Quick View
| Metric | Current Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue | ¥323.5B | ¥304.6B | +6.2% |
| Operating Income | ¥14.3B | ¥11.2B | +28.4% |
| Ordinary Income | ¥13.3B | ¥11.2B | +18.4% |
| Net Income | ¥8.6B | ¥7.5B | +15.2% |
| ROE | 14.1% | 14.2% | - |
Executive Summary
Cumulative results for FY2026 Q3 showed higher revenue and higher profit, driven by improved profitability in the Manufacturing and Sales Business. Revenue was ¥323.5B (+6.2% YoY), while Operating Income was ¥14.3B (+28.4% YoY), with the rate of profit growth significantly exceeding the rate of revenue growth. Ordinary Income was ¥13.3B (+18.4% YoY), and Net Income was ¥8.6B (+15.2% YoY). Although non-operating expenses, including interest expense of ¥0.5B and foreign exchange losses of ¥0.6B, partially offset the impact on Ordinary Income, improved profitability in the Manufacturing and Sales Business lifted company-wide earnings.
Factors Affecting Performance
【Revenue】Revenue increased 6.2% YoY to ¥323.5B. By segment, the Wholesale Business generated ¥273.7B (84.6% of total revenue, +2.7% YoY), while the Manufacturing and Sales Business generated ¥50.3B (15.4% of total revenue, +30.2% YoY), making the Manufacturing and Sales Business the main driver of company-wide growth.
【Profit and Loss】Operating Income increased 28.4% YoY to ¥14.3B, and the Operating Income Margin improved to 4.4%. Segment profit was ¥9.4B for the Wholesale Business (3.4% margin) and ¥5.2B for the Manufacturing and Sales Business (10.4% margin), with the latter substantially exceeding the former in profitability. The Manufacturing and Sales Business made a significant contribution to total Operating Income, and the shift in business composition was the primary factor behind the improvement in profitability. Meanwhile, Ordinary Income was limited to ¥13.3B (+18.4% YoY), as non-operating expenses of ¥1.2B, including interest expense of ¥0.5B and foreign exchange losses of ¥0.6B, partially offset the increase from Operating Income. Extraordinary Income of ¥1.8B and extraordinary losses of ¥2.1B were recorded; these were temporary factors included in Profit Before Tax. Net Income was ¥8.6B (+15.2% YoY), resulting in higher revenue and higher profit.
Segment Analysis
The Wholesale Business generated Revenue of ¥273.7B (84.6% of total revenue, +2.7% YoY) and segment profit of ¥9.4B (3.4% margin, +13.5% YoY), indicating a large scale but low profitability. The Manufacturing and Sales Business generated Revenue of ¥50.3B (15.4% of total revenue, +30.2% YoY) and segment profit of ¥5.2B (10.4% margin, +55.0% YoY), demonstrating high growth and high profitability. In the Manufacturing and Sales Business, goodwill of ¥5.1B was provisionally recognized in Q3 in connection with the acquisition of shares in NIITAKAYA U.S.A.INC.; the fact that purchase price allocation remains incomplete requires confirmation of the final accounting treatment going forward. The increasing contribution of the Manufacturing and Sales Business to total revenue has contributed to the improvement in the company-wide Operating Income Margin.
Key Financial Indicators
【Profitability】The Operating Income Margin was 4.4%, improving from approximately 3.7% in the same period of the previous year, while the Gross Margin of 12.4% and Net Profit Margin of 2.7% remained low. ROE was 14.1%, decomposed into a Net Profit Margin of 2.7%, Total Asset Turnover of 1.47x, and Financial Leverage of 3.61x, indicating a structure in which leverage drives ROE higher. 【Cash Flow Quality】Cash and deposits were ¥35.4B, accounts receivable were ¥85.4B (38.8% of total assets), and inventories were ¥60.0B (27.2% of total assets), with working capital accounting for more than half of total assets. 【Investment Efficiency】EPS was ¥94.56 (+13.3% YoY), and BPS was ¥656.08. 【Financial Soundness】The Equity Ratio was 27.7%, down from 31.6% in the previous year. Interest-bearing debt reached ¥44.6B, and the D/E ratio remained high, suggesting that asset expansion was supported by increases in interest-bearing debt and working capital.
Cash Flow Analysis
As cash flow statement data has not been disclosed, funding trends are analyzed based on changes in the B/S. Total assets increased from ¥162.3B in the previous year to ¥220.0B, with accounts receivable expanding from ¥61.9B to ¥85.4B and inventories from ¥35.9B to ¥60.0B. This increase in working capital occurred alongside an increase in cash and deposits from ¥28.6B to ¥35.4B on the asset side. On the liabilities side, funding was obtained through increases in short-term borrowings from ¥6.2B to ¥13.5B, long-term borrowings from ¥26.4B to ¥31.1B, and accounts payable from ¥52.0B to ¥85.8B. The company appears to be absorbing the increase in working capital requirements associated with revenue growth through both interest-bearing debt and trade credit.
Quality of Earnings
Of Net Income of ¥8.6B, extraordinary income of ¥1.8B and extraordinary losses of ¥2.1B were included in Profit Before Tax, resulting in temporary factors with a net negative contribution of ¥0.3B. In non-operating income and expenses, non-operating income of ¥0.1B was recorded against non-operating expenses of ¥1.2B, including interest expense of ¥0.5B and foreign exchange losses of ¥0.6B, indicating that recurring funding costs and foreign exchange movements exerted pressure on earnings. Comprehensive Income was ¥9.2B, and the difference from Net Income of ¥8.6B was primarily attributable to foreign currency translation adjustments of ¥0.2B and deferred hedge gains and losses of ¥0.4B, resulting in a limited divergence. The ¥1.0B decline from Operating Income to Ordinary Income indicates that the improvement in the earning power of the core business was partially offset by financial and foreign exchange costs.
Earnings Forecasts and Guidance
The cumulative Q3 progress rates against the full-year company forecasts were 80.9% for Revenue, 124.8% for Operating Income, and 120.8% for Ordinary Income. Net Income attributable to owners of the parent was ¥8.51B against a forecast of ¥7.0B, representing 121.6%. While revenue progress was the lowest among the major indicators, profit progress substantially exceeded the standard 75% level. This difference suggests that the profit plan for the second half of the year in the full-year forecast may have been set relatively conservatively. Going forward, the continued growth of the Manufacturing and Sales Business and trends in foreign exchange and extraordinary income and losses will affect the consistency between full-year results and forecasts.
Shareholder Returns
The Q2 dividend was ¥6.00 per share. Based on Net Income attributable to owners of the parent of ¥8.51B, the Payout Ratio is approximately 6.7%, remaining at a low level. As no information on share repurchases has been disclosed, shareholder returns are evaluated solely based on the Payout Ratio. The low Payout Ratio indicates a high tolerance for dividend commitments amid earnings volatility and working capital expansion; however, as Operating Cash Flow has not been disclosed, dividend coverage on a cash basis cannot be confirmed.
Risk Factors
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High financial leverage: The Equity Ratio was 27.7%, down from 31.6% in the previous year, while interest-bearing debt reached ¥44.6B. During periods of rising interest rates, increases in interest expense (¥0.5B in the current period) could place pressure on earnings.
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Working capital expansion and collection management: Accounts receivable reached ¥85.4B (38.8% of total assets), while inventories reached ¥60.0B (27.2% of total assets), with both increasing substantially from the previous year. Whether collection and inventory management can be maintained in line with revenue growth is a key monitoring point.
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Goodwill and acquisition integration risk: Goodwill of ¥5.1B was provisionally recognized in the Manufacturing and Sales Business in connection with the acquisition of NIITAKAYA U.S.A.INC. Purchase price allocation remains incomplete, and the allocation details after finalization and the possibility of future impairment should be monitored.
Industry Benchmark (Reference, Compiled by the Company)
Industry Benchmark (trading)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 4.4% | 3.3% (1.8%–5.0%) | +1.1pt |
| Net Profit Margin | 2.7% | 3.1% (1.4%–6.3%) | −0.4pt |
The Operating Income Margin exceeds the industry median, while the Net Profit Margin is slightly below it due to the impact of non-operating expenses and extraordinary income and losses.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 6.2% | 5.2% (-4.1%–8.6%) | +1.0pt |
The Revenue Growth Rate is slightly above the industry median but has not reached the upper bound of the IQR.
※Source: Compiled by the Company
Key Points from the Earnings Results
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The Manufacturing and Sales Business (15.4% of revenue) achieved a 10.4% margin, substantially exceeding the Wholesale Business (3.4%), and the change in the business portfolio was the primary factor behind the improvement in the company-wide Operating Income Margin.
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Profit progress against the full-year forecast was in the 120% range, exceeding revenue progress of 80.9%. The earnings data suggests that the full-year profit plan may have been set conservatively.
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The decline in the Equity Ratio (31.6%→27.7%) coincided with increases in accounts receivable and inventories, suggesting that business expansion was supported by increases in interest-bearing debt and working capital.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.
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AI Financial Analysis
Executive Summary
FY2026 Q3 cumulative earnings were strong, with profit growth materially outpacing sales growth and results already exceeding the company’s full-year profit forecasts. Revenue increased 6.2% year on year to ¥32.35bn. Operating income rose 28.4% to ¥1.43bn. Ordinary income increased 18.4% to ¥1.33bn. Profit attributable to owners of parent increased 13.6% to ¥0.85bn, while consolidated net income was ¥0.86bn. The operating margin expanded by 76bp year on year to 4.4% from 3.7%. Gross margin improved by 152bp to 12.4%, indicating better gross-profit generation despite the structurally low-margin nature of the distribution business. The SG&A-to-sales ratio increased by 76bp to 7.9%, but this was more than offset by the gross-margin improvement. The manufacturing and sales segment was the principal growth engine, delivering 30.2% revenue growth and 55.0% segment-profit growth. Wholesale remained the core business by segment profit contribution, generating ¥0.94bn of segment profit, or about 64% of aggregate segment profit. The annualized DuPont ROE was 18.6%, supported by a 2.6% net margin, 1.960x asset turnover and elevated 3.61x financial leverage. This return profile is efficient in revenue and asset utilization terms, but it is substantially dependent on leverage rather than high underlying margins. Ordinary income was reduced by ¥0.58bn of foreign-exchange losses and ¥0.50bn of interest expense, making financial and currency costs meaningful to earnings conversion. Extraordinary insurance income of ¥0.18bn was nearly offset by a ¥0.21bn extraordinary loss, leaving only a modest net negative effect below ordinary income. Q3 cumulative revenue reached 80.9% of the ¥40.0bn full-year forecast, above the standard 75% progress rate. Operating income reached 124.7% of full-year guidance, ordinary income 120.8%, and parent net income 121.6%, signaling that the published forecast is conservative or requires revision if the current run-rate is maintained. The balance sheet expanded sharply alongside acquisitions and trading working-capital growth, with goodwill rising to ¥4.86bn and inventories, receivables, and payables all increasing substantially. Liquidity remains sound, but leverage, receivable collection, foreign-exchange exposure, and integration of newly acquired operations are the principal financial issues to monitor.
Profitability Analysis
The annualized three-factor DuPont ROE is 18.6%, comprising a 2.6% net profit margin, 1.960x asset turnover and 3.61x financial leverage. Financial leverage is the largest contributor to the high ROE, as the net margin remains thin and below the 3% benchmark generally associated with a more resilient earnings profile. The annualized asset-turnover component is strong for a trading and distribution-oriented business and reflects the high-revenue-throughput model. The operating margin improved to 4.4% from 3.7%, a 76bp expansion, but remains below the 5% threshold identified in the quality alert and leaves earnings sensitive to changes in product spread, freight, foreign exchange and financing costs. Gross margin rose to 12.4% from approximately 10.9%, a 152bp improvement, which was the central driver of operating-profit outperformance. SG&A rose 17.4% year on year to ¥2.57bn, materially faster than 6.2% sales growth; the SG&A ratio accordingly increased by 76bp to 7.9%. This unfavorable operating-cost trend was outweighed by the larger gross-margin gain, but sustained profit expansion requires SG&A growth to normalize relative to revenue. Wholesale, the core business by operating-income contribution, recorded external sales of ¥27.32bn, up 2.7%, and segment profit of ¥0.94bn, up 13.5%; its segment margin improved by 32bp to 3.4%. Manufacturing and sales recorded external sales of ¥5.03bn, up 30.2%, and segment profit of ¥0.52bn, up 55.0%; its segment margin expanded by 166bp to 10.4%, substantially above wholesale profitability. The superior margin and growth in manufacturing and sales improved the consolidated mix. The reported interest coverage ratio of 28.7x indicates that current operating profit comfortably covers interest expense, notwithstanding the increased debt burden. The five-factor DuPont interest burden of 0.908 shows that financing costs reduce EBIT by about 9.2% before tax, while the 0.654 tax burden corresponds to a 33.9% effective tax rate.
Growth Assessment
Revenue growth of 6.2% was led by the manufacturing and sales segment, where revenue expanded ¥1.17bn year on year. Wholesale revenue increased ¥0.72bn, providing a stable larger-scale base but at a substantially slower rate. Segment-profit growth was stronger than sales growth in both segments, particularly manufacturing and sales, evidencing improved unit economics and beneficial business mix. Consolidated gross profit increased 21.1% to ¥4.00bn, materially exceeding sales growth and supporting the 28.4% rise in operating income. The manufacturing and sales segment’s 10.4% segment margin suggests that further expansion of value-added manufacturing, processing and branded product activities could improve group earnings resilience relative to pure wholesale trading. The Q3 cumulative progress rate is 80.9% for sales versus the normal 75%, while operating income is 124.7% of full-year guidance. Ordinary income and parent net income are also already above full-year targets at 120.8% and 121.6%, respectively. The size of this profit outperformance, exceeding the standard Q3 progress rate by more than 45 percentage points for operating income, implies considerable upside to the existing forecast absent a material Q4 slowdown. However, the full-year forecast calls for only 2.2% sales growth and a 1.1% operating-income decline, which is inconsistent with the current cumulative performance trajectory and likely embeds conservative assumptions. Growth quality is supported by stronger segment margins, but foreign-exchange losses and increased financing costs demonstrate that profit conversion remains exposed to non-operating volatility. The newly consolidated subsidiaries and the acquisition of NIITAKAYA U.S.A. INC. provide a further avenue for reported growth, but also increase the importance of integration execution.
Financial Health
Liquidity is adequate, with a current ratio of 162.2% and a quick ratio of 114.4%, both above healthy reference levels. Working capital was ¥7.80bn, and cash and deposits totaled ¥3.54bn. Current assets of ¥20.35bn covered current liabilities of ¥12.55bn, so there is no immediate maturity mismatch between short-term obligations and current assets. Cash-to-short-term-debt was 2.63x, offering a meaningful liquidity buffer against the ¥1.35bn short-term-loan balance. Nonetheless, the reported D/E ratio of 2.61x triggers the HIGH_LEVERAGE quality alert and indicates an aggressive capital structure relative to the 2.0x warning threshold. Debt/capital was 42.2%, moderately above the 40% investment-grade reference point, reinforcing the need to monitor debt-funded expansion. Interest-bearing debt totaled ¥4.46bn, including ¥3.11bn of long-term loans, ¥1.35bn of short-term loans and ¥0.80bn of bonds. The increase in short-term loans to ¥1.35bn from ¥0.62bn, together with higher current portions of long-term loans, raises refinancing and interest-rate sensitivity even though current coverage is strong. Total liabilities represented 72.3% of total assets, while equity accounted for 27.7%, limiting the balance-sheet cushion relative to a less leveraged peer. Accounts receivable rose 38.0% to ¥8.54bn and inventories rose 67.0% to ¥6.00bn, reflecting a sharp expansion in operating working capital. Accounts payable increased 64.9% to ¥8.58bn and partly funded this expansion, which is typical in trading operations but heightens dependence on smooth inventory turnover and customer collections. Goodwill increased ¥4.52bn year on year to ¥4.86bn following acquisitions, while intangible assets increased ¥4.43bn to ¥5.22bn. Goodwill/equity of 8.0% and goodwill/assets of 2.2% remain modest, so the balance sheet is not presently dependent on goodwill value retention. Under JGAAP, goodwill is amortized, which will reduce future operating income and net income; the acquisition accounting for NIITAKAYA U.S.A. INC. remains provisional, so the final allocation may alter goodwill and identifiable intangible-asset balances.
Notable B/S Changes
Goodwill: +¥4.52bn (+1,330.3%) to ¥4.86bn — primarily reflects acquisition activity, including NIITAKAYA U.S.A. INC.; monitor JGAAP amortization, final purchase-price allocation and impairment risk. Intangible assets: +¥4.43bn (+559.8%) to ¥5.22bn — acquisition-related asset expansion increases future amortization exposure, though intangible assets remain only 2.4% of total assets. PPE: +¥1.89bn (+150.8%) to ¥3.14bn — indicates an expanded operating asset base, potentially associated with manufacturing and acquired operations. Short-term loans: +¥0.73bn (+117.4%) to ¥1.35bn — higher short-term funding raises refinancing sensitivity, although cash-to-short-term-debt remains 2.63x. Inventories: +¥2.41bn (+67.0%) to ¥6.00bn — significant working-capital commitment; inventory turnover and product-demand conditions warrant monitoring. Accounts payable: +¥3.38bn (+64.9%) to ¥8.58bn — supplier financing has increased and partly offsets inventory and receivable growth, but increases dependence on stable payment terms. Accounts receivable: +¥2.35bn (+38.0%) to ¥8.54bn — receivables are 38.8% of total assets and align with the 72-day DSO alert; collection efficiency is a key liquidity variable.
Cash Flow Quality
The available earnings data show that reported profit expansion is accompanied by a substantial build in trading working capital. Inventories increased by ¥2.41bn year on year, while trade receivables increased by ¥2.35bn. This working-capital absorption can constrain cash conversion unless matched by proportionate increases in trade payables and rapid inventory turnover. Trade payables did increase by ¥3.38bn, exceeding the combined increase in inventories and trade receivables, which provides partial supplier-financing support to operating liquidity. The HIGH_RECEIVABLE_DAYS quality alert, based on DSO of 72 days versus the 60-day threshold, is important because it increases exposure to customer credit quality and can delay conversion of revenue into cash. The root cause is the large receivables balance of ¥8.54bn, equal to 38.8% of total assets, in a high-turnover wholesale model. The impact is that a deterioration in collections could pressure liquidity, increase funding needs and amplify leverage. Foreign-exchange losses of ¥0.58bn were material relative to ¥1.43bn of operating income, demonstrating that cash and earnings outcomes may remain sensitive to exchange-rate movements. Interest expense of ¥0.50bn also consumes a notable portion of operating earnings, although interest coverage remains strong at 28.7x. No material recurring non-operating income supports the earnings result: dividend and interest income together were only ¥0.06bn. Extraordinary insurance income of ¥0.18bn was offset by a ¥0.21bn extraordinary loss, so below-the-line one-off items had a limited net effect on cumulative earnings.
Dividend Sustainability
The disclosed interim dividend is ¥6.00 per share. Relative to cumulative parent EPS of ¥94.56, the interim dividend represents a modest earnings distribution. The calculated dividend payout ratio of 6.7% is well below the 60% sustainability benchmark and leaves substantial earnings retention capacity. Retained earnings increased to ¥5.16bn from ¥4.44bn a year earlier, supporting internal funding capacity. However, the company is simultaneously funding significant working-capital growth, higher debt balances and acquisitions, so capital allocation should be assessed in the context of balance-sheet discipline rather than payout ratio alone. The low dividend burden provides flexibility to preserve liquidity and absorb acquisition integration costs. No total return ratio is calculated because no share-repurchase amount is provided.
Risk Assessment
Business risks include Margin risk: the LOW_GROSS_MARGIN alert is valid because the 12.4% gross margin is below the 20% reference threshold. This is structurally consistent with a wholesale-led trading model, but it means relatively small changes in procurement costs, selling prices or product mix can have an outsized effect on profit., Operating-efficiency risk: the 4.4% EBIT margin is below the 5% alert threshold. Margin expanded by 76bp year on year, but the absolute cushion remains narrow and SG&A growth of 17.4% exceeded sales growth of 6.2%., Collection and credit risk: DSO of 72 days exceeds the 60-day alert threshold, while receivables total ¥8.54bn. A slowdown in customer collections would increase capital needs and potential credit-loss exposure., Inventory and commodity risk: inventories increased 67.0% to ¥6.00bn. For a food-related wholesale and manufacturing business, changes in demand, input prices, product shelf life and inventory valuation can affect margins and working-capital efficiency., M&A integration risk: the manufacturing and sales segment acquired NIITAKAYA U.S.A. INC., resulting in ¥5.11bn of provisional goodwill. Realization of expected synergies and final purchase-price allocation are important to validating acquisition economics., Foreign-exchange risk: ¥0.58bn of FX losses reduced ordinary income. International procurement and the U.S. acquisition may increase exposure to currency fluctuations..
Financial risks include Leverage risk: the reported D/E ratio of 2.61x is above the 2.0x warning threshold. The root cause is the debt-supported balance-sheet expansion, including short-term loans up 117.4% year on year. The impact is greater sensitivity to refinancing conditions, interest rates and working-capital volatility., Funding risk: short-term loans rose to ¥1.35bn, while current portions of long-term loans were ¥1.46bn. Liquidity ratios remain healthy, but continued growth in receivables and inventory could require further external funding., Profit-conversion risk: the 0.908 interest burden shows financing costs are already meaningful before tax, and a higher debt base could further dilute ordinary and net income if borrowing costs rise., Acquisition-accounting risk: goodwill and intangible assets rose sharply. While goodwill/equity is only 8.0%, future JGAAP amortization and any impairment would weigh on reported earnings..
Key concerns include Highest priority: preserve cash conversion as receivables, inventory and debt increase concurrently., High priority: determine whether operating-income outperformance versus full-year guidance can be sustained after Q3 rather than being offset by seasonality, FX losses or acquisition-related costs in Q4., High priority: monitor the final purchase-price allocation and post-acquisition profitability of NIITAKAYA U.S.A. INC., Moderate priority: track whether SG&A growth moderates relative to sales while manufacturing and sales maintains its improved 10.4% segment margin., Moderate priority: assess the trajectory of foreign-exchange losses and interest expense against operating-profit growth..
Investment Implications
Key takeaways include Operating income grew 28.4%, far exceeding 6.2% revenue growth, driven by a 152bp gross-margin expansion and a more favorable contribution from manufacturing and sales., Wholesale remains the core profit contributor, but manufacturing and sales is the higher-growth and higher-margin segment., Q3 cumulative operating income is 124.7% of full-year guidance, making forecast assumptions and any future revision central to the earnings outlook., Annualized ROE of 18.6% is strong, but its sustainability depends materially on 3.61x financial leverage rather than a high net margin., Liquidity is currently sound, but expanded receivables, inventory, short-term borrowing and acquisition-related goodwill require closer balance-sheet monitoring..
Metrics to watch include Full-year forecast revision and Q4 operating-margin trajectory, Wholesale and manufacturing-and-sales segment margins, DSO, receivable aging and credit-loss provisions, Inventory turnover, inventory valuation and trade-payable funding, Short-term loan balance, interest expense and reported D/E ratio, Foreign-exchange gains or losses, Goodwill amortization, final purchase-price allocation and acquired-business profitability.
Regarding relative positioning, The company exhibits above-benchmark annualized ROE and strong asset turnover for a trading-oriented business, but its profitability remains low-margin relative to broad market benchmarks. Its manufacturing and sales operations provide meaningfully higher margins than wholesale and are increasingly important to earnings quality. Relative financial positioning is supported by healthy current and quick ratios and modest goodwill concentration, while elevated reported leverage and high receivable days make it more balance-sheet-sensitive than a conservatively funded peer.