Brass Corporation FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥3.17B
• Operating Income: ¥-163M
• Net Income: ¥53M
• EPS: ¥-26.85

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

Verdict: Weak quarter with operating and ordinary losses, revenue flat YoY and liquidity tight. Revenue was 31.73 (100M JPY), down 0.2% YoY, while operating income fell to -1.63, ordinary income to -1.69, and net income to -1.42. Gross profit was 21.48, yielding a high gross margin of 67.7%, but SG&A of 20.74 absorbed nearly all gross profit, driving operating margin to approximately -5.1%. Non-operating items were small (income 0.15, expense 0.07), so core profitability explains most of the loss. The reported effective tax expense of 0.30 against negative pretax/ordinary income and a positive ‘profit before tax’ figure of 0.82 suggests data mapping/timing differences or undisclosed extraordinary items; net result is a bottom-line loss. DuPont shows ROE at -3.6% from a -4.5% net margin, 0.261x asset turnover, and 3.07x leverage, indicating margin pressure as the main driver. Liquidity is tight with a current ratio of 78.5% and negative working capital of -7.60, raising short-term funding risk. Debt load is meaningful (D/E 1.83x) and interest coverage is weak at -22.86x, though cash and deposits of 22.74 provide some immediate cushion. Earnings quality cannot be assessed due to missing cash flow data (OCF unreported), increasing uncertainty around the durability of results. With revenue essentially flat and SG&A near gross profit, operating leverage is unfavorable; profitability likely hinges on either cost control or improved venue utilization and average spend per event. Margin comparison in basis points versus prior year cannot be determined from the disclosed dataset, but the -72.1% YoY in operating income points to sharp deterioration. The effective tax rate appears distorted given losses, likely due to non-deductible items or timing; this may normalize. Forward-looking, the company needs to address SG&A intensity and enhance throughput to restore operating margins, while managing near-term liquidity. Key watchpoints are booking trends, cancellation rates, and wage/food cost inflation in the wedding services business. Overall, the quarter highlights operational headwinds and liquidity stress, with limited visibility given absent cash flow disclosures.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (-4.5%) × Asset Turnover (0.261x) × Financial Leverage (3.07x) = ROE (-3.6%). The largest adverse contributor is the net profit margin, driven by operating losses despite a high gross margin. Operating margin is roughly -5.1% (operating income -1.63 / revenue 31.73), and ordinary margin is -5.3%. The business reason appears to be SG&A absorbency: SG&A of 20.74 nearly equals gross profit of 21.48, leaving little room for operating profit even with a strong gross margin. Non-operating items (net +0.08) were not sufficient to offset operating losses; interest expense of 0.07 is small in absolute terms but significant relative to negative EBIT. Sustainability: without structural SG&A reduction or revenue mix/volume improvement (higher utilization, higher average spend), current margin profile is not sustainable. The asset turnover of 0.261x is low for a services venue operator, indicating underutilized assets; improving utilization would provide positive operating leverage. Leverage at 3.07x amplifies equity volatility; while it helped ROE historically, it now magnifies losses. Concerning trends: revenue was flat (-0.2% YoY) while operating income fell sharply, implying SG&A growth or reduced operating efficiency; SG&A growth versus revenue cannot be precisely compared due to missing prior-year SG&A, but the current period indicates cost pressure outpacing sales.

Growth Assessment

Top-line was essentially flat (-0.2% YoY), suggesting stable demand but no growth catalyst in the quarter. Profitability deteriorated significantly, with operating income at -1.63, indicating negative operating leverage. The high gross margin (67.7%) implies pricing and direct cost discipline are intact; the drag is in overhead and possibly event volume/utilization. With low asset turnover (0.261x), scaling revenue on the existing asset base would meaningfully lift profitability if achieved. Absent disclosure on bookings, pipeline, or per-event metrics, sustainability of revenue is uncertain; wedding industry seasonality and lead times can create lumpy quarterly patterns. Non-operating items remain small; earnings trajectory will be governed by core operations. Outlook hinges on cost containment (labor, utilities, marketing) and demand recovery in weddings/banquets; any macro slowdown or consumer retrenchment would weigh on revenue. Given liquidity constraints, aggressive growth investments may be limited near term, favoring efficiency measures over expansion.

Financial Health

Liquidity: Current assets 27.69 vs current liabilities 35.29 yield a current ratio of 0.785, below 1.0—explicit warning for short-term liquidity stress and negative working capital (-7.60). Quick ratio equals current ratio (78.5%) due to limited inventories disclosure, reinforcing tight liquidity. Cash and deposits are 22.74, a material share of current assets, which provides some immediate coverage but may be drawn down if operations remain loss-making. Solvency: Total liabilities 72.57 and equity 39.69 imply D/E of 1.83x—elevated but below the 2.0 explicit warning threshold; leverage nonetheless constrains flexibility. Long-term loans are 27.43; split of interest-bearing debt between short/long not fully disclosed. Maturity mismatch risk exists: current liabilities exceed current assets, increasing reliance on rollover or new financing. Interest coverage is weak (-22.86x), signaling vulnerability if rates rise or lenders tighten. Off-balance sheet obligations are not disclosed; no leases or guarantees reported in the dataset, so additional commitments cannot be ruled out.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income and free cash flow cannot be computed; earnings quality assessment is therefore limited. With negative operating income and tight working capital, cash generation from operations is likely under pressure, but the cash balance (22.74) offers a short-term buffer. No evidence of working capital inflows (e.g., payables stretch) or outflows (e.g., receivables build) can be confirmed due to missing cash flow and inventory data. Dividend and capex cash requirements are unreported, preventing FCF coverage analysis for shareholder returns or maintenance capex. Given the loss and liquidity strain, sustaining positive FCF would likely require cost reductions and stable bookings in the near term.

Dividend Sustainability

Dividend data (DPS, total dividends, cash outflow) are unreported, and net income is negative. The calculated payout ratio of -32.2% is not economically meaningful with negative earnings and cannot be used to judge sustainability. Without OCF and capex data, FCF coverage of dividends cannot be assessed. Given current losses, tight liquidity (current ratio 0.785), and weak interest coverage, maintaining or increasing dividends—if any—would depend on cash on hand and potential external financing rather than internally generated cash. Policy outlook is uncertain; prudence would suggest prioritizing liquidity until operating profitability normalizes.

Risk Assessment

Business Risks:

• Demand volatility and seasonality in wedding/banquet services impacting venue utilization and revenue
• Cost inflation in labor, food and beverage, and utilities compressing margins despite high gross margin
• Competitive pressure from alternative venues and experiential trends affecting pricing power and booking volumes
• Event postponements/cancellations impacting revenue recognition and capacity planning

Financial Risks:

• Low liquidity with current ratio 0.785 and negative working capital (-7.60), heightening short-term refinancing risk
• Weak interest coverage (-22.86x) raising debt service vulnerability
• Leverage at D/E 1.83x and financial leverage 3.07x amplifying earnings volatility
• Potential covenant risks or refinancing needs not disclosed
• Cash dependence to bridge operating losses if profitability does not recover

Key Concerns:

• SG&A absorbency (20.74 vs gross profit 21.48) causing operating losses
• Low asset turnover (0.261x) indicating underutilized assets
• Inconsistencies between profit before tax and net income suggest undisclosed extraordinary items or mapping differences, reducing transparency
• Missing cash flow statement prevents verification of earnings quality and liquidity trajectory

Investment Implications

Key Takeaways:

• Core issue is overhead intensity: SG&A nearly equals gross profit, yielding a -5.1% operating margin
• Liquidity is tight (current ratio 0.785; working capital -7.60) despite cash of 22.74
• Leverage is elevated (D/E 1.83x) with negative interest coverage, constraining flexibility
• Revenue flat YoY suggests limited demand momentum; utilization must improve for operating leverage
• Data gaps (cash flow, segment/event metrics) limit visibility into earnings quality and sustainability

Metrics to Watch:

• Bookings, conversion rates, and cancellation rates per quarter
• Average revenue per event and venue utilization
• SG&A run-rate vs revenue (particularly personnel and marketing)
• Operating cash flow and working capital movements (payables, deposits, receivables)
• Debt maturity profile, interest costs, and any covenant disclosures

Relative Positioning: Within domestic wedding services, the company maintains strong gross margins but is disadvantaged by high SG&A intensity and low asset turnover, leaving it more exposed to demand softness and cost inflation than leaner peers with higher utilization and stronger liquidity.

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