FRANCE BED HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥29.26B
• Operating Income: ¥1.78B
• Net Income: ¥1.32B
• EPS: ¥31.20

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

France Bed Holdings (7840) reported FY2026 Q2 consolidated results under JGAAP showing flat top-line but weaker profitability. Revenue was ¥29.26bn (+0.0% YoY), indicating stable demand but no visible volume or price growth. Gross profit was ¥16.23bn, implying a robust gross margin of 55.5%, consistent with a high value-add product/service mix in bedding and medical/welfare equipment. Operating income declined 16.0% YoY to ¥1.78bn, compressing the operating margin to about 6.1%, pointing to higher SG&A, cost inflation, mix shifts, or lower operating leverage. Ordinary income (¥1.77bn) was close to operating income, reflecting limited non-operating drag and very low interest burden (¥38m). Net income fell 20.9% YoY to ¥1.05bn, with net margin at 3.58%, reflecting the operating pressure and a normalizing tax load. The DuPont breakdown yields ROE of 2.67% = 3.58% margin × 0.436 asset turnover × 1.71 leverage, indicating that profitability and asset efficiency, rather than leverage, are the principal constraints on returns. Cash generation was strong: operating cash flow reached ¥3.89bn, 3.72x net income, signaling solid earnings quality and favorable working-capital dynamics in the period. Liquidity appears ample with a current ratio of 2.48x and a quick ratio of 2.06x, supported by ¥22.94bn of working capital. Leverage is moderate with total liabilities/equity at 0.77x, and implied equity ratio is roughly 58% (equity/total assets), supporting solvency. Depreciation and amortization of ¥2.57bn is material versus operating income, underscoring the asset-intensive nature of the model (notably rental and production assets). Interest coverage is very strong at 46.9x (operating income/interest expense), implying low refinancing and rate sensitivity. Revenue stability coupled with profit headwinds suggests pricing discipline and a resilient core, but cost controls and mix optimization will be important to restore margins. Dividend information is not disclosed in the provided data; however, financing outflows (¥1.23bn) and strong OCF imply capacity to fund shareholder returns and capex, subject to investment needs. Several figures (equity ratio, investing cash flow, cash balance, DPS, and share data) are unreported in this dataset and should not be interpreted as zero; this limits precision in free cash flow and per-share analyses.

Profitability Analysis

ROE is 2.67% per DuPont: net profit margin 3.58%, asset turnover 0.436x, and financial leverage 1.71x. The weak ROE primarily reflects modest net margin and low asset turnover rather than leverage. Gross margin is high at 55.5%, indicating strong value-add and service mix; however, operating margin is only ~6.1%, showing that SG&A and depreciation weigh heavily. EBITDA margin is 14.9% (EBITDA ¥4.36bn), highlighting solid operating cash earnings but significant D&A intensity. Operating income declined 16% YoY on flat revenue, implying negative operating leverage in the period—costs did not flex down with stagnant sales. Ordinary income (¥1.77bn) nearly equals operating income, confirming minimal non-operating noise; interest expense is de minimis (¥38m), and interest coverage is 46.9x. Using net income plus tax as a proxy for pre-tax income (¥1.86bn), the implied effective tax rate is roughly 44% (indicative only), which contributed to the drop in net income. Overall, margin quality remains anchored by strong gross profitability, but elevated fixed costs and depreciation suppress operating leverage and returns.

Growth Assessment

Top-line growth was flat at +0.0% YoY, suggesting stable demand in core bedding and medical/welfare segments but no pricing or volume uplift. Operating income down 16% YoY and net income down 20.9% YoY indicate margin compression despite steady revenue. Drivers likely include cost inflation (materials, logistics), higher personnel costs, and depreciation tied to an asset-heavy rental/product base. The high gross margin implies pricing power in parts of the portfolio, but SG&A and D&A constrained earnings growth. Ordinary income tracking close to operating income suggests the earnings decline is operational rather than financial. With OCF at ¥3.89bn, cash conversion offsets some earnings weakness and can support ongoing investment. Near-term growth outlook hinges on cost pass-through, product mix upgrades, and utilization of rental assets to lift asset turnover. Stable inventories at ¥6.52bn relative to sales imply no evident overstocking; however, improving turns could aid growth in profitability. Without disclosed capex, we cannot assess expansion pace, but the depreciation run-rate indicates continuing investment and renewal of the asset base. Overall, revenue sustainability appears solid, but profit quality must improve through efficiency and pricing to re-accelerate earnings.

Financial Health

Total assets are ¥67.08bn and equity is ¥39.16bn, implying an equity ratio of ~58% (despite the reported 0.0% being undisclosed), supporting a strong capital base. Total liabilities are ¥30.28bn, yielding liabilities/equity of 0.77x—moderate leverage. Liquidity is strong: current assets ¥38.48bn vs. current liabilities ¥15.55bn (current ratio 2.48x) and quick ratio 2.06x. Working capital stands at ¥22.94bn, providing ample buffer for operations and seasonality. Interest burden is light at ¥38m with 46.9x coverage, indicating low financial risk from rates. Ordinary income is close to operating income, so no reliance on non-operating gains. Given the balance sheet strength and liquidity, solvency risk appears low. Note that cash and cash equivalents are not disclosed in this dataset, so precise immediate liquidity cannot be gauged.

Cash Flow Quality

Operating cash flow of ¥3.89bn is 3.72x net income, a strong conversion that validates earnings quality and suggests favorable working-capital movements and solid underlying cash margins. EBITDA of ¥4.36bn vs. OCF of ¥3.89bn implies good cash conversion of operating earnings after working capital. Depreciation and amortization are significant at ¥2.57bn, consistent with an asset-intensive model (notably rental assets) and a recurring reinvestment need. Investing cash flow is undisclosed; therefore, free cash flow cannot be reliably determined, and the reported FCF figure in the summary should not be treated as zero. Financing cash flow is an outflow of ¥1.23bn, likely reflecting debt repayments and/or shareholder returns; without dividend data, attribution is uncertain. Overall, cash flow quality appears strong on the operating side, but full-cycle FCF sustainability depends on capex, which is not provided here.

Dividend Sustainability

Dividend per share and payout ratio are undisclosed in this dataset; thus, we cannot assess historical payout directly. Capacity-wise, net income is ¥1.05bn for the half-year and OCF is ¥3.89bn, suggesting room to fund distributions after investment needs. Leverage is modest (liabilities/equity 0.77x) and interest costs are minimal, supporting flexibility. However, the business is D&A-intensive, implying ongoing capex to maintain and grow the asset base; without capex data, FCF coverage of dividends cannot be measured. Policy outlook likely balances stable returns to shareholders with reinvestment in rental assets and product development. In summary, near-term capacity appears adequate, but sustainability depends on capex cadence and earnings recovery.

Risk Assessment

Business Risks:

• Cost inflation in materials, logistics, and labor compressing margins
• Pricing pressure and mix shifts in bedding and healthcare equipment
• Utilization and obsolescence risk for rental and depreciable assets
• Regulatory and reimbursement changes in Japan’s nursing care ecosystem
• Demographic and macro demand variability despite generally supportive aging trends
• Competition from domestic and imported bedding/healthcare products

Financial Risks:

• Earnings sensitivity to depreciation and reinvestment requirements
• Potential capex needs reducing free cash flow if cash generation moderates
• Working-capital swings affecting OCF despite strong liquidity
• Tax-rate volatility impacting net income

Key Concerns:

• Operating income down 16% YoY on flat revenue, indicating negative operating leverage
• Net margin at 3.58% and ROE at 2.67%, both below potential given high gross margin
• High D&A burden (¥2.57bn) constraining reported profitability
• Lack of disclosed investing cash flows limits visibility on true free cash flow
• Dividend metrics not disclosed, creating uncertainty on payout trajectory

Investment Implications

Key Takeaways:

• Stable revenue base but margin compression drove double-digit profit declines
• Strong gross margin underscores product/service value-add; SG&A and D&A weigh on OPM
• Operating cash flow is robust relative to earnings, supporting balance sheet strength
• Leverage and interest burden are low, providing financial flexibility
• ROE is constrained by modest net margin and low asset turnover rather than leverage

Metrics to Watch:

• Operating margin progression and SG&A efficiency
• Capex and investing cash flows to gauge sustainable free cash flow
• Asset turnover (including rental asset utilization) and inventory turns
• Price realization versus input cost inflation
• OCF/Net income ratio and working-capital trends
• Effective tax rate and its impact on net income

Relative Positioning: Within Japanese bedding and medical/welfare equipment peers, the company exhibits strong gross margins and liquidity with modest leverage, but faces near-term profitability pressure and ROE below sector leaders; sustained cash generation is a positive differentiator if reinvestment is disciplined.

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