Fuji Oil Company,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥175.79B
• Operating Income: ¥-18.33B
• Net Income: ¥-16.14B
• 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

Fuji Oil Co., Ltd. (5017) reported a sharp deterioration in FY2026 Q2 (JGAAP, consolidated), with revenue of ¥175.8bn, down 58.8% YoY, reflecting severe topline contraction likely driven by price normalization and/or lower volumes amid weak refining margins. Cost of sales exceeded revenue by a wide margin, producing a gross loss of ¥11.8bn and a gross margin of -6.7%, indicative of inventory valuation losses and negative crack spreads. Operating income was a loss of ¥18.3bn, essentially flat YoY per disclosure, underscoring limited improvement despite the significant revenue decline. Ordinary loss came in at ¥18.2bn, suggesting limited non-operating offsets and a modest interest burden of ¥1.07bn. Net loss was ¥18.2bn (EPS -¥235.31), and DuPont analysis shows ROE of -28.81% driven by a -10.34% net margin, 0.464x asset turnover, and high financial leverage of 6.0x. EBITDA was -¥14.5bn, implying the cost structure and margin headwinds are not merely non-cash. Liquidity is tight: the current ratio is 100.3% and the quick ratio 41.0%, with inventories of ¥143.7bn comprising the bulk of current assets. Working capital is a slim ¥0.8bn, and operating cash flow was -¥10.2bn, partially cushioned versus net loss (OCF/NI = 0.56) by non-cash charges and working capital movements. Financing cash inflow of ¥12.0bn covered the OCF shortfall, highlighting reliance on external funding while investing cash flows were not disclosed in the period. The debt-to-equity ratio stands at 4.55x, consistent with the high leverage seen in the DuPont decomposition. Total assets are ¥378.5bn and total equity ¥63.1bn, implying limited balance sheet buffer against further losses. Dividend distribution remains suspended (DPS ¥0), which aligns with negative earnings and constrained liquidity. Key data points such as ending cash, investing cash flows, and equity ratio disclosure are not available in the XBRL feed (zeros indicate unreported), which limits granularity in cash and capital structure analysis. Overall, the company faces pronounced margin pressure, elevated leverage, and tight liquidity, with near-term performance sensitive to refining margins, inventory valuation swings, and working capital management.

Profitability Analysis

ROE of -28.81% results from a deeply negative net margin (-10.34%), subdued asset turnover (0.464x), and high financial leverage (6.0x), which amplifies losses. The gross margin of -6.7% indicates cost of sales well above revenue, consistent with inventory valuation losses and adverse product spreads. EBITDA of -¥14.53bn versus operating loss of -¥18.33bn indicates depreciation and amortization of ¥3.80bn, suggesting a meaningful fixed cost base and operating leverage. Interest expense of ¥1.07bn yields EBIT interest coverage of -17.2x, highlighting the current earnings shortfall relative to financing costs. Ordinary loss (-¥18.24bn) is close to operating loss, implying minimal non-operating mitigation in the quarter-to-date period. The negative margin profile suggests that spot and/or realized margins were unfavorable relative to crude procurement and that hedges (if any) did not fully offset. Asset turnover at 0.464x is low for a refiner, reflecting depressed revenue and possibly lower utilization rates; recovery in throughput or prices would be required to improve efficiency. Operating leverage is high: small improvements in crack spreads or inventory valuation can have outsized P/L impact given the fixed cost base. Tax expense is reported at ¥0.63bn despite losses; the effective tax rate appears distorted by timing and items typical under JGAAP in loss periods.

Growth Assessment

Revenue fell 58.8% YoY to ¥175.8bn, indicating both price normalization from prior peaks and likely weaker volumes/mix. The persistence of an operating loss (-¥18.3bn) despite the revenue contraction suggests limited cost elasticity and unfavorable margin environment. Profit quality is weak: gross loss and negative EBITDA indicate core operations were loss-making before non-cash charges. With asset turnover at 0.464x, utilization and market demand likely constrained throughput; normalization of crack spreads is essential for recovery. Outlook hinges on refining margin recovery, inventory valuation stabilization, and effective crude procurement/hedging. Given elevated leverage, management may prioritize margin over volume, focusing on product slate optimization and cost control. Near-term growth visibility is low; revenue may rebound with price increases or higher run rates, but earnings leverage will depend on spreads and inventory pricing. Structural factors—energy transition, domestic demand decline, and competition from larger integrated peers—temper medium-term growth potential. Any strategic moves (asset rationalization, JV/offtake agreements, or energy transition projects) could influence the trajectory but are not reflected in the current data.

Financial Health

Total assets are ¥378.5bn against total liabilities of ¥287.0bn and equity of ¥63.1bn, implying high leverage. Current assets of ¥242.8bn nearly match current liabilities of ¥242.0bn, yielding a current ratio of 100.3%; liquidity headroom is minimal. The quick ratio of 41.0% highlights reliance on inventories (¥143.7bn) to support liquidity; conversion to cash depends on market conditions and pricing. Working capital is only ¥0.8bn, leaving little buffer for commodity price swings and margin calls. The debt-to-equity ratio of 4.55x indicates significant financial risk and limited capacity to absorb further losses without recapitalization or asset monetization. Financing cash inflow of ¥12.0bn suggests ongoing dependence on external funding, likely short-term borrowings, to bridge operating cash deficits. Equity ratio was not disclosed in the feed (0.0% placeholder), but leverage metrics and assets/equity imply a thin equity cushion. Interest expense of ¥1.07bn amidst negative EBIT underscores pressure on coverage metrics.

Cash Flow Quality

Operating cash flow was -¥10.22bn versus net loss of -¥18.18bn, giving an OCF/NI ratio of 0.56; this indicates some non-cash items and/or working capital inflows partially offset losses. Depreciation and amortization of ¥3.80bn are consistent with the gap between EBIT and EBITDA, but were insufficient to neutralize cash burn. Free cash flow could not be assessed precisely because investing cash flows were not reported in the XBRL (shown as 0 by feed). The negative OCF suggests core operations are consuming cash, likely driven by weak margins and inventory-related effects. Inventories at ¥143.7bn dominate current assets, implying significant cash tied up; changes in crude/product prices can materially affect OCF through valuation and working capital swings. Financing inflows of ¥12.01bn offset OCF deficits, but such reliance is not sustainable without an earnings turnaround. Overall earnings quality is weak, with cash conversion negative and dependent on external funding.

Dividend Sustainability

DPS is ¥0, with a payout ratio of 0% in the context of negative earnings, aligning with prudence under current conditions. Free cash flow coverage cannot be assessed due to unreported investing cash flows; however, negative OCF and high leverage suggest limited capacity for distributions. With ROE at -28.81% and tight liquidity (current ratio ~1.0x; quick ratio 0.41x), maintaining a conservative dividend policy is sensible. Future dividend prospects hinge on restoring positive operating margins and stabilizing working capital; absent these, reinstatement appears challenging. Management’s implied stance (no dividend) preserves cash for operations and financing needs.

Risk Assessment

Business Risks:

• Refining margin volatility and adverse crack spreads impacting gross margins
• Inventory valuation losses under JGAAP amid crude/product price swings
• Demand softness in domestic fuels and structural decline due to energy transition
• Feedstock procurement and FX risks affecting input costs
• Operational risks: unplanned shutdowns, maintenance turnarounds, and utilization shortfalls
• Competition from larger integrated peers with stronger balance sheets
• Hedging effectiveness and basis risk between crude inputs and product outputs
• Regulatory and environmental compliance costs tied to decarbonization

Financial Risks:

• High leverage (D/E 4.55x) with thin equity cushion
• Weak interest coverage (-17.2x EBIT/interest), raising refinancing risk
• Tight liquidity (current ratio 100.3%, quick ratio 41.0%) and low working capital buffer
• Negative OCF requiring external financing; potential covenant pressure
• Working capital volatility due to large inventory position
• Exposure to interest rate increases on short-term borrowings

Key Concerns:

• Sustained operating losses and negative EBITDA
• Dependence on financing inflows to fund operations
• Large inventory balance amid price volatility
• Limited visibility on investing cash flows and cash balance (unreported in feed)

Investment Implications

Key Takeaways:

• Severe topline contraction (-58.8% YoY) with gross loss indicates challenging margin environment
• ROE -28.81% driven by negative margin and high leverage (6.0x assets/equity)
• Liquidity tight: current ratio ~1.0x; quick ratio 0.41x; working capital only ¥0.8bn
• Negative OCF of ¥10.22bn funded by ¥12.01bn financing inflow, underscoring dependence on external funding
• Interest coverage deeply negative (-17.2x), elevating refinancing and covenant risk
• Dividend suspended (DPS ¥0) appropriately preserves cash under stress

Metrics to Watch:

• Refining crack spreads and Singapore complex margin (proxy for near-term recovery)
• Inventory levels and valuation impacts; OCF sensitivity to working capital
• Utilization rates and asset turnover progression from 0.464x
• Net debt and maturity profile; availability of committed lines
• EBITDA trajectory and EBIT/interest coverage improvement
• Hedging effectiveness between crude inputs and product outputs

Relative Positioning: Compared to larger Japanese refiners (e.g., integrated majors), Fuji Oil appears smaller, more concentrated, and more leveraged, leaving it more exposed to margin volatility and working capital swings; balance sheet flexibility and scale advantages favor peers in navigating cyclical downturns.

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