed to close the gap.

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