TOA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥164.83B
• Operating Income: ¥11.14B
• Net Income: ¥6.77B
• EPS: ¥97.56

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

For FY2026 Q2, Toa Corporation (東亜建設工業, 1885) delivered solid top-line and profit growth with revenue up 10.0% year over year to ¥164.8bn and operating income up 18.1% to ¥11.1bn, indicating operating leverage and margin improvement. Gross profit reached ¥15.9bn, implying a gross margin of 9.7%, while operating margin improved to approximately 6.8%. Ordinary income was ¥11.0bn and net income rose 15.0% YoY to ¥7.7bn, translating to a net margin of 4.65%. DuPont decomposition shows ROE of 7.12% driven by a 4.65% net margin, 0.544x asset turnover, and 2.82x financial leverage, a balanced profile for a construction contractor. EBITDA was ¥12.8bn with a 7.8% margin, and interest coverage remains very strong at 77.9x, underscoring low financial stress from interest-bearing debt. The balance sheet appears resilient with total assets of ¥303.1bn and total equity of ¥107.6bn (implying an equity ratio of roughly 35.5% despite a reported 0.0% placeholder), and a current ratio of 142%. Working capital stands at ¥72.1bn, offering liquidity to support project execution. Cash flow is the primary weak spot this quarter: operating cash flow was negative ¥9.9bn, which contrasts with positive earnings and suggests working capital absorption typical of order growth and project mix. Investing and cash balances are undisclosed (zeros are placeholders), limiting full cash flow interpretation and free cash flow assessment. The reported effective tax rate of 0.0% is a placeholder; using income tax expense of ¥3.07bn against ordinary income suggests a normalized tax rate in the high-20% range. With dividends reported as zero and payout ratio at 0%, capital allocation intentions for the year are unclear from the dataset. Overall, profitability momentum and balance sheet strength are evident, while the negative OCF and several undisclosed items require monitoring. Sector dynamics (public works, coastal and marine infrastructure) likely support revenue visibility, but input cost inflation and labor constraints remain key execution risks. We treat zeros as undisclosed items per instruction and base conclusions only on non-zero figures provided.

Profitability Analysis

ROE_decomposition: ROE 7.12% = Net margin 4.65% × Asset turnover 0.544 × Financial leverage 2.82. Net margin reflects improved operating performance; asset turnover is typical for construction with sizable work-in-process; leverage is moderate, supporting ROE without excessive balance sheet risk. margin_quality: Gross margin 9.7% and operating margin ~6.8% (¥11.139bn / ¥164.829bn) indicate healthy project profitability and cost control. EBITDA margin 7.8% aligns with an asset-light contractor model. Net margin at 4.65% benefited from controlled interest expense (¥143m) but faced a normalized tax burden (see note below). operating_leverage: Revenue grew 10.0% YoY while operating income rose 18.1% YoY, indicating positive operating leverage and mix benefits. SG&A discipline and/or better project margins likely contributed to incremental margins exceeding top-line growth.

Growth Assessment

revenue_sustainability: Revenue reached ¥164.8bn (+10.0% YoY), suggesting steady project execution and demand, likely underpinned by marine/civil public and private works. Backlog data is not provided, limiting visibility; however, the scale of current assets and working capital supports ongoing activity. profit_quality: Operating income growth (+18.1% YoY) outpaced sales growth, implying margin gains. The net margin of 4.65% is consistent with efficient cost pass-through and execution. That said, the negative OCF indicates profit not yet converting to cash due to working capital timing. outlook: Near-term growth appears supported by sector tailwinds (infrastructure maintenance, coastal resilience, port and marine projects) and cost management, but sustained growth will depend on backlog replenishment, input cost stabilization, and labor availability.

Financial Health

liquidity: Current assets ¥242.6bn vs current liabilities ¥170.5bn yield a current ratio of 142.3% and working capital of ¥72.1bn, indicating adequate short-term liquidity. Quick ratio equals current ratio due to undisclosed inventories (treated as placeholders). solvency: Total liabilities ¥191.1bn vs equity ¥107.6bn results in a debt-to-equity proxy of 1.78x. Implied equity ratio is ~35.5% (¥107.6bn/¥303.1bn), despite a reported 0.0% placeholder, suggesting a solid capital base. capital_structure: Interest expense is modest at ¥143m, and interest coverage is strong at 77.9x (operating income basis), indicating low refinancing risk. Financial leverage at 2.82x assets/equity is consistent with industry norms.

Cash Flow Quality

earnings_quality: Net income of ¥7.665bn contrasts with operating CF of -¥9.936bn (OCF/NI = -1.30), indicating earnings not yet converting to cash due to working capital swings, common in construction (receivables, unbilled revenue, and advances). FCF_analysis: Investing CF and capex are undisclosed (reported zeros are placeholders), so free cash flow cannot be reliably calculated; the provided FCF of 0 should be disregarded. With negative OCF, near-term FCF is likely pressured absent offsetting declines in working capital. working_capital: Current assets are sizable relative to current liabilities, but the negative OCF suggests increased contract assets or receivables. Detailed drivers (inventories, cash, contract balances) are not disclosed, limiting granularity.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is reported as 0 and payout ratio 0%, which we treat as undisclosed or not yet determined rather than a confirmed zero. Given positive earnings, the company has capacity, but actual policy cannot be inferred from the provided data. FCF_coverage: FCF is reported as 0 due to missing investing/capex data; thus, FCF coverage of dividends cannot be assessed. Negative OCF this period would constrain coverage if sustained. policy_outlook: No guidance on dividend policy in the dataset. With healthy profitability and balance sheet, a sustainable payout would be plausible if cash conversion normalizes, but clarity depends on cash flow trends and capital allocation priorities.

Risk Assessment

Business Risks:

• Project execution risk on large marine and civil contracts (schedule, technical complexity).
• Input cost inflation (materials, fuel) potentially compressing margins if not fully passed through.
• Labor availability and subcontractor capacity constraints affecting delivery and costs.
• Order backlog visibility is not disclosed, creating uncertainty on medium-term revenue.
• Competition in public works bidding potentially pressuring margins.

Financial Risks:

• Negative operating cash flow this period highlights working capital volatility and cash conversion risk.
• Potential increase in receivables/contract assets elevating collection risk if counterparties delay payments.
• Exposure to interest rate normalization on any floating-rate debt, albeit mitigated by strong coverage.
• Undisclosed cash balance complicates liquidity assessment under stress scenarios.

Key Concerns:

• Sustained negative OCF would erode balance sheet flexibility despite solid earnings.
• Margin resilience amid cost inflation and wage pressures.
• Backlog sufficiency and project mix to support mid-teens operating profit growth.

Investment Implications

Key Takeaways:

• Top-line growth of 10.0% YoY with operating income up 18.1% indicates operating leverage.
• ROE at 7.12% is supported by moderate leverage (2.82x) and improving margins.
• Interest coverage is strong at 77.9x, pointing to low financial stress.
• Liquidity is adequate with a 142% current ratio and ¥72.1bn working capital.
• Negative OCF (¥-9.9bn) is the main weak point; cash conversion needs monitoring.
• Several items (cash, investing CF, inventories, equity ratio) are undisclosed; conclusions rely on available figures.

Metrics to Watch:

• Operating cash flow and changes in receivables/contract assets.
• Order backlog and new order intake (not provided here).
• Gross and operating margin trends versus input cost inflation.
• Leverage and interest coverage as rates evolve.
• Capital expenditure and investing cash flows to refine FCF view.
• Dividend announcements or payout guidance.

Relative Positioning: Within Japanese construction names, Toa appears as a marine/civil-focused contractor with mid-single-digit operating margins, moderate leverage, and strong interest coverage; profitability momentum is positive, but cash conversion currently lags peers that are generating positive OCF.

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