F-TECH INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥142.09B
• Operating Income: ¥2.85B
• Net Income: ¥-5.06B
• EPS: ¥16.12

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

F-TECH (7212) posted FY2026 Q2 consolidated results under JGAAP showing resilient profitability improvement despite a modest top-line contraction. Revenue declined 2.5% YoY to ¥142.1bn, yet operating income rose 45.9% YoY to ¥2.85bn, evidencing meaningful cost discipline and mix/price improvements. Gross profit was ¥8.09bn, equating to a slim gross margin of 5.7%, but operating margin expanded to 2.0% as SG&A efficiencies took hold. Ordinary income was ¥1.82bn, reflecting a heavy interest burden (¥1.46bn) that compressed pre-tax earnings. Net income was ¥0.30bn (EPS ¥16.12), translating to a very thin net margin of 0.21%; below-the-line items (taxes and potential extraordinary items/minority interests) materially weighed on bottom line. ROE is a low 0.48% per DuPont (margin 0.21% × asset turnover 0.833 × leverage 2.75), indicating subdued equity returns despite moderate asset efficiency and leverage. Cash generation was strong: operating cash flow (OCF) of ¥7.73bn was 25.8x net income, supported by non-cash charges (¥7.49bn depreciation) and likely favorable working capital. Liquidity is tight with a current ratio of 99.3% and negative working capital of ¥0.55bn, but robust OCF mitigates near-term stress. Leverage remains elevated with debt-to-equity of 1.82x and interest coverage of 1.9x, underscoring sensitivity to financing costs. Total assets were ¥170.7bn and equity ¥62.2bn, implying an equity ratio around the mid-30% range by calculation, although the reported equity ratio field shows 0.0% (undisclosed). Inventory of ¥6.75bn appears lean relative to sales, suggesting disciplined stock management. Dividend metrics (DPS and payout) were shown as zero but should be treated as undisclosed; no conclusion on actual dividends can be drawn from the provided data. Key positives are operating margin expansion and cash generation; key pressures are interest burden, thin net margin, and tight liquidity. Data limitations include unreported investing cash flows, cash balance, and share count, constraining full FCF and per-share analyses. Overall, the quarter signals improving operational efficiency in a challenging auto components demand environment, with financial structure and below-the-line items remaining focal points.

Profitability Analysis

roe_decomposition: ROE 0.48% = Net margin 0.21% × Asset turnover 0.833 × Financial leverage 2.75. The principal drag is the very low net margin despite reasonable asset utilization and moderate leverage. margin_quality: Gross margin 5.7% and operating margin ~2.0% suggest cost improvements YoY (operating income +45.9% on -2.5% revenue). However, the interest burden (¥1.46bn) and tax/extraordinary items compress the net margin to 0.21%, indicating weak conversion of operating profit to net profit. operating_leverage: Operating income grew markedly despite lower revenue, implying favorable operating leverage via cost control, product mix, and/or pricing pass-through. EBITDA margin is 7.3% (EBITDA ¥10.34bn), comfortably above operating margin, highlighting significant non-cash D&A. Sustaining leverage benefits will require stable volumes and continued cost discipline.

Growth Assessment

revenue_sustainability: Revenue fell 2.5% YoY to ¥142.1bn, consistent with soft auto production volumes and possible customer-specific adjustments. Given F-TECH’s exposure to major OEM programs, near-term demand hinges on model cycles, regional production schedules, and supply chain normalization. profit_quality: Operating income rose 45.9% YoY to ¥2.85bn, indicating higher-quality earnings from structural cost actions and/or price adjustments. The gap between EBITDA (¥10.34bn) and EBIT (¥2.85bn) reflects high depreciation intensity, typical for tooling and chassis components, which can weigh on accounting profits despite healthy cash generation. outlook: With tight global auto supply chains easing and cost pass-through mechanisms improving, margins may continue to normalize. Risks include FX volatility, raw material surcharges rolling off, and interest burden. Sustained improvement requires maintaining price/mix and controlling fixed costs amid potentially flattish volumes.

Financial Health

liquidity: Current assets ¥81.50bn vs current liabilities ¥82.05bn → current ratio 99.3%; quick ratio 91.1% (inventories ¥6.75bn). Working capital is slightly negative (¥-0.55bn), indicating tight but manageable liquidity given strong OCF. solvency: Total liabilities ¥113.31bn and equity ¥62.16bn imply leverage is notable. Debt-to-equity 1.82x and interest coverage 1.9x indicate sensitivity to financing costs. Calculated equity ratio is roughly 36.4% (62.16/170.68), though the reported equity ratio field is undisclosed. capital_structure: High D&A (¥7.49bn) points to an asset-intensive base. With ordinary income pressured by interest expense, deleveraging or refinancing at lower rates would enhance resilience. Equity base of ¥62.16bn provides some buffer, but preserving covenant headroom requires ongoing cash generation.

Cash Flow Quality

earnings_quality: OCF of ¥7.73bn vastly exceeds net income of ¥0.30bn (OCF/NI 25.84x), driven by non-cash D&A (¥7.49bn) and likely working capital inflows. This indicates conservative accruals and strong cash conversion of operations despite thin accounting profits. fcf_analysis: Investing cash flow is undisclosed (shown as 0). As a result, Free Cash Flow cannot be reliably calculated. However, EBITDA of ¥10.34bn suggests capacity to fund maintenance capex while potentially generating positive FCF if capex is disciplined. working_capital: Inventories at ¥6.75bn appear lean; quick ratio of 91.1% indicates limited reliance on inventory for liquidity. The negative working capital position implies efficient payables management but requires vigilant receivables collection to avoid liquidity strain.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are indicated as 0.00 but should be treated as undisclosed. With net income of ¥0.30bn and strong OCF, nominal payouts could be serviceable, but the low net margin and leverage argue for balance sheet reinforcement. fcf_coverage: FCF coverage cannot be assessed due to unreported investing cash flows and cash balances. Operational cash generation is supportive, but capital intensity may absorb significant cash depending on capex cycles. policy_outlook: Given elevated leverage and interest burden, management may prioritize deleveraging and capex over distributions. Any dividend policy updates should be monitored in conjunction with visibility on FCF and balance sheet targets.

Risk Assessment

Business Risks:

• Automotive demand cyclicality and OEM production fluctuations
• Customer concentration with major OEM platforms
• Raw material cost volatility (steel, resins) and pass-through timing
• FX exposure affecting exports, costs, and translation
• Program launch risks and pricing pressure from OEMs
• Technological transition toward EV platforms impacting product mix

Financial Risks:

• High leverage (D/E 1.82x) and thin interest coverage (1.9x)
• Tight liquidity (current ratio ~1.0x; negative working capital)
• Below-the-line volatility (taxes/extraordinary items) depressing net income
• Capex intensity potentially consuming OCF in certain periods
• Refinancing risk if rates remain elevated

Key Concerns:

• Sustainability of operating margin gains amid soft revenue
• Ability to reduce interest burden through deleveraging
• Visibility on capex and investing cash flows to confirm FCF trajectory

Investment Implications

Key Takeaways:

• Operating margin expanded significantly despite a 2.5% revenue decline
• Net margin remains very thin at 0.21% due to interest and below-the-line items
• OCF strong at ¥7.73bn, indicating solid cash conversion
• Leverage elevated (D/E 1.82x) with modest interest coverage (1.9x)
• Liquidity tight (current ratio 99.3%), but supported by cash generation

Metrics to Watch:

• Operating margin and EBITDA margin sustainability
• Interest coverage and trajectory of interest expense
• Capex and full investing cash flows to derive FCF
• Working capital turns (receivables, payables, inventory)
• Equity ratio and debt reduction progress
• Price/mix and pass-through effectiveness with OEMs

Relative Positioning: Within Japanese auto parts peers, F-TECH demonstrates improving operational efficiency but remains constrained by leverage and interest burden; sustained cash generation and deleveraging are key to narrowing the profitability gap with higher-margin, lower-leverage competitors.

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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