Kanadevia Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥267.71B
• Operating Income: ¥-7.78B
• Net Income: ¥-5.46B
• EPS: ¥-32.74

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

Verdict: Weak quarter with continued operating loss despite slight revenue decline, and leverage/coverage metrics flashing caution. Revenue came in at 2,677.14, down 0.8% YoY, while gross profit was 390.59, yielding a gross margin of 14.6%. SG&A of 468.40 exceeded gross profit, resulting in operating loss of -77.81, though the YoY change (+183.4%) indicates an improvement versus last year’s deeper loss. Operating margin printed at -2.9% (operating income/revenue), and ordinary loss widened to -83.29 after a small non-operating net loss (-5.48). Net loss was -55.08, with an effective tax rate of 34.5% (tax credit against loss). Interest expense was 6.65, leaving interest coverage at -11.70x, a clear warning signal on debt service capacity. The current ratio stands at 115.4% and quick ratio at 114.6%, providing modest short-term liquidity cushion but not robust. Leverage is high with D/E at 2.12x, breaching our 2.0x warning threshold. DuPont shows ROE at -3.0% driven by a negative net margin (-2.1%), moderate asset turnover (0.459), and high financial leverage (3.12x). ROIC is -2.1%, well below a 5% warning line, pointing to capital inefficiency. Earnings quality cannot be assessed due to unreported operating cash flow, a material limitation. SG&A at 17.5% of sales (468.40/2,677.14) indicates limited operating leverage given a 14.6% gross margin, implying structural margin pressure. Non-operating income (30.60) was too small to offset non-operating expenses (36.08) and interest burden. Forward-looking, the company must either expand gross margin, reduce SG&A structurally, or accelerate top-line to move back to breakeven; absent these, losses and leverage risks may persist. Data gaps on cash flows and segment drivers constrain our visibility into sustainability and near-term inflection potential.

Profitability Analysis

ROE decomposition: ROE (-3.0%) = Net Profit Margin (-2.1%) × Asset Turnover (0.459) × Financial Leverage (3.12x). The dominant drag is the negative net margin, as operating loss persists and non-operating balance is slightly negative. Asset turnover is moderate, suggesting utilization of the asset base is not the primary issue; leverage is high, which amplifies the impact of losses on equity. Business driver: gross margin (14.6%) is insufficient to cover SG&A (17.5% of sales), leaving a structural operating deficit; interest expense (6.65) then deepens bottom-line losses. Sustainability: Without a structural SG&A reset and/or gross margin uplift (pricing, mix, cost-down), margins will likely stay under pressure; leverage limits room for prolonged fixes. Concerning trend flags: SG&A exceeds gross profit (468.40 > 390.59), and interest coverage is negative, indicating poor operating leverage and elevated financial risk.

Growth Assessment

Top-line declined slightly (-0.8% YoY), indicating a soft demand/mix environment. Profitability improved versus last year (per operating income YoY), but the magnitude is insufficient to reach breakeven, and ordinary income remains negative. Current gross margin of 14.6% versus SG&A at 17.5% implies that incremental sales need a higher contribution margin or costs must be cut to convert growth to profit. Non-operating items (dividend 2.14, interest income 3.43) are immaterial for earnings repair. With ROIC at -2.1%, current investments are not earning the cost of capital; absent a turnaround, growth may be value-destructive. Outlook hinges on mix upgrades, cost rationalization, and interest burden management; data gaps (no segment or backlog disclosure) limit visibility on revenue sustainability.

Financial Health

Liquidity: Current ratio 115.4% and quick ratio 114.6% are above 1.0 but below the 1.5x comfort threshold; near-term liquidity is adequate but not strong. Solvency: D/E at 2.12x triggers a high-leverage warning. Interest coverage at -11.70x indicates stressed debt service capacity from operations. Maturity mismatch: Current liabilities (2,815.11) are covered by current assets (3,249.32), with cash (503.99) and receivables (2,017.77) providing most of the coverage; short-term loans (396.60) are manageable in light of cash and AR, but rollover risk exists given losses. Long-term loans total 690.51; no explicit off-balance sheet obligations were reported in the data provided. Equity base remains 1,867.89, providing some buffer, but prolonged losses could erode it.

Cash Flow Quality

OCF is unreported, so OCF/Net Income cannot be evaluated, representing a key limitation for earnings quality assessment. Free cash flow is also unreported, leaving dividend and capex coverage unknown. Working capital signs: Receivables (2,017.77) are large versus inventories (22.47), consistent with the business model but elevating collection risk; we cannot assess DSO trends without historicals. With negative operating income and high interest expense, internal cash generation is likely weak unless offset by favorable working capital swings—unverifiable due to data gaps. No clear signs of working capital manipulation can be assessed from the provided snapshot alone.

Dividend Sustainability

Dividend disclosures are unreported; calculated payout ratio of -77.3% is not economically meaningful due to negative net income. With unreported OCF and FCF, we cannot assert coverage, but negative earnings and poor interest coverage suggest limited capacity to sustain or grow dividends without drawing on balance sheet. Policy outlook is unclear; prudent stance would typically prioritize balance sheet stabilization over distributions when operating losses persist.

Risk Assessment

Business Risks:

• Structural margin gap: gross margin (14.6%) below SG&A ratio (17.5%), sustaining operating losses.
• Top-line softness (-0.8% YoY) with limited non-operating offsets.
• Execution risk in cost-down, pricing, and mix improvement necessary for breakeven.
• Potential demand cyclicality affecting asset turnover and utilization.

Financial Risks:

• High leverage: D/E 2.12x (>2.0 threshold).
• Negative interest coverage (-11.70x) indicating weak debt service capacity.
• Rollover/liquidity risk if access to funding tightens, given ongoing losses.
• Asset efficiency below par: ROIC -2.1% (<5% warning).

Key Concerns:

• Sustained operating loss (-77.81) despite small YoY improvement.
• Non-operating net loss (-5.48) and interest drag (6.65) prolonging bottom-line losses.
• Limited liquidity headroom (current ratio 115.4%).
• Data gaps on cash flow and segment performance obscure sustainability assessment.

Investment Implications

Key Takeaways:

• Operating structure remains loss-making: SG&A exceeds gross profit.
• Leverage and coverage metrics are stressed (D/E 2.12x; coverage -11.70x).
• ROE (-3.0%) and ROIC (-2.1%) signal capital inefficiency.
• Modest liquidity buffer; reliance on receivables to cover current liabilities.
• Non-operating items are too small to alter the loss trajectory.

Metrics to Watch:

• Gross margin progression versus SG&A ratio (bps change).
• Operating income and operating margin trajectory toward breakeven.
• OCF and FCF disclosure and coverage of interest/dividends.
• Net debt trend and interest coverage improvement.
• Receivables collection (DSO) and working capital movements.

Relative Positioning: Versus peers with similar scale, the company currently lags on profitability (negative operating margin), capital efficiency (ROIC below threshold), and balance sheet resilience (D/E > 2x), with liquidity adequate but not strong; improvement requires either margin uplift or structural cost reduction.

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