FTGroup CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥15.91B
• Operating Income: ¥3.80B
• Net Income: ¥2.67B
• EPS: ¥89.97

Income Statement

Balance Sheet

Cash Flow Statement

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 meaningful margin compression and profit decline despite a still-solid balance sheet. Revenue fell to 159.15 (−10.2% YoY), while operating income declined to 37.99 (−32.2% YoY) and net income to 26.74 (−32.5% YoY). Gross profit came in at 67.96, implying a gross margin of 42.7%. SG&A was 29.91, representing an SG&A ratio of 18.8%. Operating margin was approximately 23.9% (37.99/159.15). Using the disclosed YoY rates, prior-year Q2 revenue is estimated at ~177.26 and operating income at ~56.05, implying a prior operating margin of ~31.6%. This indicates operating margin compressed by ~770 bps YoY. Net margin was 16.8% this quarter; back-solving implies a prior net margin of ~22.4%, a compression of ~560 bps YoY. DuPont shows ROE at 8.3%, with net margin 16.8%, asset turnover 0.385, and financial leverage 1.29x—profitability deterioration is primarily margin-driven, not leverage- or turnover-driven. Profit before tax (39.14) exceeding operating income suggests small positive non-operating contributions (~1.15), but the breakdown is unreported. Effective tax rate was 31.7%, broadly in line with typical levels. Liquidity appears strong: equity ratio is 77.8% and cash & equivalents stand at 178.93 against total liabilities of 91.75. Debt-to-equity is conservative at 0.29x (no maturity pressure evident from reported data). Earnings quality cannot be verified due to unreported operating cash flow; OCF/NI is not calculable. Dividend payout ratio is calculated at 62.4%, slightly above the 60% benchmark, making dividend sustainability dependent on cash generation and profit stabilization. ROIC is reported at 8.1%, around the target range; sustaining this will require margin recovery. Forward-looking, stabilizing topline and SG&A control will be key to restoring operating leverage, while the strong balance sheet provides a buffer. Watch for any recovery in demand and for confirmation that non-operating contributions remain minor and recurring.

Profitability Analysis

ROE decomposition: ROE (8.3%) = Net Profit Margin (16.8%) × Asset Turnover (0.385) × Financial Leverage (1.29x). The largest change driver YoY is the net profit margin, evidenced by operating margin compression from ~31.6% to ~23.9% (−770 bps) and net margin decline from ~22.4% to 16.8% (−560 bps). Business drivers likely include weaker revenue (−10.2% YoY) reducing operating leverage and/or adverse mix/pricing pressure that elevated the cost structure relative to sales. Asset turnover at 0.385 and leverage at 1.29x suggest balance sheet efficiency and capital structure were not the principal headwinds this quarter. Sustainability: margin pressure could normalize if sales recover and SG&A is flexed; however, without a breakdown of cost actions or mix effects, we treat the compression as partially cyclical with uncertain timing of recovery. Flags: revenue decline outpaced any visible cost reduction, and implied SG&A deleveraged (SG&A ratio ~18.8% vs prior unknown), indicating negative operating leverage; monitor if SG&A growth or stickiness continues to outpace revenue.

Growth Assessment

Topline contracted 10.2% YoY to 159.15, pointing to demand softness and/or intentional portfolio pruning. Operating income fell 32.2% to 37.99, a much sharper decline than revenue, confirming negative operating leverage. Net income declined 32.5% to 26.74 with an effective tax rate of 31.7%, suggesting taxation did not drive the profit drop. Non-operating items contributed modestly positive (~+1.15), but the absence of detail limits assessment of recurrence. With gross margin at 42.7% and operating margin at 23.9%, profitability remains positive but materially lower YoY. ROIC of 8.1% is around the corporate target zone; sustaining or improving this requires margin restoration or asset turnover improvement. Near-term growth will likely depend on stabilizing sales, improved cost absorption, and mix/pricing discipline; visibility is limited due to missing segment and cash flow data.

Financial Health

Liquidity appears strong: cash & equivalents of 178.93 and current assets of 250.52 provide ample coverage versus total liabilities of 91.75. Current ratio is not calculable due to unreported current liabilities, but current assets alone exceed total liabilities by ~2.7x, suggesting low near-term liquidity risk. Debt-to-equity is 0.29x, indicating conservative leverage well below any warning thresholds. Equity ratio is robust at 77.8%, underscoring balance sheet strength. Maturity mismatch risk cannot be fully assessed without debt tenor detail, but accounts receivable (67.13) plus cash substantially exceed accounts payable (30.49), implying favorable short-term liquidity. No off-balance sheet obligations were reported in the provided data. No warnings triggered for Current Ratio (<1.0) or D/E (>2.0) based on available information.

Cash Flow Quality

Operating cash flow was unreported, so OCF/Net Income cannot be assessed; we cannot confirm earnings quality versus cash conversion. Free cash flow is also unreported, preventing coverage analysis for dividends and capex. Working capital composition appears conservative (low inventories at 2.38; receivables 67.13 vs payables 30.49; large cash at 178.93), reducing the likelihood of aggressive working capital maneuvers, but the absence of period-to-period changes prevents detection of timing effects. Without OCF, we cannot judge whether the profit decline translated to weaker cash generation; this is a key monitoring item.

Dividend Sustainability

The calculated payout ratio is 62.4%, slightly above the <60% benchmark for comfort. With FCF unreported, coverage cannot be validated; however, the strong net cash posture (cash & equivalents 178.93 vs total liabilities 91.75) and low leverage (D/E 0.29x) provide a buffer in the near term. Sustainability will depend on maintaining positive operating cash flow amidst margin pressure and any capex needs (unreported). Policy outlook cannot be inferred from missing DPS/FCF data; if profits remain under pressure, a stable or flexible payout policy would be prudent to preserve ROIC and balance sheet strength.

Risk Assessment

Business Risks:

• Margin compression (operating margin down ~770 bps YoY) from negative operating leverage and/or adverse mix/pricing.
• Revenue decline (−10.2% YoY) indicating demand softness or strategic contraction.
• Execution risk on SG&A flexibility if sales remain weak.
• Potential reliance on minor non-operating gains (+~1.15) without disclosure of recurrence.

Financial Risks:

• Earnings quality uncertainty due to unreported OCF and FCF (OCF/NI not calculable).
• Dividend sustainability risk with payout ratio at 62.4% while cash flow is undisclosed.
• Limited visibility on debt maturity profile and interest-bearing debt composition.

Key Concerns:

• Sharp profit decline outpacing revenue suggests structural cost pressure.
• Data gaps (cash flow, debt details, SG&A breakdown) constrain assessment of durability.
• ROIC at 8.1% is adequate but vulnerable if margins do not recover.

Investment Implications

Key Takeaways:

• Topline contracted 10.2% YoY; operating profit fell 32.2% with ~770 bps operating margin compression.
• Net margin declined ~560 bps to 16.8%; DuPont shows ROE deterioration driven by margin, not leverage or turnover.
• Balance sheet remains strong: equity ratio 77.8%, D/E 0.29x, cash 178.93 exceeds total liabilities.
• Non-operating contribution modestly positive but undisclosed in detail; core operations are the main driver of weakness.
• Dividend payout ratio at 62.4% is slightly elevated; sustainability hinges on cash generation.

Metrics to Watch:

• Operating cash flow and OCF/Net Income ratio (target >1.0).
• Operating margin trajectory and SG&A as a percentage of sales.
• Revenue run-rate and order intake/backlog (if disclosed) to gauge demand recovery.
• ROIC versus WACC to ensure value creation is maintained.
• Receivables and payables turnover (working capital discipline).
• Any disclosure on non-operating items to confirm recurrence/quality.

Relative Positioning: Compared to peers, the company exhibits stronger-than-average balance sheet resilience (high equity ratio, low leverage) but weaker current-period operating momentum (double-digit revenue decline and significant margin compression). Its ROIC at 8.1% is around target and competitive if margins stabilize, but near-term earnings visibility is limited by data gaps and negative operating leverage.

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