FUJIX Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.78B
• Operating Income: ¥-108M
• Net Income: ¥-66M
• EPS: ¥-47.16

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

Verdict: FY2026 Q2 was weak with an operating loss and negative bottom line despite a very strong balance sheet. Revenue was 27.82 (−3.3% YoY), with gross profit of 6.37 and SG&A of 7.46 leading to operating income of −1.08. Gross margin printed at 22.9%, while operating margin was −3.9%, indicating insufficient scale to cover fixed costs. Non-operating income of 0.62 (notably dividend income 0.28 and interest income 0.05) narrowed the ordinary loss to −0.57, but it was not enough to return to profitability. Despite a pretax loss of −0.42, income tax expense of 0.24 resulted in net income of −0.64 and an effective tax rate of −58%, highlighting tax distortions. EPS was −47.16 JPY, and ROE was −0.6% on DuPont metrics (margin −2.3%, asset turnover 0.236, leverage 1.18x). Balance sheet quality is a bright spot: current ratio 1011%, quick ratio 575%, and low leverage (liabilities/equity 0.18x), underpinned by cash and deposits of 23.25 and investment securities of 22.41. Inventories are elevated at 28.19, roughly equal to half-year sales, a potential overhang for cash conversion. Margins YoY basis-point comparisons are not available due to unreported prior-year margin details, so directionality beyond the −3.3% revenue decline cannot be quantified. Earnings quality cannot be assessed fully because operating cash flow is unreported; however, the reliance on financial income to offset operating losses is a concern. ROIC is −1.4% (below the 5% warning threshold), reflecting subpar capital efficiency. Comprehensive income was −1.13, suggesting additional valuation losses (likely from securities/OCI) on top of net losses. Forward-looking, restoring operating profitability will hinge on SG&A discipline and normalization of gross margins, while inventory right-sizing is key to cash flow recovery. With a strong liquidity position, the company has runway to execute improvements, but sustained non-operating support is not a durable earnings driver. Dividend visibility is low given negative earnings and unreported DPS, though ample retained earnings (57.68) provide capacity if policy prioritizes stability. Overall, the near-term focus should be on improving core operations and working capital efficiency.

Profitability Analysis

ROE decomposition: ROE (−0.6%) = Net Profit Margin (−2.3%) × Asset Turnover (0.236) × Financial Leverage (1.18x). The dominant drag is the negative net margin, driven by an operating margin of −3.9% as SG&A (7.46) exceeded gross profit (6.37). Asset turnover is low at 0.236, indicating modest revenue generation against the asset base of 117.84; cash (23.25), investment securities (22.41), and inventories (28.19) are sizeable relative to sales. Financial leverage is low (assets/equity 1.18x), providing safety but limiting ROE uplift. The most material change component cannot be quantified due to lack of prior period decomposition; qualitatively, current ROE weakness is primarily margin-driven rather than leverage-driven. Business reason: demand softness (revenue −3.3% YoY) and/or input cost pressures likely compressed contribution margins, while fixed SG&A burden maintained, pushing operating income negative. Sustainability: Non-operating income (dividends/interest totaling 0.33) is recurring but small; it cannot sustainably offset core operating losses. Without cost actions or gross margin recovery, current margin pressure could persist. Watch for concerning trends: SG&A exceeding gross profit is a red flag for operating leverage; absent disclosure, we cannot confirm SG&A growth vs revenue, but current cost structure appears too heavy for the revenue base.

Growth Assessment

Top-line declined 3.3% YoY to 27.82, indicating modest end-market softness. Revenue quality appears mixed: dependency on non-operating income to mitigate losses suggests underlying operating profit is weak despite stable gross margin in absolute terms (22.9%). With inventories at 28.19 (about 1.0x half-year sales), near-term sales may be supported, but risk of discounting to clear stock could pressure margins. Ordinary income was −0.57 despite 0.62 of non-operating income, so recurring financial income cannot fully bridge operating losses. Outlook hinges on cost controls and pricing: to return to breakeven on current revenue, SG&A would need to decline by roughly 1.1 or gross profit increase equivalently. Absent evidence of strong order backlog or pricing power, near-term profit recovery visibility is limited. Management’s ROIC at −1.4% underscores the need to rationalize capital employed (especially inventory) and improve operating efficiency. Data gaps (no segment data, no OCF, no capex) constrain a detailed growth sustainability view.

Financial Health

Liquidity is very strong: current ratio 1011% and quick ratio 575% indicate ample coverage of current liabilities (6.47) by cash (23.25), receivables (10.29), and other liquid assets. Solvency is conservative: total liabilities/equity is 0.18x; no interest-bearing debt details are disclosed, but overall leverage is low with equity of 99.71 vs liabilities of 18.13. Maturity mismatch risk appears low since current assets (65.37) far exceed current liabilities; noncurrent assets (52.47) are covered by long-term capital (equity + noncurrent liabilities), suggesting a stable structure. There is no explicit warning on current ratio (<1.0) or D/E (>2.0). Investment securities of 22.41 introduce market valuation risk flowing through OCI, consistent with negative total comprehensive income (−1.13). Off-balance sheet obligations are not disclosed; none can be assessed from the data provided.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income and FCF cannot be calculated, limiting earnings quality assessment. Qualitatively, inventories at 28.19 (around 1.0x half-year sales) could indicate slower turnover and potential future working capital drag if demand remains soft, which would impair cash conversion. The company’s reliance on non-operating income (dividends/interest totaling 0.33) to offset operating losses suggests lower quality of earnings from a cash-generation standpoint. With abundant cash (23.25), near-term liquidity is not at risk, but sustainable FCF depends on restoring positive operating income and normalizing inventory. No signs of deliberate working capital manipulation are detectable from available data, but the elevated stock level warrants monitoring.

Dividend Sustainability

Dividend data (DPS, total dividends, FCF coverage) are unreported; payout ratio based on current period earnings is not meaningful given negative net income and the calculated payout ratio indicator is not reliable without DPS. Capacity-wise, retained earnings of 57.68 and strong cash provide potential room for dividends if policy targets stability, but sustainability should be judged against future FCF rather than current loss. Given negative earnings and unknown OCF, maintaining or increasing dividends (if any) could rely on balance sheet strength rather than cash generation, which is not a long-term solution. Until operating profitability and OCF turn positive, dividend visibility is low.

Risk Assessment

Business Risks:

• Demand softness in apparel/industrial thread end-markets (revenue −3.3% YoY).
• Gross margin pressure and fixed-cost absorption issues (SG&A > gross profit, operating margin −3.9%).
• Inventory obsolescence/markdown risk with inventories at 28.19 (~1.0x half-year sales).
• Competitive pricing pressure in textile-related markets limiting pass-through of input costs.
• Operational leverage risk: small revenue changes can swing profits due to fixed SG&A.

Financial Risks:

• Earnings reliance on non-operating income (dividends/interest 0.33) to offset operating losses.
• Market valuation risk on investment securities (22.41) affecting OCI and equity.
• Tax expense volatility with losses (effective tax rate −58%), potentially from valuation allowances or non-deductible items.
• Data gaps on interest-bearing debt and cash flows hinder full risk assessment.

Key Concerns:

• ROIC at −1.4% (below 5% warning threshold) indicating poor capital efficiency.
• Negative comprehensive income (−1.13) compounding net losses.
• Potential cash conversion headwinds if inventory normalization requires discounting.
• Limited visibility on capex and OCF, constraining assessment of self-funded turnaround capacity.

Investment Implications

Key Takeaways:

• Core operations are loss-making with operating margin −3.9% despite 22.9% gross margin.
• Non-operating income provides partial cushion but is insufficient to deliver profitability.
• Balance sheet is very strong (current ratio ~10x, liabilities/equity 0.18x) providing runway.
• Inventory level is high relative to sales and is a key determinant of near-term cash generation.
• Capital efficiency is weak (ROIC −1.4%, ROE −0.6%), requiring structural improvements.

Metrics to Watch:

• Operating income trajectory and SG&A run-rate versus gross profit.
• Inventory turnover days and inventory-to-sales ratio.
• Gross margin trends (input costs vs pricing).
• Ordinary income sensitivity to non-operating items (dividends/interest, investment valuation).
• OCF and FCF once disclosed; capex intensity.
• ROIC progression toward >5% as a minimum threshold.

Relative Positioning: Within small-cap textile/material peers, the company stands out for its very conservative balance sheet and liquidity but lags on profitability and capital efficiency, with earnings more reliant on financial income than core operations.

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