SANIX HOLDINGS INCORPORATED FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥21.50B
• Operating Income: ¥-19M
• Net Income: ¥-613M
• Earnings per Unit (EPU): ¥-12.84

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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 a small operating loss and a deepening net loss despite modest topline growth and positive operating cash flow. Revenue edged up 1.1% YoY to 215.0, but operating income slipped to -0.19 and ordinary income fell to -4.07, indicating pressure from non-operating costs. Gross profit was 71.39 for a 33.2% gross margin, but SG&A of 71.59 fully absorbed gross profit, leaving operating margin at roughly -0.1%. Non-operating expenses of 5.74, notably exceeding non-operating income of 1.86, widened losses at the ordinary level; interest expense was 1.45. Net income deteriorated to -6.13 (net margin -2.9%), with an anomalous effective tax charge (2.69) despite losses, which further weighed on the bottom line. EBITDA was 8.77 (4.1% margin), underscoring that depreciation burden (8.96) and non-operating items are pivotal swing factors. Liquidity is tight: current ratio at 0.78 and working capital at -37.7 highlight a short-term funding gap, while leverage is elevated (D/E 2.96x). Operating cash flow of 10.56 contrasted favorably with the net loss, but after capital expenditures of 23.59, an implied proxy FCF (OCF minus capex) is around -13.0, suggesting external financing needs. Financing CF was positive at 11.28, indicating reliance on debt or other funding to bridge negative investment outflows. Interest coverage based on operating income is -0.13x, highlighting fragile debt service capacity if operating losses persist. In terms of margins, gross margin sits at 33.2%; operating and net margins are negative—lack of historical margin data limits precise bps YoY analysis, but directionally margins compressed at every level below gross. Earnings quality mixed: OCF exceeded NI (given NI negative), but the OCF/NI metric shows -1.72x, and sustainability is challenged by ongoing capex and high non-operating costs. ROE of -6.5% and ROIC of -0.1% underscore value destruction in the period. Forward-looking, the company needs to execute SG&A controls, reduce non-operating drag (especially interest), and defend gross margin to return to profitability. Balance sheet repair (deleveraging, liquidity improvement) is a priority to reduce refinancing risk. Near term, cash discipline and potential asset-light growth or asset sales could be required to stabilize FCF.

Profitability Analysis

ROE decomposition: ROE (-6.5%) = Net Profit Margin (-2.9%) × Asset Turnover (0.571x) × Financial Leverage (3.96x). The primary driver of weak ROE is the negative net margin, as asset turnover is moderate and leverage is high but not accretive when profitability is negative. Net margin pressure stems from SG&A fully consuming gross profit and from a sizable non-operating expense burden (5.74) versus non-operating income (1.86), including interest of 1.45 and taxes despite losses. Asset turnover at 0.571 suggests relatively slow capital turns for the asset base of 376.8, which caps ROE potential even if margins were to normalize. Leverage (3.96x) amplifies equity return volatility; however, with negative margins, leverage increases downside to ROE. Gross margin stands at 33.2%, but operating margin is about -0.1% as SG&A (71.59) slightly exceeds gross profit (71.39). We cannot quantify bps YoY changes without prior-period margin data, but the decline in operating income (-56.1% YoY) and ordinary income (-62.8% YoY) implies margin compression below the gross line. The business drivers likely include pricing/mix headwinds or higher input/energy costs constrained by limited SG&A flexibility, combined with higher financing and other non-operating costs. Sustainability: margin recovery requires structural SG&A control and reduction of non-operating expenses; absent that, profitability may remain fragile. A notable concern is operating deleverage: even a small revenue base change swings operating income due to SG&A fixed cost load; SG&A level relative to sales (33.3%) needs addressing.

Growth Assessment

Topline growth was modest at +1.1% YoY to 215.0, indicating a stable but sluggish demand environment. Profit growth contracted sharply: operating income to -0.19, ordinary to -4.07, and net to -6.13, signaling deterioration in operating leverage and non-operating items. Gross profit of 71.39 suggests stable gross margin dynamics, but all profit erosion occurred below gross profit (SG&A + non-operating). The quality of growth is weak given that incremental revenue did not translate into operating profit, implying negative incremental margins. EBITDA at 8.77 (4.1% margin) shows some cash earnings capacity, but depreciation and non-operating costs negate it. Outlook hinges on cost actions, interest burden management, and any pricing initiatives; without these, revenue growth alone is unlikely to restore profitability. Given the tight liquidity, growth investments may be constrained unless financed externally or funded by internal cost savings or asset recycling. With an effective tax charge despite losses this quarter, normalized tax burden could help in future periods if loss carryforwards are recognized; however, predictability is low. Overall, near-term growth should focus on profitable revenue and fixed-cost absorption rather than volume for volume’s sake.

Financial Health

Liquidity is weak: current ratio 0.78 and quick ratio 0.77 both below 1.0 (explicit warning). Working capital is -37.7, reflecting current liabilities of 170.8 exceeding current assets of 133.0. Cash and deposits are 43.85 versus short-term loans of 46.10 and accounts payable of 15.75, pointing to a maturity and funding mismatch risk. Solvency is stressed: total liabilities of 281.7 against equity of 95.0 yield D/E of 2.96x (explicit warning). Long-term loans are 44.45, implying significant refinancing needs over time given weak profitability. Interest coverage based on operating income is -0.13x, indicating vulnerability to interest rate increases or tighter credit conditions. Asset base is large at 376.8 with noncurrent assets of 243.7; limited inventory (1.90) and moderate receivables (43.24) suggest cash conversion relies on receivable collection and financing rather than inventory downsizing. No off-balance sheet obligations are reported in the provided data; absence of disclosure may mask contingent liabilities or lease commitments.

Cash Flow Quality

OCF was positive at 10.56 despite a net loss of -6.13, implying cash earnings and/or favorable working capital movements supported cash generation; OCF/NI is -1.72 due to opposite signs, which flags an analytical quality issue but reflects that cash outperformed accrual earnings. With capex of 23.59, a proxy FCF (OCF minus capex) is approximately -13.0, implying insufficient internal funding for investment and potential reliance on financing. Financing CF of 11.28 suggests increased borrowings or similar measures to bridge the investment gap. Sustainability: positive OCF requires maintaining EBITDA and managing working capital; however, persistent operating losses and interest burden could erode OCF in future periods. Potential working capital manipulation signs are limited from available data; receivables (43.24) relative to revenue appear manageable, but detailed turnover data are unavailable. Investing CF is unreported, limiting a full reconciliation of capex versus other investing flows (disposals, securities).

Dividend Sustainability

Dividend data are unreported; given negative net income (-6.13), tight liquidity (current ratio 0.78), and implied negative FCF (~-13.0), capacity to pay dividends appears constrained. Payout ratio cannot be calculated from the provided data. With D/E at 2.96x and interest coverage negative, prudent capital allocation would prioritize debt service and liquidity over distributions. Unless profitability and FCF improve, sustaining or initiating dividends would likely be difficult under current conditions. Policy outlook is uncertain due to lack of disclosed guidance; monitoring capital policy statements and lender covenants is important.

Risk Assessment

Business Risks:

• Margin compression risk: SG&A roughly equals gross profit, leaving minimal operating cushion.
• Execution risk on cost reduction and pricing needed to restore positive operating margin.
• Demand/pricing risk in core businesses; modest revenue growth did not translate to profit.
• Operational leverage risk: small revenue shortfalls can drive outsized profit swings.

Financial Risks:

• Liquidity risk: current ratio 0.78 and negative working capital (-37.7).
• High leverage: D/E 2.96x; negative interest coverage (-0.13x) heightens refinancing risk.
• Cash flow risk: implied negative FCF (~-13.0) necessitates external funding.
• Interest rate risk: higher rates would further strain interest coverage and net income.

Key Concerns:

• Non-operating expense burden (5.74) significantly exceeds non-operating income (1.86).
• Tax expense (2.69) despite losses exacerbates net loss and volatility.
• ROIC of -0.1% signals value destruction; asset base may be under-earning.
• Data gaps (e.g., investing CF, dividend details, SG&A breakdown) limit visibility into drivers.

Investment Implications

Key Takeaways:

• Topline grew 1.1%, but operating and net margins turned/remaining negative.
• OCF positive (10.56) but insufficient versus capex (23.59), implying external funding reliance.
• Leverage is high (D/E 2.96x) and liquidity tight (current ratio 0.78).
• EBITDA margin 4.1% is too thin to comfortably service interest and capex.
• ROE -6.5% and ROIC -0.1% indicate current capital is not earning its cost.

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio trajectory.
• Non-operating expense, especially interest expense and any changes to tax charges.
• OCF and working capital movements (receivables collection, payables terms).
• Capex intensity versus growth and returns; trend in proxy FCF.
• Leverage (D/E) and interest coverage; refinancing timelines for short-term loans (46.10).

Relative Positioning: Within Japan small-cap industrial/environmental service peers, Sanix Holdings appears financially stretched with subscale margins, negative earnings, and elevated leverage. Recovery hinges more on internal cost discipline and capital structure repair than on near-term revenue growth.

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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