MITSUI E&S Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥165.55B
• Operating Income: ¥19.80B
• Net Income: ¥32.12B
• EPS: ¥173.76

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

Mitsui E&S (7003) delivered strong operating performance in FY2026 Q2, with revenue rising 14.1% YoY to ¥165.5bn and operating income more than doubling (+114.9% YoY) to ¥19.8bn. Gross profit reached ¥23.1bn, implying a gross margin of about 14.0%, and operating margin expanded to roughly 12.0%, evidencing meaningful operating leverage and cost discipline. Ordinary income of ¥22.7bn exceeded operating income, indicating net non-operating gains or favorable financial income components in the period. Despite the healthy operating and ordinary results, net income declined 45.7% YoY to ¥17.5bn, suggesting a tough comparison with prior-year one-offs or extraordinary items that inflated the base. The DuPont profile indicates a calculated ROE of 8.98% driven by a 10.59% net margin, asset turnover of 0.364x, and financial leverage of 2.33x, a balanced and sustainable combination for a project-heavy industrial company. Liquidity appears adequate with a current ratio of 119.4% and quick ratio of 114.1%, supported by working capital of ¥38.9bn. Capital structure is moderate: total liabilities of ¥275.1bn versus equity of ¥195.3bn (debt-to-equity 1.41x), and an implied equity ratio around 43% (computed from reported totals), even though the tabular equity ratio field shows 0.0% (an unreported placeholder rather than an actual figure). Interest coverage is solid at 12.8x, underscoring manageable financial risk. Cash flow conversion is the weak spot: operating cash flow of ¥4.1bn is only 0.23x net income, consistent with the long-cycle, percentage-of-completion profile and working capital timing in engineered projects. Financing cash flow shows a large outflow of ¥67.5bn, likely reflecting debt repayments or other capital structure actions; dividends were not paid (DPS 0), preserving internal capital. The EBITDA margin of 14.2% (EBITDA ¥23.5bn) confirms the improvement in core profitability versus revenue growth. Tax expense of ¥3.54bn against pre-tax ordinary income implies a mid-teens effective tax rate (approx. 15–16%), despite the 0.0% metric readout, which appears to be a data limitation. Inventory is modest at ¥10.6bn relative to sales, aligning with a business mix skewed to engineered/contract work rather than stock-heavy models. Overall, the period demonstrates stronger underlying operations and comfortable solvency, offset by weak cash conversion and an opaque YoY net income comparison influenced by non-recurring items. Data gaps exist for certain cash and equity ratio disclosures; conclusions rely on the available non-zero figures and derived computations.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 10.59% (Net Income ¥17.53bn / Revenue ¥165.55bn)
• asset_turnover: 0.364x (Revenue ¥165.55bn / Total Assets ¥454.45bn)
• financial_leverage: 2.33x (Total Assets ¥454.45bn / Equity ¥195.30bn)
• calculated_ROE: 8.98% (matches reported ROE 8.98%) margin_quality: Gross margin ~14.0% (¥23.10bn/¥165.55bn), consistent with engineered product mix and better cost pass-through., Operating margin ~12.0% (¥19.80bn/¥165.55bn), up sharply YoY, indicating operating leverage and SG&A efficiency., EBITDA margin 14.2% (¥23.51bn), pointing to improved core profitability beyond accounting depreciation effects., Ordinary income above operating income suggests positive non-operating balance (e.g., equity method, FX, or other financial items)., Net margin 10.6% sustained despite a mid-teens implied tax rate and interest costs. operating_leverage: Operating income +114.9% YoY on +14.1% revenue indicates substantial operating leverage., Depreciation at ¥3.71bn is modest relative to EBITDA (D&A/EBITDA ~15.8%), supporting flow-through to EBIT., Interest coverage of 12.8x provides headroom for margin volatility.

Growth Assessment

revenue_sustainability: Revenue increased 14.1% YoY to ¥165.55bn; sustainability hinges on order backlog conversion and new orders in core segments., Inventory remains low at ¥10.63bn relative to sales, consistent with long-cycle project recognition rather than volume stocking. profit_quality: Operating profit outpaced revenue growth, reflecting mix improvement and fixed-cost absorption., Ordinary income exceeded operating income, but net income fell YoY (-45.7%), implying prior-year non-recurring gains in the base period., Cash conversion (OCF/NI 0.23x) is weak, tempering the quality of earnings in the near term as working capital likely expanded. outlook: H2 results will depend on project milestones, cost containment, and FX/material cost trends., Maintaining double-digit operating margins will require stable execution on legacy projects and favorable pricing on new wins., Monitor for normalization of cash conversion as billing/advance receipts catch up with revenue recognition.

Financial Health

liquidity: Current ratio 119.4% (CA ¥239.65bn / CL ¥200.79bn) and quick ratio 114.1% indicate adequate short-term coverage., Working capital of ¥38.85bn provides a buffer for project timing volatility. solvency: Debt-to-equity 1.41x (Total liabilities ¥275.06bn / Equity ¥195.30bn) suggests moderate leverage., Interest coverage 12.8x indicates manageable debt service capacity., Implied equity ratio ~43.0% (Equity/Assets) computed from reported totals; the 0.0% equity ratio field is unreported, not an actual value. capital_structure: Large financing cash outflow (¥67.47bn) suggests deleveraging, liability management, or other capital transactions., No dividend paid, retaining cash to support project needs and balance sheet resilience.

Cash Flow Quality

earnings_quality: OCF/Net Income at 0.23x (¥4.12bn / ¥17.53bn) indicates weak cash realization in the period., Given the nature of long-term contracts, working capital swings (receivables and contract assets) likely drove the gap., Tax expense of ¥3.54bn and interest expense of ¥1.55bn are cash drains that also weigh on OCF. FCF_analysis: Free cash flow cannot be assessed because investing cash flow is unreported (shown as 0 = not disclosed)., EBITDA of ¥23.51bn less modest D&A suggests capacity to fund maintenance capex, but timing is uncertain without capex data. working_capital: Low inventories (¥10.63bn) imply cash is tied up more in receivables/contract assets than in stock., Advance receipts or billing timing may create OCF headwinds in periods of strong revenue recognition.

Dividend Sustainability

payout_ratio_assessment: DPS is unreported as 0.00 and payout ratio is shown as 0.0%; effectively, no dividend outflow this period., Withholding dividends preserves capital amid project cash needs and financing outflows. FCF_coverage: FCF coverage cannot be calculated due to missing investing CF; OCF alone (¥4.12bn) would not comfortably cover a meaningful dividend at present. policy_outlook: Continuation of a conservative payout stance appears prudent until cash conversion normalizes and visibility on capex/FCF improves., Future distributions will likely hinge on sustained ordinary profit and improved OCF-to-NI conversion.

Risk Assessment

Business Risks:

• Project execution risk (cost overruns, schedule delays) impacting margins and cash.
• Order intake and backlog risk in key end-markets (marine/industrial engines, engineering).
• Input cost volatility (steel/components) and pricing pass-through risk.
• Foreign exchange exposure affecting margins and non-operating income.
• Customer credit risk and milestone collection timing affecting OCF.

Financial Risks:

• Working capital intensity and OCF volatility (OCF/NI 0.23x).
• Exposure to refinancing or interest rate increases despite current coverage strength.
• Potential non-recurring items distorting YoY comparability of net income.
• Large financing outflows (¥67.47bn) may reduce financial flexibility if not offset by internal cash generation.

Key Concerns:

• Weak cash conversion versus earnings in the period.
• Visibility on investing cash flows and capex is limited due to unreported data.
• YoY net income decline suggests base-period one-offs; underlying trend needs clarification.

Investment Implications

Key Takeaways:

• Core profitability improved materially with operating margin ~12% and EBITDA margin 14.2%.
• ROE of 8.98% is supported by healthy margins and moderate leverage.
• Liquidity and solvency are adequate, with implied equity ratio ~43% and interest coverage 12.8x.
• Cash conversion is weak (OCF/NI 0.23x), consistent with W/C build in long-cycle businesses.
• Net income YoY decline likely reflects prior-year one-offs rather than a deterioration in core ops.

Metrics to Watch:

• Order intake and backlog, and gross-to-operating margin bridge by segment.
• OCF-to-NI ratio and movements in contract assets/receivables and advances.
• Capex and investing cash flows to assess true FCF.
• Non-operating items (FX, equity-method gains/losses) affecting ordinary income.
• Leverage (D/E) and further financing cash flows post large outflow.

Relative Positioning: Within Japanese heavy industrials/engineering peers, Mitsui E&S exhibits improved operating margins and comfortable coverage metrics, but lags on cash conversion due to project timing; balance sheet leverage is moderate and equity buffer appears solid relative to assets.

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
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