OMIKENSHI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.45B
• Operating Income: ¥-7M
• Net Income: ¥-330M
• EPS: ¥-52.20

Income Statement

Balance Sheet

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

Verdict: Weak quarter with a swing to net loss and deterioration at the ordinary and pre-tax levels, driven by interest burden and likely extraordinary losses, against declining revenue. Revenue fell to 14.53 (−12.7% YoY), with gross profit of 5.83 and gross margin at 40.1% showing reasonable product margin resilience but insufficient to cover SG&A. SG&A of 5.91 exceeded gross profit, resulting in operating loss of −0.07 (operating margin −0.5%). Non-operating expenses of 1.20—largely interest expense of 1.06—pushed ordinary income down to −1.23. Profit before tax deteriorated to −3.29, implying roughly −2.06 of extraordinary losses not detailed in the disclosure. Net income came in at −3.30, translating to basic EPS of −52.20 JPY; the positive diluted EPS (57.59 JPY) is unusual and likely reflects instrument/anti-dilution mechanics or XBRL tagging rather than fundamental improvement. Balance sheet stresses are acute: current assets 13.45 versus current liabilities 76.41 produce a current ratio of 0.18; short-term loans of 68.03 dominate the liability structure. Total equity stands at 15.99 with retained earnings of −43.93, implying a thin capital buffer and high leverage (D/E 8.48x). Interest coverage is −0.07x on the period’s operating loss, underscoring debt service strain. Using the provided DuPont metrics, ROE is −20.6%, driven by a deeply negative margin (−22.7%), very low asset turnover (0.096), and very high financial leverage (9.48x). Approximate YoY operating margin compressed by about 380 bps (from ~3.3% to −0.5%), assuming prior revenue of ~16.64 and prior OI of ~0.55 based on the −87.3% YoY change. Cash flow statements are not disclosed, preventing assessment of earnings quality via OCF/NI and FCF; this is a major limitation given the liquidity profile. Forward-looking, refinancing and liquidity management are the key determinants of continuity, alongside cost control to align SG&A with a smaller revenue base. Any recovery hinges on stabilizing financing, reducing short-term debt, improving asset turnover, and avoiding further extraordinary losses.

Profitability Analysis

ROE decomposition (DuPont): ROE (−20.6%) = Net Profit Margin (−22.7%) × Asset Turnover (0.096) × Financial Leverage (9.48x). The largest deterioration is from Net Profit Margin, reflecting operating loss plus significant interest burden and extraordinary losses. Business driver: revenue decline (−12.7% YoY) combined with SG&A exceeding gross profit turned operating earnings negative; non-operating expenses (interest) further depressed ordinary profit, and special losses widened pre-tax loss. Sustainability: margin pressure from SG&A and interest costs appears ongoing until structural cost reductions or revenue stabilization occur; extraordinary losses are more one-off but recurrence risk exists if asset impairments or restructuring persist. Operating leverage is negative at current volumes; with gross margin 40.1% but SG&A 5.91, even modest sales declines push OI negative. Concerning trends: SG&A as a percent of sales ~40.7% (5.91/14.53) is elevated versus scale; interest expense (1.06) exceeds operating profit capacity, implying financial structure, not just operations, is suppressing ROE.

Growth Assessment

Top-line contracted 12.7% YoY to 14.53, indicating weak demand/volume or product mix pressure. Gross margin at 40.1% suggests price/cost discipline, but absolute gross profit is insufficient to cover fixed SG&A at current scale. Operating income declined to −0.07 (−87.3% YoY), and ordinary income to −1.23 due to higher non-operating burden. Extraordinary losses (implied −2.06) turned pre-tax sharply negative. Given the liquidity constraints and interest burden, near-term growth is likely constrained by working capital availability and credit capacity. Outlook hinges on: revenue stabilization, SG&A right-sizing, and reduction of short-term borrowings to lower interest drag. Without cash flow data, visibility on investment for growth is limited; capex and R&D were unreported.

Financial Health

Liquidity is strained: current ratio 0.18 and quick ratio 0.11 are far below healthy thresholds; explicit warning triggered. Maturity mismatch risk is severe: short-term loans of 68.03 dwarf current assets (13.45) and cash (3.68), indicating refinancing dependence. Solvency is weak: D/E 8.48x (warning) with equity only 15.99 against total assets 151.63; retained earnings are −43.93, limiting buffer for further losses. Interest-bearing debt is concentrated in short-term buckets; long-term loans are only 2.30, increasing rollover risk. Interest coverage is −0.07x, indicating inadequate operating earnings to service interest. No off-balance sheet obligations were disclosed; absence of disclosure limits full risk assessment.

Cash Flow Quality

OCF, investing CF, FCF, and dividends are unreported, so OCF/Net Income and FCF coverage cannot be assessed. Given the operating loss and large interest costs, underlying cash generation is likely weak, but this cannot be confirmed. Working capital indicators from the balance sheet (AR 3.53, inventories 4.87 versus AP 2.13) suggest limited supplier financing and dependence on bank lines (short-term loans 68.03). No clear signs of working capital manipulation can be inferred without cash flow details; data limitations are material.

Dividend Sustainability

Dividend data are unreported. With net loss (−3.30), negative retained earnings (−43.93), and stressed liquidity, internal capacity to fund dividends appears very limited. Without FCF and policy disclosure, payout sustainability cannot be quantified; prudent expectation would be preservation of cash for operations and debt service until profitability and balance sheet metrics improve.

Risk Assessment

Business Risks:

• Revenue contraction (−12.7% YoY) and scale inefficiency with SG&A exceeding gross profit
• Potential recurring extraordinary losses (implied −2.06) from impairments/restructuring
• Input cost and energy cost volatility pressuring margins in textile/manufacturing operations
• Customer demand softness and pricing pressure in legacy fiber/textile markets

Financial Risks:

• Severe liquidity risk: current ratio 0.18; quick ratio 0.11
• Refinancing risk: short-term loans 68.03 far exceed current assets 13.45
• High leverage: D/E 8.48x with interest coverage −0.07x
• Interest rate risk: higher rates would further depress ordinary profit
• Thin equity cushion: equity 15.99 with accumulated deficit −43.93 increases going-concern risk

Key Concerns:

• Ordinary loss (−1.23) primarily from interest burden; structurally negative until deleveraging
• Approx. 380 bps YoY operating margin compression to −0.5%
• Extraordinary losses widened PBT to −3.29, indicating potential asset quality issues
• Lack of cash flow disclosure limits visibility on solvency and self-funding capacity

Investment Implications

Key Takeaways:

• Top-line down double digits with operating loss despite stable gross margin percentage
• Debt-heavy, short-term funded balance sheet heightens rollover and interest risks
• Ordinary and pre-tax losses driven by interest and special losses; ROE −20.6%
• Negative retained earnings constrain financial flexibility
• Data gaps (cash flows, capex, dividends) limit forward visibility

Metrics to Watch:

• Operating cash flow and free cash flow once disclosed
• Refinancing schedule and net short-term debt trajectory
• Interest expense run-rate and effective borrowing rates
• SG&A-to-sales ratio and fixed cost reduction progress
• Gross margin stability vs. input/energy cost trends
• Extraordinary gains/losses and impairment risk
• Covenant headroom and equity ratio improvements

Relative Positioning: Versus domestic textile/fiber peers, the company exhibits materially weaker liquidity (current ratio 0.18), higher leverage (D/E 8.5x), and lower profitability (operating margin −0.5%, ROE −20.6%). Recovery depends on deleveraging and cost restructuring more than on cyclical tailwinds.

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