CREATE CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥17.99B
• Operating Income: ¥294M
• Net Income: ¥107M
• EPS: ¥40.52

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 (JGAAP, consolidated), クリエイト株式会社 delivered moderate top-line growth and strong profit momentum but showed weak cash conversion and reliance on external financing. Revenue grew 3.5% year on year to ¥17.99bn, while operating income rose 34.8% to ¥294m and net income increased 47.0% to ¥157m, indicating meaningful margin improvement from a low base. Gross profit of ¥3.012bn implies a gross margin of 16.7%, and the operating margin expanded to about 1.6%, underscoring better cost control or mix. DuPont analysis yields an ROE of 2.90%, driven by a thin net margin (0.87%), near-1.0x asset turnover, and moderate financial leverage (~3.33x). Ordinary income of ¥277m is close to operating income, suggesting limited non-operating drag; interest expense is modest at ¥8.4m with a strong operating interest coverage (~35x). The effective tax burden, inferred from income tax expense of ¥93.5m versus pre-tax earnings, appears around one-third, despite a reported metric showing 0.0% (likely a metric artifact). Liquidity is adequate with a current ratio of 1.28x and a quick ratio of 1.06x, supported by working capital of ¥2.85bn. Balance sheet leverage is moderate with total liabilities of ¥12.04bn against equity of ¥5.41bn (debt-to-equity ~2.23x), implying an equity ratio around 30% by calculation, though the “Equity Ratio” field is unreported. Cash flow quality is weak this half: operating cash flow was -¥978m despite ¥157m of net income (OCF/NI -6.23x), implying a significant working capital build or timing effects. Free cash flow cannot be reliably assessed because investing cash flow is unreported, but financing inflows of ¥1.11bn likely bridged the OCF shortfall. Dividend data indicate DPS and payout are unreported or nil; given the low ROE and negative OCF, a conservative stance on distributions appears consistent. Overall, the company shows improved profitability on stable sales, but thin margins, negative operating cash flow, and reliance on financing temper the quality of earnings. Data gaps (notably cash, investing CF, equity ratio, shares outstanding) limit precision, so conclusions emphasize the available non-zero data. Near-term focus should be on cash conversion, working capital discipline, and sustaining margin gains.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 0.87% × Asset turnover ~1.00x × Financial leverage ~3.33x yields ROE ~2.90% (matches reported). Margins: gross margin 16.7%, operating margin 1.63% (¥294m/¥17.99bn), ordinary margin 1.54%, and net margin 0.87%. Year-on-year, operating income +34.8% vs revenue +3.5% indicates positive operating leverage and improved cost efficiency or mix. EBITDA of ¥339.5m implies an EBITDA margin of ~1.9%, only modestly above operating margin, suggesting limited D&A burden (¥45.5m) and overall low margin business profile. Non-operating items are contained: interest expense ¥8.4m and ordinary income close to operating income. Interest coverage is strong at ~35x (operating income/interest), indicating current interest burden is not a profitability constraint. Tax expense of ¥93.5m against ordinary income of ¥277m implies an effective tax rate in the low- to mid-30% range, notwithstanding the reported metric anomaly. Overall profitability improved but remains low in absolute terms, leaving limited buffer against input cost inflation or demand softness.

Growth Assessment

Revenue increased 3.5% YoY to ¥17.99bn, suggesting stable core demand with modest growth. Profit growth outpaced sales: operating income +34.8% and net income +47.0%, pointing to margin expansion from cost control, pricing, or mix benefits. Sustainability: without segment or price/volume disclosure, durability of margin gains is uncertain; thin absolute margins could be sensitive to small cost/sales variances. Profit quality: the negative OCF despite higher earnings indicates weak conversion, likely due to working capital investment (e.g., inventory or receivables build) or timing; confirmation requires detail not disclosed. Outlook: if working capital normalizes and cost disciplines hold, current operating momentum can extend; however, any reversal in inventory turns or receivable days would pressure cash and returns. Near-term growth appears incremental rather than step-change, pending visibility into order backlog, store/footprint expansion, and capex plans (not disclosed).

Financial Health

Liquidity: current ratio 1.28x and quick ratio 1.06x indicate adequate short-term coverage, supported by working capital of ¥2.85bn. Cash on hand is unreported, limiting assessment of immediate liquidity buffers. Solvency: total liabilities of ¥12.04bn and equity of ¥5.41bn imply a debt-to-equity ratio of ~2.23x and a calculated equity ratio near 30%, which is moderate for a low-margin business. Interest burden is modest (¥8.4m), with strong coverage (~35x), reducing near-term refinancing risk assuming stable rates. Capital structure: leverage (assets/equity ~3.33x) amplifies ROE but also heightens sensitivity to earnings volatility; financing cash inflow of ¥1.11bn this period indicates reliance on external funding to offset operating cash outflow. Overall, the balance sheet appears serviceable, but persistent negative OCF would tighten flexibility.

Cash Flow Quality

Earnings quality is weak this half: OCF of -¥978m vs net income of ¥157m (OCF/NI -6.23x) indicates poor cash conversion, likely driven by working capital expansion or timing. Free cash flow cannot be reliably determined because investing cash flow is unreported; the provided FCF metric of 0 should be treated as undisclosed rather than zero. Financing inflow of ¥1.11bn suggests borrowings or other financing were used to fund the operating shortfall. Without a breakdown of receivables, payables, and inventory changes, we cannot pinpoint drivers, but inventories stand at ¥2.21bn (balance sheet), and the quick ratio above 1.0x implies much of the current asset base is liquid aside from inventory. Monitoring subsequent quarters for normalization of OCF versus net income will be critical to validate earnings quality.

Dividend Sustainability

Dividend per share is reported as 0.00 and payout ratio as 0.0%, which should be treated as undisclosed in this context. Given EPS of ¥40.52 and negative operating cash flow, near-term distributable capacity looks constrained absent confirmed positive FCF. Without investing CF and cash balance disclosure, FCF coverage of dividends cannot be assessed; the reported FCF coverage of 0.00x should be considered non-disclosed. Policy outlook is unclear; if the company prioritizes working capital normalization and debt discipline after financing inflows this period, a conservative dividend stance would be consistent with fundamentals.

Risk Assessment

Business Risks:

• Thin operating and net margins leave limited buffer for cost inflation or pricing pressure.
• Potential volatility in working capital (inventory and receivables) impacting cash conversion.
• Demand softness risk given modest topline growth trajectory.
• Supplier cost pass-through and procurement risk in a low-margin model.
• Execution risk around any expansion or mix shift without disclosed capex/segment detail.

Financial Risks:

• Negative operating cash flow necessitating reliance on external financing.
• Moderate leverage (debt-to-equity ~2.23x; assets/equity ~3.33x) increasing sensitivity to earnings swings.
• Limited disclosure of cash and investing cash flows impedes assessment of liquidity runway.
• Interest rate risk if financing costs rise, though current coverage is strong.

Key Concerns:

• OCF/Net Income at -6.23x indicates weak earnings quality this half.
• Sustainability of margin improvements amidst low absolute margin levels.
• Dependence on financing inflows in the face of negative OCF.
• Data gaps (cash position, capex, share count, equity ratio) constrain precision of analysis.

Investment Implications

Key Takeaways:

• Revenue growth (+3.5% YoY) coupled with outsized profit growth signals improved operating efficiency.
• ROE at 2.9% is driven by leverage rather than robust margins; absolute returns remain modest.
• Operating cash flow is negative despite higher earnings, pointing to working capital/timing drag.
• Liquidity is adequate (current 1.28x; quick 1.06x), but repeated OCF shortfalls would erode flexibility.
• Financing inflows of ¥1.11bn likely funded the operating deficit, underscoring dependence on capital markets or banks.

Metrics to Watch:

• OCF to Net Income ratio and working capital components (inventories, receivables, payables).
• Gross and operating margin trajectory versus input costs and pricing.
• Leverage metrics (debt-to-equity, net debt/EBITDA once cash is disclosed).
• Capex and investing cash flows to assess FCF and growth reinvestment.
• Interest coverage and borrowing mix as rates evolve.

Relative Positioning: Within low-margin, volume-driven peers, the company shows improving operating efficiency but lags on cash conversion this period; balance sheet leverage is moderate, providing some ROE lift but raising sensitivity to profit variability.

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