Fuji Oil Company,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥175.79B
• Operating Income: ¥-18.33B
• Net Income: ¥-18.16B
• EPS: ¥-235.31

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

FY2026 Q2 was very weak for Fuji Oil (5017), with a deep operating loss driven by negative gross profit and heavy working-capital drag. Revenue fell to 1,757.9 (100M JPY), down 58.8% YoY, while cost of sales exceeded revenue, producing a gross loss of -161.7 and an operating loss of -183.3. Ordinary loss was -182.4 and net loss was -181.8, translating to basic EPS of -235.31 JPY. Gross margin deteriorated to -9.2% and operating margin to -10.4%; YoY basis-point changes are not disclosed but clearly compressed into negative territory. EBITDA was -152.4 (margin -8.7%), indicating weak underlying earnings even before D&A of 30.9. DuPont shows ROE at -28.8% (Net Margin -10.3% × Asset Turnover 0.464 × Leverage 6.0x), with margin collapse the primary driver. Cash flow was also stressed: operating CF was -349.2, materially worse than net income despite an OCF/NI ratio of 1.92x (both negative), implying severe cash burn from working capital. Financing inflows of 387.7 largely bridged the cash deficit, highlighting dependence on short-term funding. Liquidity is tight (current ratio 0.88; quick ratio 0.29) and leverage is high (D/E 5.0x), with interest coverage at -17.5x signaling debt-service strain. Inventories remain elevated at 1,634.6 versus cash of only 130.5, a key risk if product cracks or prices move unfavorably. ROIC is -8.4%, well below typical cost of capital, underscoring capital inefficiency. With revenue nearly halved and margins negative, near-term recovery likely hinges on refining margins and inventory valuation gains reversing recent headwinds. Forward-looking, focus should be on normalizing gross margins, reducing inventory, and restoring positive OCF; otherwise, continued reliance on short-term borrowings may pressure credit metrics. Visibility on dividends is low given losses and negative OCF; no DPS was reported. Overall, the quarter signals urgent need for operational stabilization and balance-sheet de-risking.

Profitability Analysis

ROE (-28.8%) decomposes into Net Profit Margin (-10.3%) × Asset Turnover (0.464) × Financial Leverage (6.0x). The dominant negative swing is margin: gross margin at -9.2% led to operating margin at -10.4% and bottom-line net margin at -10.3%. Asset turnover of 0.464 is depressed, consistent with a 58.8% YoY revenue decline on a large asset base, but the margin collapse is the key driver of the negative ROE. Business-wise, negative gross profit suggests adverse refining economics and/or inventory valuation losses (e.g., crude/product price decline causing cost > selling prices). Non-operating items netted nearly neutral (+15.2 income vs -14.3 expenses), so they did not offset the operating shortfall. Sustainability: margins at these levels are unlikely to be sustainable if crack spreads normalize, but absent improvement in product spreads and inventory management, profitability will remain negative. Watch for SG&A discipline; at 21.6, SG&A is modest relative to the operating loss, so deleveraging of fixed costs amid volume decline likely exacerbated operating leverage. Key concern: top-line contraction outpaced any cost adjustments, indicating negative operating leverage.

Growth Assessment

Revenue contracted 58.8% YoY to 1,757.9, implying significant volume and/or price normalization versus the prior year peak. Profitability quality is weak: negative gross profit indicates pricing below cost or inventory write-down impacts, not simply lower scale. With EBITDA at -152.4 and operating loss at -183.3, the earnings base is currently loss-making, limiting self-funded growth. Near-term growth depends on recovery in refining margins (gasoline, diesel, jet cracks), improved crude slate optimization, and potential normalization of inventory valuation effects. Non-operating income (15.2) and interest income (1.16) are too small to change the trajectory. Outlook: if product cracks improve and inventory unwinds, revenue can stabilize, but absent evidence, we assume cautious recovery. Monitor volumes, utilization rates, and pricing spreads; any rebound here should translate quickly given high operating leverage.

Financial Health

Liquidity is strained: current ratio 0.88 (<1.0 warning) and quick ratio 0.29 indicate reliance on inventory to meet obligations. Working capital is negative at -345.7; current liabilities (2,781.1) exceed current assets (2,435.4). Maturity mismatch risk is elevated: short-term loans are 1,511.0 versus cash 130.5 and receivables 612.9; inventory (1,634.6) is sizable but not fully liquid. Leverage is high: D/E is 5.0x (>2.0 warning), with total liabilities of 3,153.7 against equity of 630.8; long-term loans are 162.6, increasing refinancing risk toward short-term funding. Interest coverage is -17.5x, implying an inability to cover interest from operations. No off-balance sheet obligations are disclosed in the data provided. Equity remains positive (630.8), but sustained losses could pressure net assets and covenants.

Cash Flow Quality

OCF was -349.2 versus net income of -181.8, so OCF/NI is 1.92x (not a quality concern by the >0.8 rule), but both figures are negative, signaling material cash burn and likely working capital outflows (inventory build or margin calls). Using reported capital expenditures of -45.4 as a proxy, implied FCF (OCF - Capex) is approximately -394.6, indicating that operations plus maintenance/growth capex are not funded internally. Financing CF (+387.7) covered the deficit, underscoring dependence on external funding. Working capital signs: high inventories (1,634.6) relative to payables (606.0) and cash (130.5) suggest inventory absorption of cash; monitor for inventory reduction to release cash. No clear signs of aggressive working capital pull-forward (e.g., extended payables) beyond the large payables base typical for refining, but the negative OCF is a key red flag.

Dividend Sustainability

Dividend data is unreported; payout ratio is shown as -5.2% but not meaningful given negative net income. With EBITDA negative and implied FCF around -394.6, internal coverage of any dividend would be unsustainable this period. Given high leverage and tight liquidity, prudent policy would prioritize balance-sheet preservation; therefore, dividend visibility is low pending earnings and OCF recovery. We will reassess when DPS guidance or board resolutions are disclosed.

Risk Assessment

Business Risks:

• Refining margin (crack spread) volatility leading to negative gross margins
• Inventory valuation risk from crude/product price declines (write-downs, cost > price)
• Volume/utilization risk amid demand fluctuations and maintenance outages
• Feedstock supply and quality risk affecting yields and costs
• Environmental and carbon regulation tightening raising compliance and capex

Financial Risks:

• Liquidity risk: current ratio 0.88 and quick ratio 0.29 with large short-term loans (1,511.0)
• Refinancing risk from reliance on short-term debt and negative interest coverage (-17.5x)
• Leverage risk: D/E 5.0x; potential covenant pressure if losses persist
• Cash flow risk: OCF -349.2 and implied FCF about -394.6 requiring external funding
• Commodity and FX exposure (USD-denominated crude purchases vs JPY revenues)

Key Concerns:

• Sustained negative gross margin (-9.2%) suggests structural or acute pricing issues
• High inventory (1,634.6) vs cash (130.5) increases downside if prices fall further
• ROIC at -8.4% well below cost of capital, risking value erosion
• Limited buffer in equity (630.8) if losses continue, risking net asset erosion

Investment Implications

Key Takeaways:

• Severe earnings deterioration: operating loss -183.3 with gross margin -9.2%
• Cash burn significant: OCF -349.2; implied FCF ~ -394.6, funded by financing CF
• Balance sheet stretched: D/E 5.0x, current ratio 0.88, interest coverage -17.5x
• Recovery hinges on refining margins and inventory normalization
• High operating leverage implies outsized earnings swing if margins recover

Metrics to Watch:

• Refining crack spreads (gasoline/diesel/jet) and realized gross margin
• Inventory levels and valuation gains/losses; inventory days
• Operating cash flow and working capital movements (AR, AP, inventory)
• Net debt and maturity profile (short-term vs long-term loans)
• Utilization rates and throughput volumes
• ROIC progression toward cost of capital

Relative Positioning: Versus larger domestic peers (e.g., ENEOS, Idemitsu), Fuji Oil appears more exposed to margin volatility with higher leverage and tighter liquidity, making earnings and cash flows more sensitive to swings in crack spreads and inventory valuations.

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