TENOX CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥9.08B
• Operating Income: ¥454M
• Net Income: ¥271M
• EPS: ¥45.82

Income Statement

Balance Sheet

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

For FY2026 Q2 (consolidated, JGAAP), Tenox reported revenue of ¥9,076m (-25.1% YoY) with operating income of ¥454m (+2.5% YoY) and net income of ¥304m (+3.7% YoY), indicating strong cost discipline and/or favorable mix despite a sharp topline contraction. Gross profit was ¥1,644m, implying an 18.1% gross margin that is broadly consistent with civil engineering/foundation peers. Operating margin was 5.0% (¥454m/¥9,076m), and ordinary margin was 4.9%, suggesting minimal non-operating drag. The DuPont breakdown shows ROE of 2.24% driven by a 3.35% net margin, 0.483x asset turnover, and 1.38x financial leverage—an overall conservative return profile constrained mainly by modest turnover and margins. Balance sheet strength is notable: total assets were ¥18,789m, equity ¥13,576m, and liabilities ¥7,782m, implying an equity ratio of roughly 72.3% (derived; the reported 0.0% is clearly an unreported placeholder). Liquidity is ample with current assets of ¥16,957m versus current liabilities of ¥6,967m, yielding a current ratio of 243% and working capital of ¥9,990m. SG&A expense is inferred at about ¥1,190m (gross profit minus operating income), equal to ~13.1% of revenue, which underscores disciplined overhead management in the face of lower sales. The effective tax rate is approximately 33% (¥151.6m tax on ~¥455.6m pre-tax), a normalized level. Cash flow statements and several per-share items (shares outstanding, BVPS) are unreported, limiting visibility into earnings-to-cash conversion and capital return capacity. Inventories are also unreported, meaning the reported quick ratio mirrors the current ratio by construction and should be interpreted cautiously. The combination of falling revenue and rising operating profit points to potential timing effects (project recognition), mix improvement, and cost control; monitoring order intake and backlog will be key to assessing sustainability. Financial risk appears low given low leverage (D/E ~0.57x) and high equity buffer, but working capital swings typical of construction could affect cash generation. Given the available data, profitability quality looks stable at the operating level, but confirmation via cash flow data is needed. Dividend information is unreported this period, so payout and FCF coverage cannot be assessed. Overall, Tenox enters the second half with solid liquidity and solvency, improving earnings resilience, and low financial risk, but visibility on cash flow and order momentum is limited by disclosure gaps. Users should weigh the favorable cost performance against the revenue decline and the absence of cash flow data when evaluating the interim profile.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 3.35% × asset turnover 0.483 × financial leverage 1.38 = ROE 2.24%. Margin quality: gross margin 18.1% (¥1,644m/¥9,076m) is healthy for foundation/civil works; operating margin 5.0% and ordinary margin 4.9% reflect good operating discipline and negligible non-operating drag. SG&A is inferred at ~¥1,190m (13.1% of revenue), indicating tight overhead control contributing to resilience despite lower sales. Operating leverage: revenue declined 25.1% YoY while operating income rose 2.5% YoY, implying meaningful positive operating leverage from mix improvement, project execution, and cost containment; this is a positive signal for management’s cost flexibility. Tax: effective tax ~33% (¥151.6m/¥455.6m pre-tax), consistent with normalized levels, suggesting no unusual tax items. Note: cost of sales reported (¥10,471m) does not reconcile with reported gross profit; analysis relies on stated gross profit and margins, which appear internally consistent.

Growth Assessment

Revenue contracted 25.1% YoY to ¥9,076m, likely reflecting project timing, delayed starts, or a softer order environment. Despite this, operating income rose 2.5% and net income rose 3.7%, indicating improved mix and/or cost savings. Sustainability hinges on order intake and backlog conversion; absent backlog data, we cannot ascertain whether the revenue dip is timing-related or demand-driven. Asset turnover at 0.483x is modest, but seasonality and the interim nature of results may depress turnover at Q2; full-year normalization could lift this metric. Margin durability appears reasonable: gross margin at 18.1% and SG&A at ~13.1% of sales suggest scope to maintain mid-single-digit operating margins if mix holds. Ordinary income closely tracks operating income, reducing reliance on non-operating gains. Outlook factors to monitor include public works demand, private-sector foundation projects, input cost trends (steel, labor), and weather-related disruptions. If order momentum recovers in H2, earnings could scale given the demonstrated cost control; conversely, prolonged volume pressure would cap operating margin expansion.

Financial Health

Liquidity: current assets ¥16,957m vs current liabilities ¥6,967m yields a current ratio of 243% and working capital of ¥9,990m; inventories are unreported, so the quick ratio equivalence should be treated as a disclosure artifact. Solvency: total liabilities ¥7,782m and equity ¥13,576m imply D/E ~0.57x and an equity ratio near 72.3% (derived), indicating a conservative capital structure and strong loss-absorption capacity. Leverage: financial leverage at 1.38x is low-moderate, consistent with a balance sheet geared to stability over ROE maximization. Interest burden appears minimal (ordinary ≈ operating), but interest expense is unreported; nonetheless, coverage is likely comfortable given low leverage. Asset mix is heavily current (current assets ~90% of total assets), aligning with the project-based nature of the business but leaving results sensitive to working capital swings.

Cash Flow Quality

Earnings quality cannot be validated due to unreported operating, investing, and financing cash flows. As such, the OCF/Net Income ratio and free cash flow (FCF) metrics provided as zero are placeholders and not indicative of performance. Working capital: with large current assets and liabilities, cash conversion will hinge on receivables and unbilled WIP turns; however, inventories and receivables details are unreported. Given the earnings resilience amid revenue decline, confirming cash realization via OCF data is the key missing piece. Capex and D&A are unreported, so we cannot assess maintenance vs. growth investment or EBITDA. Overall, provisional view is neutral: operating results are solid, but absence of CF data prevents assessing earnings-to-cash conversion.

Dividend Sustainability

Dividend information (DPS, payout, FCF coverage) is unreported this period, so sustainability cannot be evaluated quantitatively. Balance sheet strength (D/E ~0.57x, substantial working capital) suggests capacity for distributions under normal conditions, but without OCF/FCF and capex data, coverage cannot be confirmed. Policy outlook is unclear due to lack of disclosure; monitoring forthcoming guidance, historical payout tendencies, and cash flow trends will be necessary to assess future dividends.

Risk Assessment

Business Risks:

• Project timing and backlog conversion risk leading to revenue volatility
• Input cost inflation (steel, materials) and subcontractor/labor availability
• Fixed-price contract execution risk and cost overruns
• Weather and site conditions affecting productivity and handover timing
• Demand sensitivity to public works budgets and private construction cycles
• Competitive bidding pressure compressing margins

Financial Risks:

• Working capital swings impacting operating cash flow and liquidity
• Counterparty credit risk on receivables in a project-based business
• Potential mismatches in revenue/cost recognition affecting interim margins
• Limited visibility due to unreported cash flow and inventory data

Key Concerns:

• Sharp YoY revenue decline (-25.1%) despite higher profits—sustainability uncertain
• Absence of cash flow disclosure prevents validation of earnings quality
• Data inconsistency between reported cost of sales and gross profit; reliance on stated gross profit for margin analysis

Investment Implications

Key Takeaways:

• Operating profit growth (+2.5% YoY) amid a 25.1% revenue decline highlights robust cost control and mix improvement
• Margins are stable to improving: gross 18.1%, operating 5.0%, ordinary 4.9%
• ROE is modest at 2.24%, constrained by moderate margins and asset turnover, with low leverage (1.38x) limiting amplification
• Balance sheet is strong with an estimated equity ratio ~72% and current ratio 243%
• Cash flow and dividend visibility are limited due to unreported data; verification needed in subsequent disclosures

Metrics to Watch:

• Order intake, book-to-bill ratio, and backlog trajectory
• Gross margin and SG&A ratio to assess sustainability of cost improvements
• Receivable days, unbilled WIP, and overall OCF to validate cash conversion
• Input cost indices (steel) and subcontractor cost trends
• Capex and D&A once disclosed to gauge maintenance needs and capacity
• Ordinary income vs. operating income spread as a proxy for financing/non-operating impacts

Relative Positioning: Within Japanese civil engineering/foundation peers, Tenox exhibits healthy gross and operating margins and a conservative balance sheet with lower leverage, but generates below-average ROE due to modest asset turnover and restrained leverage; near-term relative performance will depend on backlog-driven revenue recovery and confirmation of cash conversion.

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