Yashima & Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥15.81B
• Operating Income: ¥121M
• Net Income: ¥199M
• EPS: ¥69.32

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

Verdict: Solid topline growth but profit quality and cash conversion were weak in FY2026 Q2. Revenue rose 22.0% YoY to 158.06, with gross profit of 20.25 and operating income of 1.21, indicating very thin operating profitability. Gross margin printed at 12.8%, while the operating margin was approximately 0.8%, showing that SG&A (19.04) consumed almost all gross profit. Non-operating income of 1.24 (notably dividends 0.36 and interest 0.07) lifted ordinary income to 2.08 and net income to 1.98, implying meaningful reliance on non-core items. Net margin stood around 1.25%, and the DuPont ROE came in at 2.0% for the period, low versus typical cost of equity. Margin comparison is constrained by missing YoY profit data; in absolute terms the operating margin of about 76 bps is slim, and ordinary margin around 132 bps benefits from non-operating contributions by an estimated 50–60% of pretax/ordinary earnings. Earnings quality is a concern: operating cash flow was -14.31 versus net income of 1.98 (OCF/NI -7.23x), pointing to significant working capital outflows or timing effects. Liquidity remains comfortable (current ratio 164%, quick ratio 149%) with ample cash and deposits of 79.77, and interest burden is negligible (interest expense near zero; coverage ~15,125x). Balance sheet leverage by liabilities/equity looks moderate (1.34x), and financial leverage (assets/equity) is 2.34x. ROIC is 5.6%, below the 7–8% target range seen in best-in-class distributors/trading peers, suggesting room for efficiency and margin improvement. Non-operating income ratio of 62.4% signals outsized contribution from financial/investment items this quarter rather than core operations. Capex remained light at 0.25, indicating capital intensity is low; however, negative OCF limits near-term FCF until working capital normalizes. The implied payout ratio of 36.4% appears moderate, but FCF coverage cannot be assessed given negative OCF and unreported dividends. Forward-looking, normalization of receivables/inventory and stabilization of gross margin will be key to improve cash conversion and ROIC, while reducing dependence on non-operating gains should enhance the quality of earnings.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (~1.25%) × Asset Turnover (0.697x) × Financial Leverage (2.34x) ≈ 2.0% ROE for the half-year period. The binding constraint is the very low net margin; asset turnover is reasonable for a half-year (annualized ≈1.39x), and leverage is moderate. The largest driver limiting ROE is margin compression at the operating level: SG&A of 19.04 nearly offset gross profit of 20.25, yielding an operating margin of ~0.8% before non-operating items. Business explanation: mix and pricing discipline likely pressured gross margin (12.8%), and fixed/semi-fixed SG&A did not scale down, diluting operating profit despite 22% revenue growth. Non-operating income (dividends/interest) materially supported ordinary income, masking weak core profitability. Sustainability: absent a structural gross margin uplift or tighter SG&A control, the current ROE is unlikely to expand meaningfully; reliance on non-operating income is inherently more volatile. Concerning trend: SG&A growth versus revenue cannot be quantified due to missing YoY SG&A, but the SG&A-to-sales ratio of ~12.1% nearly equals gross margin, indicating limited operating leverage.

Growth Assessment

Revenue grew 22.0% YoY to 158.06, a strong top-line print for a distributor. However, core profit growth quality is questionable as operating income was only 1.21 and ordinary/net income benefited substantially from non-operating items (1.24). Gross margin at 12.8% and operating margin at ~0.8% imply competitive pricing and/or project mix headwinds. With ROIC at 5.6%, incremental growth must be margin-accretive or working-capital-light to create value above cost of capital. The low D&A (0.20) and capex (0.25) confirm a light-asset model, but cash conversion must improve to sustain growth. Near-term outlook hinges on working capital normalization (receivable collections, inventory turnover) and maintaining supplier pass-through to protect gross margin. If non-operating income normalizes lower, ordinary profit could decline absent margin improvement. Overall, revenue momentum appears solid, but profit sustainability is exposed to margin and cash conversion execution.

Financial Health

Liquidity is healthy: current ratio 164.1% and quick ratio 149.3%, with cash and deposits of 79.77 versus current liabilities of 113.71. No explicit interest-bearing debt is reported; interest expense is effectively nil, and interest coverage is extremely strong. The reported D/E of 1.34x likely reflects total liabilities to equity rather than financial debt. Maturity mismatch risk appears contained as current assets (186.64) exceed current liabilities (113.71); cash plus receivables (132.71) is above short-term obligations excluding payables seasonality. Total assets of 226.67 against equity of 96.85 implies financial leverage of 2.34x, moderate for the business. No off-balance sheet obligations are disclosed in the provided data. There are no explicit red flags (Current Ratio <1.0 or D/E >2.0), but monitoring payable concentration (accounts payable 89.16) versus supplier terms is prudent.

Cash Flow Quality

OCF/Net Income is -7.23x, a material quality concern indicating profit did not convert to cash due to significant working capital outflows and/or timing issues. Free cash flow cannot be precisely calculated given missing investing CF, but with capex only 0.25 and OCF at -14.31, FCF was likely negative in the period. The large negative OCF amid rising sales suggests increases in receivables and inventory or decreases in payables; balance details vs prior period are unavailable, limiting attribution. There is no evidence of aggressive capitalized costs (D&A is small), but the reliance on non-operating income to lift earnings reduces cash earnings quality. No clear signs of working capital manipulation are evident from a single-period snapshot; however, the magnitude of OCF shortfall warrants close monitoring of AR days, inventory days, and payable days next quarter. Sustainability: until OCF turns positive and covers maintenance capex and dividends, cash flow quality remains weak.

Dividend Sustainability

The payout ratio is indicated at 36.4%, which appears moderate against net income. However, with negative OCF and unreported dividend cash payments, FCF coverage cannot be assessed; on a cash basis, dividend capacity is uncertain for the half-year. Capex needs are low (0.25), which supports medium-term dividend potential once working capital normalizes. Balance sheet liquidity (cash 79.77) provides a buffer, but sustained negative OCF would erode this. Policy outlook cannot be inferred from disclosures; absent explicit guidance, a stable-to-cautious stance is appropriate pending OCF recovery.

Risk Assessment

Business Risks:

• Thin operating margin (~0.8%) leaves little buffer against pricing or cost shocks
• Gross margin pressure (12.8%) potentially driven by competitive pricing and project mix
• Dependence on non-operating income to support ordinary profit (non-operating income ratio ~50–60%)
• Execution risk in working capital management amid 22% revenue growth
• Potential supplier pass-through and procurement risks impacting COGS

Financial Risks:

• Negative operating cash flow (-14.31) versus positive net income (1.98)
• High accounts payable (89.16) relative to inventories (16.92) could indicate sensitivity to supplier terms
• ROIC at 5.6% below typical 7–8% target, risking value dilution if growth is not accretive
• Ordinary income sensitivity to dividend/interest income variability

Key Concerns:

• Earnings quality flagged by OCF/NI of -7.23x
• Low operating leverage as SG&A nearly equals gross profit
• Reliance on non-operating items to achieve ordinary/net profit
• Data gaps (no YoY profit breakdown, no investing CF detail, no dividend cash detail) limit visibility

Investment Implications

Key Takeaways:

• Strong top-line growth (+22%) but core margin remains very thin (op margin ~0.8%)
• Ordinary and net income are supported by non-operating income (dividends/interest)
• Cash conversion is weak this quarter (OCF -14.31), overshadowing accounting profit
• ROE is low at 2.0% for the period; ROIC at 5.6% indicates need for margin/asset-efficiency gains
• Balance sheet liquidity is solid, providing time to execute on margin and WC improvements

Metrics to Watch:

• Operating cash flow and OCF/NI ratio (>1.0 target)
• AR days, inventory days, and payable days (working capital normalization)
• Gross margin and SG&A ratio (operating leverage)
• Share of non-operating income in ordinary profit (quality of earnings)
• ROIC progression toward >7–8%
• Ordinary income margin and operating margin (bps changes QoQ/YoY)

Relative Positioning: Within industrial distribution peers, revenue growth is robust, liquidity is comfortable, and leverage is moderate, but profitability and cash conversion lag best-in-class operators; improving gross margin discipline and working capital turns are needed to close the ROIC and ROE gap.

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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