Kanesou Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.89B
• Operating Income: ¥327M
• Net Income: ¥240M
• EPS: ¥168.93

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

Kanesou Co., Ltd. (TSE:5979, non-consolidated, JGAAP) posted FY2026 Q2 cumulative results with revenue of ¥3,894 million (-0.1% YoY), indicating flat demand conditions. Gross profit was ¥1,375 million, yielding a solid gross margin of 35.3%. Operating income declined to ¥327 million (-11.6% YoY), pointing to margin compression and negative operating leverage. Ordinary income of ¥340 million exceeded operating income due to modest non-operating gains and low interest burden, while net income came in at ¥240 million (-8.5% YoY). Net margin was 6.16%, and operating margin 8.4%, implying tighter SG&A or input cost pressure versus the prior year. DuPont decomposition indicates ROE of 1.57% driven by a modest net margin (6.16%), low asset turnover (0.225x), and conservative leverage (assets/equity 1.13x). The balance sheet is very conservative: total liabilities of ¥2,323 million against equity of ¥15,307 million (D/E ≈0.15x), and current assets of ¥11,795 million versus current liabilities of ¥1,056 million (current ratio ≈11.2x). Interest expense was only ¥7.8 million with interest coverage at 42.1x, indicating ample buffer. Using a simple pre-tax proxy (net income + income tax), the effective tax rate is approximately 31.9%—consistent with a standard domestic tax load—although this assumes no material extraordinary items. Cash flow statement items, cash and equivalents, and inventories were not disclosed in the XBRL (reported as 0), limiting cash flow and working capital diagnostics. Dividend per share and payout ratio were also not disclosed; thus dividend capacity and policy adherence cannot be confirmed from this filing. EPS of ¥168.93 for the period suggests reasonable earnings power for a single-entity filer, albeit with margin headwinds. Overall, the company demonstrates strong balance sheet health and stable top-line trends but weaker operating leverage in the half year. The quality of earnings cannot be validated via operating cash flow due to non-disclosure. Key watch items include cost pass-through, SG&A control, and any update on dividend policy and cash flows. Data limitations restrain full assessment, but available figures point to a low-risk balance sheet supporting ongoing operations despite profitability pressure.

Profitability Analysis

ROE_decomposition: ROE 1.57% = Net margin 6.16% × Asset turnover 0.225 × Financial leverage 1.13. The low asset turnover and conservative leverage cap ROE despite a mid-single-digit net margin. margin_quality: Gross margin is 35.3%, operating margin 8.4%, ordinary margin 8.7%, and net margin 6.16%. The YoY decline in operating income (-11.6%) versus flat revenue (-0.1%) suggests SG&A inflation and/or incomplete cost pass-through. The small spread from operating to ordinary income indicates limited non-operating drag; interest burden is minimal. operating_leverage: Negative operating leverage is evident: a marginal revenue decline translated into a larger operating income decline, implying relatively high fixed cost content and/or short-term inefficiencies. Monitoring utilization, product mix, and pricing power will be key to restoring operating leverage.

Growth Assessment

revenue_sustainability: Revenue was essentially flat YoY (-0.1%), indicating stable end-market demand but limited growth momentum in the half year. profit_quality: Ordinary income slightly above operating income and strong interest coverage indicate clean non-operating items. However, margin compression suggests rising costs or mix headwinds. Effective tax rate is estimated at ~31.9% using (tax expense)/(net income + tax), assuming no major extraordinary items. outlook: With topline holding steady but margins compressing, near-term growth depends on cost normalization and price discipline. The conservative balance sheet provides flexibility, but absent disclosure on cash flows and inventories, visibility on execution improvements and working capital dynamics is limited.

Financial Health

liquidity: Current assets ¥11,795 million vs current liabilities ¥1,056 million; current ratio ~11.2x and working capital ~¥10,740 million indicate very strong liquidity. Quick ratio approximates the current ratio because inventories were not disclosed. solvency: Total liabilities ¥2,323 million vs equity ¥15,307 million; debt-to-equity ~0.15x denotes low leverage. Interest coverage is 42.1x (operating income/interest), highlighting ample headroom. capital_structure: Assets/equity 1.13x signals a highly equity-financed structure. The low leverage constrains ROE but enhances resilience.

Cash Flow Quality

earnings_quality: Operating cash flow, investing cash flow, financing cash flow, and cash balance were not disclosed (reported as 0). Therefore, we cannot reconcile earnings to cash or assess accrual intensity. FCF_analysis: Free cash flow cannot be computed due to missing OCF and capex data. Depreciation was not disclosed; EBITDA therefore cannot be reliably assessed. working_capital: Inventories and detailed receivables/payables data were not disclosed, preventing assessment of inventory turnover, collection cycles, or payables discipline. The large working capital surplus is supportive, but quality is unverified without cash flow detail.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio were not disclosed in this filing. With net income of ¥240 million in the half year, capacity for shareholder returns cannot be evaluated quantitatively without DPS and share count. FCF_coverage: FCF coverage of dividends cannot be assessed because OCF and capex were not reported. policy_outlook: No update on dividend policy is inferable from the data. Future distributions will depend on profitability stabilization and cash generation; disclosure of cash balances and OCF will be key.

Risk Assessment

Business Risks:

• Demand cyclicality in construction and building-related end markets
• Raw material cost volatility (e.g., steel, metals) pressuring margins
• Pricing power constraints amid competitive landscape
• Product mix shifts reducing gross margin
• Supply chain and procurement disruptions affecting lead times and costs
• Labor and logistics cost inflation impacting SG&A

Financial Risks:

• Potential working capital swings not visible due to non-disclosure of inventories and cash flow
• Limited interest rate sensitivity but possible refinancing risk on a small debt base
• Concentration risks (customers or products) not assessable from single-entity reporting

Key Concerns:

• Negative operating leverage in FY2026 Q2 despite flat revenue
• Margin compression at the operating line
• Lack of cash flow and inventory disclosure limiting earnings quality assessment
• Non-consolidated basis may obscure group-level dynamics if applicable

Investment Implications

Key Takeaways:

• Revenue broadly flat but operating income declined 11.6% YoY, indicating margin pressure
• Strong balance sheet with D/E ~0.15x and interest coverage 42x
• ROE of 1.57% constrained by low asset turnover and conservative leverage
• Earnings quality and FCF cannot be validated due to missing cash flow disclosures
• Tax rate appears standard (~32%) based on available data

Metrics to Watch:

• Gross and operating margin progression (price vs. cost spread)
• Operating cash flow and capex once disclosed
• Working capital components (inventories, receivables, payables) and turnover
• Order backlog and pricing actions to gauge demand and pass-through
• Any update on dividend policy and DPS

Relative Positioning: Compared to typical TSE industrial/component peers, Kanesou exhibits stronger balance sheet conservatism and liquidity, but lower ROE stemming from subdued asset turnover and margin compression in the half year.

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