Crossfor Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.27B
• Operating Income: ¥28M
• Net Income: ¥5M
• EPS: ¥0.47

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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: A solid rebound quarter with strong top-line growth translating into sharply higher operating profit, but profitability remains thin and leverage keeps the risk profile moderate. Revenue rose 44.4% YoY to 12.68, while operating income jumped 401.8% YoY to 0.28, lifting ordinary income to 0.30. Gross profit was 3.16, implying a gross margin of 24.9%, and SG&A was 3.10, leaving a narrow operating margin of 2.2%. Net income was 0.08 (+52.4% YoY), for a net margin of 0.6%, reflecting light taxation and minimal net non-operating contribution (0.09 income offset by 0.09 expenses). We estimate operating margin expanded roughly 158 bps YoY (from about 0.6% to 2.2%) given the reported growth rates, while the net margin improved only modestly by about 3 bps (from ~0.60% to ~0.63%). Interest coverage improved to 3.38x, but remains below the 5x “strong” benchmark, highlighting ongoing sensitivity to financing costs. Liquidity is healthy with a current ratio of 205% and quick ratio of 150%, supported by cash of 6.30 and receivables of 7.23 against short-term loans of 8.50. Balance sheet leverage is elevated but manageable: D/E is 1.80x and equity ratio is approximately 35.4%. Inventory at 9.58 is high relative to quarterly sales (about 75% of Q1 revenue), which supports growth but could weigh on cash conversion if demand slows. Earnings quality cannot be fully assessed because operating cash flow was not disclosed; this is a key limitation, particularly given the high working capital needs in this business. The reported payout ratio of 78.1% looks stretched relative to profit scale and unknown FCF, posing potential dividend sustainability risk if momentum eases. On DuPont metrics, ROE is 0.4% this quarter, driven mainly by high financial leverage (2.82x) over thin margins (0.6%) and modest asset turnover (0.248). With non-operating items netting to near zero, the quarter’s improvement is chiefly operating in nature, implying better cost absorption as volumes recover. Forward-looking, sustained revenue momentum and tighter SG&A control are needed to defend the expanded operating margin and improve interest coverage. Monitoring inventory turns, receivables collection, and any FX or demand volatility will be crucial to maintain the recovery trajectory.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (0.6%) × Asset Turnover (0.248) × Financial Leverage (2.82x) ≈ 0.4% ROE. The most material change versus last year appears to be operating leverage, with operating income up 401.8% against revenue up 44.4%, implying a sizable uplift in operating margin (~+158 bps YoY to 2.2%). The business driver is scale benefits: gross profit of 3.16 supported by SG&A of 3.10 allowed greater cost absorption, while non-operating items netted out. Net margin improved only slightly due to interest burden (interest expense 0.08) and limited tax expense (effective rate ~13.7%), so leverage is still a drag on bottom-line conversion. This improvement is partially sustainable if revenue growth persists and SG&A discipline holds; however, margins remain thin and vulnerable to volume normalization or price/mix shifts. Watch for SG&A growth relative to revenue; although not disclosed in detail, SG&A at 3.10 nearly consumed gross profit (3.16), indicating limited cushion if sales soften.

Growth Assessment

Top-line growth was strong at +44.4% YoY to 12.68, indicating robust demand recovery or successful sales execution. Operating income rose disproportionately (+401.8% YoY to 0.28), evidencing operating leverage from higher volumes. Ordinary income reached 0.30, with net income up 52.4% YoY to 0.08, translating to EPS of 0.47 JPY on 17.05 million average shares. Gross margin printed at 24.9%; without prior-year gross margin disclosure, we infer improved operating margin but cannot confirm gross mix effects. Revenue sustainability hinges on seasonality and end-market demand (jewelry/consumer discretionary), as well as export exposure and FX. With inventories at 9.58 (about 75% of Q1 sales) and receivables at 7.23 (about 57% of Q1 sales), the company appears positioned for continued sales but faces working capital execution risk. Outlook: If demand remains firm and SG&A intensity tapers, operating margin can grind higher; if not, the thin net margin will cap profit growth.

Financial Health

Liquidity is sound: Current ratio 205.2% and quick ratio 150.4% exceed healthy thresholds. There is no warning trigger for current ratio (<1.0), and near-term liquidity seems ample with 35.87 of current assets vs 17.48 of current liabilities. Maturity profile shows short-term loans of 8.50 and long-term loans of 14.61; cash and deposits of 6.30 plus receivables of 7.23 provide reasonable coverage of short-term obligations, though cash alone does not fully cover short-term debt. Solvency: D/E is 1.80x (above the conservative 1.5x benchmark but below the 2.0x warning level), and the equity ratio is ~35.4% (18.09/51.10). Interest coverage of 3.38x is adequate but below the >5x strong benchmark, indicating moderate sensitivity to earnings volatility or rate increases. No off-balance sheet obligations were disclosed in the data provided.

Cash Flow Quality

Operating cash flow was not disclosed, preventing direct assessment of OCF/Net Income or working capital-driven cash conversion. As a proxy risk indicator, inventories (9.58) and receivables (7.23) are sizable relative to quarterly sales (12.68), implying cash conversion risk if sales slow or collections lengthen. With capex and dividends undisclosed, FCF sustainability cannot be evaluated; however, the interest burden (0.08) and leverage suggest the firm should prioritize cash generation to support debt service. No explicit signs of working capital manipulation can be inferred from the limited data, but elevated inventories warrant monitoring of inventory turns and potential write-down risk if demand softens.

Dividend Sustainability

The calculated payout ratio is 78.1%, above the <60% benchmark for comfort, indicating a potentially stretched dividend relative to current earnings power. Annual DPS and total dividends paid were not disclosed, and FCF coverage is not calculable due to absent cash flow data. Given modest net income (0.08 in the quarter) and thin margins, dividend sustainability likely depends on continued revenue growth, stable margins, and prudent capex. Policy outlook should be assessed against leverage (D/E 1.80x) and interest coverage (3.38x); a conservative approach would be to balance shareholder returns with deleveraging until operating cash flow visibility improves.

Risk Assessment

Business Risks:

• Demand volatility in jewelry/consumer discretionary end-markets affecting volumes and pricing
• High inventory relative to quarterly sales increasing obsolescence/markdown risk
• Potential FX exposure impacting import costs or export competitiveness
• Supplier concentration or raw material price swings (e.g., precious metals, components) affecting gross margins

Financial Risks:

• Elevated leverage (D/E 1.80x) with interest coverage at 3.38x, exposing earnings to rate and profit volatility
• Working capital intensity (inventories 9.58, receivables 7.23) could pressure cash if growth slows
• Dividend payout ratio of 78.1% may not be covered if cash generation lags earnings

Key Concerns:

• Thin operating margin (2.2%) leaves limited buffer against cost inflation or sales shortfalls
• OCF unreported, limiting assessment of earnings quality and FCF
• Short-term loans (8.50) exceed cash (6.30), necessitating consistent collections and inventory turns

Investment Implications

Key Takeaways:

• Revenue up 44.4% YoY to 12.68 with strong operating leverage (+401.8% YoY OI)
• Operating margin improved to 2.2% (+158 bps YoY), but net margin remains thin at 0.6%
• Liquidity is healthy (CR 205%, QR 150%), while leverage is elevated (D/E 1.80x)
• Interest coverage at 3.38x is adequate but not robust
• Dividend payout ratio of 78.1% looks demanding absent FCF visibility
• Inventory and receivables levels require careful management to sustain growth

Metrics to Watch:

• Operating cash flow and OCF/NI once disclosed
• Inventory turns and days sales outstanding
• Operating and net margin progression
• Interest coverage and net debt trajectory
• Order trends and FX impacts on gross margin

Relative Positioning: Within small-cap consumer discretionary/jewelry peers, the company exhibits stronger near-term top-line momentum but thinner margins and higher leverage than conservative benchmarks; liquidity is a relative strength, while cash flow visibility and dividend cover are key watch points.

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