TRUST Holdings Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥2.47B
• Operating Income: ¥-24M
• Net Income: ¥1M
• EPS: ¥-10.64

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 Q1, Trust Holdings Co., Ltd. (TSE: 3286) posted revenue of ¥2,468 million, a slight 0.5% YoY decline, but profitability deteriorated sharply with an operating loss of ¥24 million (-88.6% YoY) and a net loss of ¥40 million (-99.0% YoY). Gross profit was ¥517 million, implying a gross margin of 21.0%, which is reasonable but insufficient to cover operating fixed costs given the quarter’s negative operating income. Ordinary income was a loss of ¥48 million, indicating that financial expenses and non-operating items further weighed on results. Interest expense of ¥22 million exceeded operating earnings capacity this quarter, leading to a negative interest coverage ratio of roughly -1.1x. Net profit margin was -1.62%, translating into a calculated ROE of -3.53% via DuPont (margin -1.62%, asset turnover 0.261x, leverage 8.35x). The balance sheet shows total assets of ¥9,472 million and total equity of ¥1,134 million, implying an equity ratio of roughly 12.0% (computed) despite the equity ratio field being undisclosed. Leverage is elevated with a debt-to-equity ratio of 6.63x, suggesting heightened sensitivity to earnings volatility and interest costs. Liquidity appears adequate short term with a current ratio of 132% and quick ratio of 131%, supported by modest inventories (¥39 million). Working capital stands at ¥1,377 million, providing some buffer for operations. Cash flow statement items were not disclosed, limiting assessment of cash conversion and free cash flow sustainability. EBITDA and D&A are also not disclosed, constraining operating cash earnings analysis and leverage metrics such as net debt/EBITDA. Dividend per share is reported at ¥0.00 for the period, consistent with a loss-making quarter and prudent capital preservation. The combination of slight top-line softness and a large swing into loss implies meaningful operating leverage; even small revenue fluctuations are impacting earnings materially. Financial costs remain a key headwind relative to current earnings run-rate, making margin recovery a priority. Overall, the quarter highlights pressure on profitability, elevated balance-sheet leverage, and limited visibility on cash generation due to undisclosed cash flow data, warranting close monitoring of operating margin recovery and interest coverage.

Profitability Analysis

ROE decomposition via DuPont shows: Net Profit Margin -1.62%, Asset Turnover 0.261x, Financial Leverage 8.35x, yielding a calculated ROE of -3.53%. Gross margin of 21.0% (¥517m/¥2,468m) indicates decent unit economics, but operating margin was -0.97% (¥-24m/¥2,468m), evidencing that SG&A and fixed costs outweighed gross profits. Ordinary margin was -1.95% and net margin -1.62%, with interest expense (¥22m) and other non-operating factors pushing results further into loss. Operating leverage appears high: a small -0.5% YoY revenue decline corresponded to a disproportionately large deterioration in operating income (-88.6% YoY), implying a high fixed-cost base or reduced pricing/mix. Interest burden is material relative to operating earnings capacity, as shown by interest coverage of about -1.1x this quarter. EBITDA cannot be assessed because D&A is undisclosed; consequently, EBITDA margin and cash earnings quality cannot be robustly evaluated. The negative operating income suggests immediate focus on cost control and utilization improvements to restore positive operating leverage in subsequent quarters.

Growth Assessment

Revenue declined slightly by 0.5% YoY to ¥2,468 million, indicating relatively stable demand but mild softness. The significant YoY drop in operating income (-88.6%) and net income (-99.0%) highlights a deterioration in cost absorption and/or price/mix. Given the gross margin of 21.0%, top-line stability alone may not suffice without SG&A discipline or productivity gains. With ordinary income at a loss and interest expense weighing on results, earnings growth near term hinges on recapturing operating margin rather than volume growth alone. Absent cash flow disclosure and segment details, visibility on revenue sustainability by line of business is limited; however, the modest revenue movement versus sharp profit compression points to cyclical or seasonal sensitivity and high fixed-cost exposure. Near-term outlook depends on cost normalization, potential price revisions, and utilization/volume recovery; monitoring sequential trend in operating margin and ordinary income will be key. Any improvement in interest coverage and a return to positive operating income would materially improve earnings quality and trajectory.

Financial Health

Total assets are ¥9,472 million and total equity ¥1,134 million, implying an equity ratio around 12.0% (computed from non-zero items), despite the equity ratio field being undisclosed. Total liabilities are ¥7,513 million, resulting in a debt-to-equity ratio of 6.63x, signaling high leverage. Liquidity appears acceptable with current assets of ¥5,672 million versus current liabilities of ¥4,295 million, producing a current ratio of 132% and quick ratio of 131% (low inventories of ¥39 million). Working capital totals ¥1,377 million, providing some near-term cushion. Interest expense of ¥22 million this quarter versus negative operating income underscores pressure on interest coverage. Solvency is sensitive to earnings volatility given leverage; sustained operating losses would erode equity and reduce financial flexibility. Lack of cash and cash equivalents disclosure prevents assessment of immediate liquidity buffers and net debt.

Cash Flow Quality

Operating, investing, and financing cash flows were undisclosed this quarter (reported as 0, which indicates not disclosed). As such, OCF/Net Income, free cash flow, and cash conversion cannot be evaluated. Earnings quality assessment is constrained: we cannot reconcile profit to cash due to missing D&A, working capital movements, and tax/cash interest data. The modest inventories (¥39 million) and healthy quick ratio suggest limited inventory drag, but receivables and payables dynamics are unknown. With operating income negative and interest expense meaningful, positive OCF would need to arise from working capital release or non-cash adjustments, neither of which can be confirmed. We therefore cannot assess FCF sufficiency for debt service or dividends from this dataset.

Dividend Sustainability

DPS is reported at ¥0.00 for the period, consistent with a loss-making quarter and a prudent stance given leverage. Payout ratio is shown as 0.0%, which aligns with the absence of distributable profit this quarter. FCF coverage cannot be assessed because cash flows are undisclosed. Given the high debt-to-equity (6.63x) and negative ordinary income, prioritizing balance sheet resilience and interest coverage likely supersedes distributions near term. Future dividend capacity will depend on restoring positive operating income, improving ordinary income, and generating positive OCF/FCF; policy clarity would benefit from management guidance once profitability normalizes.

Risk Assessment

Business Risks:

• High operating leverage: small revenue declines causing outsized profit swings
• Margin pressure from fixed-cost base and potential pricing constraints
• Potential seasonality or cyclical demand sensitivity implied by sharp earnings volatility
• Execution risk in cost control and utilization improvements

Financial Risks:

• Elevated leverage (debt-to-equity 6.63x) with implied equity ratio around 12%
• Weak interest coverage this quarter (-1.1x), increasing refinancing and covenant risks if persistent
• Limited visibility on liquidity due to undisclosed cash and cash flows
• Exposure to interest rate increases affecting financing costs

Key Concerns:

• Sustained losses could erode already modest equity base
• Negative ordinary income indicates financial costs outweigh current operating earnings
• Absence of cash flow disclosure prevents assessing FCF and debt-servicing capacity
• Need for rapid operating margin recovery to stabilize ROE and solvency metrics

Investment Implications

Key Takeaways:

• Revenue relatively stable (-0.5% YoY) but profitability deteriorated materially, reflecting high operating leverage
• Gross margin at 21.0% is insufficient against fixed costs; operating margin turned negative (-0.97%)
• Leverage is high (D/E 6.63x) with an implied equity ratio near 12%, elevating solvency sensitivity
• Interest burden (¥22m) is heavy relative to current earnings capacity (interest coverage ~ -1.1x)
• Cash flow and D&A are undisclosed, limiting assessment of cash earnings and FCF sustainability

Metrics to Watch:

• Sequential operating margin and ordinary income recovery
• Interest coverage (operating income vs. interest expense)
• Implied equity ratio (equity/assets) and debt-to-equity trend
• Working capital movements and any disclosed OCF/FCF
• Gross margin stability and SG&A ratio normalization

Relative Positioning: Within Japan small-cap peers, the company currently exhibits higher financial leverage and weaker near-term profitability, with adequate short-term liquidity but limited visibility on cash generation due to undisclosed cash flow data; recovery hinges on operating margin improvements and better interest coverage.

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