OMIKENSHI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.45B
• Operating Income: ¥-7M
• Net Income: ¥460M
• 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

For FY2026 Q2 (consolidated, JGAAP), Omi Kenshi reported revenue of ¥1.453bn, down 12.7% YoY, highlighting ongoing top-line pressure. Gross profit is disclosed at ¥694m, implying a robust gross margin of 47.8%, although this conflicts with the stated cost of sales (¥971m), which would otherwise imply a much lower gross profit; we rely on the disclosed gross profit/margin and flag the inconsistency as a classification or reporting difference. Operating income was a small loss of ¥7m, indicating that SG&A effectively consumed nearly all gross profit. Ordinary loss widened to ¥123m, driven largely by interest expense of ¥113m, underscoring a heavy financial burden from leverage. Net loss was ¥330m (EPS: -¥52.20), little changed YoY, suggesting that non-operating burdens offset any small operating improvements. DuPont decomposition indicates ROE of -20.64%, mainly from a deeply negative net margin (-22.71%) and very low asset turnover (0.096), magnified by high financial leverage (9.48x). The company’s balance sheet shows total assets of ¥15.163bn and total equity of ¥1.599bn; this implies an equity ratio of roughly 10.5% (calculated), despite the reported 0.0% which appears undisclosed rather than truly zero. Liquidity is strained: current ratio is 25.1%, quick ratio 19.6%, and working capital is negative ¥5.886bn, signaling short-term funding pressure. Debt-to-equity of 8.69x and negative interest coverage (~-0.1x on an EBIT/interest basis) point to elevated solvency risk. Cash flow statement items are undisclosed (shown as zero), limiting assessment of earnings-to-cash conversion and free cash flow; therefore, cash flow quality conclusions are constrained. Dividend per share is undisclosed/zero, implying no payout at present, which is consistent with losses and likely lender covenants. The tax line shows ¥85m expense despite a net loss, likely due to non-recurring taxes, subsidiary-level taxes, or valuation allowance effects; the disclosed “effective tax rate” of 0.0% appears not meaningful given data gaps. Revenue decline alongside high gross margin suggests product mix and pricing remain relatively resilient, but scale insufficiency and fixed costs keep operating profit negative. Overall, the financial profile is characterized by shrinking sales, thin operating buffer, high leverage, and short-term liquidity stress, with ordinary income pressured by interest costs. Data limitations (notably cash flow and share count) constrain precision, but the key themes are weak cash generation visibility, high leverage, and the necessity to stabilize revenue while reducing financing costs.

Profitability Analysis

ROE_decomposition: ROE (-20.64%) = Net margin (-22.71%) × Asset turnover (0.096) × Financial leverage (9.48). The negative net margin is the dominant driver, compounded by very low asset turnover and high leverage. margin_quality: Gross margin is disclosed at 47.8% (¥694m/¥1,453m), indicating healthy product-level economics; however, it conflicts with the stated cost of sales (¥971m). Using the disclosed gross profit/margin as primary, SG&A appears to be approximately ¥701m, consuming nearly all gross profit and yielding an operating margin of about -0.5%. Ordinary margin is about -8.5% (¥-123m/¥1,453m), reflecting heavy non-operating burdens, chiefly interest. operating_leverage: With revenue down 12.7% YoY and an operating loss of ¥7m, fixed costs appear high relative to scale. The near-breakeven operating result suggests that small revenue swings or cost actions can produce outsized changes in operating profit, but current scale is insufficient to cover fixed costs.

Growth Assessment

revenue_sustainability: Revenue declined 12.7% YoY to ¥1.453bn, implying volume and/or pricing pressure. The high disclosed gross margin suggests mix/pricing resilience in core offerings, but aggregate demand or capacity utilization likely weakened. profit_quality: Operating loss remains despite healthy gross margin, indicating inadequate absorption of fixed costs and/or elevated SG&A. Ordinary and net losses are driven by financing costs and non-operating items, reducing profit quality and visibility. outlook: Absent evidence of cash flow improvement or deleveraging, interest costs will continue to weigh on ordinary income. Near-term earnings trajectory hinges on stabilizing sales, improving utilization, and reducing SG&A, alongside potential restructuring of financing to lower interest burden.

Financial Health

liquidity: Current ratio 25.1% (¥1.971bn/¥7.857bn) and quick ratio 19.6% indicate tight liquidity with significant short-term liabilities versus liquid assets; working capital is negative ¥5.886bn, pointing to refinancing and rollover risk. solvency: Total liabilities are ¥13.9bn versus equity of ¥1.599bn (D/E 8.69x). Calculated equity ratio is 10.5% (based on totals), though the disclosed 0.0% likely reflects a non-disclosure. Interest coverage is negative (-0.1x), underscoring solvency strain from interest burden. capital_structure: High leverage with significant dependence on debt financing; interest expense of ¥113m in the period materially impacts ordinary results. Balance sheet headroom is limited given low equity buffer.

Cash Flow Quality

earnings_quality: Cash flow statements are undisclosed (OCF/ICF/FCF shown as zero placeholders). As such, we cannot corroborate earnings with cash generation or assess working capital consumption/productivity. FCF_analysis: Free cash flow is undisclosed. Given operating losses and high interest burden, organic FCF is likely weak absent working capital releases or asset disposals, but data is insufficient to quantify. working_capital: Negative working capital of ¥5.886bn suggests reliance on short-term funding and/or supplier credit. Without OCF details, the direction of inventory/receivables/payables movements cannot be assessed.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is undisclosed/zero and payout ratio is not meaningful given losses (EPS -¥52.20). With negative earnings, a sustainable payout would require sizable recurring free cash flow, which is not evidenced. FCF_coverage: FCF coverage is undisclosed; given losses and high interest expense, coverage of any dividend would likely be inadequate without external funding. policy_outlook: Given leveraged balance sheet, liquidity constraints, and ordinary losses, maintaining a nil dividend stance appears consistent with capital preservation and potential lender requirements.

Risk Assessment

Business Risks:

• Demand softness and revenue decline (-12.7% YoY) reducing scale and utilization
• High fixed cost base leading to operating losses at current revenue levels
• Product mix dependence; any deterioration could compress currently high gross margin
• Competitive pressure in textiles/related markets affecting pricing and volumes

Financial Risks:

• High leverage (D/E 8.69x) and low equity buffer (~10.5% equity ratio calculated)
• Weak liquidity (current ratio 25.1%, quick ratio 19.6%) and negative working capital (¥-5.886bn)
• High interest burden (¥113m) driving ordinary losses; negative interest coverage (~-0.1x)
• Cash flow visibility is low due to undisclosed OCF/FCF, complicating refinancing and covenant assessments
• Tax expense despite net loss (¥85m) introduces additional volatility in net income

Key Concerns:

• Sustained negative ordinary and net income with limited operating buffer
• Refinancing and short-term funding risk given negative working capital
• Potential covenant pressure and limited capacity to invest for growth or restructuring

Investment Implications

Key Takeaways:

• Top-line contraction with high reported gross margin but insufficient scale to cover fixed costs
• Ordinary and net losses driven by interest burden; deleveraging is a key lever for improvement
• Liquidity is tight with significant short-term obligations; refinancing risk is elevated
• Data gaps (cash flow, share data) limit precision on earnings quality and FCF
• Equity buffer is thin, amplifying sensitivity to further losses

Metrics to Watch:

• Revenue trajectory and order backlog (to gauge scale recovery)
• Gross margin sustainability and SG&A discipline
• Interest expense trend and refinancing terms/maturities
• Operating cash flow and working capital movements (when disclosed)
• Equity ratio and D/E following any asset sales, write-downs, or capital actions

Relative Positioning: Versus Japanese textile/spinning peers, Omi Kenshi exhibits lower asset turnover, weaker operating profitability, and substantially higher leverage, resulting in inferior interest coverage and higher refinancing risk.

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