SUIDO KIKO KAISHA,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.61B
• Operating Income: ¥80M
• Net Income: ¥-165M
• EPS: ¥-1.13

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

Suidokiko Co., Ltd. (TSE:64030) reported FY2026 Q2 consolidated results under JGAAP featuring strong top-line growth but thin margins and a small net loss. Revenue rose 36.1% year over year to ¥12.609 billion, reflecting robust project execution or order conversion in water infrastructure-related businesses. Despite the revenue surge, gross profit was ¥1.394 billion, implying an 11.1% gross margin, and operating income was only ¥80 million (operating margin ~0.6%), up 8.2% YoY—indicating limited operating leverage and cost pressure. Ordinary income was a loss of ¥13 million, pointing to non-operating headwinds despite positive operating profit. Net income was a small loss of ¥4 million (EPS: -¥1.13), aided by a ¥100 million tax benefit; this implies likely extraordinary losses around the quarter, consistent with JGAAP treatment of non-recurring items. The DuPont-calculated ROE was approximately -0.04%, driven primarily by a near-zero net margin (-0.03%) and moderate asset turnover (0.517) with financial leverage at 2.37x. Liquidity appears sound with current assets of ¥20.794 billion and current liabilities of ¥13.212 billion, yielding a current ratio of 157% and working capital of ¥7.582 billion. Total equity was ¥10.299 billion against total assets of ¥24.407 billion, implying an equity ratio around 42% (despite a reported 0.0% that appears to be an unreported placeholder). Operating cash flow was strong at ¥4.478 billion, materially exceeding the accounting loss and suggesting favorable working capital inflows or milestone collections on projects. Investing cash flows were not disclosed (shown as zero), and financing cash flow was an outflow of ¥1.778 billion, likely debt repayment or other financing uses. EBITDA was ¥165 million, and D&A ¥85 million, underscoring modest operating cash generation from core operations relative to revenue scale. Dividend per share is shown as ¥0.00 and payout ratio 0.0%, but DPS may be undisclosed at this stage; coverage analysis is limited without reported FCF and share data. There is an apparent inconsistency between reported revenue and cost of sales versus gross profit; we rely on the explicit gross profit figure and margin provided while acknowledging potential classification differences in cost components. Overall, the period shows strong revenue growth with constrained profitability, solid liquidity, healthy operating cash generation, and some non-operating/extraordinary drag on the bottom line. Data limitations include unreported inventories, cash balances, investing cash flows, share counts, and certain line-item details, which constrain precision in some ratios and conclusions. The medium-term focus should be on sustaining backlog conversion while restoring margin quality and insulating ordinary income from non-operating/extraordinary volatility.

Profitability Analysis

ROE decomposition (DuPont): Net margin is -0.03%, asset turnover 0.517x, and financial leverage 2.37x, yielding an ROE of about -0.04%. The negative net margin is the key detractor, as operating income is positive but diluted by non-operating and extraordinary items. Gross margin is 11.1% (gross profit ¥1.394bn on revenue ¥12.609bn), which is modest for engineered projects/services and leaves limited headroom for SG&A and project risk buffers. Operating margin is ~0.6% (¥80m OI), signaling tight cost control challenges or pricing pressure. EBITDA margin of 1.3% (¥165m) implies limited operating cushion. Operating leverage was weak this period: revenue increased 36.1% YoY while operating income rose only 8.2% YoY, indicating cost inflation, mix deterioration, or timing effects that constrained incremental margins. Ordinary loss of ¥13m suggests non-operating losses (e.g., financial income/expense, equity-method impacts, or other non-operating costs) overcame operating profit; interest expense is unreported, so the driver mix is unclear. A tax benefit of ¥100m and an inferred extraordinary loss (approx. ¥-91m) bridge ordinary loss to the net loss, consistent with JGAAP’s extraordinary item presentation. Overall profitability quality is fragile, with project margins likely sensitive to execution and input costs.

Growth Assessment

Revenue growth was strong at +36.1% YoY to ¥12.609bn, indicating healthy demand and/or accelerated backlog execution in water and environmental solutions. However, profit growth lagged sharply: operating income rose only +8.2% YoY to ¥80m, compressing incremental margins. The ordinary loss (¥-13m) and net loss (¥-4m) point to ongoing non-operating/extraordinary drags that offset operating performance. Sustainability depends on maintaining order intake and backlog conversion at acceptable margins; current margin levels (gross 11.1%, EBITDA 1.3%, operating 0.6%) leave little room for execution slippage. The tax benefit this period is non-core and should not be extrapolated; likewise, extraordinary losses may not recur but highlight risk in project businesses. Looking ahead, if revenue remains elevated and cost normalization or mix improvement occurs, modest operating leverage could re-emerge; conversely, persistent non-operating losses could cap bottom-line recovery. The asset turnover of 0.517x (on a mid-year basis) is reasonable for a project-based model but needs higher margins to translate into ROE. Overall outlook is cautiously constructive on top-line, but profit quality remains the key swing factor.

Financial Health

Liquidity: Current assets ¥20.794bn vs current liabilities ¥13.212bn yield a current ratio of 157% and quick ratio shown as 157% (inventories not disclosed), indicating comfortable short-term coverage. Working capital stands at ¥7.582bn, supporting project execution needs. Solvency: Total liabilities ¥15.877bn vs equity ¥10.299bn give a debt-to-equity of 1.54x; equity ratio is approximately 42.2% (computed) despite reported 0.0% due to disclosure limits. Leverage (DuPont financial leverage 2.37x) is moderate for the sector. Interest expense is unreported, so interest coverage cannot be assessed; however, ordinary loss indicates limited buffer at the pre-tax level. Capital structure appears balanced but leaves limited margin for error if profits remain thin. No cash and equivalents figure is disclosed, restricting analysis of cash runway; nonetheless, strong OCF in the period mitigates immediate liquidity concerns.

Cash Flow Quality

Earnings quality looks favorable in cash terms this period: operating cash flow was +¥4.478bn versus a net loss of ¥4m, producing an OCF/Net Income ratio of approximately -1,119x (distorted by the very small negative net income). The large positive OCF likely reflects working capital inflows, milestone billings, or advances typical in EPC/project businesses. EBITDA (¥165m) is modest relative to OCF, reinforcing that working capital movements, not underlying run-rate profitability, drove cash generation. Investing cash flow is unreported (shown as zero), preventing a reliable free cash flow calculation; the reported “FCF: 0” should be treated as unavailable, not zero. Financing cash flow was an outflow of ¥1.778bn, suggesting debt repayment or other financing uses; without cash balances and debt detail, sustainability cannot be judged. Working capital management appears constructive this period, but sustainability depends on project timing; reversals are possible in subsequent periods. Overall, cash conversion is strong but likely timing-driven rather than purely margin-driven.

Dividend Sustainability

DPS is shown as ¥0.00 and payout ratio 0.0%, but these likely indicate non-disclosure rather than actual zeros. With net income negative and investing cash flows unreported, free cash flow coverage cannot be assessed. Historically, project-centric firms may favor conservative payout policies during periods of thin profitability and working capital swings. For sustainability, consistent positive net income and demonstrable FCF after necessary capex are prerequisites. Given current margins, a prudent stance is implied until operating margins normalize and non-operating/extraordinary volatility subsides. Policy outlook likely hinges on backlog profitability, cash collections, and leverage targets; absent explicit guidance, dividend visibility is low.

Risk Assessment

Business Risks:

• Project execution risk leading to cost overruns and margin erosion
• Input cost inflation (materials, subcontracting) compressing gross margins
• Timing risk in revenue recognition and cash collections for milestone-based projects
• Customer concentration and public-sector budget timing typical in water infrastructure
• Competitive bidding pressure reducing price discipline
• Supply chain and subcontractor performance variability

Financial Risks:

• Thin operating margin (0.6%) leaves limited buffer against shocks
• Non-operating losses driving ordinary income negative despite operating profit
• Extraordinary losses under JGAAP add bottom-line volatility
• Leverage of 1.54x D/E with limited profit can pressure covenants if conditions worsen
• Interest expense undisclosed; coverage metrics not assessable
• Working capital reversals could swing OCF negative in subsequent periods

Key Concerns:

• Discrepancy between reported cost of sales and gross profit; reliance on gross profit figure
• Unreported items (cash, inventories, investing CF, share data) constrain analysis
• Sustained margin compression despite strong revenue growth
• Ordinary income loss and reliance on tax benefits to narrow net loss

Investment Implications

Key Takeaways:

• Top-line growth is robust (+36.1% YoY), but operating leverage is weak (OI +8.2% YoY).
• Gross margin (11.1%) and operating margin (~0.6%) indicate tight profitability.
• Ordinary loss (¥-13m) and inferred extraordinary items drove a small net loss despite positive OI.
• Liquidity is solid (current ratio 157%, WC ¥7.582bn) with moderate leverage (D/E 1.54x).
• Operating cash flow is strong (¥4.478bn), likely driven by favorable working capital timing.
• Several critical disclosures are missing (cash, investing CF, inventories, shares), limiting precision.

Metrics to Watch:

• Order intake, backlog size, and book-to-bill to assess revenue sustainability
• Gross margin and SG&A ratio trends to gauge margin recovery
• Ordinary income bridge (non-operating items) and extraordinary gains/losses
• Working capital components (receivables, advances, payables) and OCF sustainability
• Equity ratio and net cash/debt once cash and debt details are disclosed
• Capex and investing cash flows to evaluate true free cash flow

Relative Positioning: Within Japanese water/environmental engineering peers, the company demonstrates strong near-term revenue momentum but lags on profitability resilience, with liquidity adequate and leverage moderate; bottom-line volatility from non-operating and extraordinary items appears higher than ideal.

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