Kanadevia Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥267.71B
• Operating Income: ¥-7.78B
• Net Income: ¥-1.06B
• 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

Kanadevia Co., Ltd. (Consolidated, JGAAP) reported FY2026 Q2 revenue of ¥267.7bn, a modest 0.8% YoY decline, indicating broadly stable top-line demand but with signs of softness. Gross profit was ¥42.8bn, implying a gross margin of 16.0%, which supports that core pricing and direct cost control remain intact. Despite positive gross profit, the company posted an operating loss of ¥7.8bn, highlighting elevated SG&A and/or development expenses that outweighed gross profit generation. Ordinary loss widened to ¥8.3bn, reflecting net financial costs including ¥0.53bn in interest expense. Net loss was ¥5.5bn, with reported YoY change (-54.8%) indicating a deterioration in bottom-line performance versus the prior year period. The DuPont profile shows a negative net margin (-2.06%), moderate asset turnover (0.459x), and meaningful financial leverage (3.12x), culminating in a negative ROE of -2.95%. The combination of negative margin and leverage amplifies equity return volatility and suppresses ROE. Liquidity appears adequate with a current ratio of 121.4% and working capital of ¥62.8bn, suggesting near-term obligations are covered, though headroom is not abundant given ongoing losses. The quick ratio of 120.7% and very low inventory level (¥2.0bn) point to a business model with limited inventory intensity, likely service or project-based. Total assets stand at ¥582.8bn against total liabilities of ¥411.8bn and equity of ¥186.8bn, implying a liabilities-to-equity ratio of 2.20x. Although the disclosed equity ratio is 0.0% (undisclosed), the implied equity ratio from the balance sheet is about 32% (equity/assets), indicating a moderate capitalization. Interest coverage based on operating income is -14.7x, underscoring that current operating earnings do not cover interest costs. All cash flow line items were undisclosed (reported as zero), limiting the ability to assess earnings-to-cash conversion, working capital cash dynamics, and free cash flow. No dividend was reported (DPS ¥0), which is consistent with a loss-making period and prudence in capital allocation. Overall, the key issues are operating losses despite positive gross margins, financial leverage that heightens downside risk to equity, and the lack of cash flow disclosure that constrains assessment of cash sustainability. The near-term focus should be on stabilizing revenue, tightening operating cost discipline, and improving operating cash generation to support solvency and eventually restore returns.

Profitability Analysis

ROE of -2.95% is driven by a negative net profit margin (-2.06%), partially offset by moderate asset turnover (0.459x) and elevated financial leverage (3.12x). Gross margin is 16.0%, indicating that direct cost inflation is manageable; however, the translation to operating margin is negative due to high SG&A/R&D or overhead intensity. The gap between gross profit (¥42.8bn) and operating loss (¥7.8bn) suggests approximately ¥50–51bn in operating expenses over the period, implying limited operating leverage at current revenue levels. Ordinary loss (¥8.3bn) versus operating loss (¥7.8bn) indicates modest incremental drag from non-operating items, notably interest expense of ¥0.53bn. The interest coverage ratio of -14.7x confirms insufficient earnings to service interest from operations. With EBITDA data undisclosed (D&A reported as zero), EBITDA-based metrics are not reliable; nonetheless, the operating loss signals negative EBITDA or minimal add-back effects in this period. Overall profitability hinges on lowering fixed costs and/or achieving higher utilization to regain operating leverage.

Growth Assessment

Revenue declined 0.8% YoY to ¥267.7bn, a minor contraction suggesting a relatively resilient top line but no clear growth catalyst in the period. The deterioration in operating income (+183.4% YoY indicates a deeper operating loss) signals profit headwinds tied to cost structure rather than revenue collapse. Net income of -¥5.5bn with a reported -54.8% YoY change implies bottom-line pressure, potentially from higher operating costs, interest burden, or tax effects despite losses. Gross margin stability at 16.0% suggests pricing power and input cost management have not materially eroded, but overhead absorption is weak. With inventories very low relative to sales, revenue likely depends on service/project throughput; sustained growth may require backlog expansion or improved win rates rather than inventory investment. Absent disclosed cash flow, we cannot confirm whether working capital is a drag or support to revenue sustainability. Near-term outlook depends on cost rationalization and demand stabilization; even flat revenue could significantly improve profits if fixed costs are addressed. If revenue softness persists, operating leverage will remain negative, prolonging losses.

Financial Health

Total assets: ¥582.8bn; total liabilities: ¥411.8bn; total equity: ¥186.8bn, implying an approximate equity ratio near 32% (calculated, as the disclosed figure is undetermined). The debt-to-equity ratio is 2.20x, indicating meaningful leverage that heightens sensitivity to earnings volatility. Liquidity is acceptable with current assets of ¥357.1bn versus current liabilities of ¥294.3bn (current ratio 121.4%, quick ratio 120.7%), aided by minimal inventory (¥2.0bn). Working capital is ¥62.8bn, providing a buffer, though sustained operating losses could erode this cushion. Interest expense of ¥0.53bn against an operating loss indicates reliance on non-operating sources for interest coverage, which is not sustainable long term. Without cash and cash equivalents disclosure, cash runway cannot be assessed; however, the balance sheet scale and equity base suggest some capacity to absorb near-term stress if liquidity is managed prudently. Overall solvency appears moderate but contingent on reversing operating losses.

Cash Flow Quality

Operating CF, investing CF, financing CF, and cash balances are undisclosed for the period, so traditional cash conversion metrics cannot be evaluated. The OCF/Net Income ratio shown as 0.00 and FCF of 0 reflect non-disclosure rather than actual zero cash flows. Earnings quality assessment is therefore limited; we cannot verify whether losses are accompanied by favorable working capital inflows or masked by accruals. Given a positive gross margin and operating loss, cash generation likely depends on billing milestones and receivable collections in a low-inventory, service/project-oriented model. Working capital quality cannot be judged without AR/AP turnover data or OCF detail. Until OCF and capex are disclosed, conclusions on FCF sustainability and the alignment between accounting earnings and cash are necessarily tentative.

Dividend Sustainability

No dividend was reported for the period (DPS ¥0), consistent with loss-making conditions and capital preservation. Payout ratio and FCF coverage metrics showing 0 are placeholders due to non-disclosure of cash flows and reflect no distribution. With negative net income and absent OCF/FCF data, distributions would not be supported by earnings and are unlikely to be prioritized ahead of restoring profitability and strengthening liquidity. Longer-term dividend capacity will depend on a return to positive operating income, improved interest coverage, and demonstrable free cash flow. Policy visibility is low given interim losses and undisclosed cash flows; management focus is likely on balance sheet stability.

Risk Assessment

Business Risks:

• Persistent operating losses despite positive gross margin, indicating cost structure misalignment
• Revenue softness (-0.8% YoY) with potential demand uncertainty in core end-markets
• Execution risk in cost reduction and operating leverage recovery
• Project/service delivery risk given low inventory intensity (backlog, utilization, milestone timing)
• Pricing pressure or mix headwinds that could compress gross margin from 16.0%

Financial Risks:

• Leverage of 2.20x liabilities-to-equity amplifies equity downside
• Negative interest coverage (-14.7x) indicates reliance on non-operating support for debt service
• Cash flow non-disclosure limits visibility on liquidity runway and covenant compliance
• Potential tax expense despite losses (¥1.70bn) reducing net income and cash, depending on cash tax timing
• Exposure to refinancing risk if losses persist and market conditions tighten

Key Concerns:

• Path to operating breakeven is unclear within current cost base
• Lack of OCF/FCF data impairs assessment of cash sustainability
• Ordinary loss exceeding operating loss points to non-operating drags including interest
• Moderate liquidity could compress if losses continue and working capital swings are unfavorable
• Equity return remains negative (-2.95% ROE), with leverage magnifying volatility

Investment Implications

Key Takeaways:

• Top line is relatively resilient, but profitability is constrained by elevated operating costs
• Gross margin (16.0%) is holding, suggesting room to restore operating leverage if SG&A is addressed
• Leverage (2.20x) and negative interest coverage elevate financial risk if losses persist
• Liquidity is adequate near term (current ratio 121.4%), but cushion is limited without positive OCF
• Visibility is reduced by lack of cash flow disclosure and unreported D&A/EBITDA

Metrics to Watch:

• Operating margin trajectory and SG&A ratio to sales
• Order backlog, book-to-bill, and utilization (if disclosed) to gauge revenue durability
• Gross margin stability versus input cost and pricing dynamics
• Operating cash flow and free cash flow, including working capital movements
• Interest coverage and effective leverage (net debt to equity, when cash is disclosed)
• Equity ratio (implied ~32%) and any changes from retained losses

Relative Positioning: Relative to peers, Kanadevia shows stable revenue but weaker operating leverage and interest coverage, with a moderate equity buffer; recovery hinges on cost discipline and cash flow execution.

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