KOMAIHALTEC Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥15.79B
• Operating Income: ¥106M
• Net Income: ¥181M
• EPS: ¥38.74

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

FY2026 Q2 was a mixed quarter: core profitability improved markedly on a lower revenue base, but overall returns remained very low and earnings leaned heavily on non-operating income. Revenue fell 26.9% YoY to 157.94, reflecting a soft order execution phase or project phasing in steel structures, while operating income jumped 260.2% YoY to 1.06 as cost discipline and mix lifted core earnings off a low base. Ordinary income climbed 368.2% YoY to 2.82, supported by 2.85 in non-operating income, including 1.52 of dividend income. Net income was 1.81, down 85.9% YoY, implying the prior-year period had unusually large one-time gains (likely extraordinary items) that did not recur. Operating margin improved to about 0.67%, up roughly 53 bps from the ~0.14% implied last year, while ordinary margin expanded to about 1.79% from ~0.28% (up ~151 bps). EBITDA was 9.57 with a 6.1% margin, indicating substantial non-cash costs (D&A of 8.51) and thin operating leverage at the EBIT level. Cash generation was strong: operating cash flow was 35.95, roughly 20x net income, suggesting substantial working capital release or upfront payments on projects. Financing cash flow was -49.17, pointing to debt reduction and/or shareholder returns, with cash and deposits at 78.20 providing a reasonable liquidity cushion. Balance sheet liquidity is solid (current ratio 254%), and leverage is moderate (D/E 0.94x), but interest coverage is weak at 1.58x, keeping debt service risk on watch. ROE is low at 0.6% (NPM 1.1% × asset turnover 0.247 × leverage 1.94), and ROIC is 0.2%, indicating limited value creation this period. Profit composition shows a high reliance on non-operating income (non-operating income > operating income), which may not be structurally dependable. Total comprehensive income was 13.11, far above net income, likely driven by valuation gains in investment securities booked to OCI rather than recurring cash earnings. The reported payout ratio calculation (219.8%) suggests dividends could be above earnings if accurate, though dividend amounts were not disclosed; sustainability hinges on sustained OCF and capex needs. With revenue softness but improving margins, near-term focus shifts to backlog conversion, cost control, and reducing reliance on financial income. Forward-looking, visibility will depend on project wins and execution cadence, steel cost pass-through, and the durability of dividend income from investment holdings. Overall, incremental operational improvement is evident, but low returns, thin interest cover, and dependence on non-operating income temper the quality of earnings.

Profitability Analysis

ROE decomposition and drivers: Net profit margin was approximately 1.1% (NI 1.81 / Revenue 157.94). Asset turnover was 0.247 (Revenue 157.94 / Assets 638.17), indicating a low velocity typical of project-based fabrication. Financial leverage was 1.94x (Assets 638.17 / Equity 329.40). Multiplying these yields an ROE of ~0.6%, consistent with the reported figure. The largest positive change vs. last year is operational: operating income rose 260% YoY despite a 27% revenue decline, lifting operating margin by about 53 bps and ordinary margin by roughly 151 bps; this indicates improved cost discipline and better project mix. The step-up in ordinary income was amplified by non-operating income (dividends 1.52), making profit growth partially financial rather than purely operational. The business reason appears to be a combination of lower-cost execution/mix and higher returns from investment securities. Sustainability is mixed: cost improvements could persist if procurement discipline and cost pass-through continue, but non-operating dividend income is market-dependent and may fluctuate. A concern is that SG&A detail is unreported; while total SG&A is 21.40, we cannot confirm whether underlying SG&A growth is outpacing revenue. Overall operating leverage is modest; EBITDA margin at 6.1% vs. EBIT margin ~0.7% shows heavy D&A burden, limiting bottom-line scalability.

Growth Assessment

Top-line contracted 26.9% YoY to 157.94, suggesting either delayed project recognition, slower order intake, or completion timing effects typical in steel/construction fabrication. Despite the revenue drop, operating profit grew to 1.06, implying better pricing/mix and cost control; ordinary income also benefited from higher non-operating items. Net income declined 85.9% YoY to 1.81, indicating a tough comparison likely due to prior-year one-offs at the below-OP line. Revenue sustainability hinges on order backlog conversion and new project wins; without disclosed backlog, forward visibility is limited. Profit quality in this quarter leans on non-operating dividends (1.52), so recurring core earnings need to expand to de-risk volatility. Outlook drivers: steel price trends (pass-through effectiveness), labor and subcontracting availability/costs, and public/private infrastructure demand. Near-term, we expect continued margin repair at the operating level, but overall growth depends on improving order intake and stabilizing non-operating contributions.

Financial Health

Liquidity is strong with a current ratio of 253.9% (current assets 366.07 vs. current liabilities 144.16). There is no warning on current ratio (<1.0 threshold not breached). Cash and deposits (78.20) comfortably exceed short-term loans (22.32), reducing near-term refinancing risk. Solvency is moderate with D/E at 0.94x, below the 1.5x reference; total interest-bearing debt reported by components is 103.93 (short 22.32 + long 81.61). Interest coverage is weak at 1.58x (operating income 1.06 / interest expense 0.67), signaling debt service sensitivity if earnings dip. Maturity mismatch appears manageable given strong current assets, but noncurrent liabilities (164.60) are significant, and rolling long-term debt will depend on maintaining EBITDA and asset coverage. Off-balance sheet obligations are not disclosed; given the project nature of the business, potential guarantees or performance bonds may exist but are unreported.

Cash Flow Quality

OCF was 35.95 versus net income of 1.81, yielding an OCF/NI of 19.86x, which is very strong and suggests heavy working capital inflows (collections or advances) and/or non-cash charges (D&A 8.51). Free cash flow cannot be computed due to unreported investing CF and capex, so sustainability for all commitments cannot be fully assessed. Financing CF of -49.17 indicates debt repayment and/or shareholder returns exceeded OCF in the period, leading to a net cash outflow; however, liquidity remains adequate at cash 78.20. Earnings quality is mixed: cash conversion is excellent this quarter, but strong OCF against thin EBIT may reflect timing (working capital release) rather than structural earnings power. Working capital manipulation signs cannot be confirmed or denied due to missing AR, AP, and inventory data; the magnitude of OCF vs. NI warrants monitoring for reversals in subsequent quarters.

Dividend Sustainability

Dividend data are largely unreported; however, a calculated payout ratio of 219.8% suggests dividends may exceed current-period earnings if that metric is accurate. With OCF at 35.95, near-term cash coverage for dividends could be adequate, but without capex data and investing CF, full FCF coverage is unknown. Given interest coverage at 1.58x and ROIC at 0.2%, sustaining a payout above earnings could pressure balance sheet flexibility over time if OCF normalizes. Policy outlook should be assessed against medium-term earnings capacity, order visibility, and capex needs; a payout aligned to normalized earnings rather than a single quarter would be prudent. Missing disclosures (DPS, total dividends) limit precision.

Risk Assessment

Business Risks:

• Project execution and margin risk in steel structure/bridge fabrication with thin EBIT margins (~0.7%).
• Revenue volatility from order timing and backlog conversion; revenue down 26.9% YoY.
• Commodity price pass-through risk (steel and related inputs) affecting gross margins.
• Dependence on non-operating dividend income (1.52) to support ordinary income.
• Labor/subcontractor cost inflation and capacity constraints impacting delivery.

Financial Risks:

• Low interest coverage (1.58x) heightens sensitivity to earnings dips or rate increases.
• Moderate leverage (D/E 0.94x) with significant long-term debt (81.61) requiring ongoing refinancing access.
• Potential reversal of working capital-driven OCF spike (OCF/NI 19.86x) could tighten liquidity.
• Return metrics are weak (ROE 0.6%, ROIC 0.2%), risking value dilution if not improved.

Key Concerns:

• Quality of earnings relies on non-operating items; operating profit is small relative to dividends received.
• Net income decline of 85.9% YoY suggests prior-year one-offs; visibility on normalized earnings is limited.
• Dividend sustainability uncertain given >100% payout ratio indication and missing capex/FCF data.
• Data gaps (gross profit, inventory/AR/AP, capex) limit assessment of core margin and cash needs.

Investment Implications

Key Takeaways:

• Core profitability improved despite a large revenue decline, lifting OP and ordinary margins by ~53 bps and ~151 bps, respectively.
• Earnings remain fragile with low ROE (0.6%) and heavy reliance on non-operating income (dividends 1.52).
• Cash generation was strong this quarter (OCF 35.95), but likely aided by working capital movements.
• Balance sheet liquidity is solid (current ratio 254%), yet interest coverage is weak (1.58x), keeping debt service on watch.
• ROIC at 0.2% signals the need for better asset productivity or portfolio optimization.

Metrics to Watch:

• Order backlog and new orders to gauge revenue recovery trajectory.
• Gross margin and cost of sales disclosure to track input pass-through and project mix.
• Composition and stability of non-operating income, especially dividend income from securities (91.96).
• Interest coverage trend and debt amortization schedule.
• Capex and investing cash flows to evaluate FCF and dividend coverage.
• Working capital levels (AR, AP, inventories) for potential OCF reversals.

Relative Positioning: Within domestic steel structure/fabrication peers, Komai Haltec shows improving operational discipline but remains subscale with low returns and higher sensitivity to non-operating income. Liquidity is a relative strength, while interest coverage and ROIC lag sector leaders.

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