Kurimoto,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥58.45B
• Operating Income: ¥3.19B
• Net Income: ¥3.08B
• EPS: ¥49.72

Income Statement

Balance Sheet

Cash Flow Statement

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: Solid Q2 with resilient profitability and robust cash generation despite slight top-line slippage. Revenue declined 0.8% YoY to 584.5, but operating income rose 7.3% YoY to 31.9, lifting operating margin to 5.45%. Gross profit reached 155.4 with a gross margin of 26.6%, indicating healthy pricing/mix or input cost relief. Ordinary income increased 3.8% YoY to 33.1, while net income grew a stronger 20.5% YoY to 30.1, aided by non-operating gains and a broadly normal tax rate of 30.2%. EBITDA was 49.9 (8.5% margin), and interest coverage was a very comfortable 23.9x, underscoring earnings resilience. Operating cash flow of 60.4 was 2.0x net income, a strong signal of earnings quality and working capital discipline. The balance sheet is solid with current ratio at 195% and total liabilities/equity at 0.63x; cash of 158 exceeds short-term loans of 74, limiting near-term refinancing risk. ROE is modest at 3.3% from NPM 5.2%, asset turnover 0.396, and leverage 1.63x, highlighting low capital efficiency. ROIC at 2.5% sits below the 5% warning threshold, indicating an area needing improvement despite solid profits. Non-operating income of 5.17 (notably 3.57 from dividends) contributed meaningfully (non-operating income ratio 17.1%), so recurring profit partly depends on investment income. Comprehensive income of 39.5 exceeded net income, likely reflecting valuation gains in securities (investment securities 212.5), which also boosts equity. OCF covered financing outflows (-55.5), implying internally funded shareholder returns/debt reduction, though investing CF and capex were unreported. Operating margin expanded by approximately 41 bps YoY (from ~5.04% to 5.45%), signaling better mix and/or cost control against flat-to-down revenue. Earnings quality is high this quarter (OCF/NI > 1.0), and liquidity is ample, but structural capital efficiency remains weak. Forward-looking, maintaining margin gains while lifting ROIC above 5% will be key; watch input cost pass-through, order intake in infrastructure-related businesses, and the durability of dividend income.

Profitability Analysis

ROE decomposition: 3.3% = Net Profit Margin (5.2%) × Asset Turnover (0.396) × Financial Leverage (1.63x). The largest constraint on ROE is low asset turnover, reflecting a capital-intensive business with sizable working capital and fixed assets. Net margin improved as operating income grew (+7.3% YoY) despite revenue declining (-0.8% YoY), indicating margin uplift likely from cost pass-through, favorable mix, or easing raw material/freight costs. Operating margin expanded by ~41 bps YoY to 5.45%, while non-operating income (notably dividend income of 3.57) provided an additional boost to below-the-line profits. This mix-driven and cost discipline-driven margin improvement appears partially sustainable if input cost and pricing dynamics remain favorable; however, the reliance on dividend income introduces some variability. Financial leverage at 1.63x is moderate and stable, contributing modestly to ROE without elevating balance-sheet risk. SG&A was 123.6, but YoY growth is unreported; with revenue down and operating income up, implied operating leverage was positive. Key flag: capital efficiency is low (ROIC 2.5%), and asset turnover (0.396) suggests underutilized asset base or long project cycles.

Growth Assessment

Top-line dipped 0.8% YoY to 584.5, but profit growth outpaced sales with operating income +7.3% and net income +20.5% YoY, demonstrating improved margin structure. Gross margin at 26.6% and EBITDA margin at 8.5% indicate progress in profitability despite demand softness. Non-operating income (5.17, with 3.57 from dividends) contributed to earnings growth; this portion may be less predictable than core operations. With ordinary income +3.8% YoY and a normal tax rate (30.2%), bottom-line growth quality is reasonable. The sustainability of growth will hinge on order intake/backlog in core infrastructure/machinery lines and continued cost normalization. Given low ROIC (2.5%), incremental growth should prioritize returns-focused deployment (pricing discipline, project selection, asset-light measures). Near term, maintaining the ~5.5% OPM appears achievable if input costs remain stable and procurement efficiency holds; upside requires better asset turns.

Financial Health

Liquidity is strong: current ratio 195%, quick ratio 165%, and working capital 418.1. Cash and deposits (158.1) exceed short-term loans (74.0), mitigating refinancing risk; current assets (857.1) comfortably cover current liabilities (439.0), so no maturity mismatch warning. Solvency is conservative: total liabilities/equity 0.63x and interest coverage 23.95x. Long-term loans are 76.8, manageable versus total equity of 904.3. No explicit off-balance sheet obligations were reported; data limitations may omit lease/guarantee details. No warnings: Current Ratio well above 1.0 and D/E (total liabilities/equity) below 2.0.

Cash Flow Quality

OCF/Net Income at 2.00x signals strong earnings quality with supportive working capital. Operating CF of 60.4 broadly covered financing outflows (-55.5), suggesting internally funded dividends/debt service; investing CF and capex are unreported, limiting FCF assessment. With EBITDA at 49.9 and depreciation 18.0, cash conversion appears healthy. No clear signs of working capital manipulation can be inferred from point-in-time balances; receivables (298.2) and inventories (132.6) look proportionate to sales, and payables (110.3) are moderate. Without investing CF/capex disclosure, FCF sustainability for long-term commitments cannot be fully evaluated.

Dividend Sustainability

Dividend data are largely unreported; the calculated payout ratio of 604.9% appears distorted and should be treated cautiously. Financing CF of -55.5 likely includes dividend payments and/or debt repayment, and was almost covered by OCF of 60.4, implying near-term distributions are supported by operations. With strong liquidity (cash > short-term loans) and conservative leverage, the balance sheet can support ordinary dividends; however, absent capex/FCF data, we cannot assess medium-term coverage. Policy outlook cannot be inferred from the filing; monitor official guidance and payout targets.

Risk Assessment

Business Risks:

• Demand cyclicality in infrastructure/machinery end-markets leading to volatile order intake
• Raw material price volatility (steel and components) affecting gross margin if pass-through lags
• Project execution risk on large contracts (timeline/cost overrun risk)
• Dependence on non-operating income (dividends) for part of earnings

Financial Risks:

• Low ROIC (2.5%) indicating weak capital efficiency and potential value dilution if investments under-earn
• Asset turnover of 0.396 suggests heavy asset base and slower cash cycle, elevating returns risk
• Equity market exposure via investment securities (212.5) introducing valuation and dividend income variability
• Potential interest rate risk on floating-rate borrowings despite low leverage

Key Concerns:

• Sustaining operating margin gains amid flat revenue
• Visibility on capex and investing CF, which are unreported
• Reliance on dividend income within non-operating results
• Closing the gap between ROE (3.3%) and cost of equity through improved ROIC

Investment Implications

Key Takeaways:

• Earnings resilience: OPM expanded ~41 bps YoY to 5.45% with OCF/NI at 2.0x
• Balance sheet strength: current ratio 195%, liabilities/equity 0.63x, interest coverage 23.9x
• Capital efficiency is the weak link: ROIC at 2.5% and asset turnover at 0.396 constrain ROE
• Non-operating income (notably dividends) is a material profit contributor this quarter
• Cash generation covered financing outflows; FCF unknown due to missing investing CF

Metrics to Watch:

• Order backlog and book-to-bill to gauge revenue trajectory
• Gross and operating margins, especially pass-through of input costs
• ROIC progression toward >5% and asset turnover improvement
• Working capital turns (AR and inventory days) and OCF/NI ratio
• Dividend income trends and equity securities valuation effects
• Capex and investing CF disclosure to assess true FCF

Relative Positioning: Relative to domestic industrial/infrastructure peers, the company exhibits stronger liquidity and leverage metrics with mid-single-digit operating margins, but lags on capital efficiency (low ROIC/asset turns). Earnings quality is solid near term, though a portion of profit stems from investment income.

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