KURABO INDUSTRIES LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥69.25B
• Operating Income: ¥3.93B
• Net Income: ¥3.46B
• EPS: ¥384.12

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

Kurabo (Kurashiki Spinning Co., Ltd.) reported FY2026 Q2 consolidated results under JGAAP showing top-line softness but resilient profitability and a strong balance sheet. Revenue was 69.25bn JPY, down 3.6% YoY, indicating a mild volume and/or price headwind across core businesses. Gross profit reached 14.66bn JPY, implying a gross margin of 21.2%, which is solid for a textile/industrial materials mix and suggests reasonable pricing discipline and input cost management. Operating income was 3.93bn JPY (-7.3% YoY), with an operating margin of 5.7%, reflecting some negative operating leverage as the decline in sales outpaced cost flexing. Ordinary income of 4.84bn JPY exceeded operating income, indicating positive non-operating contributions (e.g., equity method gains, dividends/interest, or FX), while interest expense remained modest at 0.17bn JPY. Net income surged 87.5% YoY to 6.42bn JPY (EPS 384.12), driven by non-operating and/or extraordinary gains; this magnitude of bottom-line growth is unlikely to be purely operational. DuPont decomposition shows: net margin 9.27%, asset turnover 0.364x, and financial leverage 1.51x, yielding ROE of 5.11%—respectable but not high, with margin being the principal driver. Liquidity is strong: current ratio 215% and quick ratio 182%, supported by 84.84bn JPY of current assets and 39.50bn JPY of current liabilities. The capital structure is conservative, with total liabilities of 69.35bn JPY versus equity of 125.70bn JPY; the implied equity ratio is approximately 66% (equity/assets), despite the reported equity ratio item being undisclosed in XBRL. Operating cash flow was 4.60bn JPY, equating to 0.72x of net income; this indicates moderate earnings quality with likely working capital absorption. Interest coverage is robust at 23.2x, demonstrating ample buffer against rate and earnings volatility. Reported investing cash flow and cash & equivalents are undisclosed (shown as zeros), limiting free cash flow precision and cash position assessment. Dividend data are also undisclosed (DPS and payout ratio shown as zero), so dividend policy cannot be inferred from this dataset alone. Overall, Kurabo exhibits stable core profitability under a softer demand environment, a clean balance sheet, and positive but conversion-challenged cash generation. The surge in net income appears non-recurring or non-operational in nature, warranting caution in extrapolating EPS growth. Data gaps (notably equity ratio detail, cash, capex, DPS) constrain the depth of certain conclusions, but the available metrics point to a financially resilient profile.

Profitability Analysis

ROE (DuPont): 5.11% = 9.27% net margin × 0.364x asset turnover × 1.51x leverage. Margin quality: Gross margin at 21.2% is healthy for the sector, while operating margin of 5.7% indicates controlled SG&A yet some pressure from lower volumes. EBITDA margin of 9.4% (EBITDA 6.49bn JPY) provides a buffer, with D&A at 2.56bn JPY suggesting a capital-intensive but manageable asset base. Ordinary income exceeds operating income, showing supportive non-operating items; sustainability of these items is uncertain. The Net/Operating spread and a large YoY increase in net income versus an operating decline imply one-off or non-core gains affecting bottom-line quality. Operating leverage: Revenue fell 3.6% while operating income fell 7.3%, indicating negative operating leverage in the period. Interest burden is minimal (interest expense 0.169bn JPY; coverage 23.2x), limiting financial drag on profitability.

Growth Assessment

Revenue declined 3.6% YoY to 69.25bn JPY, signaling softness likely in textiles/industrial products amid macro normalization and possibly weaker export demand or pricing. Operating income decreased 7.3% YoY to 3.93bn JPY, reflecting some fixed-cost rigidity. Net income surged 87.5% YoY to 6.42bn JPY, driven by non-operating/extraordinary components rather than core operations. Sustainability: Gross margin resilience suggests cost pass-through and mix support; however, the negative operating leverage indicates that without top-line recovery, operating profit growth will be constrained. Profit quality: The large gap between ordinary/net income and operating income raises questions on recurrence; excluding non-operating benefits, underlying profit growth appears flat-to-down. Near-term outlook: With strong liquidity and low leverage, Kurabo can continue to invest and navigate cyclical softness, but core growth will depend on demand recovery in industrial and textile end-markets and stabilization of input costs. Absent disclosed backlog or segment detail, we assume a cautious growth trajectory anchored by operational discipline rather than volume expansion.

Financial Health

Liquidity is strong: current ratio 214.8% (84.84bn JPY current assets vs. 39.50bn JPY current liabilities) and quick ratio 181.9% (excluding 12.97bn JPY inventories), implying ample short-term coverage. Working capital stands at 45.33bn JPY, providing operational flexibility. Solvency: Total liabilities are 69.35bn JPY versus equity of 125.70bn JPY; the implied equity ratio is ~66% (equity/assets), indicating a conservative balance sheet, notwithstanding the non-disclosed equity ratio metric. Leverage: Debt-to-equity is reported at 0.55x using total liabilities; interest-bearing debt specifics are undisclosed, but interest expense is low, consistent with modest financial leverage. Interest coverage of 23.2x highlights strong capacity to service debt. Overall, the company appears well-capitalized with low solvency risk.

Cash Flow Quality

Operating cash flow was 4.60bn JPY, yielding an OCF/Net Income ratio of 0.72. This suggests moderate earnings quality with some cash conversion headwinds, likely from working capital movements (inventories/receivables), though detailed CF components are undisclosed. Free cash flow cannot be reliably determined because investing cash flow and capex are not disclosed (shown as zeros). EBITDA of 6.49bn JPY compared to OCF of 4.60bn JPY implies cash conversion below EBITDA, consistent with working capital absorption and/or cash taxes/interest. Financing cash flow was -4.90bn JPY, indicating possible debt repayment and/or shareholder returns, but the split is not disclosed. Cash and equivalents are undisclosed, limiting assessment of liquidity buffers beyond working capital. Overall, cash generation is positive but tempered by conversion; visibility on capex is the key missing link to judge sustainable FCF.

Dividend Sustainability

Dividend data (DPS and payout ratio) are undisclosed in this dataset, so policy inference is not possible here. On capacity, net income of 6.42bn JPY and OCF of 4.60bn JPY indicate room for distributions while maintaining investment and balance-sheet strength, assuming maintenance capex is moderate; however, the step-up in net income appears non-operational, so sustainable distributable earnings likely track operating/ordinary income rather than reported net. FCF coverage cannot be evaluated without capex; therefore, any payout assessment should be anchored to cash earnings and normalized profit excluding non-recurring gains. Absent explicit guidance, we assume a conservative policy bias given the company’s historically prudent balance sheet.

Risk Assessment

Business Risks:

• Cyclical demand in textiles and industrial materials leading to volume and pricing volatility
• Raw material and energy price fluctuations impacting gross margin
• Foreign exchange swings affecting export competitiveness and material costs
• Potential concentration in key end-markets (e.g., automotive, construction) amplifying macro sensitivity
• Execution risk in maintaining cost discipline amid lower volumes
• Dependence on non-operating gains to support net income in the near term

Financial Risks:

• Working capital swings reducing operating cash conversion (OCF/NI at 0.72)
• Potential capex requirements not visible due to undisclosed investing CF
• Interest rate normalization increasing financing costs, albeit from a low base
• Limited visibility on cash holdings and debt mix due to undisclosed cash and interest-bearing debt details

Key Concerns:

• Sustainability of the large YoY increase in net income given non-operating drivers
• Negative operating leverage with revenue decline outpacing cost reductions
• Data gaps (equity ratio, cash, capex, DPS) constraining assessment of FCF and payout capacity

Investment Implications

Key Takeaways:

• Core operations softened: revenue -3.6% YoY and operating income -7.3% YoY indicate mild negative operating leverage
• Margins resilient: 21.2% gross margin and 5.7% operating margin underscore cost control and pricing discipline
• Bottom-line inflated by non-operating factors: net income +87.5% YoY, ordinary income > operating income
• Solid balance sheet: implied equity ratio ~66%, interest coverage 23.2x, and strong liquidity ratios
• Cash conversion moderate: OCF/NI at 0.72, suggesting working capital absorption
• Dividend outlook unclear due to undisclosed DPS and capex; prioritize normalized cash earnings for policy view

Metrics to Watch:

• Operating margin trajectory and SG&A efficiency
• Non-operating/extraordinary gains and their recurrence
• Working capital intensity (inventory and receivable days) and OCF/NI ratio
• Capex and investing cash flows to gauge sustainable FCF
• Revenue trend and order intake in key segments
• Leverage metrics based on interest-bearing debt disclosure and cash balance

Relative Positioning: Relative to domestic textile and diversified industrial-material peers, Kurabo exhibits moderate profitability but superior balance-sheet conservatism and liquidity; however, its near-term earnings growth appears more reliant on non-operating items than on core operating momentum.

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