TOKYO KIKAI SEISAKUSHO,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.64B
• Operating Income: ¥-222M
• Net Income: ¥113M
• EPS: ¥-31.18

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

Tokyo Kikai Seisakusho (6335) reported FY2026 Q2 consolidated results under JGAAP showing a weak operating profile amid a sharp top-line contraction and significant cash outflows from operations. Revenue was ¥2.643bn, down 28.0% YoY, with gross profit of ¥827m, implying a gross margin of 31.3%. Operating loss narrowed to ¥222m (−35.6% YoY), and ordinary loss was ¥188m, indicating modest non-operating gains relative to operating losses. Net loss was ¥251m (EPS −¥31.18), placing pressure on retained earnings, though the balance sheet remains relatively solid. DuPont metrics indicate ROE of −2.78% (Net margin −9.50%, asset turnover 0.170x, financial leverage 1.72x), highlighting structurally low asset efficiency as a major drag alongside negative margins. EBITDA was −¥149m with an EBITDA margin of −5.6%, reflecting insufficient gross profit to cover SG&A. Based on gross profit and operating loss, SG&A is inferred at roughly ¥1.05bn (about 39.7% of sales), signaling heavy overheads versus current scale. Despite a reported equity ratio of 0.0% (undisclosed), simple calculation from the balance sheet suggests equity of ¥9.034bn against assets of ¥15.541bn, implying an equity ratio near 58%, and a liabilities-to-equity (D/E) of 0.58x. Liquidity appears ample on paper: current assets ¥11.41bn and current liabilities ¥2.745bn yield a current ratio of ~416%; however, operating cash flow was a sizable outflow of ¥1.588bn, pointing to working capital consumption or collection timing issues. Interest expense was negligible (≈¥0.07m) and not a near-term risk, but interest coverage is negative given operating losses. Cash and equivalents, inventories, investing cash flows, and several share-related fields were undisclosed (recorded as zero), limiting certain ratio interpretations and cash runway assessment. The company paid no dividend (DPS ¥0), appropriately conserving cash given losses and negative OCF. Overall, the quarter shows improved operating loss versus last year but weaker revenue and strained cash conversion, with balance sheet solvency providing runway to pursue turnaround measures. The sustainability of gross margin near 31% and normalization of working capital will be critical to restoring positive EBITDA and operating cash flow. Given substantial current assets and moderate leverage, liquidity risk appears manageable, but the persistence of negative OCF is a key concern. Outlook hinges on order intake visibility, delivery schedules, and the company’s ability to right-size SG&A and improve asset turnover. Data limitations (notably undisclosed inventories, cash, investing CF, equity ratio detail, and share counts) warrant caution in interpreting liquidity and per-share metrics.

Profitability Analysis

ROE decomposition: Net profit margin −9.50% × asset turnover 0.170 × financial leverage 1.72 = ROE −2.78%, consistent with the reported figure. The principal ROE drags are the negative margin and low asset turnover. Gross margin was 31.3% (¥827m / ¥2.643bn), which is adequate but not enough to absorb SG&A. Implied SG&A was approximately ¥1,049m (gross profit ¥827m minus operating income −¥222m), equating to about 39.7% of revenue, pointing to limited operating leverage at the current sales level. Operating margin was −8.4% (−¥222m / ¥2.643bn). Ordinary loss (−¥188m) being smaller than operating loss suggests non-operating net income of roughly ¥34m, possibly forex or other income. EBITDA of −¥149m indicates insufficient scale/utilization; depreciation was modest at ¥73m, so cash losses from core operations remain. Interest expense was minimal (~¥0.07m), so financing costs are not pressuring margins; the issue is operating efficiency and scale. The YoY operating loss improvement (−35.6%) despite a 28% revenue decline suggests some cost control progress or one-off support in non-operating items, but underlying operating leverage is still adverse due to fixed costs. Margin quality depends on sustaining gross margin while reducing SG&A density; any mix shift toward higher-margin equipment or services could help.

Growth Assessment

Revenue declined 28.0% YoY to ¥2.643bn, indicating soft demand, delivery timing issues, or order backlog conversion delays. With gross profit at ¥827m, gross value-add remains but below the threshold to cover fixed overheads this quarter. The narrowing in operating loss (−35.6% YoY) implies some improvement in cost discipline relative to scale, though absolute profitability remains negative. Profit quality is weak given negative EBITDA and OCF, suggesting earnings are not yet cash-supported. Sustainability hinges on order intake, backlog execution, and timing of customer acceptances; without disclosure on orders/backlog, visibility is limited. With asset turnover at 0.170x, capital employed is underutilized, and recovery in sales is necessary to drive operating leverage. Near-term outlook depends on the pace of market recovery in the company’s end-markets and management’s ability to right-size costs; absent top-line stabilization, further SG&A rationalization will be required. Non-operating items modestly cushioned losses, but underlying operating momentum remains the key driver. Given limited disclosures on segment mix and geographic exposure, we assume growth normalization will track overall capital goods cycles and project timing.

Financial Health

Total assets were ¥15.541bn, equity ¥9.034bn, and liabilities ¥5.241bn, implying a computed equity ratio of ~58% and D/E of 0.58x. Current assets were ¥11.41bn versus current liabilities of ¥2.745bn, producing a current ratio of ~416% and working capital of ~¥8.665bn. Quick ratio was also shown as ~416% due to inventories being undisclosed (recorded as zero); actual quick liquidity may be lower if inventories are material. Interest expense was ~¥0.07m and ordinary loss narrower than operating loss, indicating no immediate debt service burden. However, the large negative operating cash flow (−¥1.588bn) despite strong balance-sheet liquidity raises concerns on cash conversion, receivable collections, contract assets, or inventory build. Cash and equivalents were undisclosed (recorded as zero), limiting cash runway assessment. Solvency appears sound given equity buffer, but persistent negative OCF could erode liquidity if not corrected. No material refinancing risk is evident from the limited interest expense, but maturities and covenants are not disclosed.

Cash Flow Quality

Operating cash flow was −¥1,588m, materially weaker than net income (−¥251m), yielding an OCF/Net Income ratio of 6.32; because both figures are negative, this ratio is not an indicator of quality and instead reflects large non-cash working capital outflows. EBITDA was −¥149m, confirming cash earnings weakness before working capital movements. Investing cash flow was undisclosed (recorded as zero), so true free cash flow cannot be reliably computed; the reported FCF metric of 0 should be treated as non-informative. The magnitude of OCF outflow suggests significant working capital consumption (e.g., receivables, contract assets, or inventory), project timing effects, or advance payments to suppliers; detailed components were not provided. Depreciation was modest at ¥73m, indicating limited non-cash expense cushion. With limited financing cash flow activity (−¥8m) and undisclosed cash balance, near-term liquidity relies on existing current assets and potential credit lines. Improving billing/collection cycles and aligning procurement with delivery schedules will be essential to normalize cash conversion.

Dividend Sustainability

The company paid no dividend (DPS ¥0; payout ratio 0%). Given a net loss of ¥251m and negative operating cash flow of ¥1,588m, current earnings and cash generation do not support distributions. Free cash flow is not assessable due to undisclosed investing cash flows; thus, FCF coverage metrics are not meaningful this period. Balance sheet equity is relatively strong (~58% computed equity ratio), but policy prudence dictates conserving cash until profitability and OCF turn positive. No explicit dividend policy update was provided; absent a return to positive earnings and cash flow, dividend resumption appears unlikely in the near term.

Risk Assessment

Business Risks:

• Demand cyclicality in capital goods/printing and machinery end-markets affecting order intake and backlog conversion.
• Project execution and delivery timing risk driving revenue volatility and working capital swings.
• High SG&A density (~40% of sales) limiting operating leverage at current revenue scale.
• Pricing pressure and input cost volatility potentially compressing gross margins (~31%).
• Dependence on non-operating gains to cushion losses, which may not be recurring.

Financial Risks:

• Large negative operating cash flow (−¥1.588bn) despite strong balance-sheet liquidity, indicating cash conversion risk.
• Potential build-up in receivables/contract assets or inventories (inventories undisclosed), raising collection and obsolescence risks.
• Limited disclosure on cash balance and investing cash flows, constraining assessment of cash runway and capex needs.
• If losses persist, erosion of equity base could increase leverage over time.
• Exposure to interest rate or FX movements on any unhedged positions (specifics not disclosed).

Key Concerns:

• Sustainability of gross margin and path to positive EBITDA given current cost structure.
• Normalization of working capital and restoration of positive operating cash flow.
• Revenue recovery and asset turnover improvement from a low 0.170x base.

Investment Implications

Key Takeaways:

• Revenue fell 28% YoY to ¥2.643bn; operating loss narrowed to ¥222m but remains negative.
• Gross margin held at 31.3%, yet SG&A at ~¥1.05bn (~40% of sales) kept operating margin at −8.4%.
• ROE −2.78% driven by negative margin and low asset turnover (0.170x), despite moderate leverage (1.72x).
• Balance sheet solvency is solid (computed equity ratio ~58%, D/E 0.58x), but OCF was a large outflow (−¥1.588bn).
• Key near-term focus is cash conversion and backlog execution to lift EBITDA and OCF.

Metrics to Watch:

• Order intake and backlog conversion/delivery schedules.
• Gross margin trajectory and input cost pass-through.
• SG&A run-rate and operating break-even sales level.
• Operating cash flow and working capital days (DSO/DPO/DIO or contract assets).
• Asset turnover improvement and utilization of current assets.
• Any disclosures on cash, inventories, and investing cash flows.

Relative Positioning: Within Japanese industrial machinery peers, the company currently exhibits weaker profitability (negative EBITDA and operating margin) and significantly poorer cash conversion, offset by a comparatively solid equity buffer and low financing costs; recovery hinges on demand normalization and cost recalibration.

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