SHINTO COMPANY LIMITED FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.08B
• Operating Income: ¥-20M
• Net Income: ¥-8M
• EPS: ¥-12.35

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

Shinto Co., Ltd. (53800) reported FY2026 Q1 standalone results under JGAAP showing top-line contraction and a swing to operating loss, with weak operating leverage and tight liquidity. Revenue was 1,080 million yen, down 10.5% year over year, signaling softer demand or pricing pressure in its markets. Gross profit was reported at 234 million yen, implying a gross margin of 21.7%, but operating income was a loss of 20 million yen, indicating SG&A exceeded gross profit by roughly 20 million yen in the quarter. Ordinary income was a loss of 11 million yen and net income was a loss of 8 million yen; despite the loss, the YoY change in net income (+28.2%) suggests the prior-year Q1 loss was larger. EPS was negative at -12.35. The DuPont decomposition indicates a net margin of -0.74%, asset turnover of 0.171x, and financial leverage of 1.95x, yielding a calculated ROE of -0.25% for the quarter. Asset turnover at 0.171x for a single quarter implies low utilization in the period; annualized in a steady state this could be higher, but we do not extrapolate given limited disclosure. Balance sheet strength is moderate: total assets were 6,328 million yen and total equity was 3,241 million yen, implying a calculated equity ratio around 51.2% (the reported equity ratio of 0.0% appears undisclosed rather than truly zero). Total liabilities were 2,977 million yen (debt-to-equity 0.92x), with current liabilities of 2,540 million yen versus current assets of 2,622 million yen, yielding a thin current ratio of 103.2%. Inventories were sizable at 1,494 million yen, driving a low quick ratio of 44.4%, which heightens short-term liquidity risk if sales remain soft. Interest expense was modest at 2.84 million yen, but with operating loss, the interest coverage ratio is negative (-7.0x), underscoring the importance of restoring operating profitability. Cash flow statements were not disclosed in this dataset (zeros reflect unavailable data), limiting analysis of operating cash flow conversion and free cash flow. Dividend data were also undisclosed; with a quarterly net loss and constrained liquidity, distributable capacity appears limited near term, but we cannot draw conclusions without policy guidance. There is an apparent inconsistency between revenue and cost of sales versus reported gross profit; we rely on the disclosed gross margin (21.7%) and gross profit figure for margin analysis. Overall, Q1 shows demand pressure and insufficient cost absorption, with moderate solvency but tight near-term liquidity and elevated working capital intensity.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin -0.74%, asset turnover 0.171x, and financial leverage 1.95x produce a calculated ROE of -0.25% for the quarter, consistent with the reported figure. Gross margin was 21.7% (gross profit 234 million yen on 1,080 million yen revenue), suggesting some pricing power or mix, but below what is typically required to comfortably absorb fixed costs. Operating margin was -1.9% (operating loss of 20 million yen), implying SG&A of roughly 254 million yen (gross profit 234 million minus operating loss -20 million = 254 million), i.e., SG&A exceeded gross profit by ~20 million yen. The negative operating margin alongside a positive gross margin highlights weak operating leverage this quarter, likely due to volume deleverage and fixed cost burden. Ordinary loss (-11 million yen) narrowed versus operating loss, indicating some non-operating positive items partially offset interest expense of 2.84 million yen. Net loss of 8 million yen improved YoY (+28.2%), suggesting some progress or a lower drag below operating line versus last year. Interest coverage is negative at -7.0x due to operating loss, though the absolute interest burden is small. EBITDA was undisclosed (0 indicates not reported), so we avoid EBITDA-based inferences. Overall profitability is pressured by lower volumes and an SG&A base that did not flex down commensurately with revenue.

Growth Assessment

Revenue declined 10.5% YoY to 1,080 million yen, indicating a weak demand environment or pricing headwinds in Q1. The drop in revenue, combined with an operating loss, suggests negative operating leverage in the near term. Gross margin at 21.7% is decent but insufficient to offset fixed costs at the current volume level. Net loss narrowed YoY (+28.2%), implying some improvement in below-OP items or tax effects, but core operating performance deteriorated. Sustainability of revenue will depend on order inflows, end-market recovery (likely in construction/industrial materials for this issuer), and pricing discipline. Given the inventory build level (1,494 million yen) relative to the quarter’s sales, near-term sell-through and backlog conversion will be key to stabilizing top line. With limited visibility into cash flows and no segment detail, we refrain from projecting growth; however, restoring operating break-even likely requires either mid-single-digit revenue recovery from Q1 levels or cost measures to reduce SG&A. Outlook hinges on demand normalization and inventory management; absent these, growth quality remains fragile.

Financial Health

Liquidity: Current assets 2,622 million yen vs current liabilities 2,540 million yen yield a current ratio of 103.2%, only slightly above 1.0x. The quick ratio is 44.4%, reflecting heavy inventory reliance and suggesting tighter near-term liquidity if cash collections slow. Working capital is positive but slim at 81.8 million yen. Solvency: Total liabilities 2,977 million yen and equity 3,241 million yen imply a debt-to-equity ratio of 0.92x and an equity ratio of roughly 51.2%, indicating a moderate capital buffer. Long-term liabilities are approximately 437 million yen (total minus current), suggesting manageable maturity structure if cash generation recovers. Interest expense is low at 2.84 million yen, but negative operating income leads to negative interest coverage; improving operating profitability is essential for comfort. Capital structure appears balanced overall, but the high share of current liabilities versus current assets increases refinancing and rollover risk if operating cash flow remains weak.

Cash Flow Quality

Cash flow statements (operating, investing, financing) were not disclosed; zeros represent unavailable data, so we cannot compute OCF, FCF, or coverage metrics from this dataset. Earnings quality assessment must therefore rely on accrual indicators from the balance sheet: inventories are high at 1,494 million yen relative to quarterly revenue (1,080 million yen), implying slow inventory turns in the quarter and potential working capital drag. The thin working capital of 81.8 million yen alongside large inventories suggests that any revenue softness could quickly pressure cash. With operating loss and negative interest coverage, internal funding capacity is currently limited; without OCF data, we cannot confirm the degree of cash burn or the impact of changes in receivables/payables. Capex is undisclosed (D&A not reported), so maintenance investment needs and FCF sustainability cannot be assessed from the provided figures.

Dividend Sustainability

Dividend-related data (annual DPS, payout ratio, FCF coverage) are undisclosed in this dataset, so we cannot assess current policy execution. Given a quarterly net loss (-8 million yen) and tight liquidity metrics (current ratio 103.2%, quick ratio 44.4%), near-term capacity to fund distributions from internal cash generation appears constrained, but this is not conclusive without cash flow and policy disclosure. Under JGAAP, single-quarter losses do not preclude annual dividends, especially if full-year profitability and retained earnings are sufficient; however, visibility is limited. We therefore refrain from judging payout sustainability and note that confirmation would require full-year guidance, historical dividend policy, and OCF/FCF data.

Risk Assessment

Business Risks:

• Demand softness evidenced by a 10.5% YoY revenue decline in Q1.
• Negative operating leverage with SG&A exceeding gross profit, creating loss risk at current volumes.
• High inventory balance (1,494 million yen) raising obsolescence and markdown risk if demand remains weak.
• Potential input cost inflation squeezing gross margin despite pricing efforts.
• Cyclical exposure to construction/industrial materials end-markets (inferred from industry), leading to volume volatility.

Financial Risks:

• Tight liquidity: current ratio 103.2% and quick ratio 44.4% indicate reliance on inventory monetization.
• Negative interest coverage (-7.0x) due to operating loss; sustained losses could erode covenant headroom if debt covenants exist.
• High proportion of current liabilities (2,540 million yen) relative to current assets increases refinancing and rollover risk.
• Working capital sensitivity: limited buffer (81.8 million yen) leaves little room for adverse shocks in receivables or payables.
• Limited visibility on cash flows and capex due to undisclosed CF statements, increasing uncertainty around FCF.

Key Concerns:

• Restoring operating break-even amid revenue declines.
• Managing and reducing inventories to improve cash conversion.
• Maintaining solvency comfort while addressing near-term liquidity constraints.
• Potential mismatch in reported cost of sales vs gross profit figures; reliance on disclosed gross margin for analysis.
• Absence of cash flow and dividend disclosures complicates assessment of sustainability.

Investment Implications

Key Takeaways:

• Q1 showed revenue down 10.5% YoY to 1,080 million yen and an operating loss of 20 million yen, highlighting weak operating leverage.
• Gross margin of 21.7% is insufficient to cover the SG&A base at current volumes; SG&A approximated at 254 million yen.
• Liquidity is tight (current ratio 103.2%, quick ratio 44.4%) with inventories high at 1,494 million yen.
• Balance sheet solvency remains moderate (equity ratio ~51.2%, D/E 0.92x), but near-term cash generation is the swing factor.
• Negative interest coverage (-7.0x) underscores urgency to improve operating profits.
• Cash flow, capex, and dividend data are unavailable, limiting visibility on FCF and payout capacity.

Metrics to Watch:

• Order intake and backlog to gauge near-term revenue recovery.
• Gross margin trajectory and pricing vs input costs.
• SG&A run-rate and cost reduction progress to restore operating break-even.
• Inventory turnover and days inventory outstanding; working capital movements (AR/AP).
• Operating cash flow recovery and free cash flow once disclosed.
• Interest coverage and short-term debt refinancing profile.
• Equity ratio and net debt (when cash is disclosed) to monitor solvency.

Relative Positioning: Relative to domestic industrial materials/ceramics peers, the company exhibits moderate solvency but weaker short-term liquidity and profitability this quarter, with operating leverage working against it amid a double-digit revenue decline; recovery depends on demand normalization and cost control.

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