SANRIN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.05B
• Operating Income: ¥-270M
• Net Income: ¥207M
• EPS: ¥-1.60

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

Sanrin Co., Ltd. reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth but continued weakness at the operating line contrasted with solid operating cash flow. Revenue rose 2.6% year over year to ¥12.054 billion, with gross profit of ¥2.925 billion and a gross margin of 24.3%, consistent with a mixed portfolio of LPG, petroleum, and related services. Operating loss widened slightly to ¥270 million, implying an operating margin of approximately -2.2%, reflecting cost pressures and/or weaker operating leverage in a seasonally sensitive business. Despite the operating loss, ordinary income was positive at ¥40 million, indicating material non-operating gains (roughly ¥310 million implied) and very low finance costs (interest expense ¥5 million). Net income was a small loss of ¥19 million (EPS -¥1.60), better year over year in percentage terms but still negative, with reported income tax expense of ¥116 million suggesting tax effects from non-operating items or deferred tax movements. The DuPont bridge shows a slightly negative ROE of -0.09%, driven by a marginally negative net margin (-0.16%) and modest asset turnover (0.419), while financial leverage remains conservative (1.36x). Liquidity appears strong: current ratio 223.3% and quick ratio 196.5%, supported by ¥13.713 billion in current assets and ¥6.141 billion in current liabilities. Balance sheet strength is notable, with total equity of ¥21.121 billion against total assets of ¥28.781 billion (implying an equity ratio of roughly 73% by calculation, though the disclosed equity ratio field shows 0%, which should be interpreted as undisclosed). Operating cash flow was robust at ¥1.103 billion despite the small net loss, aided by depreciation of ¥346 million and likely favorable working capital movements. Investing cash flow is not disclosed (shown as 0), and financing cash flow was an outflow of ¥313 million, likely debt repayment and/or lease outflows given DPS is listed as 0. Dividend per share is undisclosed/zero for the period; payout and FCF coverage metrics are listed as 0, consistent with no dividend payment information at this interim stage. EBITDA was ¥76 million and the EBITDA margin 0.6%, underscoring limited operating cushion; interest coverage based on EBIT is negative, but the absolute interest burden is very small. Working capital is ample at ¥7.572 billion, which, together with low leverage (debt-to-equity 0.39x), supports solvency through seasonal swings. Asset turnover at 0.419 is typical for a half-year; on an annualized basis it would be more in line with sector norms. Overall, the company shows resilient cash generation and a conservative balance sheet but needs to restore operating profitability for improved earnings quality. Data limitations exist around cash and equivalents, investing cash flow, and certain per-share metrics; analysis focuses on the available non-zero items.

Profitability Analysis

ROE decomposition: Net margin -0.16%, asset turnover 0.419x, and financial leverage 1.36x yield a calculated ROE of -0.09%, consistent with the reported figure. The negative net margin reflects an operating margin of approximately -2.2% (operating loss ¥270 million on revenue ¥12.054 billion), partially offset by non-operating gains that lifted ordinary income to ¥40 million. Gross margin is 24.3%, indicating adequate spread at the gross level but insufficient to cover SG&A and other operating expenses in this half. EBITDA of ¥76 million and an EBITDA margin of 0.6% show limited operating buffer; depreciation of ¥346 million indicates a capital-intensive asset base relative to earnings. Operating leverage appears unfavorable this period: revenue grew 2.6% YoY but operating income remained negative, suggesting fixed cost absorption challenges or pricing/mix headwinds. The interest burden is negligible (¥5 million), so financing costs are not the driver of weakness; rather, core operating efficiency and expense control are the key levers. Ordinary income turning positive implies material non-operating contributions (~¥310 million net), likely not reliably repeatable as a driver of profitability quality. Overall margin quality is weak at the operating level despite stable gross margin, and restoring positive operating margin is essential to improve ROE.

Growth Assessment

Revenue growth of 2.6% YoY to ¥12.054 billion suggests resilient demand across LPG/petroleum and related services, though seasonality can meaningfully influence interim volumes and mix. The modest growth did not translate into operating profit, indicating either increased operating costs, limited pricing power, or adverse mix. Gross profit grew to ¥2.925 billion with a 24.3% margin, broadly healthy for the sector, but SG&A control remains the swing factor. Ordinary income at ¥40 million signals support from non-operating items in the period, which may not be sustainable as a growth driver. Net income at -¥19 million represents a small absolute loss; the large YoY percentage change (+109.4%) is mainly a base effect. Asset turnover at 0.419 for the half suggests annualized turnover around ~0.84, consistent with a stable revenue base rather than outsized growth. Near-term outlook hinges on seasonal winter demand (heating) and fuel price trends; normalization of operating expenses and better volume/margin mix would be necessary for profit growth in H2. Given low interest costs and strong balance sheet, the company has capacity to pursue steady growth initiatives without overleveraging, but execution on operating efficiency is key. Non-operating gains helped this half; a sustainable growth path requires operating profit improvement rather than reliance on such items.

Financial Health

Liquidity is strong with a current ratio of 223.3% and a quick ratio of 196.5%, supported by current assets of ¥13.713 billion and current liabilities of ¥6.141 billion. Working capital stands at ¥7.572 billion, providing a sizable buffer for seasonal inflows/outflows. Solvency appears robust: total equity is ¥21.121 billion against total liabilities of ¥8.170 billion, implying an equity-to-assets ratio of roughly 73% by calculation (the disclosed equity ratio field is 0%, which should be read as undisclosed). Leverage is conservative with a debt-to-equity ratio of 0.39x, and financial leverage used in DuPont is 1.36x, indicating moderate balance sheet gearing. Interest expense is minimal at ¥5 million, and although EBIT-based interest coverage is negative due to operating loss, the absolute risk from interest burden is low. The capital structure is equity-heavy, providing resilience against operating volatility. Absence of disclosed cash and equivalents (0 reported as undisclosed) limits precision in assessing immediate liquidity, but overall metrics suggest ample capacity to meet obligations.

Cash Flow Quality

Operating cash flow was strong at ¥1.103 billion despite a small net loss of ¥19 million, yielding an OCF/Net Income ratio of -58.05 due to the near-zero negative denominator; directionally, cash earnings exceeded accounting earnings. Depreciation of ¥346 million contributed to cash generation, and working capital likely released cash (inventories at ¥1.643 billion and lower payables/receivables details not disclosed). EBITDA of ¥76 million is modest, so OCF strength likely reflects timing benefits in working capital that may not fully repeat. Free cash flow is shown as 0 due to undisclosed investing cash flows (capex not provided); therefore, we refrain from inferring FCF despite positive OCF. Financing cash flow was an outflow of ¥313 million, likely debt/lease repayments; dividend cash outflow appears absent per DPS/payout disclosures. Overall, cash flow quality is acceptable for an interim period, but sustainability depends on maintaining working capital discipline and restoring operating profit. Data limitations (no cash balance, no investing CF detail) constrain a full assessment of cash coverage and reinvestment intensity.

Dividend Sustainability

Annual DPS is listed as 0.00 and payout ratio 0.0%, indicating no dividend information for the period; this is not unusual for an interim update. With FCF shown as 0 (investing CF undisclosed), we cannot evaluate FCF coverage quantitatively. From a balance sheet standpoint, high equity and low leverage provide capacity for distributions over a cycle, but interim operating losses argue for prioritizing earnings recovery. If dividends were to be considered, sustainable payout would need to be covered by recurring OCF after maintenance capex; current reliance on working capital inflows and non-operating gains does not support visibility. Policy outlook: likely conservative until operating margin returns to positive territory and capex requirements are clarified. We therefore refrain from drawing conclusions on payout capacity beyond noting balance sheet headroom and the need for operating improvement.

Risk Assessment

Business Risks:

• Seasonality and weather sensitivity (warmer winters reduce LPG/heating demand)
• Commodity price volatility affecting gross spread and inventory valuation
• Competitive pricing pressure in LPG/petroleum distribution and home equipment sales
• Regulatory and decarbonization trends impacting fossil fuel demand over time
• Execution risk in controlling SG&A and improving operating leverage
• Customer credit risk in B2B/B2C receivables amid macro fluctuations
• Dependence on non-operating income in the period, which may not be repeatable

Financial Risks:

• Operating losses leading to negative EBIT and weak interest coverage (though interest burden is small)
• Potential reversal of working capital cash inflows in subsequent periods
• Uncertainty around capital expenditures due to undisclosed investing cash flows
• Inventory price risk from fuel price swings affecting gross margins
• Tax expense variability despite low earnings, impacting net results

Key Concerns:

• Persistently negative operating margin despite stable gross margin
• Reliance on non-operating gains to lift ordinary income
• Limited visibility on cash and investing activities due to undisclosed items

Investment Implications

Key Takeaways:

• Top-line grew 2.6% YoY to ¥12.054 billion, but operating loss of ¥270 million persists
• Gross margin is stable at 24.3%, yet SG&A absorption remains challenging
• Ordinary income positive at ¥40 million implies sizable non-operating gains (~¥310 million)
• Net loss is small (¥19 million), but tax expense of ¥116 million introduces volatility
• Operating cash flow strong at ¥1.103 billion, benefiting from depreciation and working capital
• Balance sheet is conservative: D/E 0.39x and implied equity ratio ~73%
• Liquidity robust with current ratio 223% and quick ratio 197%
• EBITDA margin thin at 0.6%, highlighting limited operating cushion
• Interest burden is minimal (¥5 million), limiting financial risk
• Data gaps on cash balance and investing cash flows constrain FCF assessment

Metrics to Watch:

• Operating margin trajectory and SG&A trends in H2
• Unit volumes and gross spread per unit in LPG/petroleum
• Working capital movements (receivables and inventory days)
• Non-operating income components and sustainability
• Capex and maintenance vs. growth investment once disclosed
• Seasonal demand indicators (heating degree days/weather)
• Asset turnover recovery on a full-year basis

Relative Positioning: Within domestic energy distributors, Sanrin shows stronger balance sheet conservatism and liquidity than many peers but weaker interim operating profitability; cash generation was comparatively resilient this half due to working capital inflows, yet sustained competitiveness hinges on restoring operating margins.

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