WILLTEC Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥21.88B
• Operating Income: ¥161M
• Net Income: ¥183M
• EPS: ¥15.86

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Wiltec Co., Ltd. (TSE:7087) posted modest top-line growth in FY2026 Q2, with revenue up 1.3% year over year to ¥21.884 billion, but profitability deteriorated sharply at the operating and net levels. Gross profit of ¥3.896 billion implies a gross margin of 17.8%, yet operating income fell 32.6% YoY to ¥161 million, compressing the operating margin to roughly 0.7%. Ordinary income was ¥244 million, supported by non-operating items, while net income declined 44.8% YoY to ¥101 million. DuPont metrics indicate a low but positive ROE of 1.25% driven by a very slim net margin of 0.46%, reasonable asset turnover of 1.15x, and moderate financial leverage of 2.35x. The EBITDA margin was 1.2% (EBITDA of ¥262 million), highlighting limited operating cushion and cost absorption pressure amid tepid growth. Despite minimal interest burden (¥3 million; interest coverage ~53.7x), earnings quality signals caution as operating cash flow was negative ¥200 million versus positive net income, resulting in an OCF/NI ratio of -1.98. Liquidity appears solid on headline ratios, with a current ratio of 217.4%, quick ratio of 195.8%, and working capital of ¥8.165 billion, supported by sizeable current assets of ¥15.12 billion. Balance sheet strength is moderate, with total equity of ¥8.091 billion against total assets of ¥19.023 billion, implying an equity ratio of approximately 42.5% (the reported 0.0% equity ratio appears undisclosed rather than truly zero). Debt-to-equity is 1.24x, consistent with a liability base of ¥10.046 billion that likely includes substantial non-interest-bearing items. The sharp drop in operating income despite higher sales suggests negative operating leverage, likely from higher SG&A or mix changes, as SG&A (implied) is about ¥3.735 billion, or roughly 17.1% of sales. Cash and equivalents were not disclosed in XBRL for this period, constraining a detailed liquidity runway assessment, and free cash flow cannot be reliably derived due to missing investing/capex details. Dividend metrics (DPS and payout) are also undisclosed this quarter, so distribution trends cannot be inferred from this dataset alone. Overall, the quarter portrays a company with stable revenues but pressured margins, adequate solvency, and weak cash conversion, suggesting a focus on cost control, pricing/mix optimization, and working capital discipline is needed. Data gaps (notably cash, capex, share count, and dividends) limit precision in cash and per-share analyses, so conclusions are primarily based on the disclosed non-zero items.

Profitability Analysis

ROE decomposition (DuPont): ROE ~1.25% = Net margin (0.46%) × Asset turnover (1.15x) × Leverage (2.35x). The principal drag is the very thin net margin; asset efficiency and leverage are reasonable but insufficient to offset weak profitability. Gross margin is 17.8%, while operating margin is approximately 0.7%, indicating substantial SG&A absorption; implied SG&A is ~¥3.735 billion (~17.1% of sales). EBITDA margin at 1.2% signals limited buffer to absorb shocks. Ordinary income of ¥244 million above operating income suggests non-operating gains (e.g., financial income or other) partially mitigated weak core operations; interest expense is minimal at ¥3 million. The delta between revenue growth (+1.3% YoY) and operating income (-32.6% YoY) evidences negative operating leverage—small sales growth was outweighed by cost inflation or unfavorable mix/utilization. Effective tax optics are distorted in the provided metrics; with income tax of ¥176 million versus ordinary income of ¥244 million and net income of ¥101 million, there may be extraordinary items and/or minority interests affecting the reconciliation. Overall margin quality is weak this half, and sustaining profitability will require SG&A control, productivity actions, and/or pricing.

Growth Assessment

Top-line growth was modest at +1.3% YoY to ¥21.884 billion, suggesting stable demand but limited expansion. Gross profit growth is not provided, but margin at 17.8% indicates potential mix or cost headwinds versus prior periods given the operating income decline. Operating income fell 32.6% YoY to ¥161 million, highlighting that incremental revenue did not translate into profit due to higher operating costs or lower value-added business mix. Ordinary income at ¥244 million benefitted from non-operating items, masking underlying operating weakness. Net income contracted 44.8% YoY to ¥101 million, implying deterioration below the operating line and/or tax/minority effects. With EBITDA at ¥262 million (1.2% margin), the run-rate earnings power is modest relative to sales, limiting self-funded growth capacity without margin improvement. Near-term outlook hinges on cost normalization, utilization/productivity gains in dispatched/contracted operations, and potential recovery in higher-margin segments. Sustainability of revenue appears moderate but profit quality is fragile given negative operating leverage. Absent clearer visibility on capex and order/backlog trends (not disclosed), growth should be viewed as stable in sales but uncertain in margins. Monitoring client demand in manufacturing/tech end-markets and wage/pass-through dynamics is critical.

Financial Health

Liquidity is strong on paper: current ratio 217.4%, quick ratio 195.8%, and working capital of ¥8.165 billion, supported by current assets of ¥15.12 billion (including inventories of ¥1.504 billion). However, cash and equivalents were not disclosed, preventing a precise near-term liquidity runway assessment and emphasizing the need to monitor receivables quality and collection. Solvency appears moderate with total equity of ¥8.091 billion versus total assets of ¥19.023 billion; this implies an equity ratio near 42.5% (calculated), despite the reported 0.0% entry being undisclosed rather than zero. Total liabilities of ¥10.046 billion translate to a debt-to-equity ratio of 1.24x; with interest expense of only ¥3 million and interest coverage of ~53.7x, financial risk from interest-bearing debt appears low. Capital structure is balanced with meaningful equity cushion and modest financial burden. Inventory levels at ¥1.504 billion look manageable; working capital discipline remains important given negative OCF.

Cash Flow Quality

Earnings quality is weak this half: OCF of -¥200 million against net income of ¥101 million yields an OCF/NI ratio of -1.98, indicating profits did not convert to cash, likely due to working capital build or timing effects. Without disclosure of cash and equivalents and investing cash flows/capex (reported as zero/undisclosed), free cash flow cannot be robustly assessed; the reported FCF of zero should be treated as missing. EBITDA of ¥262 million and D&A of ¥101 million suggest limited non-cash addbacks to support cash generation relative to the revenue base. The negative OCF spotlights potential increases in receivables or other current assets; with inventories at ¥1.504 billion, inventory management likely contributed less than receivable timing, but itemized drivers are not provided. Overall, cash conversion is a key concern until working capital normalizes.

Dividend Sustainability

Dividend data (DPS and payout ratio) are undisclosed for this period in the provided dataset, so we cannot confirm current distributions or policy changes. Given net income of ¥101 million and negative operating cash flow in H1, coverage from earnings and cash is likely tight absent a second-half rebound or working capital release. With no reliable FCF calculation due to missing capex data, FCF coverage cannot be assessed. Balance sheet equity and low interest burden provide some flexibility, but prudent distribution would depend on restoring positive cash conversion and stabilizing margins. Historically, staffing/services peers often target stable-to-progressive dividends, but the near-term sustainability would hinge on H2 performance.

Risk Assessment

Business Risks:

• Margin compression from wage inflation and limited pass-through in dispatch/contracting services
• Client concentration or cyclicality in manufacturing/technology end-markets
• Utilization volatility leading to negative operating leverage on small revenue changes
• Talent acquisition/retention pressures affecting service delivery and costs
• Regulatory changes in labor dispatch laws and compliance costs

Financial Risks:

• Weak cash conversion (OCF -¥200 million vs NI +¥101 million)
• Potential working capital build in receivables impacting liquidity despite high current ratios
• Limited EBITDA margin (1.2%) reducing cushion for shocks
• Visibility on cash, capex, and dividends is limited due to undisclosed items
• Tax and below-the-line items causing earnings volatility

Key Concerns:

• Operating income down 32.6% YoY despite revenue growth of 1.3%
• Net margin only 0.46% and ROE 1.25%, indicating low returns
• Negative OCF with OCF/NI at -1.98
• Dependence on non-operating income to lift ordinary income above operating income
• Undisclosed cash, capex, and dividend details constrain forward cash planning

Investment Implications

Key Takeaways:

• Sales held up (+1.3% YoY), but margins deteriorated; operating margin ~0.7%
• ROE is low at 1.25%, driven by a very thin net margin
• Cash conversion is weak; OCF negative despite positive earnings
• Balance sheet leverage is moderate with an estimated equity ratio ~42.5% and interest burden minimal
• Operational efficiency and SG&A control are immediate levers for improvement

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio trajectory
• OCF and working capital movements (DSO, inventory turns, payable days)
• Order trends and utilization rates in key end-markets
• Ordinary-to-operating income gap (non-operating dependency)
• Capex and FCF once investing cash flows are disclosed
• Tax rate normalization and any extraordinary items

Relative Positioning: Within Japan’s staffing/technical services peers, Wiltec exhibits stable revenue but below-average profitability and cash conversion this half; balance sheet strength and low interest burden are positives, yet near-term positioning is constrained by margin pressure and negative operating cash flow.

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