SEKI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.65B
• Operating Income: ¥-196M
• Net Income: ¥78M
• EPS: ¥-22.73

Income Statement

Balance Sheet

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

Seki Co., Ltd. (7857) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥5.646 billion, down 2.8% year over year, indicating modest top-line pressure. Gross profit was ¥1.282 billion, equating to a gross margin of 22.7%, which suggests limited pricing power or input cost pressure in a relatively low-margin business mix. Operating income deteriorated to a loss of ¥196 million (operating margin of approximately -3.5%), implying a notable negative swing relative to the modest revenue decline and indicating high operating leverage and/or rising fixed costs. Ordinary loss was ¥97 million, narrower than the operating loss, implying positive net non-operating income offsetting the core shortfall despite ¥1.474 million in interest expense. Net loss was ¥94 million (net margin -1.66%), a slight YoY change (+0.5% YoY on net income), pointing to a relatively stable bottom line despite weaker operations. The DuPont decomposition yields a calculated ROE of -0.59% driven by a -1.66% net margin, asset turnover of 0.301x, and low financial leverage of 1.17x, highlighting that weak profitability, rather than leverage, explains the negative equity return. The balance sheet is strong: total assets are ¥18.728 billion with equity of ¥16.034 billion, implying an equity-to-asset ratio of roughly 85.6% and a conservative capital structure. Liquidity appears ample, with a current ratio of 392.7% and quick ratio of 384.1%; working capital is ¥5.688 billion, underpinned by modest inventories of ¥168 million. Interest coverage, based on operating loss, is -133x, reflecting current earnings pressure rather than a debt-servicing problem. Reported income tax expense of ¥61 million despite a net loss suggests fixed statutory/minimum tax and local taxes, not reflective of an effective tax on profits. Cash flow statement items (operating, investing, financing) are unreported in the provided XBRL extract; therefore, cash flow quality and free cash flow cannot be assessed from this dataset. Depreciation and amortization are also unreported, limiting EBITDA analysis and capex inference. Dividend per share and share data are shown as zero in the dataset, which should be treated as undisclosed rather than actual zero, so payout assessment requires caution. Overall, Seki exhibits solid liquidity and solvency but faces profitability headwinds and operating leverage risk given the mismatch between a small revenue decline and a much larger deterioration at the operating level. With low leverage, the balance sheet provides resilience, but a return to sustainable profitability will hinge on margin recovery, cost control, and revenue stabilization. Data limitations around cash flows and DPS constrain the assessment of earnings quality and dividend capacity. Monitoring gross margin trends, SG&A intensity, and order momentum will be critical for the second half. The near-term outlook depends on the company’s ability to manage input costs, pricing, and utilization in a likely soft demand environment.

Profitability Analysis

ROE_decomposition: DuPont shows ROE of -0.59% = Net margin (-1.66%) × Asset turnover (0.301x) × Financial leverage (1.17x). The negative net margin is the dominant drag; leverage is low and does not amplify returns (or losses) meaningfully. margin_quality: Gross margin is 22.7%, indicating limited value-add and/or input cost pressure. Operating margin is approximately -3.5% (operating loss of ¥196 million on ¥5.646 billion revenue). Ordinary loss is smaller than operating loss due to net non-operating gains, but the core profitability remains weak. operating_leverage: A 2.8% decline in revenue coincided with a 49.2% YoY deterioration in operating income, evidencing high operating leverage and/or cost inflation. The divergence implies fixed cost absorption issues and/or insufficient price pass-through.

Growth Assessment

revenue_sustainability: Revenue declined 2.8% YoY to ¥5.646 billion, signaling soft demand or mix headwinds. The modest topline contraction suggests the core franchise remains intact, but momentum is weak. profit_quality: Core profit quality is challenged: operating loss of ¥196 million versus small ordinary loss of ¥97 million indicates reliance on non-operating items to cushion results. Gross margin at 22.7% and negative operating margin point to cost pressures and limited pricing power. outlook: Absent disclosed order/backlog data, the near-term outlook hinges on cost control, utilization, and recovery in end-market demand. If input cost pressures persist and pricing remains constrained, margin recovery may be gradual; conversely, stabilization in demand and better mix could lift gross margins and narrow losses.

Financial Health

liquidity: Current assets ¥7.631 billion vs. current liabilities ¥1.943 billion yield a current ratio of 392.7% and quick ratio of 384.1%. Working capital stands at ¥5.688 billion, with low inventories (¥168 million), indicating substantial short-term liquidity buffer. solvency: Total equity ¥16.034 billion versus total assets ¥18.728 billion implies an equity ratio of ~85.6% (using available balances). Debt-to-equity is 0.18x and interest expense is only ¥1.474 million, reflecting low financial risk. capital_structure: Low leverage (financial leverage 1.17x) provides balance sheet resilience. The company can withstand near-term losses without immediate refinancing pressure, though sustained negative operating performance would gradually erode equity.

Cash Flow Quality

earnings_quality: Operating CF is undisclosed in the provided data; thus, OCF-to-net income and accruals cannot be evaluated. The reported OCF/Net Income ratio of 0.00 reflects missing OCF data rather than true cash conversion. FCF_analysis: Investing and financing cash flows are also undisclosed, preventing free cash flow assessment. Without D&A disclosure, we cannot infer maintenance capex or EBITDA-based cash generation. working_capital: Balance sheet indicates strong working capital (¥5.688 billion), but period-to-period movements, receivable collections, and inventory turns cannot be assessed due to missing cash flow and schedule details.

Dividend Sustainability

payout_ratio_assessment: EPS is -¥22.73 for the period. Dividend per share is shown as 0.00 in the dataset, which should be treated as undisclosed rather than an actual zero. Consequently, payout ratio cannot be reliably determined from the provided data. FCF_coverage: Free cash flow is unreported; hence FCF coverage of dividends cannot be assessed. Any payout analysis would be speculative without OCF and capex detail. policy_outlook: Given a net loss and limited visibility on cash generation, near-term dividend capacity appears constrained by earnings; however, the strong balance sheet provides flexibility if the company opts for stability once profitability normalizes. Confirm management’s stated dividend policy and full-year guidance in official disclosures.

Risk Assessment

Business Risks:

• Demand softness in core end-markets leading to further revenue pressure
• Input cost inflation (paper, materials, energy) compressing gross margins
• High operating leverage causing outsized earnings swings on small revenue changes
• Pricing power constraints limiting cost pass-through
• Project timing and seasonality affecting utilization and margin
• Customer concentration risk typical in niche B2B printing/services
• Execution risk on cost reduction and mix improvement initiatives

Financial Risks:

• Sustained operating losses could erode equity over time despite low leverage
• Potential tax expense even in loss periods (fixed statutory/local taxes) impacting cash
• Limited visibility on cash flows due to undisclosed OCF/Capex in the dataset
• Interest rate normalization marginally increasing financing costs (though current interest burden is low)

Key Concerns:

• Negative operating margin despite only a modest revenue decline
• Reliance on non-operating gains to narrow losses at the ordinary level
• Data gaps on cash flows and depreciation hindering assessment of cash earnings and FCF

Investment Implications

Key Takeaways:

• Revenue declined 2.8% YoY to ¥5.646 billion; topline pressure is modest but persistent
• Gross margin at 22.7% and operating margin around -3.5% highlight margin compression
• ROE at -0.59% reflects weak profitability rather than capital structure issues
• Balance sheet is robust with ~85.6% equity ratio and current ratio ~393%
• Interest burden is minimal (¥1.474 million), but interest coverage is negative due to operating loss
• Cash flow data are undisclosed, limiting visibility on cash conversion and FCF
• Dividend assessment is inconclusive given undisclosed DPS and FCF

Metrics to Watch:

• Quarterly gross margin and SG&A-to-sales ratio
• Operating margin and ordinary income trend
• Order intake/backlog and book-to-bill (if disclosed)
• OCF, capex, and free cash flow once available
• Working capital turns (DSO/DIO/DPO) and cash conversion cycle
• Pricing actions versus input cost trends
• Equity ratio and net cash position

Relative Positioning: Compared to domestic peers in printing/related services, Seki appears more conservatively capitalized with low leverage and strong liquidity, but currently exhibits weaker operating profitability and higher earnings sensitivity to small revenue changes.

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