TOSO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥11.14B
• Operating Income: ¥280M
• Net Income: ¥-36M
• EPS: ¥20.13

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

TOSO Co., Ltd. (59560) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥11.144 billion, up 5.8% YoY, indicating steady top-line momentum despite a softer profit profile. Gross profit was ¥4.255 billion, implying a gross margin of 38.2%, which is healthy for building fixtures/interior fittings and suggests good product mix and pricing discipline at the gross level. Operating income declined 19.7% YoY to ¥280 million, compressing operating margin to roughly 2.5%, pointing to higher SG&A, cost inflation, or mix effects beyond cost of goods sold. Ordinary income of ¥294 million exceeded operating income, indicating net non-operating gains offsetting interest costs; interest expense was modest at ¥13.2 million. Net income declined 20.0% YoY to ¥178 million (EPS ¥20.13), driving a low net margin of 1.60% and a calculated ROE of 1.20% via DuPont (NPM 1.60% × asset turnover 0.509 × leverage 1.48). EBITDA was ¥558 million (5.0% margin), highlighting limited operating leverage at current scale. Cash generation was solid: operating cash flow reached ¥316 million, 1.77x net income, underscoring good earnings-to-cash conversion. The balance sheet is strong with total assets of ¥21.905 billion, liabilities of ¥7.424 billion, and equity of ¥14.839 billion; this implies an equity ratio of roughly 67.7% even though the reported metric shows 0.0% (unreported). Liquidity is ample with a current ratio of 266% and quick ratio of 240%, and working capital of ¥10.293 billion. Leverage appears conservative at 0.50x debt-to-equity and interest coverage at 21.2x, suggesting low financial risk. The implied tax burden based on reported income tax and net income is roughly ~21%, though the provided “effective tax rate 0.0%” should be treated as unreported. The decline in operating profit despite higher sales points to margin headwinds—likely from SG&A normalization, wage and logistics inflation, or weaker scale benefits. Inventory of ¥1.604 billion looks reasonable relative to current assets, helping support fulfillment while not overly tying up capital. Dividends are shown as DPS ¥0.00 and payout 0.0%, which likely reflects lack of disclosure at the interim stage rather than policy shift; coverage analysis is therefore constrained. Overall, TOSO demonstrates resilient demand and strong financial health, but profitability is under pressure and ROE remains low, making margin restoration and cost control the key focus. Data limitations exist where values are shown as zero (e.g., equity ratio, cash and equivalents, investing CF, DPS, shares), which represent unreported items rather than actual zeros; conclusions are based only on available non-zero data.

Profitability Analysis

ROE_decomposition: DuPont: Net margin 1.60% × asset turnover 0.509 × financial leverage 1.48 = ROE 1.20%. The primary drag is the low net margin; asset turnover and leverage are moderate and not primary constraints. margin_quality: Gross margin of 38.2% is solid, but operating margin compressed to ~2.5% as operating income fell 19.7% YoY despite 5.8% revenue growth, implying elevated SG&A or limited pricing power on overhead recovery. Ordinary margin is ~2.6% due to positive non-operating items. Net margin at 1.60% remains thin for the sector. operating_leverage: Revenue +5.8% with operating income -19.7% indicates negative operating leverage in the period, suggesting fixed cost absorption challenges and/or higher opex inflation. EBITDA margin at ~5.0% is modest, leaving limited buffer for shocks.

Growth Assessment

revenue_sustainability: Top-line +5.8% YoY suggests stable end-market demand in housing renovation/commercial interiors and possibly product mix upgrades. Sustainability depends on housing starts, renovation activity, and project timing. profit_quality: Ordinary income exceeded operating income due to non-operating gains, while interest burden is minimal (¥13.2m). OCF/NI of 1.77 indicates earnings quality is good, with profits largely cash-backed. outlook: Near-term growth will hinge on cost pass-through, SG&A control, and mix improvement. With a strong balance sheet, TOSO has capacity to invest in efficiency and product development, but restoring operating margin will be critical to re-accelerate earnings growth.

Financial Health

liquidity: Current ratio 266.1% and quick ratio 240.2% indicate very strong short-term liquidity. Working capital is ¥10.293 billion, offering ample cushion for operations and supply chain needs. solvency: Debt-to-equity at 0.50x and interest coverage of 21.2x reflect conservative leverage and low solvency risk. Despite the reported equity ratio being 0.0% (unreported), implied equity ratio is ~67.7% (¥14.839b / ¥21.905b). capital_structure: Assets ¥21.905b funded primarily by equity (implied 68%) with modest liabilities of ¥7.424b. Financial leverage (A/E) at ~1.48 aligns with DuPont, supporting balance sheet resilience.

Cash Flow Quality

earnings_quality: OCF of ¥315.8m vs net income of ¥178.0m (OCF/NI 1.77x) indicates healthy conversion and limited accrual risk in the period. FCF_analysis: Investing cash flow is shown as ¥0 (unreported), so free cash flow cannot be reliably calculated. EBITDA of ¥558.5m suggests internal capacity to fund maintenance capex, but capex levels are not disclosed. working_capital: Inventories of ¥1.604b appear manageable relative to current assets ¥16.492b; the strong liquidity ratios imply no material working capital stress. Detailed receivables/payables turnover data are not disclosed.

Dividend Sustainability

payout_ratio_assessment: Payout ratio shown as 0.0% and DPS ¥0.00 likely reflect non-disclosure at the interim stage. With EPS ¥20.13 for H1, earnings capacity exists, but actual payout policy for the year is not provided. FCF_coverage: Free cash flow is not derivable due to unreported investing cash flows; hence, coverage analysis is inconclusive. OCF generation is positive and comfortably exceeds interest costs. policy_outlook: Given the strong balance sheet and cash generation, the company appears positioned to sustain ordinary dividends when declared, but no interim distribution data are available; final policy will depend on full-year profitability and capex needs.

Risk Assessment

Business Risks:

• Exposure to domestic housing starts and renovation cycles affecting demand for interior fittings/window treatments
• Raw material price volatility (aluminum, steel, resins) impacting margins
• Wage and logistics cost inflation pressuring SG&A and operating margins
• Competitive pricing pressure in building fixtures and interior products
• Product mix shifts toward lower-margin items
• Project timing risk in commercial fit-outs affecting quarterly volatility

Financial Risks:

• Margin compression leading to low ROE despite a strong balance sheet
• Potential increase in working capital needs if demand accelerates
• Non-operating income dependency to bridge operating shortfalls
• Limited operating leverage at current margin levels

Key Concerns:

• Operating income decline (-19.7% YoY) despite sales growth (+5.8% YoY)
• Thin operating margin (~2.5%) and net margin (1.60%)
• Insufficient disclosure on investing cash flows and dividends in the interim period
• Low reported ROE (1.20%) versus sector norms

Investment Implications

Key Takeaways:

• Top-line growth is intact (+5.8% YoY) but profitability has weakened
• Gross margin (38.2%) remains solid; the pressure is at the SG&A/overhead level
• Cash conversion is healthy (OCF/NI 1.77x)
• Balance sheet is strong with implied equity ratio ~67.7% and D/E 0.50x
• ROE is low at 1.20%, highlighting the need for margin recovery
• Interest burden is minimal; interest coverage at 21.2x
• Limited disclosure on capex/FCF and dividends constrains assessment

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio trends
• Gross margin stability and cost pass-through effectiveness
• OCF/NI ratio and working capital turns (inventories, receivables)
• Capex and investing cash flows (to gauge true FCF)
• Revenue growth versus housing/renovation indicators
• ROE trajectory via DuPont components

Relative Positioning: Within Japan’s building fixtures/interior fittings peers, TOSO exhibits a conservative balance sheet and solid gross margins but currently lags on operating margin and ROE; execution on cost control and mix improvement is needed to close the profitability 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
• 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