FUJIX Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.78B
• Operating Income: ¥-108M
• Net Income: ¥-98M
• 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

Fujix Co., Ltd. reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥2.782 billion, down 3.3% year on year, indicating modest top-line softness amid a challenging demand environment. Gross profit was ¥676.96 million, implying a gross margin of 24.3%, but operating income was a loss of ¥108 million (operating margin roughly -3.9%), highlighting a high SG&A burden relative to gross profit. Ordinary income improved to a smaller loss of ¥57 million, suggesting net non-operating gains of about ¥51 million (e.g., interest income, FX, investment-related items), which partially offset operating weakness. Net income was a loss of ¥64 million (net margin -2.3%), broadly flat versus the prior year per the disclosed YoY indicator. Despite the small net loss, the balance sheet remains robust with total assets of ¥11.784 billion and total equity of ¥9.971 billion, implying a recalculated equity ratio near 84.6% and financial leverage of 1.18x, consistent with the DuPont inputs. Liquidity is very strong: the current ratio is 1,143.7% and quick ratio is 666.5%, supported by significant working capital headroom of ¥6.132 billion. Inventories of ¥2.804 billion represent a sizable share of current assets (about 41.7%) and total assets (about 23.8%), which warrants monitoring for turn and obsolescence risk. ROE is modestly negative at -0.64% from the DuPont decomposition (net margin -2.30%, asset turnover 0.236x, leverage 1.18x), reflecting low turnover and a small loss rather than balance-sheet strain. The decline in revenue and negative operating margin indicate operating deleverage: small revenue declines can disproportionately impact profit given the fixed-cost base. Reported cash flow figures were not disclosed (values shown as 0 indicate unreported), limiting assessment of earnings-to-cash conversion this quarter. The company paid no dividends in the period (DPS 0), consistent with loss-making results and a conservative capital policy. Debt load appears low (total liabilities ¥1.677 billion; D/E about 0.17x), indicating ample solvency headroom to navigate near-term profit pressure. While there is a minor data inconsistency between reported gross profit and cost of sales versus revenue, headline margins and DuPont metrics are internally coherent and form the basis of this analysis. Overall, Fujix demonstrates strong liquidity and solvency, but profitability is constrained by SG&A intensity and soft demand; near-term outlook hinges on revenue stabilization, gross margin resilience, and inventory discipline.

Profitability Analysis

ROE of -0.64% is explained by net margin -2.30%, asset turnover 0.236x, and financial leverage 1.18x. Gross margin stands at 24.3% (¥676.96m/¥2.782b), but operating margin is about -3.9% (¥-108m/¥2.782b), implying SG&A of roughly ¥785m and an SG&A-to-sales ratio near 28.2%. The negative operating income despite a mid-20s gross margin indicates a heavy fixed-cost burden and operating deleverage. Non-operating items improved ordinary income by about ¥51m relative to operating income, cushioning the bottom line. Net margin at -2.3% aligns with the small ordinary loss and a modest tax expense despite losses, likely due to non-deductible items or jurisdictional mix. Asset turnover is low (0.236x using period-end assets), typical of an asset-rich balance sheet supporting working capital in a manufacturing/thread supply context. Operating leverage is unfavorable this quarter: a 3.3% sales decline translated to persistent operating losses, indicating limited short-term variable cost flexibility. Margin quality depends on the ability to hold gross margin while reducing SG&A, particularly personnel, logistics, and energy costs; absent that, profitability will remain constrained. DuPont signals that leverage is not the issue; rather, weak turnover and negative margin drive the ROE outcome.

Growth Assessment

Revenue declined 3.3% YoY to ¥2.782b, suggesting soft end-market demand or customer inventory adjustment. Operating and net income were flat YoY at a loss per the disclosure (+0.0% YoY), implying limited progress on structural cost reduction versus the prior year. The gross margin of 24.3% suggests product mix and pricing are holding up reasonably, but not enough to offset SG&A intensity. Ordinary loss narrowed versus operating loss due to non-operating gains, which are inherently less sustainable than operating improvements. Without disclosed order backlog or regional breakdown, it is unclear whether weakness is broad-based or concentrated; inventory levels indicate cautious sales throughput. Near-term growth will likely hinge on apparel and industrial sewing thread demand normalization, channel inventory digestion, and the company’s ability to monetize inventories without discounting. Price-cost dynamics (raw materials, chemicals, dyes, energy, logistics) remain key; maintaining gross margin in a softer sales environment is critical. If sales stabilize and SG&A is trimmed, operating breakeven appears reachable given the small loss magnitude; conversely, further top-line pressure risks deepening operating losses. Outlook is cautiously neutral operationally, contingent on demand recovery and cost discipline rather than capacity expansion.

Financial Health

Liquidity is very strong: current assets ¥6.719b vs current liabilities ¥0.588b, yielding a current ratio of 11.4x and a quick ratio of 6.7x, plus working capital of ¥6.132b. Inventories are elevated at ¥2.804b, forming 41.7% of current assets and 23.8% of total assets; inventory management is a focal point for liquidity quality. Solvency is solid with total liabilities of ¥1.677b against equity of ¥9.971b (D/E ~0.17x). Recalculating equity ratio from disclosed assets and equity yields about 84.6%, indicating a conservative capital structure. Low leverage mitigates refinancing and interest-rate risks. The strong equity base provides a buffer for loss absorption and operational adjustments. Absence of disclosed interest expense suggests limited borrowings, consistent with the low D/E, though the exact financing cost is not reported.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed this quarter; therefore, OCF/NI and FCF cannot be evaluated and the displayed zeros should not be interpreted as actual values. Earnings quality assessment is constrained: with no D&A disclosure, we cannot separate cash vs non-cash components of operating profit. Working capital observations from the balance sheet indicate a sizable inventory position; if inventory turnover slowed, it could have weighed on operating cash flow, but this cannot be confirmed without the CF statement. The negative operating income raises the bar for cash generation; however, non-operating gains that supported ordinary income may be non-cash. Overall, cash conversion remains uncertain; confirmation via OCF, inventory turns, and payables/receivables movements is needed in subsequent filings.

Dividend Sustainability

DPS is reported at ¥0.00 with a payout ratio of 0%, consistent with a net loss and a conservative stance. With FCF undisclosed, coverage cannot be assessed; however, the balance sheet strength (equity ratio ~85%, D/E ~0.17x) suggests capacity to reinstate distributions once sustainable profitability and cash generation resume. Given the small magnitude of losses, a path back to dividends would likely require restoring positive operating income and demonstrating positive OCF over multiple periods. Policy outlook appears cautious, prioritizing balance sheet resilience and reinvestment in working capital over distributions until earnings visibility improves.

Risk Assessment

Business Risks:

• End-market demand volatility in apparel and industrial sewing thread segments
• Inventory obsolescence and markdown risk given high inventory levels
• Raw material, energy, and logistics cost inflation pressuring gross margins
• Customer consolidation and pricing pressure from large buyers
• FX fluctuations impacting imported inputs and export competitiveness
• Operational leverage leading to outsized profit swings on small revenue changes

Financial Risks:

• Uncertain cash generation due to negative operating income and undisclosed OCF
• Working capital intensity potentially tying up cash in inventories
• Non-operating income reliance to narrow losses, which may be volatile
• Tax expense despite losses due to non-deductible items or jurisdictional factors

Key Concerns:

• Sustained negative operating margin driven by SG&A intensity
• Low asset turnover (0.236x) limiting ROE despite strong equity base
• Large inventory position that could dampen cash flow if turnover weakens

Investment Implications

Key Takeaways:

• Top line declined 3.3% YoY to ¥2.782b; demand normalization remains key
• Gross margin at 24.3% is resilient, but SG&A (~28% of sales) drives operating loss
• Ordinary loss narrower than operating loss, implying supportive non-operating gains
• Balance sheet strength: equity ratio ~85%, D/E ~0.17x, ample liquidity
• Inventory is elevated and central to cash flow outcomes
• ROE negative (-0.64%) due to low turnover and small net loss rather than leverage

Metrics to Watch:

• SG&A-to-sales ratio and progress on fixed cost reduction
• Gross margin trend and price-cost spread
• Inventory turnover days and write-downs, if any
• Operating cash flow and free cash flow once disclosed
• Order trends and revenue growth trajectory
• Non-operating income composition and sustainability

Relative Positioning: Within Japan-listed textile and industrial materials suppliers, Fujix exhibits a stronger-than-average balance sheet with low leverage and high liquidity but weaker profitability near-term due to negative operating margin and low asset turnover; restoration of operating leverage and cash conversion would be needed to close the gap with more profitable peers.

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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