KITABO CO.,LTD FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥821M
• Operating Income: ¥-34M
• Net Income: ¥-40M
• EPS: ¥-1.35

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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, 株式会社北紡 reported revenue of ¥821.0m, up 6.8% YoY, but remained loss-making at every profit line, underscoring fragile profitability despite top-line growth. Gross profit was ¥100.9m, yielding a gross margin of 12.3%, which was insufficient to cover operating costs, resulting in operating income of -¥34.0m and an operating margin of roughly -4.1%. Ordinary income improved slightly versus operating income to -¥33.0m, indicating small net non-operating gains offsetting interest expense. Net income was -¥36.0m (EPS -¥1.35), translating to a net margin of -4.38%. DuPont metrics show ROE at -2.80% driven primarily by a negative net margin, with low asset turnover (0.377x) and moderate financial leverage (1.69x). The stability of operating losses despite a 6.8% rise in revenue suggests high operating leverage and limited cost flexibility in the current environment. EBITDA was -¥26.0m (margin -3.2%), highlighting that even before depreciation the business is not covering fixed costs. Liquidity is comparatively sound with a current ratio of 165% and quick ratio of 146%, supported by positive working capital of ¥353.8m. The balance sheet is conservatively capitalized: based on disclosed assets and equity, the implied equity ratio is about 59% (equity/total assets), and the debt-to-equity ratio stands at 0.75x. Operating cash flow was negative at -¥37.4m, broadly aligned with the net loss (OCF/NI ≈ 1.04), indicating limited accrual distortion but cash burn nonetheless. Financing cash inflow of ¥107.7m helped bridge the operating deficit, implying reliance on external funding in the absence of positive internal cash generation. Dividend payments are currently suspended (DPS ¥0), which is appropriate given the loss and negative operating cash flow. Inventory of ¥106.1m and overall asset turnover suggest capital intensity and/or subdued throughput relative to asset base. Data limitations exist: several line items (e.g., investing cash flows, cash balance, share count, equity ratio) are unreported in XBRL; analysis focuses on available non-zero datapoints and derived relationships. Overall, the company exhibits adequate liquidity and moderate leverage but continues to face margin pressure, negative OCF, and weak coverage, requiring either further pricing power, mix improvements, or cost restructuring to achieve breakeven.

Profitability Analysis

ROE_decomposition: ROE -2.80% = Net margin (-4.38%) × Asset turnover (0.377x) × Financial leverage (1.69x). The dominant drag is the negative net margin; low asset turnover further suppresses ROE while leverage is moderate and not the main driver. margin_quality: Gross margin 12.3% (¥100.9m GP on ¥821.0m revenue) is too thin to absorb fixed SG&A and other operating costs, producing operating margin around -4.1% and ordinary margin around -4.0%. Non-operating items marginally improved ordinary income vs operating income by ~¥1m, but interest expense of ¥5.24m weighed on results. Effective tax is essentially nil given losses, notwithstanding ¥2.07m tax expense recorded. operating_leverage: Revenue grew 6.8% YoY (≈¥+52.5m vs implied prior-year revenue), but operating income was flat at -¥34.0m YoY, implying negligible incremental operating margin. This points to high fixed costs and limited cost elasticity or insufficient price/mix improvement to expand contribution margins.

Growth Assessment

revenue_sustainability: Top-line expanded to ¥821.0m (+6.8% YoY), indicating some demand resilience. However, low asset turnover (0.377x) and inventory levels (¥106.1m) imply throughput constraints and/or a capital-intensive model; sustaining growth likely requires better utilization and pricing discipline. profit_quality: EBITDA margin (-3.2%) and operating losses indicate weak profit quality. Ordinary income marginally outperformed operating income, but the gap is too small to offset structural cost pressure. Negative OCF mirrors the net loss, suggesting limited accruals but no cash cushion from working capital releases. outlook: Absent clear evidence of gross margin expansion or cost restructuring, near-term earnings recovery is challenged. Pricing actions, product mix upgrades, and efficiency gains are needed to convert revenue growth into positive operating leverage. Monitoring seasonality and input cost trends (e.g., fibers, energy, logistics) is key to assessing sustainability.

Financial Health

liquidity: Current ratio 165.3% (¥895.3m CA / ¥541.5m CL) and quick ratio 145.7% indicate adequate short-term coverage. Working capital stands at ¥353.8m, offering a buffer despite negative OCF. solvency: Debt-to-equity ratio is 0.75x (total liabilities/equity), and implied equity ratio is ~59% (¥1,288.0m / ¥2,178.0m), suggesting a reasonable equity cushion. Interest coverage is negative (EBIT/interest ≈ -6.5x), highlighting near-term earnings stress. capital_structure: Total assets ¥2,178.0m, liabilities ¥964.4m, equity ¥1,288.0m. Leverage is moderate (financial leverage 1.69x). The company tapped financing (+¥107.7m) to offset cash burn, indicating some dependence on external funding while profitability remains negative.

Cash Flow Quality

earnings_quality: OCF of -¥37.4m vs net income of -¥36.0m (OCF/NI ≈ 1.04) implies limited accrual-driven divergence; losses are translating into cash outflows. D&A is modest at ¥8.0m, so EBITDA remains negative even before non-cash charges. FCF_analysis: Investing cash flow is unreported this period, so FCF cannot be reliably computed from disclosed data. Conceptually, with negative OCF and ongoing maintenance capex needs (not disclosed), underlying FCF is likely negative. working_capital: Current assets of ¥895.3m include inventories of ¥106.1m (~12% of CA). While period-to-period WC drivers are not disclosed, the negative OCF suggests either operating losses and/or WC investment consumed cash.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0.00 and payout ratio is 0.0%, consistent with a net loss (EPS -¥1.35). FCF_coverage: With OCF negative and investing cash flows undisclosed, FCF coverage of dividends cannot be established; however, the absence of payouts aligns with current cash generation capacity. policy_outlook: Given negative earnings and OCF, resumption of dividends would likely require a sustained return to positive EBITDA/OCF and clearer visibility on capex needs. Balance sheet equity is adequate, but operating performance is the gating factor.

Risk Assessment

Business Risks:

• Thin gross margins and high fixed costs limiting operating leverage
• Input cost volatility (fibers, energy, chemicals) impacting COGS
• Demand cyclicality in textiles/apparel and potential customer concentration
• Pricing power constraints in a competitive market
• Supply chain and logistics disruptions affecting lead times and costs
• Foreign exchange exposure on imported materials (if applicable)

Financial Risks:

• Negative operating cash flow requiring external financing
• Weak interest coverage (EBIT/interest ≈ -6.5x)
• Potential covenant pressure if losses persist
• Working capital swings could exacerbate cash burn
• Interest rate risk on floating-rate borrowings (if any)

Key Concerns:

• Sustained operating losses despite revenue growth
• Negative EBITDA and OCF indicate ongoing cash burn
• Reliance on financing inflows (+¥107.7m) to fund operations
• Low asset turnover (0.377x) suggesting underutilization or capital intensity
• Need for margin improvement through pricing, mix, or cost restructuring

Investment Implications

Key Takeaways:

• Revenue grew 6.8% YoY to ¥821.0m, but profitability remained negative at every level
• Gross margin 12.3% is insufficient to cover fixed costs; operating margin ~-4.1%
• ROE -2.80% driven by negative net margin and low asset turnover (0.377x)
• Liquidity is adequate (CR 165%, QR 146%) with positive working capital
• Moderate leverage (D/E 0.75x) and implied equity ratio ~59% provide balance sheet support
• OCF -¥37.4m closely tracks the net loss; earnings quality not distorted but cash burn persists
• Financing inflow of ¥107.7m bridged operating deficits, indicating dependence on external funding
• Dividend remains suspended (DPS ¥0), consistent with negative earnings and OCF

Metrics to Watch:

• Gross margin trajectory and pricing/mix improvements
• EBITDA and operating margin inflection toward breakeven
• OCF trends and working capital rotation (DSO/DIO/DPO if disclosed)
• Interest coverage and financing costs
• Asset turnover improvements via utilization and inventory management
• Capex levels (once disclosed) to assess true FCF

Relative Positioning: Within domestic textile/spinning peers, the company shows weaker profitability and cash generation but comparatively solid liquidity and moderate leverage; near-term positioning hinges on executing margin recovery and improving asset utilization.

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