FUJITA CORPORATION Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.46B
• Operating Income: ¥39M
• Net Income: ¥14M
• EPS: ¥4.08

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

Fujita Corporation (3370) reported FY2026 Q2 consolidated results under JGAAP with steady top-line growth and modest profit expansion amid a highly leveraged balance sheet. Revenue was ¥2,462 million, up 3.6% YoY, while operating income increased 13.1% YoY to ¥39 million, indicating positive operating leverage. Net income came in at ¥14 million (+9.3% YoY), translating to a net margin of 0.57%, reflecting thin profitability after interest and below-the-line items. Gross profit was ¥1,406.9 million, with a robust gross margin of 57.1%, suggesting strong unit economics or a favorable sales mix despite a low operating margin. EBITDA was ¥103.3 million, implying an EBITDA margin of 4.2%, which remains modest for a model with high gross margins, pointing to substantial SG&A and other fixed cost burdens. Ordinary income of ¥31 million trails operating income, reflecting interest burden (¥23.37 million) and possibly other non-operating items. Interest coverage at 1.7x (operating income/interest expense) is thin and could become a constraint if rates rise or earnings soften. The DuPont framework shows a calculated ROE of 6.11%, driven largely by very high financial leverage (assets/equity of 12.21x) and moderate asset turnover (0.88x), with a very slim net margin (0.57%). Total assets were ¥2,797 million and total equity ¥229 million, implying an equity ratio near 8.2% by calculation, although the disclosed equity ratio field shows 0.0% and should be treated as unreported. Liquidity is tight with a current ratio of 89.8% and negative working capital of ¥80 million, indicating reliance on short-term liabilities to fund operations. Operating cash flow was positive at ¥57.37 million and exceeded net income 4.1x, a favorable indicator for earnings quality this period. Investing and cash balances are not disclosed (zeros represent unreported), limiting full cash flow interpretation and liquidity assessment. The company did not pay dividends (DPS ¥0.00) and maintained a 0% payout, appropriate given leverage and liquidity constraints. Overall, the quarter reflects cautious improvement in operating performance, but thin interest coverage, low equity buffer, and negative working capital remain key financial constraints. Data gaps (equity ratio, cash, investing CF, share count) warrant caution in drawing definitive conclusions.

Profitability Analysis

ROE decomposition indicates: Net margin 0.57% x Asset turnover 0.880 x Leverage 12.21 = ROE 6.11%. The ROE is therefore predominantly leverage-driven rather than margin-led, which raises sensitivity to earnings volatility. Gross margin of 57.1% is strong, but the conversion from gross profit to operating profit is weak, with an operating margin of approximately 1.6% (¥39m / ¥2,462m), signaling significant SG&A and fixed cost intensity. EBITDA margin of 4.2% suggests some fixed cost absorption but leaves limited buffer for shocks. Operating income growth (+13.1% YoY) outpaced revenue growth (+3.6% YoY), evidencing positive operating leverage in the period. Ordinary income (¥31m) below operating income highlights financing costs; interest expense of ¥23.37m consumes a meaningful share of operating profit. Net income grew 9.3% YoY, but at a low level, reinforcing thin bottom-line economics. Margin quality appears mixed: healthy gross structure but pressured operating and net margins due to overhead and interest burden.

Growth Assessment

Revenue growth of 3.6% YoY is modest and appears organic; sustainability will depend on demand resilience and pricing. Operating income growth of 13.1% YoY indicates incremental efficiency or better mix, but the absolute margin remains thin. Net income rose 9.3% YoY despite interest drag, demonstrating some resilience but leaving little room for error. Asset turnover at 0.88x is adequate for a multi-site service/retail-like model, but not high enough to offset ultrathin net margins without leverage. Profit quality is supported by OCF exceeding net income (OCF/NI 4.10x), reducing concerns about accrual-driven earnings for the half. Outlook hinges on maintaining price/mix and controlling SG&A, while interest expense and leverage remain headwinds. Given limited disclosures on segment drivers or store pipeline, we assume steady-state growth near low-single digits with margin improvement dependent on fixed cost discipline.

Financial Health

Total assets are ¥2,797m and total equity ¥229m; implied equity ratio is approximately 8.2% (while the reported 0.0% should be treated as undisclosed). Total liabilities are ¥2,560m, yielding a debt-to-equity ratio of 11.18x (liabilities/equity), indicating high leverage. Liquidity is tight: current ratio 89.8%, quick ratio 86.6%, and working capital at -¥80m, suggesting reliance on short-term financing or trade payables. Interest coverage is 1.7x (operating income/interest expense), thin for comfort and sensitive to earnings volatility or rate increases. The capital structure is heavily skewed to debt, amplifying both ROE and downside risk. Absence of disclosed cash and cash equivalents precludes a definitive liquidity buffer assessment. Overall solvency is acceptable for now but constrained by low equity and limited interest service capacity.

Cash Flow Quality

Operating cash flow of ¥57.37m exceeds net income of ¥14m, yielding an OCF/NI ratio of 4.10x, indicative of supportive cash conversion this period. Depreciation and amortization (¥64.25m) comprise a significant share of EBITDA (¥103.25m), implying meaningful non-cash add-backs driving OCF. Working capital appears managed tightly given negative working capital on the balance sheet; however, period-specific working capital movements are not disclosed, limiting deeper analysis. Free cash flow is not determinable due to undisclosed investing cash flows (reported as 0, which indicates unreported), so FCF quality cannot be concluded. Financing cash flow of -¥73.97m suggests net repayments or distributions, but details are unavailable. With cash balance undisclosed, we cannot triangulate period-end liquidity; thus, we rely on OCF as the main quality indicator, which is favorable this half.

Dividend Sustainability

The company paid no dividend (DPS ¥0.00), with a payout ratio of 0.0%. Given thin earnings, high leverage (11.18x liabilities/equity), negative working capital, and modest interest coverage (1.7x), retaining earnings is prudent from a balance sheet perspective. FCF coverage of dividends cannot be assessed because investing cash flows are undisclosed; the provided 0.00x should be treated as not determinable. Policy-wise, reinstatement or increases would likely depend on sustained improvement in operating margin, stronger interest coverage (>2.5x), and a higher equity buffer. Near-term dividend capacity appears constrained by financial health considerations despite positive OCF.

Risk Assessment

Business Risks:

• Thin operating and net margins despite high gross margin, leaving limited buffer for shocks
• Dependence on pricing/mix and cost control to sustain operating leverage
• Potential volatility in demand affecting a relatively low asset turnover model
• Execution risk in SG&A containment and store-level profitability (if multi-site operations)

Financial Risks:

• High leverage with debt-to-equity of 11.18x and implied equity ratio near 8%
• Tight liquidity: current ratio 89.8% and negative working capital of ¥80m
• Low interest coverage of 1.7x, sensitive to rate increases or earnings dips
• Data gaps on cash position and investing cash flows hinder liquidity assessment

Key Concerns:

• Sustainability of operating margin improvements given fixed cost base
• Exposure to financing costs constraining ordinary and net income
• Limited equity cushion elevates refinance and covenant risk if performance weakens

Investment Implications

Key Takeaways:

• Revenue growth modest at +3.6% YoY with operating income up +13.1% YoY, indicating positive operating leverage
• ROE of 6.11% is leverage-driven (12.21x), not margin-led, increasing earnings sensitivity
• Interest coverage is thin at 1.7x and liquidity is tight (current ratio 89.8%)
• OCF strength (OCF/NI 4.10x) supports earnings quality this half
• Data limitations (cash, investing CF, equity ratio field) constrain full assessment

Metrics to Watch:

• Operating margin progression and SG&A-to-sales ratio
• Interest coverage (targeting >2.5x for comfort) and net finance costs
• Working capital trends and current ratio trajectory
• Asset turnover and same-store/volume indicators (if available)
• Equity buildup via retained earnings and any deleveraging actions

Relative Positioning: Within small-cap Japanese consumer/service peers, Fujita exhibits strong gross margin but below-average operating and net margins, higher financial leverage, tighter liquidity, and adequate but not standout asset turnover; cash generation this half is supportive, yet capital structure remains a key differentiator and constraint.

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
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