Kurimoto,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥58.45B
• Operating Income: ¥3.19B
• Net Income: ¥2.59B
• 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

Kurimoto Iron Works Co., Ltd. (TSE:5602) delivered mixed FY2026 Q2 results under JGAAP on a consolidated basis, with modest top-line softness but improved earnings. Revenue declined slightly by 0.8% YoY to ¥58.45bn, while operating income rose 7.3% to ¥3.19bn, indicating successful cost control and/or better mix. Net income increased 20.5% to ¥3.02bn, outpacing operating profit growth due to favorable non-operating items and a normalizing tax burden. Profitability trends were solid: gross margin was 25.7%, operating margin 5.45%, and EBITDA margin 8.0%. The DuPont framework shows ROE of 3.33% driven by a 5.16% net margin, asset turnover of 0.396x, and moderate financial leverage of 1.63x. Liquidity is strong with a current ratio of 162% and quick ratio of 141%, supported by ¥35.67bn of working capital. Leverage is moderate (debt-to-equity of 0.70x) and interest burden light (interest expense ¥91m) with robust interest coverage of 35x on EBIT. Despite these positives, operating cash flow was negative at -¥2.44bn, implying a working capital build that is out of step with reported earnings momentum. The OCF/Net Income ratio of -0.81 highlights weak cash conversion this half, warranting close monitoring of receivables and inventories (inventories stand at ¥12.12bn). Ordinary income of ¥3.31bn exceeded operating income, suggesting net non-operating gains outweigh interest costs. Using disclosed income tax (¥0.92bn) and net income, the implied tax rate is roughly in the low-20% range for the period, although the provided "effective tax rate" metric shows 0.0% (likely not disclosed). Balance sheet strength provides a buffer to cash flow volatility, and financing cash inflow (¥2.19bn) appears to have bridged near-term funding needs. Dividend and share count data are not disclosed in this dataset (reported zeros indicate non-disclosure), limiting per-share and payout analysis beyond EPS of ¥49.72. Overall, the company shows healthy profitability and balance sheet resilience, but cash flow quality is the key watchpoint. Given the company’s exposure to project-based businesses, seasonality and order timing likely affect working capital. The outlook hinges on backlog realization, price-cost dynamics for materials, and execution on large projects. Data gaps (equity ratio, cash balance, investing cash flows, DPS, and share count) constrain depth of analysis; conclusions are therefore framed with these limitations in mind.

Profitability Analysis

ROE (3.33%) decomposes into: net profit margin 5.16% × asset turnover 0.396× × financial leverage 1.63×. Margin quality improved YoY as operating income grew (+7.3%) despite slightly lower sales, pointing to better mix, improved pricing discipline, and/or cost efficiencies. Gross margin of 25.7% versus operating margin of 5.45% indicates sizable fixed and SG&A burden; however, the positive operating leverage this half is evident in profit growth outpacing sales. EBITDA margin at 8.0% provides additional cushion; D&A of ¥1.51bn implies a tangible asset base and ongoing maintenance needs. Non-operating items netted positively: ordinary income (¥3.31bn) exceeded operating income by ~¥0.13bn despite ¥0.09bn interest expense, implying net other income (e.g., interest income, equity method income, or FX). Interest coverage is strong at ~35x on EBIT, suggesting low earnings sensitivity to financing costs. The implied tax burden, using disclosed income tax, appears normalizing (low-20% range), aiding net margin expansion. Overall profitability is solid but ROE remains modest given conservative leverage and moderate asset turnover.

Growth Assessment

Top-line contracted slightly (-0.8% YoY to ¥58.45bn), consistent with softer project timing or demand normalization. Despite this, operating income rose 7.3% and net income 20.5%, indicating margin enhancement and beneficial non-operating contributions. Revenue sustainability hinges on backlog conversion in core businesses and stability in public/private capex cycles; a flat-to-low growth revenue environment is plausible near term without evidence of order acceleration in the dataset. Profit quality appears reasonable at the P/L level, but weak cash conversion (OCF/NI -0.81) tempers the quality assessment and suggests profit is currently ahead of cash due to working capital. EPS of ¥49.72 reflects the stronger bottom line, though share count data is not disclosed, limiting per-share trend analysis. Outlook drivers include materials cost pass-through, execution on large contracts, and timing of deliveries, which can create intra-year volatility. With ordinary income above operating income, supplementary earnings sources are currently supportive, but may not be structurally repeatable. Given the slight revenue dip and stronger profits, short-term operating leverage seems favorable, but sustaining it will require stable volumes and continued cost discipline.

Financial Health

Balance sheet strength is evident: total assets ¥147.66bn funded by total liabilities ¥62.86bn and equity ¥90.43bn (assets/equity leverage 1.63x). Liquidity is ample with current ratio 162.3% and quick ratio 141.1%, supported by ¥35.67bn in working capital. Inventories are ¥12.12bn; without prior-period comparatives we cannot quantify changes, but OCF weakness suggests working capital expansion in receivables and/or inventories. Debt-to-equity of 0.70x indicates moderate leverage, comfortably serviced given interest coverage of 35x. Financing CF inflow (+¥2.19bn) likely supported working capital; cash and equivalents are not disclosed in this dataset (reported as zero), so absolute liquidity headroom cannot be precisely assessed. The provided equity ratio is not disclosed (reported 0.0%); however, the balance sheet mix implies a solid equity base relative to assets. Overall solvency appears sound, with low refinancing risk implied by low interest expense and strong coverage.

Cash Flow Quality

Earnings quality is mixed: while profits improved, operating cash flow was -¥2.44bn, producing an OCF/Net Income ratio of -0.81. This points to cash absorption in working capital, typical in project-heavy businesses during build phases or periods of elongated collection cycles. With investing CF not disclosed (reported as zero), Free Cash Flow cannot be reliably computed; the provided FCF value of zero should be treated as non-disclosed rather than economic zero. If we were to proxy FCF as OCF less capex, the missing capex item prevents assessment; D&A of ¥1.51bn suggests at least maintenance capex requirements. Interest expense is modest, so financing cash needs are more tied to working capital swings than debt service. The negative OCF alongside positive financing CF (+¥2.19bn) indicates reliance on external financing to bridge operating cash shortfalls this half. Key to improving cash flow quality will be conversion of receivables and managing inventory turns in the second half.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed in this dataset (reported zeros). EPS is ¥49.72 for the period, but without DPS and capex disclosure, a robust payout sustainability analysis is not possible. Conceptually, given negative OCF this half, cash coverage of any dividends would rely on second-half cash generation or balance sheet capacity. Equity is sizeable (¥90.43bn) and leverage moderate (0.70x), implying capacity, but sustainable payouts should align with normalized FCF rather than accounting earnings. Company policy signals are not available here; investors should reference the latest dividend policy and medium-term plan for targets such as payout ratio or DOE (dividend on equity).

Risk Assessment

Business Risks:

• Project timing risk causing volatility in revenue recognition and working capital
• Materials cost and procurement risk affecting gross margins and price pass-through
• Demand cyclicality in infrastructure and industrial end-markets
• Execution risk on large, complex contracts impacting profitability
• Supply chain and logistics disruption risk

Financial Risks:

• Working capital expansion leading to negative operating cash flow
• Interest rate risk on floating-rate borrowings despite currently low interest burden
• Counterparty credit risk concentrated in large customers/government-related entities
• Potential need for short-term financing to bridge cash conversion
• FX exposure on imports/exports if applicable to materials or equipment

Key Concerns:

• OCF/Net Income ratio at -0.81 indicates weak cash conversion in the period
• Revenue declined 0.8% YoY, suggesting fragile top-line momentum
• Reliance on positive non-operating contributions to lift ordinary income above operating income
• Limited disclosure on cash, investing cash flows, and dividends constrains assessment
• Inventory and receivables management critical to H2 cash recovery

Investment Implications

Key Takeaways:

• Earnings resilience: operating income +7.3% and net income +20.5% despite slight revenue decline
• Healthy margins: gross 25.7%, operating 5.45%, EBITDA 8.0%
• Strong liquidity and moderate leverage provide balance sheet flexibility
• Weak cash conversion: OCF -¥2.44bn implies working capital absorption
• ROE of 3.33% modest, constrained by asset turnover and conservative leverage

Metrics to Watch:

• Order intake and backlog conversion to support H2 revenue
• Receivables days and inventory days to gauge cash conversion
• Operating cash flow trajectory and capex disclosure to assess FCF
• Operating margin sustainability versus materials and labor costs
• Debt mix and interest coverage amid interest rate environment
• Non-operating income components and their recurrence

Relative Positioning: Within Japan’s industrials/infrastructure equipment and materials peer set, Kurimoto exhibits above-average liquidity and conservative balance sheet management with moderate leverage, solid but not top-tier margins, and currently modest ROE; cash flow conversion trails best-in-class peers this half due to working capital build.

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