Vertex Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥17.65B
• Operating Income: ¥2.36B
• Net Income: ¥1.45B
• EPS: ¥28.94

Income Statement

Balance Sheet

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

Vertex Corporation (5290) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line and operating earnings slippage, but still healthy profitability and a strong balance sheet. Revenue was ¥17.653bn, down 2.0% YoY, indicating mild demand softness or project timing effects in H1. Operating income was ¥2.361bn (-3.6% YoY), implying slight negative operating leverage as costs did not fall as quickly as sales. Ordinary income reached ¥2.428bn, supported by minimal interest burden, and net income was ¥1.442bn (-0.7% YoY), yielding a net margin of 8.17%. The DuPont bridge indicates ROE of 4.07%, driven by an 8.17% net margin, asset turnover of 0.352x, and modest financial leverage of 1.42x. Operating margin stands at roughly 13.4% (operating income/revenue), a solid level for a construction materials-related franchise. Gross margin quality requires caution: reported gross profit of ¥6.043bn implies a 34.2% gross margin, whereas cost of sales of ¥11.964bn would imply gross profit of ¥5.689bn (32.2% margin), suggesting a data classification or rounding inconsistency in non-zero items. Despite near-flat earnings, interest expense was only ¥15.1m, equating to an interest coverage of ~156x, highlighting very low financial risk. Tax expense of ¥787m against ordinary income suggests an effective tax rate around the low-30s, consistent with Japan’s statutory range, despite the “0.0%” placeholder in the calculated metrics. The balance sheet is strong: total assets ¥50.196bn and total equity ¥35.439bn imply an equity ratio of approximately 70.6% (the listed 0.0% is a placeholder), with debt-to-equity of 0.43x. Liquidity appears ample with a current ratio near 2.9x and quick ratio around 2.5x, supported by working capital of ¥22.73bn. Cash flow statements are not disclosed in this dataset (zeros are placeholders), so operating cash flow, capex, and free cash flow cannot be assessed from the provided figures. Depreciation and EBITDA are also not disclosed here, limiting visibility into non-cash components and underlying cash earnings. EPS was ¥28.94; back-solving implies roughly 49–50 million average shares outstanding, given net income. Overall, the company shows resilient profitability, conservative leverage, and strong liquidity, with the main analytical gaps being cash flow disclosure and the internal inconsistency within gross profit figures. Given the small YoY contraction in sales and operating income, monitoring pricing, mix, and input cost trends is important for margin sustainability into H2. The company’s financial posture suggests capacity to absorb near-term volatility, but confirmation through cash flow data would raise confidence in earnings quality.

Profitability Analysis

ROE_decomposition: ROE 4.07% = Net margin 8.17% × Asset turnover 0.352× × Leverage 1.42×. Net income ¥1.442bn on revenue ¥17.653bn yields the margin; asset turnover is revenue/total assets (¥17.653bn/¥50.196bn); leverage is assets/equity (¥50.196bn/¥35.439bn). margin_quality: Operating margin ~13.4% (¥2.361bn/¥17.653bn) and ordinary margin ~13.8% indicate solid core profitability. Gross margin is ambiguous: reported gross profit suggests ~34.2%, while revenue less reported cost of sales implies ~32.2%, pointing to a potential classification or rounding difference within non-zero items. Net margin of 8.17% reflects a typical tax burden (~32% implied) and negligible interest costs. operating_leverage: With revenue down 2.0% YoY and operating income down 3.6% YoY, incremental operating leverage appears slightly negative, implying some fixed cost absorption or mix headwinds in H1. Interest expense is de minimis, so financial leverage does not materially amplify earnings.

Growth Assessment

revenue_sustainability: Revenue declined 2.0% YoY to ¥17.653bn, suggesting modest demand softness or project timing effects. Without order backlog or segment detail, sustainability into H2 is uncertain; seasonality and public/private project mix could drive a rebound or further softness. profit_quality: Operating income contracted slightly (-3.6% YoY), a smaller decline than sales, indicating reasonable cost control but some negative operating leverage. Ordinary income exceeded operating income due to low non-operating expense burden. The implied effective tax rate (~32%) looks normal, supporting the quality of reported net income. outlook: Assuming stable public works demand and manageable input costs, margins could remain resilient. Key swing factors are price realization vs. material/labor inflation, project mix, and execution in H2. Absence of cash flow and capex data limits conviction on the durability of earnings conversion.

Financial Health

liquidity: Current assets ¥34.69bn vs. current liabilities ¥11.96bn yields a current ratio ~2.90x; quick ratio ~2.54x after excluding inventories of ¥4.26bn. Working capital stands at ¥22.73bn, indicating ample near-term liquidity. solvency: Total equity ¥35.44bn vs. total assets ¥50.20bn implies an equity ratio ~70.6% (the stated 0.0% is a placeholder). Debt-to-equity is 0.43x (total liabilities/total equity). Interest coverage ~156x underscores very low solvency risk. capital_structure: Balance sheet is equity-heavy with modest leverage, providing flexibility to absorb cyclical swings or fund investment without straining credit metrics.

Cash Flow Quality

earnings_quality: OCF is undisclosed in this dataset (zeros are placeholders), so OCF-to-net-income and accruals cannot be evaluated. Low interest expense and normal tax suggest limited below-the-line distortions. FCF_analysis: Investing CF and capex are undisclosed; therefore, free cash flow cannot be derived. Without capex visibility, maintenance vs. growth investment intensity is unknown. working_capital: Inventories are ¥4.26bn; relative to cost of sales (¥11.96bn for the half), this implies an approximate inventory hold of ~0.36 half-years (~65–70 days if scaled to the half-year), subject to seasonality and mix. Receivables/payables details are not provided, limiting a full working capital assessment.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are not disclosed in this dataset (zeros are placeholders). EPS is ¥28.94, suggesting capacity for distributions depending on policy and cash flows. FCF_coverage: Free cash flow is not provided; thus, dividend coverage from FCF cannot be assessed here. policy_outlook: Given strong liquidity and low leverage, the balance sheet appears supportive of stable shareholder returns; however, without OCF/capex data or explicit guidance, the payout trajectory cannot be inferred.

Risk Assessment

Business Risks:

• Demand cyclicality tied to public works and private construction cycles
• Input cost volatility (cement, aggregates, resin/chemicals, logistics) pressuring margins
• Labor availability and subcontractor cost inflation affecting project execution
• Project timing and mix shifts leading to quarter-to-quarter revenue/margin variability
• Potential competitive pricing pressure in key product lines

Financial Risks:

• Working capital swings (receivables, inventory) could dampen OCF in certain periods
• Inflation in materials and wages may outpace pricing if contracts lack indexation
• Interest rate normalization could incrementally raise financing costs, albeit from a low base
• Data gaps on cash flow and capex reduce visibility into FCF resilience

Key Concerns:

• Slight decline in revenue (-2.0% YoY) and operating income (-3.6% YoY) indicating modest negative operating leverage
• Inconsistency between reported gross profit and cost of sales implies uncertainty around precise gross margin
• Absence of OCF, capex, and FCF disclosure in the provided dataset limits earnings quality assessment
• Headline equity ratio shown as 0.0% in the summary contradicts balance sheet math (true ~70.6%)

Investment Implications

Key Takeaways:

• Solid profitability with operating margin ~13–14% and net margin ~8%
• ROE of ~4% constrained by conservative leverage and modest asset turnover
• Strong balance sheet (equity ratio ~71%, D/E ~0.43x) and ample liquidity (current ratio ~2.9x)
• Interest burden negligible; interest coverage ~156x
• Minor top-line softness and slight negative operating leverage in H1
• Gross margin disclosure inconsistency warrants follow-up
• Cash flow and capex not disclosed here; visibility on FCF is limited

Metrics to Watch:

• Order backlog and booking trends into H2
• Price realization versus material and labor cost inflation
• Operating cash flow and working capital changes (DSO, DIO, DPO)
• Capex intensity and depreciation (to infer maintenance vs. growth investment)
• Gross margin reconciliation and product/project mix
• Asset turnover progression and ROE path
• Dividend policy updates and payout/FCF alignment

Relative Positioning: Within Japan-listed building materials and civil engineering peers, Vertex exhibits stronger-than-average balance sheet strength and healthy operating margins, but delivers a mid-single-digit ROE primarily due to conservative leverage and modest asset turnover; near-term growth appears subdued pending clearer order momentum and cash flow disclosure.

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