Origin Company,Limited FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.72B
• Operating Income: ¥-754M
• Net Income: ¥-15M
• EPS: ¥-182.63

Income Statement

Balance Sheet

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

For FY2026 Q2, 株式会社オリジン reported consolidated revenue of ¥12,721 million, down 9.4% year over year, indicating a soft top-line environment. Reported gross profit was ¥3,454 million, consistent with a gross margin of approximately 27.2%, suggesting the company maintained pricing/mix or cost control despite the revenue decline. Operating income was a loss of ¥754 million, essentially flat year over year per disclosure, implying fixed cost pressures and/or under-absorption amid lower volume. Ordinary loss was narrower at ¥523 million, indicating positive non-operating contributions offsetting interest expense. Net loss widened to ¥960 million, with a notable tax expense of ¥223 million despite the loss, likely reflecting non-cash tax items such as valuation allowances, statutory minimums, or timing differences. DuPont metrics show a net margin of -7.55%, asset turnover of 0.291x, and financial leverage of 1.74x, yielding an ROE of -3.83% for the period. Liquidity appears strong: current assets of ¥25,268 million against current liabilities of ¥8,760 million translate to a current ratio of 288% and a quick ratio of 268%. Capital structure is conservative, with total liabilities of ¥18,781 million and total equity of ¥25,086 million (implying an equity ratio of roughly 57% using provided totals), and a debt-to-equity ratio of 0.75x. Interest expense is modest at ¥11 million; however, interest coverage based on operating income stands at -68.5x, reflecting current operating losses rather than financing stress. The gap between operating and ordinary losses implies the presence of non-operating gains (roughly ¥240 million), partially cushioning operating weakness. SG&A is implied to be high relative to revenue (around ¥4.2 billion by back-solving), highlighting operating leverage and the sensitivity of earnings to revenue trends. Working capital of ¥16,508 million provides a meaningful buffer for operations and inventory management. Cash flow figures were not disclosed in XBRL (zeros indicate non-reporting), limiting an assessment of earnings-to-cash conversion and free cash flow. Dividend per share is reported as zero for the period, consistent with the current loss profile and lack of disclosed operating cash flow. Overall, the company exhibits solid balance sheet strength and liquidity, but profitability is challenged by revenue contraction and fixed-cost absorption, resulting in a negative ROE. Data limitations around cash flows and certain ratios constrain the depth of our cash conversion analysis.

Profitability Analysis

ROE of -3.83% is driven by: net profit margin (-7.55%), asset turnover (0.291x), and financial leverage (1.74x). The negative margin is the largest drag; leverage is moderate and not a driver of returns in this period. Gross margin at roughly 27.2% looks resilient, but the operating margin is materially negative due to SG&A burden (implied SG&A ~¥4,208 million, or ~33% of revenue). Operating leverage is unfavorable this quarter: a 9.4% revenue decline swung/kept operating income in loss territory, implying a high fixed-cost base or lagged cost adjustments. Ordinary loss (-¥523 million) is smaller than operating loss (-¥754 million), indicating non-operating net income of approximately ¥231–¥242 million after ¥11 million interest expense, which partially offsets core weakness but is likely non-recurring or less controllable. Interest coverage is -68.5x on an operating basis, underscoring near-term earnings pressure rather than financing strain (given low interest expense). The tax charge despite losses suggests non-cash effects, which further depresses net margin quality in the period.

Growth Assessment

Revenue declined 9.4% YoY to ¥12,721 million, pointing to demand softness or potential product/segment headwinds. The maintenance of gross margin near 27% implies some pricing/mix stability or effective cost of goods control, though volume deleverage remains evident. Operating loss stability ("+0.0% YoY" per disclosure) suggests cost containment offsetting top-line weakness, but profitability has not yet inflected. Ordinary results benefited from non-operating gains; however, these are typically less sustainable than operating improvements. With implied SG&A at ~¥4.2 billion for the half-year, breakeven likely requires either revenue recovery or structural cost reductions. The negative ROE reflects current loss-making status; improvement depends on restoring positive operating margins. Absent disclosed order backlog or segment data, visibility on revenue sustainability is limited. Outlook hinges on normalization of demand, productivity gains, and potential price-cost spread improvements; monitoring 2H seasonality will be important. Given the sizeable working capital buffer, the company should be positioned to support sales initiatives without liquidity constraints, but margin recovery is the key swing factor.

Financial Health

Total assets are ¥43,733 million and total equity ¥25,086 million, implying an equity ratio around 57% (despite a reported 0.0% in the template field). Total liabilities are ¥18,781 million, yielding a debt-to-equity ratio of 0.75x, indicative of a moderate leverage profile. Current assets of ¥25,268 million and current liabilities of ¥8,760 million produce a current ratio of 288% and a quick ratio of 268%, signaling strong short-term liquidity. Working capital of ¥16,508 million provides ample operational flexibility. Interest expense is low at ¥11 million, and despite negative operating income, financing risk appears contained. Ordinary loss being smaller than operating loss suggests some cushion from non-operating sources, but this does not change the structural need to restore operating profitability. No cash and cash equivalents were disclosed in XBRL; however, liquidity ratios derived from current asset components indicate adequate coverage of short-term obligations.

Cash Flow Quality

Cash flow statements are not disclosed (zeros represent non-reporting), preventing a direct assessment of OCF, capex, and FCF. OCF/Net Income appears as 0.00 only due to missing OCF, so earnings-to-cash conversion cannot be evaluated this period. Depreciation is undisclosed, so EBITDA and non-cash expense mix cannot be reliably inferred, though the provided EBITDA metric is shown as zero due to non-reporting. Working capital levels are sizable (¥16,508 million), and with inventories at ¥1,765 million, the quick ratio suggests limited inventory risk; however, without OCF we cannot determine whether receivables or payables movements supported or consumed cash. The presence of a tax expense despite a net loss hints at non-cash tax effects, which reduces earnings quality but may not impact cash in the period. Free cash flow cannot be calculated without OCF and capex data; therefore, any conclusions on cash generation are constrained.

Dividend Sustainability

Annual DPS is reported as ¥0.00 for the period, consistent with a net loss of ¥960 million and lack of disclosed operating cash flow. Payout ratio is shown as 0.0% due to no dividend, and FCF coverage is not meaningful given unreported cash flows. With negative earnings and undisclosed cash generation, maintaining or initiating dividends near term would typically require balance sheet support; the company does have moderate leverage and strong liquidity ratios, but prudent capital allocation likely prioritizes earnings recovery. Future dividend capacity will depend on restoring positive operating income and generating consistent OCF, as well as clarity on capex needs. Policy outlook is uncertain in the absence of guidance; we will watch for management commentary on shareholder returns once profitability stabilizes.

Risk Assessment

Business Risks:

• Demand softness leading to revenue decline (-9.4% YoY) and under-absorption of fixed costs
• High SG&A intensity (~33% of revenue) creating unfavorable operating leverage
• Reliance on non-operating gains to offset operating losses, potentially non-recurring
• Price/mix and input cost volatility that could pressure gross margin (~27.2%)
• Execution risk around cost restructuring and productivity improvements needed for breakeven

Financial Risks:

• Sustained operating losses resulting in negative interest coverage (-68.5x) despite low interest expense
• Tax expense incurred despite net loss, reducing reported earnings and complicating forecasting
• Limited visibility on cash generation due to undisclosed OCF/FCF, constraining cash flow assessment
• Potential working capital swings given large current asset base (¥25,268 million)

Key Concerns:

• Negative ROE (-3.83%) driven by margin compression rather than leverage
• Operating loss persistence with no clear inflection indicated in disclosed data
• Lack of cash flow disclosure, limiting evaluation of earnings quality and FCF

Investment Implications

Key Takeaways:

• Top line declined 9.4% YoY to ¥12.7 billion, but gross margin held near 27%
• Operating income remained in loss at -¥754 million; ordinary loss narrower at -¥523 million
• ROE at -3.83% reflects negative margin and modest asset turnover (0.291x)
• Liquidity is strong (current ratio 288%, quick ratio 268%) and leverage moderate (D/E 0.75x)
• Cash flow not disclosed, constraining assessment of earnings quality and FCF
• Non-operating gains (~¥0.24 billion) cushioned results, but sustainability is uncertain

Metrics to Watch:

• Revenue trajectory and order trends in 2H FY2026
• Operating margin improvement and SG&A as a percentage of sales
• Gross margin stability versus input cost and pricing dynamics
• OCF and FCF once disclosed; capex and working capital movements
• Ordinary income composition (recurring vs. one-off non-operating items)
• Tax expense behavior relative to pre-tax loss

Relative Positioning: Balance sheet strength and liquidity are comparatively solid for a loss-making period, but operating profitability lags; near-term positioning hinges on restoring margin via cost discipline and revenue recovery while maintaining gross margin resilience.

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