Fukoku Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥44.37B
• Operating Income: ¥1.55B
• Net Income: ¥1.63B
• EPS: ¥58.82

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

Fukoku Co., Ltd. (TSE: 5185) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥44.37bn, down 0.5% YoY, indicating a largely flat topline against a weaker profit profile. Gross profit came in at ¥8.21bn, yielding a gross margin of 18.5%, while operating income declined 24.8% YoY to ¥1.55bn, compressing the operating margin to approximately 3.5%. Ordinary income was ¥1.53bn, slightly below operating income due to non‑operating items including interest expense of ¥108m. Net income fell 38.5% YoY to ¥948m, resulting in an EPS of ¥58.82 for the period and a net margin of 2.14%. The DuPont bridge provided indicates ROE of 2.13% with an asset turnover of 0.581x and financial leverage of 1.71x, signaling subdued profitability predominantly driven by low net margins and modest turnover. SG&A appears to have absorbed roughly 15.0% of sales (¥6.66bn), highlighting limited operating leverage in the period. Liquidity remains solid with a current ratio of 188.1% and quick ratio of 160.9% supported by inventories of ¥6.60bn and working capital of ¥21.36bn. The balance sheet is conservative: total assets are ¥76.43bn and total equity is ¥44.61bn, implying an equity ratio of about 58% (the reported 0.0% equity ratio is not disclosed; calculation based on non‑zero figures). Leverage is moderate with debt‑to‑equity of 0.75x and interest coverage of about 14.3x from operating income. The effective tax rate shown in the calculated metrics as 0.0% appears non‑representative; using disclosed taxes (¥760m) and ordinary income suggests a tax burden around 50%, though Q2 JGAAP interim items and non‑operating/extraordinary effects may distort this simple read. Cash flow statements were not disclosed (shown as zeros), so operating cash conversion and free cash flow cannot be assessed this quarter. Dividend information was also not disclosed (DPS shown as 0.00), and payout/coverage metrics cannot be inferred from cash flows. Overall, the quarter reflects stable revenue but meaningful margin pressure and a disproportionately large decline in earnings, consistent with adverse mix, input cost headwinds, or pricing pressure. The company’s balance sheet strength provides resilience, but improving profitability execution and cash conversion will be critical to support future shareholder returns. Data limitations—particularly the absence of cash flow and share count disclosures—constrain some assessments; the analysis below focuses on available non‑zero data and standard inferences under JGAAP.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 2.14%
• asset_turnover: 0.581
• financial_leverage: 1.71
• calculated_ROE: 2.13%
• commentary: ROE is subdued at 2.13%, held back primarily by a thin net margin. Asset turnover is modest for an auto parts materials/processing business, and leverage is not excessive, so margin repair is the key lever for ROE improvement. margin_quality:
• gross_margin: 18.5%
• operating_margin: 3.5%
• ordinary_margin: 3.4%
• net_margin: 2.1%
• sg_and_a_ratio: ≈15.0% (SG&A ≈ ¥6.66bn)
• insights: Gross margin of 18.5% provides limited headroom after SG&A, resulting in a narrow operating margin. The YoY decline in operating income (−24.8%) against flattish revenue implies mix and cost pressures and/or higher SG&A. Ordinary income tracks operating income closely, indicating limited non‑operating support. operating_leverage: Negative operating leverage was evident: a modest −0.5% revenue decline translated to a −24.8% drop in operating income, indicating high sensitivity of profits to small topline changes and cost pass‑through challenges.

Growth Assessment

revenue_sustainability: Revenue was essentially stable (−0.5% YoY), suggesting steady demand across core automotive customers but no clear growth catalysts within the quarter. profit_quality: Profit contraction outpaced revenue, pointing to adverse product/customer mix, raw material or energy cost pressures, and/or pricing concessions. The tax burden also appears heavy relative to ordinary income, further depressing net income. outlook: Without order/backlog or regional mix data, near‑term growth visibility is limited. If raw material inflation moderates and price pass‑through improves, margins could recover; otherwise, profitability may remain constrained despite stable sales.

Financial Health

liquidity:

• current_ratio: 188.1%
• quick_ratio: 160.9%
• working_capital: ¥21,358m
• inventories: ¥6,596m
• assessment: Ample short‑term liquidity with healthy buffer over current liabilities. Inventory levels appear manageable relative to current assets. solvency:
• total_assets: ¥76,428m
• total_equity: ¥44,607m
• total_liabilities: ¥33,465m
• equity_ratio_estimate: ≈58% (derived from disclosed assets and equity)
• debt_to_equity: 0.75x
• interest_coverage: 14.3x (operating income/interest expense)
• assessment: Balance sheet is conservatively positioned with moderate leverage and strong equity cushion; interest burden is well covered. capital_structure: Leverage remains reasonable for the sector. The company appears to be funding operations largely with equity and manageable liabilities, leaving capacity for selective investment if profitability improves.

Cash Flow Quality

earnings_quality: Cannot be fully assessed due to undisclosed cash flow statements this quarter. The magnitude of net income decline vs. revenue suggests pressure below gross profit line; cash conversion remains a key open item. free_cash_flow_analysis: OCF and FCF were not disclosed (displayed as zeros), so FCF generation and coverage cannot be evaluated. Capex and depreciation were also not disclosed, limiting visibility into maintenance vs. growth investment. working_capital: With inventories at ¥6.60bn and strong current assets, working capital appears robust; however, without cash flow details, changes in receivables/payables and their impact on OCF remain unknown.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio were not disclosed for the period (values shown as 0 indicate non‑disclosure). With EPS at ¥58.82 for the half, a normalized payout cannot be inferred without a full‑year outlook and cash flow data. FCF_coverage: Not assessable due to lack of OCF/FCF disclosure. policy_outlook: Given the conservative balance sheet, the capacity for dividends may exist longer term; however, near‑term payout decisions will depend on profit recovery and demonstrated cash generation.

Risk Assessment

Business Risks:

• Auto production cycle sensitivity and exposure to OEM volume fluctuations
• Raw material (synthetic rubber, petrochemicals) and energy cost inflation impacting gross margins
• Pricing pressure and pass‑through lag with large OEM customers
• Product/customer mix shifts affecting margin profile
• FX volatility (especially JPY vs. USD/EUR/CNY) influencing export pricing and imported material costs
• Regional exposure risks (China/ASEAN) including demand softness or supply chain disruptions
• Technological transition in autos (EV shift) altering component demand

Financial Risks:

• Potential working capital swings affecting operating cash flow
• Interest rate changes impacting financing costs (albeit currently well covered)
• Tax rate volatility and interim adjustments affecting net profit
• Capex requirements for tooling and process upgrades potentially compressing FCF in downturns
• Limited visibility due to undisclosed cash flow data in the period

Key Concerns:

• Sharp YoY decline in operating and net income despite flat sales
• Thin operating margin (~3.5%) with evidence of negative operating leverage
• Unclear cash flow conversion due to lack of disclosure
• High apparent tax burden relative to ordinary income weighing on net profit

Investment Implications

Key Takeaways:

• Stable revenue but significantly weaker profitability in FY2026 Q2
• Gross margin of 18.5% and SG&A at ~15% leave a narrow operating margin buffer
• ROE is low at 2.13%, constrained primarily by margin compression
• Balance sheet strength (≈58% equity ratio) and solid liquidity support resilience
• Cash flow non‑disclosure limits assessment of earnings quality and dividend capacity

Metrics to Watch:

• Gross and operating margin trajectory (cost pass‑through, mix)
• SG&A efficiency and fixed cost absorption
• Order trends and regional/customer mix within automotive end markets
• Raw material cost indices and price adjustment timing with OEMs
• FX rates (USD/JPY, EUR/JPY, CNY/JPY) and hedging outcomes
• Inventory turns and receivables/payables days to gauge OCF conversion
• Capex and depreciation disclosure to evaluate maintenance vs. growth spend
• Effective tax rate normalization in subsequent quarters
• Dividend policy announcements and any buyback signals

Relative Positioning: Within Japan’s auto parts and materials suppliers, Fukoku shows resilient liquidity and moderate leverage but currently lags on profitability, with ROE and operating margins below typical mid‑tier peers; margin recovery and cash conversion will be pivotal to close the gap.

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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