OIZUMI Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥10.67B
• Operating Income: ¥783M
• Net Income: ¥777M
• EPS: ¥34.52

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: Solid operating performance and cash conversion despite top-line contraction, but headline net profit declined due to taxation/one-off dynamics and capital efficiency remains weak. Revenue fell 8.4% YoY to 106.68, yet operating income rose 4.4% YoY to 7.83, evidencing effective cost control and mix/take-rate improvement. Gross profit reached 40.39 with a 37.9% gross margin, and SG&A was contained at 32.55 (30.5% of sales). Operating margin improved to 7.3% (operating income/revenue), roughly a 90 bps expansion versus an implied ~6.4% a year ago. Ordinary income increased 6.8% YoY to 7.92, with a modest positive non-operating balance (+0.08). Profit before tax was 11.76, implying about 3.84 of net extraordinary gains relative to ordinary income. Despite this, net income declined 22.2% YoY to 7.76, alongside a 33.9% effective tax rate, pointing to less favorable below-ordinary items or prior-year one-offs. Cash generation was strong: operating cash flow was 17.29, 2.23x net income, indicating high earnings quality with positive working capital contribution and/or good accrual discipline. However, capital expenditures were heavy at 29.35, likely driving negative period free cash flow on an OCF–capex basis (approximately -12.1). Leverage is sizable (short-term loans 28.45, long-term loans 108.40), with D/E at 1.18x; liquidity remains comfortable (current ratio 200%, quick ratio 182%). Interest coverage is healthy at 10.5x, but Debt/EBITDA is elevated at ~11.9x, highlighting sensitivity to earnings volatility. ROE is a modest 4.1% (net margin 7.3% × asset turnover 0.260 × leverage 2.18x), and ROIC at 2.1% is below the 5% warning threshold, signaling capital efficiency challenges. Dividend payout ratio is a conservative 34.8% on earnings, but dividend coverage by free cash flow was likely weak this half due to front-loaded capex. Forward-looking, sustaining the improved operating margin while normalizing capex intensity and improving asset turnover will be key to lifting ROE/ROIC. Execution risk stems from industry demand cycles and regulatory dynamics, while higher interest rates would pressure coverage given leverage. Overall, quality of earnings this quarter is solid, but structural capital efficiency and capex-funded growth need close monitoring.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 7.3% × Asset turnover 0.260 × Financial leverage 2.18x = ROE 4.1%. The largest drag is the low asset turnover (0.26x), followed by only moderate profitability; leverage partially offsets these. Operating margin improved to 7.3%, from an implied ~6.4% last year, helping ordinary income rise despite revenue decline. The business driver appears to be cost discipline and possibly favorable mix/pricing, given gross margin at 37.9% and SG&A ratio held at ~30.5% of sales. The margin lift seems partly sustainable if mix and SG&A control persist; however, the presence of ~3.84 in extraordinary gains this period indicates some one-time support below operating line. Watch for any SG&A growth outpacing revenue; with revenue down 8.4% YoY and operating income up 4.4%, current operating leverage is positive, but a rebound in SG&A could quickly erode margins. The key to improving ROE is raising asset turnover through higher sales velocity and better utilization of the sizable asset base (total assets 410.8), while protecting the operating margin gains.

Growth Assessment

Top-line contracted 8.4% YoY to 106.68, indicating soft demand or product cycle effects. Operating income increased 4.4% YoY to 7.83, demonstrating resilient earnings power despite lower volumes. Ordinary income grew 6.8% YoY to 7.92, aided by a small positive non-operating balance. Net income fell 22.2% YoY to 7.76, likely reflecting tax/one-offs and a less favorable below-ordinary profile versus the prior year. Operating margin expanded by ~90 bps YoY to 7.3%, helped by gross margin at 37.9% and SG&A management. EBITDA was 11.54, implying an EBITDA margin of 10.8%; interest coverage at 10.5x underscores near-term earnings stability. However, ROIC is 2.1%, well below common targets (>7–8%), suggesting growth has not yet translated into efficient capital deployment. Near-term outlook hinges on sustaining cost efficiencies and stabilizing demand; any revenue recovery would have high incremental margins given the cost base achieved. Absent top-line recovery, further profitability gains will depend on continued mix improvement and overhead control.

Financial Health

Liquidity is strong: current ratio 200.2% and quick ratio 182.1%, well above healthy thresholds. No warning on liquidity (Current Ratio > 1.0) or leverage (D/E 1.18x < 2.0). Working capital stands at 90.75, supported by cash and deposits of 76.78; current liabilities are 90.53, including short-term loans of 28.45. Maturity mismatch risk appears manageable given cash/current assets cover short-term obligations; however, reliance on debt (total loans ~136.85) raises medium-term refinancing sensitivity. Interest coverage is robust at 10.51x, but Debt/EBITDA at ~11.86x is high for an industrial, signaling leverage risk if EBITDA weakens. Intangibles and goodwill total 37.0, and although not excessive versus total assets (410.8), they highlight potential impairment risk should earnings underperform. No off-balance sheet obligations were reported in the provided data.

Cash Flow Quality

OCF/Net Income is 2.23x, comfortably above the 0.8 threshold, indicating high earnings quality with favorable working capital dynamics and non-cash charges (D&A 3.71). Approximated free cash flow for the period is negative at about -12.06 (OCF 17.29 minus capex 29.35), reflecting front-loaded investment. Financing cash flow was +10.60, suggesting external funding (likely debt) bridged the FCF gap and potentially dividends. There are no clear signs of working capital manipulation from the limited line items; however, absent YoY balance details on receivables/inventories, full assessment is constrained. Sustained high capex would pressure FCF and could necessitate continued financing unless OCF steps up.

Dividend Sustainability

The payout ratio is calculated at 34.8%, which is conservative on an earnings basis. However, free cash flow coverage this half was likely insufficient given negative OCF–capex, implying dividends (if paid) were effectively funded by cash on hand or incremental debt. With liquidity strong and leverage moderate-to-high, the current dividend level appears serviceable near term, but sustained high capex or weaker OCF would tighten coverage. Policy outlook likely prioritizes stable dividends, but improvement in ROIC and FCF generation will be important to maintain future flexibility.

Risk Assessment

Business Risks:

• Demand cyclicality in core equipment markets leading to revenue volatility (-8.4% YoY sales decline this period).
• Regulatory risk inherent to Japan’s gaming/amusement equipment sector (machine approvals and rule changes).
• Product cycle and mix risk affecting gross margin and operating leverage.
• Execution risk on capital projects given elevated capex (29.35) versus OCF.

Financial Risks:

• High Debt/EBITDA (~11.9x) despite healthy interest coverage, exposing the company to earnings downturn risk.
• Refinancing and interest rate risk with total loans of ~136.85 and D/E at 1.18x.
• Low ROIC (2.1%) signaling inefficient capital use and potential value dilution if not improved.
• Potential impairment risk on goodwill/intangibles (total ~37.0) if performance deteriorates.

Key Concerns:

• Net income declined 22.2% YoY despite stronger operating profit, implying unfavorable below-ordinary items/taxes.
• Negative period free cash flow driven by heavy capex, increasing reliance on financing.
• Asset turnover at 0.260 is low, capping ROE at 4.1% despite margin improvements.
• Sensitivity to regulatory changes and customer investment appetite in the amusement sector.

Investment Implications

Key Takeaways:

• Operational execution strong: operating margin expanded to 7.3% despite an 8.4% revenue decline.
• Earnings quality high with OCF/NI at 2.23x, but headline NI down 22.2% YoY due to below-ordinary items and taxes.
• Capital intensity elevated (capex 29.35), producing negative FCF and leaning on financing (+10.60).
• Leverage comfortable on coverage but high on Debt/EBITDA; balance sheet can support near term but needs EBITDA growth.
• ROE 4.1% and ROIC 2.1% highlight capital efficiency improvement as a priority.

Metrics to Watch:

• Order trends and unit shipments to drive asset turnover (sales/total assets).
• Gross margin and SG&A ratio to confirm sustainability of the 90 bps operating margin expansion.
• Free cash flow trajectory versus capex pipeline and any changes in investment pace.
• Net extraordinary items and effective tax rate, given PBT > ordinary income by ~3.84.
• Debt/EBITDA and interest coverage sensitivity to rate changes and EBITDA volatility.
• ROIC progression toward >5% as a minimum threshold.

Relative Positioning: Within Japan’s amusement equipment peers, the company shows commendable cost control and cash conversion but lags on capital efficiency and leverage intensity (Debt/EBITDA) versus more asset-light competitors; near-term resilience is supported by liquidity and coverage, while medium-term rerating depends on restoring growth and improving ROIC.

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