FUJISHOJI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥8.85B
• Operating Income: ¥-3.75B
• Net Income: ¥-3.00B
• EPS: ¥-143.31

Income Statement

Balance Sheet

Cash Flow Statement

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

FY2026 Q2 was a weak quarter for Fujishoji, marked by a sharp revenue contraction and deep operating losses despite a still-solid balance sheet. Revenue fell 64.8% YoY to 88.51, while operating income deteriorated to -37.53 and ordinary income to -36.21, culminating in net income of -29.97. Gross profit of 39.93 implies a gross margin of 45.1%, but heavy SG&A of 77.47 (about 87.6% of sales) drove an operating margin of -42.4% and an EBITDA margin of -31.8%. Non-operating income was small at 1.41 (mainly dividends 0.85), not enough to offset the operating shortfall. On margins, the gross margin is healthy this quarter at 45.1%, but the operating margin compressed to -42.4%; while YoY basis-point comparisons are not disclosed, directionally both operating and net margins worsened given the larger losses on a much smaller revenue base. The ROE calculated via DuPont was -6.8%, driven primarily by a negative net margin (-33.9%) and very low asset turnover (0.175), with only modest leverage (1.15x). Cash flow was notably weak: operating cash flow came in at -54.00, materially worse than accounting loss (OCF/NI is 1.80x but both are negative), signaling cash burn from operations. Liquidity remains ample with cash and deposits of 148.79, a current ratio of 555.5%, and working capital of 235.55, cushioning near-term stress. The balance sheet is conservative with total liabilities of 67.15 and equity of 438.83 (D/E 0.15x), providing resilience despite poor earnings. Capex was modest at 5.18 and financing cash flow was -6.33, suggesting limited external funding needs this quarter. Investment securities are sizable at 107.43, adding potential valuation volatility but also optionality. Effective tax rate was 16.4% despite a loss, reflecting tax effects rather than cash taxes. ROIC printed -10.8%, signaling poor capital efficiency in the period. With significant cash, low leverage, and high retained earnings (339.63), financial flexibility is intact; however, sustained losses will pressure dividend capacity and capital allocation. Near-term outlook hinges on the launch cadence and hit-rate of new pachinko/pachislot titles and market demand normalization; visibility remains low given the steep sales decline.

Profitability Analysis

ROE decomposition: ROE (-6.8%) = Net Profit Margin (-33.9%) × Asset Turnover (0.175) × Financial Leverage (1.15x). The largest negative driver is the net profit margin, reflecting a deep operating loss (operating margin -42.4%) due to SG&A (77.47) overwhelming gross profit (39.93). Asset turnover is also weak at 0.175, indicating low sales relative to the asset base (assets 505.98), consistent with a demand trough and light product cycle. The business reason is sharp revenue contraction (-64.8% YoY) likely tied to the hit-driven nature of the amusement machine market and regulatory-constrained replacement cycles. Leverage is low (1.15x), so capital structure is not amplifying returns nor losses meaningfully. Sustainability: the margin compression appears cyclical rather than structural if new titles ramp, but absent a clear pipeline recovery, current margins are not sustainable. Watch for SG&A discipline: SG&A at 87.6% of sales implies negative operating leverage; if SG&A growth (not disclosed) outpaces revenue, profitability will remain constrained. Gross margin at 45.1% indicates pricing/mix is not the core problem; scale and fixed cost absorption are. Non-operating income (1.41) is too small to buffer operating volatility and includes dividend income (0.85), which is recurring but not large.

Growth Assessment

Top-line collapsed by 64.8% YoY to 88.51, signaling a severe downturn in unit shipments or weaker title performance. Profitability followed revenue down, with operating income at -37.53 and net income at -29.97, pointing to strong negative operating leverage. Gross margin remains decent at 45.1%, implying that pricing/mix or cost of goods did not deteriorate drastically; the issue is scale. Non-operating items were modestly positive and did not change the trajectory. Near-term growth sustainability hinges on the launch cycle, acceptance of new machines by pachinko halls, and regulatory/payout environment; no quantitative backlog or pipeline disclosures were provided. With asset turnover at 0.175, there is significant headroom if sales normalize, but visibility is limited. Absent evidence of a robust release slate, sequential recovery cannot be assumed. We will monitor whether H2 sees seasonal/title-driven uplift typical in this industry.

Financial Health

Liquidity is strong: current assets 287.26 vs current liabilities 51.71 yield a current ratio of 555.5% and a quick ratio of 540.6%. No warning for current ratio (<1.0) or D/E (>2.0); D/E is a low 0.15x. Cash and deposits of 148.79 provide ample runway to absorb interim losses. Working capital is 235.55, and payables (33.91) are well covered by receivables (28.49) plus cash. Maturity mismatch risk appears low given minimal disclosed debt and high liquid assets; however, interest-bearing debt details are unreported, so a full maturity profile assessment is not possible. Off-balance sheet obligations are not disclosed in the provided data.

Cash Flow Quality

OCF was -54.00 versus net income of -29.97, resulting in an OCF/NI ratio of 1.80x; while the ratio is above the 0.8 threshold, both figures are negative, indicating poor cash earnings quality and working capital/cash burn pressure. Depreciation was 9.40, implying EBITDA of -28.13, which reconciles to the negative OCF when factoring working capital outflows and other non-cash items, though the detailed drivers are undisclosed. Free cash flow cannot be fully computed given missing investing CF, but capex was modest at 5.18; if we simplistically consider OCF minus capex, implied FCF would be approximately -59.18, indicating insufficient internal funding for dividends or buybacks without drawing on cash. Signs of working capital manipulation are not evident from levels alone: AR days are roughly ~58 days (28.49 on 88.51 half-year sales), inventory days ~29 (7.72 on 48.57 half-year COGS), and payable days ~126 (33.91 on 48.57), suggesting heavy supplier financing; however, period-to-period changes are unavailable, limiting conclusions.

Dividend Sustainability

Dividend disclosures are unreported for the period, and the calculated payout ratio of -42.0% is not economically meaningful given a net loss. With OCF at -54.00 and implied negative FCF, current-period cash generation does not cover any potential dividend outlay. That said, balance sheet capacity exists: cash of 148.79 and retained earnings of 339.63 could support modest distributions temporarily. Sustainability depends on a near-term earnings rebound; persistent operating losses would argue for dividend restraint or a policy revision. Without confirmed DPS or total dividends paid, we cannot assess FCF coverage quantitatively.

Risk Assessment

Business Risks:

• Hit-product risk: reliance on successful pachinko/pachislot titles; large revenue swings (-64.8% YoY) highlight volatility.
• Regulatory risk: changes in gaming machine regulations and certification cycles can delay launches and constrain demand.
• Channel risk: pachinko hall investment appetite can tighten in weak macro or after regulatory changes.
• Execution risk: high SG&A burden (87.6% of sales) requires strict cost control to restore profitability.

Financial Risks:

• Cash burn risk: OCF -54.00 with negative EBITDA (-28.13) increases dependency on cash reserves.
• Valuation risk on investment securities: sizeable balance (107.43) exposes to mark-to-market fluctuations and dividend variability.
• Concentration risk: limited non-operating buffer (non-operating income 1.41) to offset operating losses.
• Potential maturity/profile opacity: interest-bearing debt breakdown unreported, limiting visibility on refinancing needs.

Key Concerns:

• ROIC at -10.8% signals poor capital efficiency and risk of value erosion if weak conditions persist.
• Asset turnover at 0.175 indicates underutilized assets amid demand slump.
• Operating margin at -42.4% implies severe negative operating leverage.
• Sustained losses could pressure dividend policy despite strong liquidity.

Investment Implications

Key Takeaways:

• Severe top-line decline (-64.8% YoY) drove deep operating and net losses despite a still-solid gross margin (45.1%).
• Cost base remains heavy: SG&A at 87.6% of sales led to an operating margin of -42.4% and EBITDA margin of -31.8%.
• Balance sheet strength (cash 148.79, current ratio 555.5%, D/E 0.15x) provides a cushion to navigate the downturn.
• Cash flow burn is material (OCF -54.00), implying limited capacity for shareholder returns without recovery.
• ROE (-6.8%) and ROIC (-10.8%) reflect depressed profitability and capital inefficiency in the period.

Metrics to Watch:

• Quarterly unit shipments and new title launch schedule (pipeline visibility).
• SG&A trajectory and fixed-cost reduction initiatives.
• Order backlog or booking indicators from pachinko halls.
• Working capital trends (AR, inventory, and payable movements) and OCF recovery.
• Investment securities income/valuation sensitivity and any asset disposals.

Relative Positioning: Within Japan’s amusement machine manufacturers, Fujishoji currently appears in a cyclical trough with weaker scale utilization and profitability versus periods of successful title cycles. Its balance sheet is stronger than earnings would suggest, offering resilience, but operational momentum and cash generation lag peers that have active hit titles.

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