TORICO Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.44B
• Operating Income: ¥-77M
• Net Income: ¥-139M
• EPS: ¥-9.86

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

TORICO reported FY2026 Q2 consolidated results under JGAAP showing a sharp topline contraction and continued operating losses, albeit with reasonable balance-sheet resilience. Revenue was ¥1,435 million, down 24.4% YoY, indicating significant pressure on demand or a deliberate scaling-back of lower-margin activities. Despite the revenue decline, gross profit margin was a solid 48.4% (gross profit ¥694.969 million), suggesting that pricing, mix, or procurement discipline helped protect unit economics. Operating income remained negative at ¥-77 million (flat YoY), translating to an operating margin of approximately -5.4%, highlighting ongoing fixed-cost absorption issues and limited operating leverage at current scale. Ordinary income was ¥-76 million and net income was ¥-84 million (EPS -¥9.86), with a net margin of -5.85%, underscoring that the path to break-even still requires either a revenue rebound or further cost rationalization. The DuPont profile shows calculated ROE at -7.17%, driven by a -5.85% net margin, asset turnover of 0.761x, and moderate financial leverage of 1.61x. On cash flows, operating cash flow was negative at ¥-57.506 million; relative to net loss, the OCF/NI ratio of 0.68 indicates OCF was less negative than earnings, aided by non-cash items (e.g., ¥18.361 million D&A) and/or working capital movements. Financing cash flow was positive at ¥263.794 million, implying reliance on external capital to fund losses and growth; investing cash flow was not disclosed. Liquidity appears ample with current assets of ¥1,408.533 million versus current liabilities of ¥501.817 million, yielding a current ratio of 280.7% and working capital of ¥906.716 million. Total liabilities were ¥667.502 million against total equity of ¥1,171 million, for a liabilities-to-equity ratio of 0.57x; based on total assets of ¥1,885 million, the implied equity-to-asset ratio is approximately 62.1% (the reported equity ratio field is not disclosed). Interest expense was modest at ¥3.003 million; however, the interest coverage ratio using operating income is negative (-25.6x) because EBIT is negative. Dividend payments remain suspended (DPS ¥0.00), consistent with loss-making operations and the need to preserve liquidity. Overall, TORICO’s unit economics at the gross level are reasonably healthy, but the company remains sub-scale relative to its fixed cost base, leading to persistent operating losses. The priority remains stabilizing revenue after the 24.4% YoY contraction and aligning opex with the current revenue run-rate to reach break-even. While balance sheet liquidity provides a buffer, sustained negative OCF would eventually require further financing absent an earnings turnaround. Data limitations exist (certain items reported as 0 indicate non-disclosure rather than actual zero), but the available figures are sufficient to assess profitability pressures, liquidity strength, and moderate leverage.

Profitability Analysis

ROE decomposition (DuPont): Net margin -5.85% × Asset turnover 0.761 × Financial leverage 1.61 = ROE -7.17%. The principal drag is negative net margin; leverage is moderate and not the main driver of ROE. Gross margin is strong at 48.4%, indicating reasonable pricing power and/or favorable mix, but operating margin is -5.4% as fixed costs and SG&A outweigh gross profits at the current revenue base. EBITDA was ¥-58.639 million (margin -4.1%), reflecting limited operating leverage and indicating that breakeven requires either a revenue uplift or further cost containment. Ordinary margin of roughly -5.3% shows non-operating items are not materially offsetting operating losses. Interest expense is low (¥3.003 million), so financing costs are not the core issue; rather, scale and cost efficiency are the constraints. The flat YoY operating loss despite a 24.4% revenue decline implies some opex flexibility and/or gross margin resilience, partially mitigating deleverage. Effective tax rate is effectively neutral given losses. Overall, profitability hinges on restoring revenue momentum while protecting gross margin, and on rightsizing SG&A to achieve positive operating margin.

Growth Assessment

Revenue declined 24.4% YoY to ¥1,435 million, signaling either weaker end-market demand, product/channel mix shifts, or deliberate pruning of low-return activities. The ability to hold a 48.4% gross margin amidst the revenue drop is encouraging for unit economics, suggesting that pricing and mix remain disciplined. However, negative operating income (¥-77 million) indicates that the current scale does not cover fixed costs. Profit quality is mixed: net loss persisted, but OCF was less negative than NI (OCF/NI 0.68), indicating some support from non-cash items and/or working capital. Near-term outlook centers on revenue stabilization and cost alignment; without growth reacceleration or incremental efficiency gains, continued losses are likely. Key swing factors include demand elasticity to pricing, marketing effectiveness, and any progress in shifting mix toward higher-margin offerings. Given the magnitude of the topline decline, YoY comps in the next periods may ease, but visibility is limited from the disclosed data. Execution on customer acquisition/retention and inventory/fulfillment efficiency (inventory data not disclosed) will be pivotal to sustain gross margin while rebuilding volume.

Financial Health

Liquidity is strong with current assets of ¥1,408.533 million and current liabilities of ¥501.817 million, yielding a current ratio of 280.7% and working capital of ¥906.716 million. Quick ratio is the same as current ratio due to non-disclosure of inventories; nonetheless, liquidity headroom appears ample. Total assets are ¥1,885 million with total equity of ¥1,171 million, implying an equity-to-asset ratio of roughly 62.1% (reported field not disclosed) and liabilities-to-equity of 0.57x, reflecting moderate leverage. Interest expense is modest at ¥3.003 million, and while interest coverage is negative due to operating losses, absolute interest burden is not large. The capital structure is equity-heavy, which provides resilience during loss-making periods. Financing inflows of ¥263.794 million in the period supplemented liquidity, reducing near-term refinancing pressure. Solvency appears adequate given the equity base, but prolonged negative OCF would gradually erode this cushion or necessitate additional financing.

Cash Flow Quality

Operating cash flow was ¥-57.506 million versus net income of ¥-84 million, producing an OCF/NI ratio of 0.68. This indicates OCF was less negative than earnings, supported by non-cash charges (e.g., ¥18.361 million D&A) and/or favorable working capital movements. Free cash flow is not derivable due to undisclosed investing cash flows and capex; the FCF figure shown as 0 reflects non-disclosure rather than actual zero. Financing cash flow of ¥263.794 million covered the negative OCF, implying dependence on external capital during the period. Working capital stands at ¥906.716 million; without inventory and receivables/payables detail, the durability of any working capital-driven cash support cannot be assessed. Earnings quality is mixed: while non-cash items partially bridge earnings to cash, core operations remain cash-absorbing. Sustained improvement requires turning EBITDA positive and stabilizing working capital intensity.

Dividend Sustainability

The company paid no dividends (DPS ¥0.00) with a payout ratio of 0.0%, appropriate given negative earnings and OCF. Free cash flow coverage cannot be assessed due to non-disclosure of investing cash flows; the displayed 0.00x coverage reflects missing data. Given ongoing losses and reliance on financing inflows, near-term capacity to initiate dividends is limited. Dividend policy is likely to remain conservative until the company reaches consistent positive OCF and earnings. Key to future distributions will be restoring revenue growth, sustaining gross margins near current levels, and achieving operating margin break-even or better.

Risk Assessment

Business Risks:

• Topline volatility evidenced by a 24.4% YoY revenue decline.
• Operating leverage risk: fixed costs not fully absorbed at current scale, leading to operating losses.
• Execution risk in cost control and efficiency improvements needed to reach break-even.
• Margin risk if pricing/mix or procurement conditions deteriorate from the current 48.4% gross margin.
• Demand uncertainty and potential competitive pressures in core markets.

Financial Risks:

• Negative operating cash flow (¥-57.506 million) necessitating financing support.
• Interest coverage negative due to operating losses, leaving limited buffer if rates or borrowings rise.
• Potential need for additional capital if losses persist, leading to dilution or higher leverage.
• Liquidity reliance on sizable working capital base; limited visibility into inventory/receivables turnover due to non-disclosure.

Key Concerns:

• Sustained operating losses (operating margin -5.4%).
• Large YoY revenue contraction (-24.4%) with limited visibility on recovery drivers.
• Dependence on financing inflows (¥263.794 million) to fund operations.
• Inability to assess FCF trajectory due to undisclosed capex/investing cash flows.

Investment Implications

Key Takeaways:

• ROE -7.17% primarily driven by a -5.85% net margin; leverage is moderate and not the main driver.
• Gross margin is solid at 48.4%, but the company remains sub-scale, resulting in an operating loss of ¥-77 million.
• Liquidity is strong (current ratio 280.7%; working capital ¥906.716 million), providing near-term flexibility.
• Operating cash burn (¥-57.506 million) persists; financing inflows of ¥263.794 million bridge the gap.
• Path to break-even requires revenue stabilization and tighter opex discipline to convert strong gross margins into positive operating margins.

Metrics to Watch:

• Quarterly revenue trend and YoY growth trajectory after the -24.4% decline.
• Gross profit margin sustainability around the current 48–50% range.
• SG&A as a percentage of sales and EBITDA margin progression toward breakeven.
• Operating cash flow and working capital movements (DSO/DPO/DIO when disclosed).
• Leverage and liquidity (implied equity ratio ~62.1%, interest expense trend, financing inflows/outflows).

Relative Positioning: Within small-cap Japan peers facing scale constraints, TORICO exhibits relatively healthy gross margins and a conservative balance sheet, but trails on profitability and cash generation due to sub-scale operations and a sharp recent revenue decline.

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
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