Sekisui House,Ltd. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥2.94T
• Operating Income: ¥210.89B
• Net Income: ¥167.39B
• EPS: ¥226.89

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

Sekisui House (1928) reported FY2026 Q3 consolidated results under JGAAP with steady top-line growth but weaker profitability. Revenue rose 2.5% year over year to ¥2,935.7bn, while operating income declined 9.3% to ¥210.9bn, signaling margin compression despite higher sales. Gross profit reached ¥554.7bn, translating to a gross margin of 18.9%, which, together with the decline in operating income, implies higher cost of goods sold and/or elevated SG&A. Net income fell 10.8% to ¥147.1bn, with net margin at 5.01%. Ordinary income of ¥199.9bn sits below operating income, reflecting net non-operating expense (including ¥24.2bn of interest expense) and other financial items. The DuPont framework indicates ROE of 7.47% driven by a 5.01% net margin, asset turnover of 0.612x, and financial leverage of 2.44x—pointing to moderate efficiency and leverage but pressure on the margin leg. Operating margin stands at roughly 7.2% (operating income over revenue), down year on year given the OI decline versus revenue growth. The implied effective tax rate is approximately 29–30% using reported tax expense and net income; the displayed “0%” is a placeholder due to unreported fields. The balance sheet shows total assets of ¥4,796.8bn and equity of ¥1,968.8bn, implying an equity ratio near 41% (the reported 0% is an undisclosed placeholder). Liquidity appears sound with current assets of ¥3,712.1bn and current liabilities of ¥1,555.6bn, yielding a current ratio of 238.6%, though the identical quick ratio reflects unreported inventories and thus overstates near-term liquidity relative to peers with material inventories. Interest coverage is healthy at 8.7x (based on operating income), despite higher interest costs. Cash flow statements were not disclosed in this dataset (OCF/FCF shown as zero placeholders), preventing direct assessment of earnings-to-cash conversion. Dividend fields are also undisclosed this quarter; thus payout and FCF coverage cannot be computed from the provided data. Overall, the quarter reflects resilient revenue but softer profitability, with stable solvency and liquidity. The key to improving ROE lies in stabilizing gross margin and controlling SG&A to restore operating leverage. Given data limitations (notably cash flows, D&A, inventories, and dividend details), interpretation focuses on the available income statement and balance sheet figures.

Profitability Analysis

ROE decomposition: Reported ROE is 7.47%, derived from a 5.01% net margin, 0.612x asset turnover, and 2.44x financial leverage. Operating margin is approximately 7.18% (¥210.9bn/¥2,935.7bn), down YoY given the -9.3% operating income on +2.5% revenue, indicating negative operating leverage this period. Gross margin of 18.9% combined with the OI decline suggests either cost inflation (materials/subcontracting), mix shifts to lower-margin segments, and/or higher SG&A. The gap between operating income (¥210.9bn) and ordinary income (¥199.9bn) shows net non-operating expense of about ¥11.0bn, consistent with higher interest costs (¥24.2bn) partially offset by other non-operating items. Interest coverage is 8.7x (operating income/interest expense), adequate but with less headroom if rates remain elevated or if earnings weaken further. Margin quality: Net margin at 5.01% remains moderate for a large housing and construction group; the decline in operating profit despite sales growth implies cost pass-through lag and/or project timing effects. Operating leverage: With revenue up and profits down, fixed-cost absorption likely deteriorated, and SG&A discipline appears a focus area to restore leverage in subsequent quarters.

Growth Assessment

Revenue grew 2.5% YoY to ¥2,935.7bn, indicating steady demand across the portfolio, though mix is not disclosed. Profit growth lagged significantly, with operating income down 9.3% and net income down 10.8%, highlighting that current growth is not translating to bottom-line expansion. The ordinary-to-operating income gap suggests higher financing costs and other non-operating drags compared with prior periods. Sustainability: Given the scale and diversification typical of a large homebuilder, topline resilience often depends on order intake and backlog quality; however, orders/backlog are not disclosed here, limiting visibility on sustainability. Profit quality appears pressured by input cost trends and potentially by a greater contribution from lower-margin segments or geographies; without segment detail, this remains an inference. Outlook hinges on stabilizing gross margin via pricing discipline and procurement, as well as controlling SG&A to regain operating leverage. If costs normalize and price/mix improve, profit conversion could recover even with modest revenue growth. Conversely, a weaker housing cycle or delayed project completions could keep margins under pressure near term.

Financial Health

Total assets are ¥4,796.8bn, total liabilities ¥2,790.2bn, and total equity ¥1,968.8bn, implying an equity ratio around 41% (reported 0% reflects nondisclosure). Current assets of ¥3,712.1bn against current liabilities of ¥1,555.6bn yield a current ratio of 238.6% and working capital of ¥2,156.5bn, evidencing strong short-term capacity. The quick ratio shown equals the current ratio because inventories are undisclosed; for a housing company, inventories are typically material, so true quick liquidity is lower than indicated. Debt-to-equity is 1.42x using total liabilities as a proxy for leverage; interest-bearing debt details are not provided. Interest expense is ¥24.2bn with interest coverage of 8.7x, suggesting manageable debt service. Solvency appears stable given the sizeable equity base and implied equity ratio, though off-balance obligations (JVs, guarantees) are not assessable from the data.

Cash Flow Quality

Operating, investing, and financing cash flows are undisclosed in this dataset (displayed zeros are placeholders). As a result, OCF/Net income, FCF, and cash conversion cannot be evaluated directly. For a developer/homebuilder, working capital dynamics (land acquisition, work-in-progress, receivables) can drive material OCF volatility; the absence of inventories and cash flow statements prevents assessing whether the reported earnings are supported by cash. Depreciation and amortization are also undisclosed, limiting EBITDA and non-cash earnings analysis. Key watchpoints include: cash generation relative to net income, changes in inventories and advances received, and capital allocation to land and development projects once the cash flow data are available.

Dividend Sustainability

Dividend per share and payout are not disclosed for this period (reported zeros are placeholders). With net income at ¥147.1bn, earnings capacity exists to support distributions, but sustainability should be assessed against free cash flow, which is not available here. FCF coverage cannot be computed, and buyback activity, if any, is also not disclosed. Policy outlook cannot be derived from this dataset; assessment should await official guidance on dividends and capital return together with full-year cash flow and balance sheet detail (including net cash/debt and inventories).

Risk Assessment

Business Risks:

• Housing cycle sensitivity in Japan and overseas markets (order intake and backlog timing).
• Input cost inflation (materials, labor, subcontracting) compressing gross margins.
• Project execution and completion timing affecting revenue recognition and profitability.
• Sales mix shifts toward lower-margin products or regions.
• Competitive pricing pressure in domestic detached housing and rental/multifamily segments.
• Regulatory and zoning changes impacting development pipelines.
• FX exposure on overseas operations and procurement.

Financial Risks:

• Higher interest expense (¥24.2bn) and potential rate increases reducing ordinary income.
• Working capital volatility driven by land acquisition and WIP inventories, affecting OCF.
• Refinancing and liquidity risks if inventories rise and sales slow (true quick liquidity is lower than indicated due to undisclosed inventories).
• Potential covenant constraints tied to interest coverage or leverage if earnings weaken.
• Exposure to JV/guarantee obligations not visible in the provided data.

Key Concerns:

• Operating income down 9.3% YoY despite 2.5% revenue growth, indicating negative operating leverage.
• Net margin at 5.01% and ordinary income below operating income highlight non-operating drags.
• Lack of disclosed cash flow data and inventories obscures earnings quality and liquidity assessment.
• Interest coverage at 8.7x is adequate but could compress if rates remain elevated or margins weaken.

Investment Implications

Key Takeaways:

• Top-line growth of 2.5% is intact, but profitability softened with operating income down 9.3% YoY.
• Gross margin at 18.9% and OPM ~7.2% indicate cost pressure and weaker operating leverage.
• ROE of 7.47% is driven more by asset turnover and leverage than by margin; margin recovery is pivotal.
• Balance sheet strength is solid with an implied ~41% equity ratio and strong working capital.
• Interest cost of ¥24.2bn weighs on ordinary income; coverage remains 8.7x but bears monitoring.
• Cash flow and dividend data are not disclosed; conclusions on earnings quality and capital returns are constrained.

Metrics to Watch:

• Order intake and backlog by segment/region.
• Gross margin by segment and SG&A-to-sales ratio.
• Inventories (land bank and WIP) and advances received; cash conversion cycle.
• Operating cash flow and free cash flow versus net income.
• Interest-bearing debt, average funding cost, and interest coverage.
• Pricing power and cost pass-through (materials/labor trends).
• Capital allocation: land acquisition pace, dividends, and share buybacks.

Relative Positioning: Within Japan’s housing and construction sector, Sekisui House exhibits resilient scale and liquidity but currently faces margin compression and negative operating leverage. ROE is moderate and below what many investors target for the sector without margin recovery. Restoring gross margin and improving cash conversion will be key differentiators versus 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