Meiji Machine Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.28B
• Operating Income: ¥-257M
• Net Income: ¥-296M
• EPS: ¥-8.91

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

For FY2026 Q2, Meiji Machinery Co., Ltd. reported revenue of ¥2,276 million, down 2.8% YoY, indicating a soft top line amid what appears to be a sluggish demand backdrop or delivery timing effects. Gross profit was ¥458 million, yielding a gross margin of 20.1%, which is modest for industrial machinery and suggests limited pricing power or elevated input costs. Operating income was a loss of ¥257 million, implying an operating margin of approximately -11.3%; this reflects a cost base (notably SG&A) that remains too heavy relative to gross profit. Ordinary income improved slightly versus operating income (loss of ¥242 million), indicating small positive non-operating contributions versus interest costs. Net loss narrowed to ¥95 million (+95.1% YoY), implying material below-ordinary improvements (e.g., subsidies, investment gains, or special factors), though the details are not disclosed. EBITDA was negative at ¥204 million, confirming weak operating cash earnings despite positive gross profit. The DuPont breakdown shows a net margin of -4.17%, asset turnover of 0.389x, and financial leverage of 1.99x, resulting in ROE of -3.23%; profitability—not leverage—is the primary drag on returns. Liquidity appears sound with a current ratio of 202% and quick ratio of 194%, supported by substantial working capital of ¥2,454 million. Solvency is moderate with total liabilities to equity at 1.30x and low interest expense (¥6 million), indicating manageable debt service despite losses. Operating cash flow was negative ¥286 million, worse than net income, pointing to working capital outflows and cash conversion challenges in the period. Inventory at ¥209 million (about 4.3% of assets) is comparatively light, suggesting the drag likely came from receivables or lower payables rather than inventory build. Dividend remains suspended (DPS ¥0), appropriate given losses and negative OCF. Revenue contraction alongside operating losses suggests fixed-cost absorption and operating leverage remain unfavorable at current volume levels. The improvement at the net level versus ordinary income implies non-recurring support that may not be repeatable; core earnings remain weak. Asset turnover of 0.389x at the half-year mark is low for a machinery company and underscores utilization issues. Data limitations exist (several items unreported in XBRL, including cash balance, investing CF detail, equity ratio breakdown, shares outstanding), so conclusions focus on the disclosed non-zero metrics and may change with fuller disclosure.

Profitability Analysis

ROE_decomposition: Net profit margin -4.17% × asset turnover 0.389 × financial leverage 1.99 = ROE -3.23%. The negative ROE is driven predominantly by the negative net margin; leverage is not excessive and turnover is subdued. margin_quality: Gross margin 20.1% supports a viable gross profit pool, but SG&A and other operating costs of roughly ¥715 million (calculated as gross profit minus operating income) outstrip the gross profit, resulting in an operating margin of about -11.3%. Ordinary income (-¥242 million) is modestly better than operating income, implying slight non-operating relief, but insufficient to offset core weakness. The positive YoY change in net income contrasts with still-weak operating profitability, suggesting non-recurring or non-core contributions at the bottom line. operating_leverage: With revenue down 2.8% and operating loss at ¥257 million, fixed-cost absorption remains unfavorable. The scale is insufficient to cover operating expenses, implying high operating leverage: small revenue shortfalls disproportionately depress operating income.

Growth Assessment

revenue_sustainability: Revenue declined 2.8% YoY to ¥2,276 million, indicating soft demand or project phasing. Asset turnover of 0.389x (half-year basis) remains low, suggesting underutilization or delivery delays. profit_quality: Net loss narrowed to ¥95 million while operating and ordinary losses persisted, implying the improvement at the bottom line may stem from non-core or non-recurring items. EBITDA at -¥204 million signals weak core earning power. outlook: Absent evidence of margin mix improvements or cost restructuring, a return to operating profitability requires either a meaningful revenue inflection or further SG&A discipline. Sustainability of net improvement is uncertain without confirmation of recurring drivers (e.g., backlog conversion, structural cost reductions).

Financial Health

liquidity: Current ratio 202.4% and quick ratio 193.7% indicate ample short-term liquidity. Working capital stands at ¥2,454 million, with inventories relatively low (¥209 million). solvency: Total liabilities/ equity is 1.30x and financial leverage 1.99x; interest expense is modest at ¥5.98 million with EBIT interest coverage at about -43x (loss-making). While leverage is moderate, persistent operating losses could erode equity over time. capital_structure: Total assets ¥5,854 million vs. total equity ¥2,941 million. Detailed debt mix (short vs. long-term interest-bearing) is not disclosed; interest burden appears light, implying limited financial risk today but reliance on continued liquidity management.

Cash Flow Quality

earnings_quality: Operating CF of -¥286 million vs. net loss of -¥95 million yields an OCF/NI ratio of 3.01 (both negative), indicating cash outflow exceeded the accounting loss—weak cash conversion. FCF_analysis: Investing CF is unreported (shown as 0), preventing a reliable free cash flow calculation; the provided FCF figure of 0 should be treated as undisclosed rather than true zero. Given negative OCF, underlying FCF was likely negative absent asset sales or subsidies. working_capital: Inventory is low relative to assets, so OCF weakness likely reflects receivables growth or payables reduction (specific movements not disclosed). Monitoring collection cycles and order billing terms is critical.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 with a reported payout ratio of 0.0%, consistent with losses (EPS -¥8.91). With negative OCF, distributions would not be covered by internal cash generation. FCF_coverage: Reported FCF coverage of 0.00x is not meaningful due to unreported investing cash flows. Practically, dividends are not supported until OCF turns sustainably positive. policy_outlook: Suspension is prudent while operating losses persist. Resumption likely requires demonstrable turnaround in operating margin and cash conversion.

Risk Assessment

Business Risks:

• Demand cyclicality in industrial/processing machinery leading to volatile order intake and delivery timing.
• High operating leverage with fixed-cost base exceeding current gross profit, magnifying earnings sensitivity to revenue.
• Pricing pressure and input cost inflation compressing gross margin (20.1% is not ample for loss absorption).
• Execution risk on project delivery and receivables collection affecting cash conversion.
• Potential reliance on non-operating or non-recurring items to support net income.

Financial Risks:

• Negative operating cash flow (-¥286 million) increasing dependence on working capital management and external financing.
• Erosion of equity if losses persist, pressuring solvency over time (liabilities/equity 1.30x).
• Limited visibility on cash balance, capex, and debt maturities due to unreported items.
• Interest coverage negative on an EBIT basis, leaving less room for rate or earnings shocks.

Key Concerns:

• Core operating loss (-¥257 million) despite positive gross profit.
• Weak cash conversion with OCF more negative than net income.
• Uncertain sustainability of the improved net result given ongoing operating and ordinary losses.

Investment Implications

Key Takeaways:

• Top line contracted 2.8% YoY, and operating margin remained deeply negative at -11.3%.
• ROE of -3.23% is driven by weak profitability; leverage is moderate and not the main issue.
• Liquidity is adequate (current ratio ~2.0x), but negative OCF highlights cash discipline needs.
• Net loss narrowed to ¥95 million, likely aided by non-operating factors; core earnings remain weak.
• Operating leverage is unfavorable at current volumes; either revenue recovery or cost restructuring is required.

Metrics to Watch:

• Order intake and backlog conversion to revenue (to improve asset turnover).
• Gross margin trajectory and SG&A as a percentage of sales.
• Operating cash flow and working capital days (DSO/DPO/DIO).
• Capex and investing cash flows (currently unreported) to assess true FCF.
• Interest-bearing debt levels, maturity profile, and covenants.
• Any recurring vs. one-off items affecting net income.

Relative Positioning: Versus domestic small/mid-cap industrial machinery peers, the company shows weaker operating profitability and cash conversion but maintains acceptable liquidity and moderate leverage; execution on cost discipline and backlog monetization is needed to close the performance 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
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