TAKAMISAWA CO.,LTD. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥17.24B
• Operating Income: ¥125M
• Net Income: ¥217M
• EPS: ¥48.50

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

Verdict: A soft quarter with margin compression and a sharp drop in earnings despite modest top-line growth. Revenue grew 1.6% YoY to 172.42, while operating income fell 45.7% YoY to 1.25, indicating negative operating leverage. Gross profit was 28.75, implying a gross margin of 16.7%, but operating margin declined to roughly 0.73%. Based on last year’s comparable revenue of about 169.68 and operating income of ~2.30, operating margin compressed by approximately 63 bps YoY. Ordinary income decreased 54.3% YoY to 1.52, translating to an ordinary margin of about 0.88%, a compression of roughly 108 bps YoY. Net income dropped 63.4% YoY to 0.80, with net margin at about 0.46% versus ~1.29% a year ago—an ~82 bps compression. Non-operating income of 1.61 and non-operating expenses of 0.58 provided a net positive buffer, and interest coverage remained acceptable at 6.58x, but could weaken if operating earnings remain pressured. The effective tax rate of 34.3% is within a normal range and does not explain the earnings decline. Leverage appears elevated versus conservative benchmarks (D/E 1.65x), though not at a warning threshold. Liquidity is adequate but not robust (current ratio 124%, quick ratio 102%), suggesting careful working capital management is needed amid softer profitability. ROE is low at 0.5%, and ROIC is flagged at 0.4%, indicating weak capital efficiency this quarter. Dividend sustainability is a concern given a calculated payout ratio of 109.9% against compressed earnings and unreported cash flow data. OCF was not disclosed, limiting assessment of cash conversion and earnings quality. Forward-looking, stabilizing margins, controlling SG&A, and improving asset turnover will be key, alongside monitoring financing costs given the debt load. The quarter’s message is clear: slight sales growth did not translate into profit, and restoring margin discipline is imperative.

Profitability Analysis

ROE decomposition (DuPont): ROE ≈ Net Profit Margin (≈0.5%) × Asset Turnover (0.437) × Financial Leverage (2.65x) ≈ 0.5%. The biggest negative delta appears to be the net profit margin, with net income down 63.4% YoY despite revenue up 1.6%. Operating margin compressed roughly 63 bps YoY (to ~0.73%), reflecting higher cost pressure and/or SG&A intensity; SG&A details were not disclosed, but the drop in operating income suggests negative operating leverage. Ordinary and net margins compressed further (~108 bps and ~82 bps, respectively), indicating that non-operating gains were insufficient to offset weaker operations and that below-the-line factors did not rescue earnings. Business drivers likely include: cost of sales pressure (commodity/material costs, logistics), limited pricing power, and sticky fixed costs leading to operating deleverage. Sustainability: margin pressure could persist near term unless pricing and mix improve or cost actions are taken; non-operating supports (dividends/interest) are small and not a structural offset. Watch for any trend where SG&A growth outpaces revenue; while we lack a YoY SG&A split, the magnitude of the operating income decline versus revenue growth implies that fixed/overhead costs weighed on profitability.

Growth Assessment

Top-line grew 1.6% YoY to 172.42, but growth quality was weak as it did not translate to profit. Gross margin was 16.7%, but operating income declined 45.7% YoY, indicating negative operating leverage. Ordinary income fell 54.3% YoY and net income declined 63.4% YoY, showing that earnings contraction accelerated down the P&L. Non-operating income (1.61) and expenses (0.58) netted a positive contribution, but the core profit engine underperformed. With ROIC at 0.4%, recent investments are not earning the cost of capital this quarter. Outlook hinges on margin recovery via pricing, mix shift, and cost control; absent that, incremental revenue will not improve earnings. Given limited disclosed detail by segment or product, sustainability of revenue is uncertain; monitor seasonality and project timing effects typical for building materials/industrial distribution businesses.

Financial Health

Liquidity: Current ratio 124.4% and quick ratio 102.3% indicate adequate short-term coverage, though below the 1.5x comfort benchmark. No explicit warning trigger (current ratio is not <1.0). Working capital is 40.91, supported by receivables (129.22) and inventories (37.04) against current liabilities (167.34). Maturity profile: Short-term loans (43.99) are material relative to cash (32.79), but receivables coverage mitigates near-term risk; continued collection discipline is important. Solvency: Debt-to-equity is 1.65x, modestly above the conservative benchmark (1.5x) but below a hard-risk threshold (2.0x); leverage is elevated given weak profitability. Long-term loans are 49.92, reducing immediate rollover pressure but increasing interest sensitivity. Equity base is 148.93, with retained earnings of 125.15 providing some cushion. No off-balance sheet obligations disclosed in the data provided.

Cash Flow Quality

Operating cash flow was not disclosed, so OCF/Net Income and free cash flow cannot be assessed. Given net income of 0.80 and a calculated payout ratio over 100%, internal cash generation resilience is a key unknown. Working capital composition (high receivables and inventories) implies that cash conversion can be volatile; absent OCF, we cannot confirm whether collections lagged or inventory built this quarter. No explicit signs of working capital manipulation can be inferred from the limited data, but the combination of thin operating margin and leverage elevates the need for strong cash conversion.

Dividend Sustainability

The calculated payout ratio is 109.9%, implying dividends exceeded quarterly earnings. With OCF and FCF unreported, coverage from internal cash is unassessable. Given ROIC at 0.4% and compressed profitability, sustaining a payout above earnings would likely require balance sheet support or an earnings rebound. Policy outlook cannot be inferred from the data; if management targets stable or progressive dividends, near-term payout may cap flexibility for capex or debt reduction. Monitor upcoming quarters for earnings normalization and disclosure of cash flows before concluding on sustainability.

Risk Assessment

Business Risks:

• Margin compression from input cost inflation (materials, energy, logistics) amid limited pricing power
• Negative operating leverage due to fixed cost base versus modest sales growth
• Customer demand volatility in construction/industrial end-markets impacting volumes and mix
• Project timing and seasonality leading to uneven quarterly performance

Financial Risks:

• Leverage above conservative benchmark (D/E 1.65x) while profitability is weak
• Refinancing/rollover risk tied to short-term loans (43.99) versus cash (32.79)
• Potential interest expense sensitivity if rates rise; interest coverage at 6.58x could deteriorate with lower EBIT
• Dividend coverage risk given >100% payout ratio and undisclosed OCF

Key Concerns:

• ROIC flagged at 0.4%, well below 5% warning threshold
• Operating margin down ~63 bps YoY; net margin down ~82 bps YoY
• Ordinary income down 54.3% YoY indicates pressure beyond operating line
• Data limitations (no OCF/FCF/SG&A detail) constrain diagnostics on cash conversion and cost structure

Investment Implications

Key Takeaways:

• Modest revenue growth did not translate to profit; operating, ordinary, and net margins all compressed
• Non-operating items provided limited cushion; core operations are the issue
• Liquidity is adequate but not abundant; leverage is somewhat elevated versus conservative norms
• Capital efficiency is weak (ROIC 0.4%), highlighting the need for margin and asset turnover improvements
• Dividend sustainability is questionable near term given a >100% payout ratio and lack of cash flow disclosure

Metrics to Watch:

• Operating margin and SG&A ratio trajectory
• OCF/Net income and working capital turns (DSO, DIO) once disclosed
• Debt mix and interest coverage as rates and profits evolve
• Gross margin vs input cost trends (materials/fuel/logistics)
• ROIC versus management targets and cost of capital

Relative Positioning: Within Japanese mid-cap industrial/distribution peers, the company shows weaker margin resilience and lower capital efficiency this quarter, with adequate but not strong liquidity and a somewhat elevated leverage profile; near-term upside hinges on restoring operating leverage and cash conversion.

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