KANEFUSA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥9.78B
• Operating Income: ¥435M
• Net Income: ¥39M
• EPS: ¥21.57

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

Kanefusa Co., Ltd. (TSE:5984) reported FY2026 Q2 (cumulative) results showing resilient profitability despite a soft top line. Revenue declined 2.9% YoY to ¥9.78bn, but operating income rose 10.3% YoY to ¥0.44bn, indicating successful cost control and/or favorable mix and pricing. Gross profit was ¥2.97bn with a 30.3% margin, evidencing improved margin quality versus the revenue contraction. EBITDA reached ¥1.33bn (13.6% margin), highlighting substantial non-cash depreciation of ¥0.90bn that depresses operating profit but not cash generation. Net income jumped to ¥0.30bn (+659.6% YoY), reflecting a very low prior-year base and improved non-operating balance, though the net margin remains modest at 3.06%. DuPont decomposition yields ROE of 1.01%, with low asset turnover (0.266x) and moderate leverage (1.25x) being the main constraints on equity returns. Liquidity is exceptionally strong: current ratio 527.3%, quick ratio 436.5%, and working capital of ¥16.40bn. The balance sheet is conservatively structured; the derived equity ratio is approximately 80.2% (¥29.46bn equity / ¥36.72bn assets), even though the disclosed equity ratio field shows 0.0% due to data non-disclosure. Operating cash flow was robust at ¥1.50bn, translating to an OCF/Net Income of 5.03x, signaling high cash earnings quality in the period. Interest coverage is comfortable at 10.0x, and debt-to-equity is low at 0.27x, underscoring limited solvency risk. Investing and cash balances were not disclosed in XBRL (displayed as 0), so free cash flow and cash runway cannot be conclusively assessed; financing CF was a net inflow of ¥1.66bn, but composition (debt/dividends/treasury) is not provided. The effective tax rate appears normal when inferred from reported income tax expense versus profit before tax, despite the calculated figure field showing 0.0% due to missing inputs. Overall, the company demonstrates solid margin resilience, strong cash conversion, and a very strong financial position, with the main structural headwinds to ROE being low asset turnover and high depreciation burden. Near-term outlook depends on demand trends in core end-markets (woodworking, industrial tools), price-cost dynamics for steel and energy, and FX. Given the missing disclosures (Investing CF, cash, DPS, share count details), conclusions on capital returns and FCF coverage must be qualified. Nonetheless, the reported figures suggest ample capacity to fund operations and maintain a conservative balance sheet, even in a soft revenue environment.

Profitability Analysis

roe_decomposition: DuPont ROE = Net margin (3.06%) × Asset turnover (0.266x) × Financial leverage (1.25x) = 1.01%. The primary drag is low asset turnover for a capital-intensive tool/blade manufacturer, with moderate leverage providing little ROE amplification by design. margin_quality: Gross margin at 30.3% on ¥2,966.9m gross profit improved relative to the top-line decline, implying effective pricing/mix and/or input cost relief. Operating margin is 4.45% (¥435.0m/¥9,777.0m). EBITDA margin at 13.6% reflects heavy depreciation (¥895.1m), suggesting an asset base with significant past capex; this supports cash margins but caps accounting ROIC/ROE. operating_leverage: Despite a 2.9% revenue decline, operating income rose 10.3% YoY, indicating positive operating leverage achieved via fixed-cost containment and/or a richer mix. The gap between gross margin and operating margin (25.8pp) indicates room for SG&A efficiency gains. Interest expense of ¥43.7m is manageable, enabling most operating gains to flow through to ordinary income.

Growth Assessment

revenue_sustainability: Revenue decreased 2.9% YoY to ¥9.78bn, pointing to softer demand in key end-markets or FX headwinds. The decline appears manageable and not indicative of structural share loss based on the modest magnitude. profit_quality: Net income rose sharply (+659.6% YoY) from a low base, but core signals are EBITDA growth and stable margins. The net margin of 3.06% remains modest; however, the large OCF/NI (5.03x) indicates earnings are backed by cash in this half. outlook: Near-term trajectory hinges on order intake in woodworking and industrial cutting tools, FX (export exposure), and input costs (steel/energy). If pricing discipline and mix hold, operating margin could remain resilient even on flat-to-soft volumes; however, a rebound in volumes is needed to lift ROE given the low asset turnover.

Financial Health

liquidity: Current ratio 527.3% and quick ratio 436.5% indicate ample liquidity. Working capital stands at ¥16.40bn (Current assets ¥20.23bn minus current liabilities ¥3.84bn). Cash and equivalents were not disclosed (shown as 0), so absolute cash runway cannot be quantified from the dataset. solvency: Debt-to-equity is a low 0.27x, and interest coverage is 10.0x, indicating low financial risk. Total equity is ¥29.46bn against total assets of ¥36.72bn, implying an equity ratio of ~80.2% (derived), notwithstanding the reported 0.0% field. capital_structure: Leverage is intentionally conservative (financial leverage 1.25x), limiting downside risk but also constraining ROE. Positive financing CF of ¥1.66bn suggests capital structure actions (details undisclosed) during the period.

Cash Flow Quality

earnings_quality: Operating cash flow of ¥1,505.0m vs net income of ¥299.0m (OCF/NI 5.03x) indicates strong cash conversion, likely aided by working capital inflows and substantial non-cash depreciation (¥895.1m). fcf_analysis: Free cash flow cannot be determined because investing cash flows were not disclosed (reported as 0). Given the depreciation level, maintenance capex is likely meaningful; true FCF may be materially lower than OCF. working_capital: Inventories are ¥3,483.9m within current assets of ¥20,233.3m; the strong OCF suggests either inventory discipline or receivables collection improvements, but component movements are not provided. Monitoring inventory turns and receivables days is important for sustainability.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio fields show 0.00 but are undisclosed rather than true zero. With EPS of ¥21.57 for the period, an assessment of payout requires the actual dividend policy disclosure. fcf_coverage: FCF coverage cannot be evaluated because investing CF is not disclosed; OCF is strong, but capex needs relative to depreciation are unknown. policy_outlook: Given low leverage and strong liquidity, the company appears to have capacity for stable shareholder returns in principle; however, without disclosed DPS and investing CF, visibility on dividend sustainability is limited.

Risk Assessment

Business Risks:

• Demand cyclicality in woodworking, construction, and industrial end-markets affecting volumes and utilization
• Raw material (steel) and energy cost volatility impacting gross margins
• FX fluctuations affecting export competitiveness and translated earnings
• Competitive pricing pressure in cutting tools and industrial blades
• Customer concentration risk with OEMs or large distributors
• Product mix shifts requiring ongoing R&D and precision manufacturing investment

Financial Risks:

• High depreciation indicates ongoing capex needs; FCF may lag OCF if reinvestment intensity is high
• Potential inventory and receivables build if demand weakens, straining cash conversion
• Limited ROE due to low asset turnover and conservative leverage, potentially weighing on capital efficiency
• Uncertainty around financing CF composition (debt changes, dividends, or buybacks) given disclosure gaps

Key Concerns:

• Low asset turnover (0.266x) constrains ROE despite healthy margins
• Investing cash flows and cash balance not disclosed, creating uncertainty around true FCF and liquidity buffers
• Revenue softness (-2.9% YoY) could persist if macro and end-market conditions remain weak

Investment Implications

Key Takeaways:

• Operating resilience: operating income +10.3% YoY on -2.9% revenue showcases cost control and mix benefits
• Strong cash earnings: OCF ¥1.50bn and OCF/NI 5.03x indicate high cash conversion this half
• Robust balance sheet: low leverage (0.27x D/E), high liquidity (current ratio 527%) and implied equity ratio ~80%
• ROE remains low at 1.01% due to low asset turnover and modest net margin
• Disclosure gaps (Investing CF, cash, DPS) limit precision on FCF and capital returns

Metrics to Watch:

• Order intake and book-to-bill in core tool/blade segments
• Operating margin and EBITDA margin trajectory vs input cost trends
• Inventory turns and receivable days; OCF/NI ratio sustainability
• Capex vs depreciation to gauge maintenance vs growth spend and true FCF
• FX sensitivity and overseas sales mix
• Asset turnover improvement initiatives (capacity utilization, yield, and mix)

Relative Positioning: Compared with domestic precision tool and industrial component peers, Kanefusa exhibits a stronger balance sheet and cash conversion but lower capital efficiency (ROE/asset turnover), implying defensive financial strength with moderate profitability.

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