JMS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥32.22B
• Operating Income: ¥-19M
• Net Income: ¥-215M
• Earnings per Unit (EPU): ¥-7.78

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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: Soft quarter with contracting topline and marginal operating loss, but cash generation stabilized; balance sheet liquidity remains adequate while profitability and interest coverage are weak. Revenue declined 4.8% YoY to 322.2, with gross profit of 73.5 and gross margin of 22.8%. SG&A of 73.7 fully absorbed gross profit, yielding operating income of -0.19 (operating margin about -0.1%). Ordinary income was -0.46 and net income was -1.90 (EPS -7.78 yen), albeit a smaller loss YoY (+11.7% improvement vs last year’s deeper loss). Non-operating income of 2.13 (dividends 0.47, interest income 0.13) was outweighed by non-operating expenses of 2.41 (interest expense 1.76 the main drag). EBITDA was positive at 18.44 (margin 5.7%), supported by sizeable D&A of 18.63. Based on back-calculations using provided YoY rates, operating margin likely improved by roughly 4 bps YoY (from about -0.10% to -0.06%), and ordinary margin by roughly 9 bps (from about -0.23% to -0.14%), while gross margin direction is unclear without prior-year cost detail. Earnings quality shows a large divergence: operating cash flow was +8.0 versus net loss of -1.90, implying strong cash conversion this quarter driven by non-cash charges and likely working capital releases. Liquidity is sound with a current ratio of 189% and quick ratio of 147%, but solvency optics are mixed given debt-to-equity of 1.04x and very weak interest coverage (-0.11x). Working capital remains ample at 226.98, and short-term loans (52.32) are well-covered by cash (81.29) and receivables (177.49). ROE was -0.5% on a DuPont basis, driven by a negative net profit margin (-0.6%) despite modest asset turnover (0.388) and leverage (2.04x). Estimated free cash flow was approximately breakeven (~0.05) after capex of 7.95, suggesting limited capacity to fund dividends or deleverage without improvement in operating profit. The effective tax rate appears distorted (-258%) due to losses and tax accruals, a non-recurring indicator rather than an operational trend. Forward-looking, restoring operating leverage by rationalizing SG&A and improving gross margin is essential to cover financing costs. Key watchpoints include price/cost pass-through in medical devices, utilization recovery in hospital procurement, and interest burden. With adequate liquidity but fragile profitability, execution on margin improvement and cash discipline will determine the pacing of balance sheet repair through 2H.

Profitability Analysis

ROE decomposition: ROE (-0.5%) = Net Profit Margin (-0.6%) × Asset Turnover (0.388) × Financial Leverage (2.04x). The dominant drag is the net profit margin, which is negative due to gross margin pressure and SG&A fully consuming gross profit, compounded by interest expense. Directionally, operating and ordinary margins appear to have improved a few basis points YoY based on back-solved prior figures (operating margin about +4 bps; ordinary margin about +9 bps), but still remain negative. The business driver is likely revenue softness (-4.8% YoY) and limited gross margin expansion, while SG&A was sticky; interest costs of 1.76 further pushed ordinary profit into loss. This change is only marginally sustainable: EBITDA is positive, so if gross margin recovers and SG&A is contained, operating profit could turn positive; however, interest expense will continue to cap ordinary income absent deleveraging. Concerning trend: SG&A equaled gross profit (73.7 vs 73.5), indicating no operating leverage; if SG&A grows faster than revenue or gross profit, profitability will remain constrained.

Growth Assessment

Revenue fell 4.8% YoY to 322.2, indicating soft demand or pricing in core medical consumables/equipment. Operating income improved slightly in margin terms but stayed negative; ordinary and net income remain losses with smaller magnitudes YoY. Non-operating items were a net negative due to interest burden despite dividend/interest income inflows. EBITDA at 18.44 signals underlying cash-generative operations before D&A, but conversion to operating profit is hindered by SG&A rigidity. Near-term growth hinges on hospital procedure volumes, product mix (higher-margin disposables vs devices), and ability to pass through input cost inflation. Outlook: modest recovery possible in 2H if cost pass-through and utilization improve; however, rising interest costs and a high-cost base pose headwinds. Without evidence of accelerating orders or material SG&A reduction, revenue recovery appears uncertain and margin upside limited.

Financial Health

Liquidity: Current ratio 189% and quick ratio 147% indicate healthy short-term liquidity; no warning threshold breached (<1.0). Working capital is 226.98, providing a buffer for operations. Maturity mismatch: Short-term loans (52.32) are covered by cash (81.29) plus receivables (177.49), reducing rollover risk. Solvency: Debt-to-equity is 1.04x (within our conservative benchmark <1.5x), but interest coverage is -0.11x, signaling weak capacity to service debt from current earnings. Long-term loans of 138.95 represent the majority of debt; deleveraging capacity is limited until operating profit turns sustainably positive. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF was 8.0 versus net income of -1.90, yielding OCF/NI of -4.21x (flagged by the rule), but qualitatively this reflects positive cash generation despite an accounting loss. The gap is primarily explained by non-cash D&A (18.63) and likely favorable working capital moves; EBITDA is positive (18.44), supporting cash flow. Estimated free cash flow is approximately breakeven at ~0.05 (OCF 8.0 minus capex 7.95). Sustainability: With EBITDA positive and capex modest, FCF can be maintained near breakeven, but interest and any dividend outflows would pressure cash unless operating profit improves. No clear signs of working capital manipulation are observable from the limited data; however, continued reliance on working capital releases to support OCF would be a risk if receivables/inventories re-build.

Dividend Sustainability

Dividend details were not disclosed; the calculated payout ratio (-221.3%) is not meaningful due to negative net income. With estimated FCF near zero and interest coverage negative, capacity to fund dividends from internal cash flow appears constrained. Unless 2H operating profit and OCF strengthen, sustaining or increasing dividends (if any) would likely require balance sheet support, which is not preferable given leverage and interest burden. Policy outlook: expect conservative stance until earnings normalize; priority should be on restoring profitability and interest coverage.

Risk Assessment

Business Risks:

• Pricing and reimbursement pressure in medical devices/consumables affecting gross margins
• Hospital demand volatility and procedure volume fluctuations impacting revenue
• Input cost inflation (resins, logistics) with lagged pass-through
• Product mix shift toward lower-margin items
• Regulatory/quality compliance risks including potential recalls

Financial Risks:

• Very weak interest coverage (-0.11x) with interest expense of 1.76 weighing on ordinary income
• Limited FCF (~0.05) constraining deleveraging and shareholder returns
• Potential working capital re-build reversing OCF if sales recover without margin improvement
• Refinancing risk if rates rise, given total loans of 191.27 (short + long term)

Key Concerns:

• SG&A fully consuming gross profit, preventing operating leverage
• Sustained negative operating and ordinary margins despite positive EBITDA
• Dependence on non-operating income (dividends/interest) that cannot offset financing costs
• Tax volatility creating distorted effective tax rate in loss periods

Investment Implications

Key Takeaways:

• Topline contracted 4.8% YoY; operating and ordinary losses narrowed slightly but remain negative
• EBITDA positive (18.44) with high D&A (18.63), supporting OCF despite accounting loss
• Interest burden (1.76) is a key drag; interest coverage -0.11x is the most acute weakness
• Liquidity is adequate (current ratio 189%, cash 81.29) but solvency improvement needs earnings recovery
• Estimated FCF roughly breakeven after capex (7.95), limiting scope for dividends/deleveraging

Metrics to Watch:

• Gross margin trajectory vs input cost inflation
• SG&A growth vs revenue growth to confirm operating leverage
• Operating margin turning sustainably positive
• OCF relative to NI and changes in receivables/inventories
• Interest expense trend and coverage ratio
• Capex discipline and any changes in dividend policy

Relative Positioning: Versus larger domestic peers in medical devices/consumables (e.g., Terumo, Nipro), JMS exhibits significantly lower margins and weaker interest coverage, albeit with acceptable liquidity; strategic focus must be on restoring gross margin and SG&A efficiency to close the profitability 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
• 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