TAKAMATSU MACHINERY CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.10B
• Operating Income: ¥-188M
• Net Income: ¥-271M
• EPS: ¥-25.13

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

Verdict: FY2026 Q2 was weak operationally with a swing to operating and net loss, offset by unusually strong operating cash flow driven by working-capital release. Revenue declined 5.5% YoY to 60.96, indicating a soft machine tool demand backdrop. Gross profit was 14.92 with a gross margin of 24.5%, while SG&A was 16.81 (27.6% of sales), resulting in an operating loss of -1.88 and an operating margin of -3.1%. Ordinary income deteriorated to -2.36, as non-operating expenses (0.96) outweighed non-operating income (0.49), including dividend income of 0.08 and interest income of 0.09. Net income was -2.70 (EPS -25.13 yen), and total comprehensive income was -4.84, implying additional OCI headwinds (likely securities/FX-related) beyond the P&L. Margin mix shows the SG&A-to-sales ratio exceeds gross margin by roughly 313 bps (27.6% vs 24.5%), explaining the operating loss; YoY margin change in basis points cannot be quantified due to missing prior-period margin disclosure. EBITDA was barely positive at 0.24 (0.4% margin), with depreciation and amortization of 2.12 consuming operating cash earnings capacity. Despite losses, operating cash flow was robust at 16.51, diverging sharply from net income (OCF/NI -6.11x), indicating sizable working-capital inflows (likely receivables collection and/or inventory reduction) rather than improved underlying profitability. Liquidity remains very strong: cash and deposits at 64.64 and a current ratio of 381%, with net cash position against interest-bearing loans (short 6.90, long 6.42) implying low refinancing risk. Solvency is conservative with total liabilities of 48.31 vs equity of 157.48 (approx. liabilities/equity 0.31x), though ROIC at -1.8% highlights weak capital efficiency in the current downcycle. ROE was -1.7% derived from a negative net margin (-4.4%), low asset turnover (0.296x), and modest leverage (1.31x). Interest coverage on an EBIT basis is -26.9x, underscoring that current operating earnings do not cover interest expense; the cushion is provided by cash rather than income. With revenue soft and SG&A heavy, near-term profitability hinges on volume recovery, product mix, and cost control. The strong cash flow this quarter improves flexibility but may not be recurring if driven by one-time working-capital normalization. Forward-looking, the company must restore gross margin and right-size SG&A to return to positive operating margin; otherwise, ROIC and ROE will remain below acceptable thresholds. Data gaps (no YoY operating line items, investing CF, dividends) limit precision, but the balance sheet provides ample runway for restructuring through the cycle.

Profitability Analysis

DuPont (ROE = Net Profit Margin × Asset Turnover × Financial Leverage): ROE -1.7% = (-4.4%) × 0.296 × 1.31. The primary driver of weak ROE is the negative net profit margin; asset turnover is low, consistent with a downcycle and high asset base, while leverage is modest and not amplifying returns. The biggest change driver vs a typical profitable period is the margin turning negative due to SG&A (27.6% of sales) exceeding gross margin (24.5%), leading to an operating margin of -3.1%. Business reason: softer demand (revenue -5.5% YoY) pressured capacity utilization and pricing, while fixed SG&A did not adjust quickly, and non-operating net expense (-0.47) further weighed on ordinary income. Sustainability: the negative margin appears cyclical rather than structural if demand rebounds; however, absent volume recovery or SG&A reduction, losses could persist. Concerning trends include: SG&A intensity is high relative to gross margin; EBITDA barely positive (0.24) vs D&A 2.12 indicates under-earning assets; and non-operating drag offsetting small financial income. Operating leverage is currently unfavorable: each incremental yen of revenue shortfall flows through at a high rate due to fixed costs, amplifying losses.

Growth Assessment

Top-line contracted 5.5% YoY to 60.96, consistent with a softer machine tool investment environment. Revenue sustainability near term is uncertain given cyclical end-markets (automotive, general machinery) and global capex hesitancy; no order/backlog disclosures provided to gauge visibility. Profit quality is weak: gross margin of 24.5% is insufficient against SG&A 27.6%, pushing operating margin to -3.1%. EBITDA margin (0.4%) suggests minimal operating cash earnings before D&A; improvement requires both mix/volume rebound and cost discipline. Non-operating items netted -0.47, implying limited cushion from financial/other income. ROIC at -1.8% is below the 5% warning threshold, implying value dilution unless the cost of capital falls or margins normalize. Outlook: watch for stabilization in orders, utilization, and pricing; a modest recovery in revenue combined with SG&A restraint could quickly swing operating margin positive given high operating leverage. In the absence of revenue recovery, structural cost actions will be necessary to restore breakeven.

Financial Health

Liquidity is strong: current assets 123.43 vs current liabilities 32.37 yields a current ratio of 381% and a quick ratio of 346%; no warning on current ratio (<1.0) applies. Cash and deposits of 64.64 comfortably exceed short-term loans (6.90), reducing maturity mismatch risk; receivables (12.41) and inventories (11.55) provide additional coverage. Solvency is conservative: total liabilities 48.31 vs equity 157.48 (approx. liabilities/equity 0.31x); interest-bearing loans total 13.32, implying net cash of about 51.3. There is no indication of off-balance sheet obligations in the provided data. However, earnings-based interest coverage is weak (EBIT/interest -26.9x), so the firm relies on cash reserves rather than ongoing earnings to service debt in the short term.

Cash Flow Quality

OCF was 16.51 versus net income -2.70, producing an OCF/NI of -6.11x. While this trips a mechanical quality flag, the interpretation here is that cash generation was strong despite an accounting loss, likely due to working-capital release (collections and/or inventory reductions) and non-cash D&A of 2.12. Free cash flow (strict) cannot be fully computed due to missing investing cash flows; a proxy FCF (OCF minus reported capex 0.81) would be about 15.7, comfortably positive, but this excludes other investing items (e.g., securities, M&A). Sustainability is uncertain: if OCF strength stems from one-time working-capital normalization, it may not recur in subsequent quarters, especially if sales stabilize and inventories/receivables rebuild. No clear signs of working-capital manipulation can be assessed without period-to-period deltas, but the magnitude of OCF versus loss warrants monitoring for reversals.

Dividend Sustainability

Dividend data are unreported; the calculated payout ratio (-40.8%) is not economically meaningful due to a net loss. Capacity to sustain a dividend, if any, rests on cash and OCF: cash 64.64 and proxy FCF ~15.7 suggest room for distributions in the short term, even amid losses. Balance sheet strength (low leverage, ample liquidity) supports flexibility; however, ongoing negative EBIT and ROIC (-1.8%) argue for caution, as sustained payouts would increasingly depend on cash reserves and working-capital inflows rather than recurring earnings. Policy outlook cannot be inferred from the data; monitor management guidance and any announced DPS targets.

Risk Assessment

Business Risks:

• Cyclical demand weakness in machine tools leading to underutilization and pricing pressure
• High operating leverage with SG&A exceeding gross margin, prolonging losses at current volume
• Product mix and geographic exposure risks amid soft capex in key end markets (auto/general machinery)
• Dependence on recovery in orders/backlog without disclosed visibility
• FX volatility impacting export competitiveness and yen-based costs/revenues

Financial Risks:

• Negative EBIT results in poor interest coverage (-26.9x), increasing reliance on cash to service debt
• Potential reversal of working-capital-driven OCF in subsequent periods
• Inventory obsolescence risk if demand remains weak
• ROIC (-1.8%) below cost of capital, implying value erosion if not corrected

Key Concerns:

• Operating margin -3.1% with SG&A ratio 27.6% vs gross margin 24.5%
• EBITDA only 0.24 against D&A 2.12, indicating under-earning asset base
• Total comprehensive loss -4.84 suggests additional OCI headwinds beyond the P&L
• Data gaps (investing CF, dividends, segment/orders) limit visibility and forecasting precision

Investment Implications

Key Takeaways:

• Revenue down 5.5% YoY and margins negative; operating loss of -1.88
• Strong OCF (16.51) likely driven by working-capital release rather than core profitability
• Liquidity is ample (current ratio 381%, net cash position) mitigating near-term financial stress
• ROE -1.7% and ROIC -1.8% flag poor capital efficiency in the current downcycle
• SG&A intensity (27.6% of sales) is the key swing factor for returning to breakeven

Metrics to Watch:

• Order intake, book-to-bill, and backlog trajectory
• Gross margin progression and pricing/mix
• SG&A as a percent of sales and fixed cost actions
• OCF versus working-capital changes (AR, inventory, AP turnover)
• EBITDA margin recovery relative to D&A
• FX rate movements and hedging impacts
• Capex discipline and any non-core investment outflows

Relative Positioning: Within domestic machine tool peers, the company currently exhibits weaker profitability (negative operating and net margins, minimal EBITDA) but a stronger liquidity buffer (high cash, low leverage). Operating leverage is high, so modest volume recovery could drive outsized profit improvement; conversely, prolonged demand softness would keep ROIC and ROE below peers focused on higher-margin niches.

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