KIMURA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.29B
• Operating Income: ¥1.04B
• Net Income: ¥736M
• EPS: ¥44.53

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

Kimura Co., Ltd. (7461) reported FY2026 Q2 consolidated results under JGAAP with solid top-line growth and mixed profitability dynamics. Revenue rose 6.6% year over year to ¥19.293 billion, indicating resilient demand despite a softening in operating profit. Gross profit reached ¥5.432 billion, implying a gross margin of 28.2%, which appears healthy for a trading/industrial distribution profile. Operating income declined 3.3% YoY to ¥1.037 billion, suggesting cost pressures or adverse mix offsetting revenue gains. Ordinary income of ¥1.086 billion exceeded operating income by roughly ¥49 million, indicating a modest net non-operating tailwind. Net income improved 13.0% YoY to ¥660 million, supported by the small non-operating gain and likely timing effects in taxes; the disclosed effective tax rate of 0.0% is not consistent with the reported income tax expense and is likely an artifact of disclosure limitations. Cash generation was strong, with operating cash flow of ¥1.158 billion, yielding an OCF/Net Income ratio of 1.75, which supports earnings quality. The DuPont decomposition shows a net margin of 3.42%, asset turnover of 0.496x, and financial leverage of 1.98x, producing a calculated ROE of 3.36% for the period. Liquidity appears robust with a current ratio of 160.5% and working capital of ¥4.799 billion. Leverage is moderate with a debt-to-equity ratio of 0.62x and interest expense of only ¥7.38 million, resulting in a high interest coverage ratio of ~140x. The balance sheet indicates total assets of ¥38.882 billion and total equity of ¥19.67 billion, implying an equity ratio around 50.6% despite the tabular ‘0.0%’ placeholder. EBITDA was ¥1.524 billion, translating to a 7.9% EBITDA margin, pointing to reasonable operating efficiency for a mid-volume distributor. Free cash flow is not derivable because investing cash flows were not disclosed; the reported FCF of ‘0’ should be treated as unreported rather than zero. Dividend information (DPS and payout) was not disclosed, so policy assessment relies on capacity rather than stated guidance. Data gaps are present in key line items (e.g., inventories, investing cash flows, cash balance, equity ratio, and share data), so the analysis focuses strictly on available non-zero disclosures and derived relationships. Overall, Kimura’s 1H shows healthy revenue momentum, resilient margins, strong cash conversion, and conservative leverage, with near-term focus on cost control and working capital discipline to support full-year profitability.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 3.42% × Asset turnover 0.496 × Financial leverage 1.98 = ROE 3.36%. The margin profile is adequate for a trading/distribution business, with gross margin at 28.2% and EBITDA margin at 7.9%. Operating margin compression (-3.3% YoY in operating income vs +6.6% YoY revenue) suggests operating leverage worked against the company this half, likely due to higher SG&A, mix, or pricing pressures. Ordinary income exceeded operating income by about ¥49 million, indicating minor non-operating support (possibly financial income or equity-method contributions) with negligible interest burden (¥7.38 million). The increase in net income (+13.0% YoY) despite lower operating income implies favorable non-operating and/or tax timing effects; the effective tax rate metric shown as 0.0% is not reliable given reported income tax expense of ¥404.7 million. On a cash basis, OCF of ¥1.158 billion versus EBITDA of ¥1.524 billion implies ~76% cash conversion in the half, a respectable outcome given typical working capital needs in the sector. Overall, profitability quality is decent, but sustaining operating margin will be key as revenue grows.

Growth Assessment

Revenue growth of 6.6% YoY to ¥19.293 billion indicates stable end-market demand through 1H. The divergence between revenue growth and operating income (-3.3% YoY) suggests growth came with margin dilution, potentially from input cost normalization, sales mix, or elevated labor/logistics costs. Net income increased 13.0% YoY to ¥660 million, aided by non-operating items and tax timing effects; this is positive but may not be fully repeatable if operating costs persist. Asset turnover of 0.496x reflects interim-period dynamics and the relatively asset-light trading model; full-year turnover should be higher on an annualized basis. Given the modest difference between ordinary and operating income, non-operating support appears limited and not the principal driver of growth. Outlook hinges on cost containment, pricing discipline, and steady demand in housing/construction-related channels (sector inference), as well as normalization of lumber/material pricing. With strong liquidity and low interest burden, Kimura is positioned to fund growth organically; however, sustained revenue gains must translate to operating profit expansion to improve ROE.

Financial Health

Liquidity is solid, with current assets of ¥12.726 billion against current liabilities of ¥7.927 billion, yielding a current ratio of 160.5% and working capital of ¥4.799 billion. The quick ratio equals the current ratio in the dataset due to unreported inventories; in practice, actual quick liquidity is likely lower once inventories are included. Total assets were ¥38.882 billion and total equity ¥19.670 billion, implying an equity ratio of ~50.6% (the reported 0.0% is a placeholder). Total liabilities were ¥12.293 billion, with a debt-to-equity ratio of 0.62x, indicating moderate leverage. Interest expense was only ¥7.38 million, and interest coverage stood at ~140.5x, reflecting minimal financial strain. Overall solvency appears strong, supported by adequate equity capitalization and limited interest burden.

Cash Flow Quality

Operating cash flow of ¥1.158 billion exceeded net income of ¥660 million (OCF/NI = 1.75), supporting earnings quality in the half. Depreciation and amortization totaled ¥486.9 million, and EBITDA was ¥1.524 billion, implying ~76% conversion of EBITDA to OCF—sound for a working-capital-intensive business. Working capital drivers are not fully analyzable due to unreported inventories and receivables/payables breakdowns, but the strong OCF suggests either healthy collections or a release of working capital. Investing cash flow was not disclosed (shown as 0), so capex cannot be assessed; consequently, true free cash flow cannot be calculated and the displayed ‘FCF: 0’ is not informative. Financing cash flow was a net outflow of ¥74 million, indicating modest debt service or shareholder returns, but details are unavailable. Given these constraints, cash flow quality appears good in 1H, but sustainability depends on ongoing working capital discipline and visibility on capex.

Dividend Sustainability

Dividend per share and payout ratio are shown as 0.00%, which should be treated as undisclosed rather than zero. With 1H net income of ¥660 million and OCF of ¥1.158 billion, capacity to distribute dividends exists in principle, supported by low interest burden and moderate leverage. However, without capex data and with investing cash flows unreported, free cash flow coverage of dividends cannot be reliably assessed. Balance sheet strength (implied equity ratio ~50.6%) provides flexibility for stable shareholder returns if policy prioritizes them. Near-term sustainability would hinge on maintaining positive OCF after working capital needs and normalizing capex levels once disclosed. Policy outlook cannot be inferred from the provided data; investors should look for guidance in the company’s dividend policy statements or medium-term plan.

Risk Assessment

Business Risks:

• Exposure to housing and construction cycles affecting building materials demand
• Commodity price volatility (e.g., lumber/material inputs) impacting margins
• Pricing power and competitive intensity in distribution/trading channels
• Supply chain and logistics cost fluctuations
• Labor availability and wage inflation pressures
• Regional demand variability and weather seasonality

Financial Risks:

• Working capital intensity (receivables and inventories) potentially increasing cash flow volatility
• Potential inventory valuation risks amid commodity price swings (inventories not disclosed)
• Tax rate normalization risk in 2H versus favorable/timing effects in 1H
• Limited visibility on capex and investment needs due to unreported investing cash flows
• Refinancing risk appears low but interest rate increases could modestly raise financing costs

Key Concerns:

• Operating margin compression despite revenue growth in 1H
• Data gaps on inventories, capex, and cash balances hinder full cash flow assessment
• Sustainability of OCF outperformance versus net income if working capital reverses

Investment Implications

Key Takeaways:

• Top-line growth (+6.6% YoY) with softer operating profit (-3.3% YoY) highlights margin pressure
• Earnings quality supported by strong OCF (OCF/NI 1.75) and minimal interest burden
• Balance sheet is conservatively capitalized (implied equity ratio ~50.6%, D/E 0.62x)
• ROE at 3.36% leaves room for improvement via margin restoration and asset efficiency
• Non-operating contribution is modest; sustained profit growth must come from operations

Metrics to Watch:

• Operating and gross margin trends versus input cost movements
• Working capital turns (receivable days, inventory days, payable days) once disclosed
• Capex and investing cash flows to assess true free cash flow
• Tax rate normalization in 2H and full-year effective tax rate
• Ordinary income components (non-operating gains/losses) and interest expense
• Asset turnover and ROE progression as revenue scales

Relative Positioning: Relative to domestic trading/distribution peers, Kimura exhibits solid liquidity, moderate leverage, strong interest coverage, and average profitability; the key differentiator near term will be its ability to defend operating margins while sustaining mid-single-digit revenue growth.

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