Janis Industries Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.39B
• Operating Income: ¥-105M
• Net Income: ¥-89M
• EPS: ¥-24.18

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

Verdict: FY2026 Q2 was weak, with a continued operating loss and negative net income despite modest top-line growth. Revenue rose 7.1% YoY to 23.93, but gross profit of 3.64 was insufficient to cover SG&A of 4.70, resulting in operating income of -1.05 and ordinary income of -0.83. Net income came in at -0.89 (net margin -3.7%), a steep YoY deterioration of 78.2% despite small non-operating support (net +0.22). Gross margin stood at 15.2%, while operating margin was -4.4% and ordinary margin -3.5%, reflecting negative operating leverage; YoY margin basis-point comparisons are not disclosed. SG&A consumed 19.6% of sales, exceeding gross profit and leaving the core business structurally loss-making in the quarter. Non-operating income of 0.39 (dividends 0.08) partially offset 0.17 in non-operating expenses, but this was insufficient to restore profitability. Cash generation was weaker than earnings: operating cash flow was -1.45 vs net income -0.89, implying cash burn in the core. Analyst-calculated free cash flow was approximately -2.13 (OCF -1.45 minus capex 0.68), pointing to funding needs. Liquidity is adequate but tight (current ratio 120.6%), and solvency is stretched with liabilities-to-equity (reported D/E) of 3.36x and interest coverage deeply negative (-16.05x). Balance sheet shows limited cash (3.05) against sizable short-term loans (11.50), heightening refinancing risk if losses persist. ROE is -8.9% from DuPont (net margin -3.7%, asset turnover 0.548, leverage 4.37x), underscoring profitability as the main drag. ROIC is -4.7%, well below a typical cost of capital, indicating value destruction in the current run-rate. Retained earnings are negative (-7.34), constraining dividend capacity and financial flexibility. Forward-looking, the company must either raise pricing/mix and utilization or execute cost reductions to lift gross margin above SG&A, while managing working capital to stem cash burn. Near-term focus should be on restoring operating margin to breakeven, de-risking short-term debt, and improving ROIC toward at least mid-single digits.

Profitability Analysis

ROE decomposition (DuPont): ROE (-8.9%) = Net Profit Margin (-3.7%) × Asset Turnover (0.548) × Financial Leverage (4.37x). The dominant negative change driver is the net profit margin, which is currently negative as gross profit (3.64) failed to cover SG&A (4.70), producing an operating margin of -4.4%. Business reason: cost pressures and/or pricing/mix shortfalls held gross margin to 15.2% while fixed/semi-fixed SG&A remained high at 19.6% of sales, creating negative operating leverage; small non-operating gains (+0.22) could not offset the core loss. Sustainability: the margin shortfall is not a one-off; absent structural actions (price increases, cost cuts, throughput gains), the gap between gross profit and SG&A will persist. Asset turnover at 0.548 is modest for a manufacturing business and likely constrained by suboptimal capacity utilization; improvement would require volume recovery or asset rationalization. Financial leverage at 4.37x amplifies ROE volatility; with negative margins, leverage exacerbates equity erosion. Concerning trend: SG&A exceeds gross profit, and ordinary loss (-0.83) indicates limited buffer from non-operating items; SG&A YoY growth vs revenue growth is undisclosed, but current SG&A intensity (19.6%) is too high relative to the 15.2% gross margin.

Growth Assessment

Top-line grew 7.1% YoY to 23.93, suggesting some demand resilience or pricing contribution. However, profitability did not follow, with operating and net losses despite higher revenue, implying adverse mix, insufficient price-cost recovery, or under-absorption. Gross margin at 15.2% is too low to sustain SG&A at 19.6%, resulting in negative operating leverage. Non-operating income (0.39) provided limited support primarily from dividends (0.08), not a durable earnings driver for the core. EBITDA was -0.83 (margin -3.5%), signaling weak cash earnings. Outlook hinges on: (1) price increases and mix upgrades in sanitary/ceramic lines, (2) procurement and energy cost normalization, and (3) throughput and yield improvements to lift gross margin above 20%. Without margin repair, revenue growth will not translate into profit. Near term, breakeven requires either several hundred basis points of gross margin expansion and/or SG&A reductions of roughly 1.0 in run-rate terms.

Financial Health

Liquidity: Current ratio is 120.6% (above 1.0 but below the 1.5 comfort threshold); quick ratio also 120.6% due to inventory not disclosed. Cash and deposits (3.05) plus receivables (6.44) provide moderate coverage against current liabilities (21.08), but reliance on short-term loans is high (11.50). Solvency: Reported D/E (total liabilities/equity) is 3.36x, which is high and a clear warning. Interest coverage is deeply negative (-16.05x), reflecting operating losses and interest expense of 0.07. Equity base is thin (equity 10.00; retained earnings -7.34), leaving limited shock absorption; implied equity ratio is roughly 22.9% (analyst-calculated). Maturity mismatch: short-term loans (11.50) vs current assets (25.43) suggests coverage exists, but negative OCF increases refinancing dependence. No explicit off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF was -1.45 versus net income of -0.89, yielding OCF/NI of 1.63x; while the ratio exceeds the 0.8 threshold, both figures are negative, indicating weak cash conversion. Analyst-calculated free cash flow was approximately -2.13 (OCF -1.45 minus capex 0.68), implying external funding needs to sustain operations and investment. Working capital: receivables of 6.44 against half-year revenue of 23.93 imply an estimated DSO around the high-40s days, not obviously stressed; inventory data is unreported, limiting assessment of build-ups. No evidence of aggressive working capital release; rather, cash burn reflects operating losses and capex. Sustainability: absent a turnaround in operating margin, FCF is likely to remain negative, pressuring liquidity.

Dividend Sustainability

Dividend data is unreported for the period, and retained earnings are negative (-7.34), which materially restricts capacity to pay or maintain dividends under JGAAP constraints. With net loss (-0.89), negative OCF (-1.45), and analyst-estimated negative FCF (-2.13), coverage for any dividend would be poor. Given high leverage (reported D/E 3.36x) and negative ROIC (-4.7%), prudent capital allocation would prioritize balance sheet stabilization over distributions. Policy outlook likely hinges on restoring profitability; absent a return to positive FCF, dividend resumption or increases appear constrained.

Risk Assessment

Business Risks:

• Raw material and energy cost inflation compressing gross margins in ceramic/sanitary ware production
• Demand cyclicality tied to housing starts and renovation activity
• Negative operating leverage as SG&A exceeds gross profit
• Pricing/mix execution risk in passing through costs to customers
• Operational efficiency and utilization risk affecting absorption and yields

Financial Risks:

• High leverage with reported D/E of 3.36x and thin equity base
• Refinancing risk on short-term loans of 11.50 amid negative OCF
• Interest rate risk increasing debt service burden with negative interest coverage (-16.05x)
• Potential covenant pressure given losses and negative retained earnings
• Liquidity headroom modest (current ratio 1.21), sensitive to further cash burn

Key Concerns:

• ROIC at -4.7% indicates value destruction relative to likely WACC
• Sustained operating losses (operating margin -4.4%) with gross margin below SG&A
• Negative free cash flow (~-2.13) pointing to external funding dependence
• Retained earnings deficit (-7.34) curtails financial flexibility and dividend capacity
• Data gaps (inventories, detailed SG&A, investing CF) limit full diagnostic

Investment Implications

Key Takeaways:

• Revenue grew 7.1% YoY, but margins deteriorated with net loss of -0.89 (net margin -3.7%)
• Gross margin (15.2%) below SG&A intensity (19.6%) is the core profitability issue
• OCF (-1.45) and analyst-estimated FCF (~-2.13) indicate ongoing cash burn
• Balance sheet risk elevated: reported D/E 3.36x, interest coverage negative
• ROE -8.9% and ROIC -4.7% reflect subpar returns requiring operational turnaround

Metrics to Watch:

• Gross margin progression (price/mix vs input cost trends)
• SG&A run-rate and cost-reduction execution
• Operating cash flow and free cash flow trajectory
• Short-term debt refinancing and interest coverage
• Order backlog and utilization rates (if disclosed)
• Equity ratio and any capital measures to bolster equity

Relative Positioning: Relative to domestic building materials/sanitary peers, the company is currently weaker on profitability (negative operating and EBITDA margins), returns (ROIC well below the 7–8% benchmark), and balance sheet resilience (higher leverage and negative retained earnings), necessitating margin repair and deleveraging 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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