FALTEC Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥34.14B
• Operating Income: ¥195M
• Net Income: ¥-0
• EPS: ¥-12.71

Income Statement

Balance Sheet

Cash Flow Statement

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

FALTEC Co., Ltd. (7215) reported FY2026 Q2 (cumulative) consolidated results under JGAAP with revenue of ¥34.141bn, down 12.2% YoY, highlighting a demand slowdown and/or price/mix pressure. Gross profit was ¥5.566bn, implying a gross margin of 16.3%, which is modest for an auto parts supplier and suggests limited pricing power and/or elevated input costs. Operating income declined to ¥195m (−61.2% YoY), compressing operating margin to 0.6% and signaling significant operating leverage to sales declines. Ordinary income of ¥301m exceeded operating income, indicating reliance on non-operating gains (e.g., financial income, forex) to support earnings. Despite positive ordinary income, net income was a loss of ¥119m, implying below-the-line charges and/or tax effects drove the bottom line negative. The reported tax expense of ¥431m alongside a net loss suggests deferred tax effects or non-recurring tax items under JGAAP. Depreciation and amortization of ¥2.236bn is high relative to operating income, depressing EBIT and underscoring the capital-intensive nature of the business. EBITDA was ¥2.431bn (7.1% margin), demonstrating underlying cash earnings strength versus slim operating profit. Operating cash flow was positive at ¥1.48bn, substantially exceeding accounting earnings; the OCF/Net Income ratio of −12.44 reflects the loss figure’s sign effect rather than poor cash generation. Liquidity appears adequate with a current ratio of 130.7% and quick ratio of 115.9%, supported by ¥9.836bn in working capital. On solvency, total liabilities of ¥46.129bn against equity of ¥20.4bn yield a debt-to-equity of 2.26x and an implied equity ratio of roughly 30.7% (despite the reported 0.0% placeholder), adequate but leaving limited cushion if profitability remains weak. Interest coverage is thin at 1.8x, suggesting sensitivity to further margin pressure or rate increases. Free cash flow cannot be assessed because investing cash flow was not disclosed (reported as zero indicates missing, not actual), though OCF provides a buffer in the interim. Dividend per share is shown as ¥0.00 and payout ratio 0.0%, consistent with a suspension amid losses and preservation of liquidity. Overall, the period shows revenue pressure, high operating leverage, thin margins, and dependence on non-operating items, offset by positive OCF and acceptable liquidity; near-term priorities are stabilizing sales, protecting gross margin, and improving operating efficiency.

Profitability Analysis

roe_decomposition: DuPont shows Net Profit Margin −0.35%, Asset Turnover 0.515x, and Financial Leverage 3.25x, resulting in ROE of −0.58%. The negative margin is the principal driver of weak ROE; asset utilization is mid-pack for an auto parts supplier in a half-year view, while leverage amplifies the small loss into a negative equity return. margin_quality: Gross margin 16.3% is constrained, pointing to input cost pressure and/or limited pricing headroom. Operating margin at 0.6% (¥195m on ¥34.141bn) is very thin and down markedly YoY, reflecting cost stickiness and high operating leverage. Ordinary margin of ~0.9% (¥301m) relies on non-operating elements to offset weak core profits. Net margin is −0.35% due to below-the-line items including a sizeable tax expense despite weak pretax profitability. operating_leverage: Revenue declined 12.2% YoY while operating income fell 61.2% YoY, indicating high operating leverage and insufficient variable cost flexibility. D&A of ¥2.236bn significantly exceeds operating income, magnifying EBIT sensitivity to small changes in gross profit.

Growth Assessment

revenue_sustainability: The 12.2% YoY revenue contraction suggests end-market softness (auto production volumes, model cycles) and/or customer price reductions. Sustained recovery will depend on OEM demand normalization, program wins, and pass-through of material costs. profit_quality: EBITDA margin of 7.1% vs operating margin of 0.6% indicates that non-cash D&A depresses accounting profitability; however, reliance on non-operating income to lift ordinary profit signals core earnings fragility. The net loss despite positive ordinary income points to non-recurring items and tax effects weighing on bottom line. outlook: Short-term, stabilization hinges on restoring gross margin via cost pass-through and mix improvements, while controlling fixed costs to reduce operating leverage. Medium-term growth will depend on new program ramp-ups and recovery in global auto builds; absent that, margins may remain compressed.

Financial Health

liquidity: Current assets ¥41.921bn vs current liabilities ¥32.085bn yield a current ratio of 130.7% and quick ratio of 115.9% (inventories ¥4.721bn). Working capital stands at ¥9.836bn, supporting near-term obligations. solvency: Total liabilities are ¥46.129bn vs equity ¥20.4bn (debt-to-equity 2.26x). Based on the balance sheet totals, the implied equity ratio is approximately 30.7% (¥20.4bn / ¥66.322bn), despite the reported 0.0% placeholder. Interest coverage is 1.8x, indicating limited headroom if rates rise or EBIT slips further. capital_structure: Leverage is moderate-to-elevated for cyclical conditions, with financial flexibility increasingly dependent on maintaining positive OCF. Ordinary income exceeding operating income suggests some support from financial/other income, but this does not strengthen structural leverage metrics.

Cash Flow Quality

earnings_quality: Operating cash flow of ¥1.48bn contrasts with a net loss of ¥119m, yielding an OCF/NI ratio of −12.44 due to sign effects; cash earnings are stronger than accounting profit as non-cash D&A (¥2.236bn) and working capital movements supported OCF. fcf_analysis: Free cash flow cannot be determined because investing cash flow was undisclosed (reported as zero indicates not provided). As such, we cannot assess capex intensity or maintenance versus growth spend for the period. working_capital: Quick ratio of 115.9% and inventories at ¥4.721bn imply manageable inventory risk. The positive OCF suggests either disciplined receivables collection or controlled inventory, but detailed drivers are not available without the cash flow breakdown.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is reported as ¥0.00 with a payout ratio of 0.0%, consistent with a suspension amid a net loss and fragile margins. Given negative ROE and thin interest coverage, maintaining a payout would be imprudent near term. fcf_coverage: FCF coverage cannot be calculated due to missing investing cash flow. While OCF is positive, sustainability of any future dividend would hinge on capex requirements and consistent cash generation. policy_outlook: Management is likely prioritizing balance sheet resilience and margin recovery over distributions. A reinstatement would require sustained positive net income, improved EBIT margins, and clearer visibility on capex and leverage.

Risk Assessment

Business Risks:

• Auto cycle exposure: sensitivity to OEM production volumes and model refresh timing
• Pricing pressure from OEM customers limiting gross margin expansion
• Input cost volatility (resins, metals, logistics) and pass-through risk
• High operating leverage causing outsized EBIT swings on modest revenue changes
• Program concentration and potential ramp or quality issues
• Foreign exchange volatility affecting non-operating income and import costs

Financial Risks:

• Thin interest coverage at 1.8x increases vulnerability to rate hikes or EBIT declines
• Leverage of 2.26x liabilities-to-equity elevates downside risk in a downturn
• Tax expense volatility despite weak pretax profit, impacting bottom-line predictability
• Limited visibility on capex/FCF due to undisclosed investing cash flows
• Potential covenant pressure if profitability deteriorates further

Key Concerns:

• Sustained revenue decline (−12.2% YoY) with operating profit down 61.2% YoY
• Operating margin compressed to 0.6% and reliance on non-operating income
• Net loss despite positive ordinary income, with ¥431m tax expense
• High D&A (¥2.236bn) relative to EBIT, depressing accounting profitability
• Data gaps on cash and investing flows impede full FCF and liquidity assessment

Investment Implications

Key Takeaways:

• Revenue down 12.2% YoY with high operating leverage; margins are fragile
• Gross margin 16.3% and operating margin 0.6% indicate limited pricing power and fixed-cost rigidity
• Ordinary profit exceeds operating profit, implying reliance on non-operating items
• Net loss of ¥119m driven by below-the-line impacts including ¥431m in taxes
• Positive OCF of ¥1.48bn supports liquidity despite accounting loss
• Leverage moderate-to-elevated (2.26x liabilities-to-equity) with interest coverage at 1.8x
• Dividend suspended (DPS ¥0.00) to preserve cash

Metrics to Watch:

• Revenue trajectory by customer/program and price/mix trends
• Gross margin recovery and cost pass-through effectiveness
• EBIT margin progression and reduction in reliance on non-operating income
• OCF sustainability and disclosure of capex/investing cash flows to gauge FCF
• Interest coverage and leverage metrics (net debt/EBITDA if available)
• Tax expense normalization and extraordinary items under JGAAP

Relative Positioning: Within Japanese auto parts suppliers, FALTEC currently sits in the lower profitability cohort due to thin operating margins and negative ROE, though liquidity is adequate and cash generation is better than accounting earnings; recovery hinges on margin repair and sales stabilization.

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