Janis Industry Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.39B
• Operating Income: ¥-105M
• Net Income: ¥-68M
• 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

Janis Kogyo (5342) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥2.393bn, up 7.1% YoY, indicating a modest top-line recovery. Despite the growth, profitability remained weak: gross profit was ¥389.8m implying a gross margin of 16.3%, and the company posted an operating loss of ¥105m (flat YoY). Ordinary loss narrowed to ¥83m, suggesting some support from non-operating items offsetting low interest burden (interest expense ¥2.8m). Net loss widened to ¥89m (EPS -¥24.18), down 78.2% YoY, highlighting pressure at the bottom line despite higher sales. DuPont breakdown yields ROE of -8.90%, driven primarily by a negative net margin of -3.72%, partially offset by asset turnover of 0.548 and relatively high financial leverage of 4.37. The margin profile reflects a thin gross margin and insufficient scale to cover fixed costs, resulting in negative EBITDA of ¥85.8m and an EBITDA margin of -3.6%. Liquidity appears adequate with a current ratio of 134.6% and working capital of ¥701m, providing some short-term buffer. The capital structure is stretched: total liabilities are ¥3.356bn against equity of ¥1.0bn, implying a debt-to-equity ratio of 3.36x and an implied equity ratio near 23% (reported equity ratio is undisclosed). Operating cash flow was negative at ¥18.9m but less negative than net income, indicating some non-cash add-backs and/or working capital tailwinds; however, overall cash generation remains weak. Investing cash flow was undisclosed, so free cash flow cannot be determined with confidence (reported FCF of 0 reflects missing data, not actual zero). Financing cash outflows of ¥54.3m likely reflect debt service without dividends (DPS ¥0). The company suspended dividends, which is consistent with loss-making conditions and the need to preserve liquidity. Interest burden is not the core issue (interest expense is small), but insufficient operating leverage and pricing/mix headwinds seem to be weighing on profitability. Key priorities include improving gross margin via cost pass-through and mix, tightening SG&A, and stabilizing operating cash flow. Data limitations exist—several items (e.g., inventories, cash balance, investing CF, shares outstanding) are undisclosed—so conclusions rely on available non-zero data points and implied ratios.

Profitability Analysis

ROE of -8.90% decomposes into a net margin of -3.72%, asset turnover of 0.548, and financial leverage of 4.37, confirming that negative profitability is the primary drag while leverage amplifies equity volatility. Gross margin was 16.3% (¥389.8m/¥2.393bn), which is thin for a ceramics/sanitary-ware manufacturer and insufficient to cover fixed costs at current scale. Operating margin was -4.4% (¥-105m/¥2.393bn), indicating fixed-cost absorption pressure despite 7.1% revenue growth. EBITDA margin was -3.6%, implying that even before depreciation the business is not generating positive operating cash earnings. The spread between operating loss (¥105m) and ordinary loss (¥83m) suggests roughly ¥22m in net non-operating gains or income, partly mitigating weak core operations. Interest expense was modest at ¥2.8m; the negative interest coverage ratio (-37.5x using EBIT) reflects losses rather than a heavy interest burden. Operating leverage appears unfavorable this quarter—incremental revenue did not translate into profits—implying either insufficient price pass-through, adverse mix, or elevated input/energy costs. Effective tax expense (¥3.7m) despite a loss likely represents non-income taxes; the reported “effective tax rate 0.0%” is not meaningful given the loss. Overall, profitability hinges on restoring gross margin and achieving better conversion of sales growth into operating income.

Growth Assessment

Top-line growth of 7.1% YoY to ¥2.393bn signals demand recovery or improved pricing, but quality of growth is mixed given the persistent operating loss. The gross margin at 16.3% suggests that growth may be volume led or facing price/mix pressure; the company has yet to demonstrate cost pass-through sufficient to offset input inflation. Ordinary loss being narrower than operating loss indicates some non-operating tailwinds, but they are not sustainable growth drivers. With EBITDA still negative, incremental revenue is not yielding adequate contribution margin—highlighting a need for further cost optimization or pricing discipline. Outlook near term depends on construction and renovation demand, pass-through of raw material and energy costs, and product mix upgrades. Without visibility into order backlog and inventories (undisclosed), revenue sustainability cannot be fully assessed; however, continued high single-digit growth, if accompanied by margin recovery, could quickly reduce losses due to operating leverage. Absent such margin improvement, growth may remain dilutive to earnings.

Financial Health

Total assets were ¥4.365bn, liabilities ¥3.356bn, and equity ¥1.0bn, implying an equity ratio around 22.9% (reported equity ratio is undisclosed) and a leveraged balance sheet. Current assets were ¥2.729bn versus current liabilities of ¥2.027bn, yielding a current ratio of 134.6% and working capital of ¥701m—adequate short-term liquidity. Quick ratio equals the current ratio in the provided metrics because inventories are undisclosed; actual quick liquidity may be lower if inventories exist. The debt-to-equity ratio of 3.36x (using total liabilities as a proxy) is elevated for a business with negative EBITDA, increasing solvency risk. Interest expense of ¥2.8m appears manageable relative to scale, suggesting low explicit coupon costs, but sustainability depends on returning to positive EBIT. Financing cash outflow of ¥54.3m points to ongoing debt service or lease repayments; with operating cash outflow, reliance on liquidity headroom is likely. Overall, liquidity is acceptable but solvency is sensitive to prolonged losses.

Cash Flow Quality

Operating cash flow was -¥18.9m versus net loss of -¥89.0m, giving an OCF/NI ratio of 0.21, which indicates losses were partially cushioned by non-cash items and/or working capital inflows. Depreciation of ¥19.2m is relatively small versus the operating loss, so the gap likely reflects working capital movements; however, inventories and other components are undisclosed, limiting attribution. EBITDA was -¥85.8m, consistent with negative OCF, underscoring weak cash earnings. Investing cash flow is undisclosed (reported as 0), so free cash flow cannot be reliably computed; any FCF figure based on missing capex would be speculative. Financing cash flow of -¥54.3m suggests debt repayments or lease payments in the absence of dividends. Overall earnings quality is weak, with negative EBITDA and OCF; modestly better OCF than net income is a positive but not sufficient trend without sustained margin improvement.

Dividend Sustainability

The company paid no dividend (DPS ¥0; payout ratio 0%) as it reported a net loss and negative OCF. With EBITDA and EBIT both negative, internal coverage for distributions is absent. FCF coverage cannot be assessed given undisclosed investing cash flows; therefore, any payout would likely rely on balance sheet capacity, which is constrained by leverage (D/E 3.36x). Given the need to stabilize profitability and cash generation, preserving cash appears consistent with capital protection. Future dividend resumption would depend on restoring positive EBITDA/OCF and lowering leverage; absent that, a continuation of no dividend is the prudent policy outlook.

Risk Assessment

Business Risks:

• Input cost inflation (raw materials, energy) outpacing price pass-through, pressuring a thin 16.3% gross margin.
• Demand cyclicality tied to construction and renovation markets, potentially impacting utilization and fixed cost absorption.
• Product mix and pricing discipline—volume-led growth with insufficient margin could prolong operating losses.
• Scale disadvantages versus larger peers may limit bargaining power and cost efficiency.
• Supply chain and lead-time variability affecting working capital needs (inventories and receivables data undisclosed).
• Execution risk in cost reduction and SG&A efficiency initiatives necessary to turn EBITDA positive.

Financial Risks:

• Elevated leverage (D/E 3.36x; implied equity ratio ~23%) increases sensitivity to prolonged losses.
• Negative EBITDA and EBIT imply weak interest coverage despite low interest expense, raising covenant/refinancing risk.
• Operating cash outflows alongside financing outflows could pressure liquidity if not reversed.
• Limited visibility on cash position and capex (investing CF undisclosed) complicates assessment of runway.
• Potential working capital swings given sector seasonality could strain liquidity.

Key Concerns:

• Sustained operating losses despite 7.1% revenue growth indicate poor operating leverage.
• Gross margin at 16.3% is insufficient for breakeven; urgency around price/mix and cost control.
• Negative OCF and undisclosed investing CF hinder clarity on free cash flow and funding needs.

Investment Implications

Key Takeaways:

• Top-line grew 7.1% YoY to ¥2.393bn, but operating income remained a ¥105m loss; EBITDA margin -3.6%.
• ROE -8.90% driven by a -3.72% net margin and high leverage (financial leverage 4.37).
• Liquidity acceptable (current ratio 134.6%; working capital ¥701m), but solvency is stretched (D/E 3.36x).
• OCF -¥18.9m vs net loss -¥89.0m suggests some non-cash/working capital support, yet cash earnings remain negative.
• Dividend suspended (DPS ¥0) appropriately preserves cash under loss-making conditions.

Metrics to Watch:

• Gross margin progression and price pass-through vs input/energy costs.
• Operating expense ratio and break-even revenue level (EBITDA turning positive).
• Order backlog and book-to-bill (if disclosed) to assess sustainability of revenue growth.
• Operating cash flow and capex to derive true free cash flow.
• Leverage metrics (net debt/EBITDA when EBITDA turns positive) and interest coverage.
• Working capital intensity (inventories and receivables turnover when disclosed).

Relative Positioning: Within Japan’s sanitary ceramics/building materials space, the company operates at smaller scale with weaker profitability and higher leverage than larger peers, relying on margin recovery and cost discipline 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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