Fukushima Printing Co., Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.46B
• Operating Income: ¥-37M
• Net Income: ¥-1M
• EPS: ¥-0.34

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 weak Q1 with negative operating margin and declining sales, partly cushioned by non-operating gains and a large tax benefit, leaving net loss nearly breakeven but core profitability deteriorated. Revenue fell 9.2% YoY to 14.62, while gross profit was 2.81 for a gross margin of 19.2%. SG&A of 3.19 exceeded gross profit, driving operating income to -0.37 and an operating margin of -2.5%. Ordinary income improved YoY but was still negative at -0.13, supported by non-operating income of 0.26 and modest interest expense of 0.02. Net income was a small loss of -0.01 versus -0.17 a year ago, aided by a tax benefit of -0.11 (effective tax rate ~86%). Operating margin compressed by about 123 bps YoY (-2.53% vs -1.30%), while net margin improved by roughly 99 bps due to the tax benefit and non-operating gains. Interest burden remained heavy with EBT/EBIT at 0.355, indicating 64% of EBIT was consumed by net interest and other non-operating effects. Despite earnings weakness, the balance sheet is liquid: current ratio 246% and cash of 13.91 comfortably exceeds short-term loans of 3.28 (cash/STD 4.23x). Leverage is conservative with D/E 0.29x and Debt/Capital 10.5%, though 53% of debt is short-term, creating refinancing exposure. DuPont shows ROE ~0% negative, driven by a thin net loss margin (-0.1%), low asset turnover (0.216 quarterly), and modest leverage (1.29x). ROIC is -0.4%, below a 5–7% printing industry hurdle, signaling value destruction this quarter. Earnings quality cannot be validated due to missing cash flow data; the divergence between nearly flat net loss and negative EBIT suggests reliance on non-operating items and tax benefits. Dividend intentions (interim ¥5, year-end ¥6) imply c. 0.66 in cash outflow for the year, which is serviceable from cash, but sustainability depends on restoring positive operating cash flow. Forward-looking, the priority is restoring operating breakeven through cost control and mix improvement amid soft demand; continued reliance on non-operating income and tax benefits is not a durable strategy. Monitoring gross margin resilience, SG&A discipline, interest coverage, and order trends will be critical for an inflection in profitability.

Profitability Analysis

ROE decomposition (3-factor): Net Profit Margin (-0.1%) × Asset Turnover (0.216) × Financial Leverage (1.29x) ≈ slightly negative ROE. The component that deteriorated most YoY at the operating level is the EBIT margin: operating margin fell ~123 bps to -2.5%, as gross profit (19.2% margin) could not cover SG&A (21.8% of sales). Business drivers likely include lower print volumes (-9.2% sales), price pressure, and relatively fixed SG&A, which limited operating leverage and pushed EBIT negative. Interest burden is high (EBT/EBIT 0.355), indicating weak operating earnings leave the firm sensitive to financing costs even though nominal interest expense is small (0.02). The tax burden of 0.076 (effective ~86%) is distorted by a tax benefit; it boosts net income this quarter but is non-recurring and not indicative of sustainable earnings power. Sustainability: Without revenue stabilization and SG&A reduction, the margin pressure is likely to persist; non-operating income (0.26) and tax benefits cannot be relied upon to support bottom line. Concerning trend: SG&A exceeds gross profit, and EBIT margin is below 0%; unless mix/pricing or cost base improves, structural under-earning will continue.

Growth Assessment

Top line contracted 9.2% YoY to 14.62, indicative of weak demand and/or pricing in core printing. Profit mix is unfavorable: operating loss widened to -0.37, while bottom-line improvement to -0.01 was driven by non-operating income (0.26) and a sizable tax benefit (-0.11). With gross margin at 19.2% and SG&A at 21.8% of sales, operating leverage is negative; revenue declines disproportionately pressure EBIT. Near-term growth outlook hinges on order recovery, product mix shifts (higher-value print/packaging or ancillary services), and cost actions. Without evidence of recurring non-operating income, normalized profitability is currently below par. Pipeline/backlog, pricing discipline, and input cost trends (paper, energy) will determine whether revenue and margin stabilize in coming quarters.

Financial Health

Liquidity is strong: current ratio 246% and quick ratio 246% with cash of 13.91 versus current liabilities of 11.94 and short-term loans of 3.28. Solvency is conservative: D/E 0.29x, Debt/Capital 10.5%, and total interest-bearing debt 6.15 against equity 52.59. Maturity profile shows 53.4% short-term debt, creating some refinancing risk; however, cash/STD at 4.23x provides a buffer. No off-balance sheet obligations were disclosed. There is no immediate maturity mismatch warning given cash on hand, but sustained operating losses could erode this cushion.

Cash Flow Quality

Operating cash flow, free cash flow, and capex are unreported, so OCF/NI, FCF coverage, and accrual quality cannot be assessed. Absence of OCF data prevents validation of whether the near-breakeven net loss reflects strong cash conversion or accrual-driven effects. Given EBIT is negative while NI is near zero due to tax benefits and non-operating income, the quality of earnings is likely weak for this quarter. Dividend and debt service capacity appear sufficient from current cash balances, but sustainability requires positive OCF. No signs of working capital manipulation can be identified due to missing inventory and OCF details.

Dividend Sustainability

Planned DPS totals ¥11 (interim ¥5, year-end ¥6). On 6.0 million shares, annual cash outflow is ~¥66 million (~0.66), which is modest relative to cash (13.91). The calculated payout ratio is not meaningful due to negative net income. With unreported FCF, we infer coverage this year from balance sheet cash rather than ongoing cash generation. Sustainability medium-term depends on restoring positive OCF and EBIT; if losses persist, continued dividends would gradually consume cash, albeit from a currently ample base for the company’s size.

Risk Assessment

Business Risks:

• Demand softness and structural decline in traditional printing pressuring volumes and pricing
• Input cost volatility (paper, ink, energy) impacting gross margin
• Operating deleverage as SG&A base appears sticky versus declining revenue
• Customer concentration risk cannot be ruled out (not disclosed)
• Potential technology substitution toward digital reducing print runs

Financial Risks:

• High interest burden relative to negative EBIT (EBT/EBIT 0.355)
• Refinancing exposure due to 53.4% short-term debt, despite high cash coverage
• Tax asset valuation and volatility: large tax benefits may reverse if profitability improves or deferred tax assets are reassessed
• Low ROIC (-0.4%) below cost of capital, implying value erosion if sustained

Key Concerns:

• DEBT_SERVICE flag: Root Cause: Interest coverage -23.55x arises from negative EBIT against interest expense of 0.02, indicating operating earnings are insufficient to service interest. Context: For small printers, low absolute interest can coexist with weak coverage during downturns; this appears worse than typical healthy coverage (>5x). Impact: Heightens downside risk if non-operating gains/tax benefits fade; banks may demand covenants tightening if sustained.
• HIGH_TAX_BURDEN flag: Root Cause: Tax burden 0.08 (effective ~86%) due to a tax benefit distorting NI/EBT. Context: Unusual versus normal range (>0.70); reflects one-off tax effects rather than operating strength. Impact: Inflates net income relative to EBIT; not sustainable and complicates forecasting.
• HIGH_INTEREST_BURDEN flag: Root Cause: Interest burden 0.35 shows 64% of EBIT absorbed by interest/non-operating effects. Context: Elevated for a company with modest nominal debt; indicates inadequate EBIT. Impact: Limits bottom-line recovery until operating profits normalize; constrains financial flexibility.
• LOW_OPERATING_EFFICIENCY flag: Root Cause: EBIT margin -2.5% (<5% threshold) as SG&A exceeds gross profit. Context: Below industry norms; suggests negative operating leverage and pricing pressure. Impact: Core profitability is the primary investment risk; requires cost reductions or mix shift.
• REFINANCING_RISK flag: Root Cause: Short-term debt ratio 53% (>40%) concentrates maturities. Context: Common in SMEs, but comforted by cash/STD 4.23x; trend unknown. Impact: Rollover risk if banks tighten terms; liquidity currently adequate but dependent on lender support.
• CAPITAL_EFFICIENCY flag: Root Cause: ROIC -0.4% (<5%) denotes value destruction. Context: Sub-par versus typical cost of capital; turnarounds need margin recovery or asset rationalization. Impact: Persistent sub-WACC returns weigh on valuation and limit capacity for shareholder returns.

Investment Implications

Key Takeaways:

• Core operations deteriorated: operating margin -2.5% with SG&A above gross profit
• Net loss narrowed via non-operating income and tax benefits—low quality of earnings
• Balance sheet liquidity is solid (current ratio 2.46x; cash/STD 4.23x) despite refinancing concentration
• Leverage conservative (D/E 0.29x), but interest burden high relative to EBIT
• ROIC (-0.4%) below hurdle, indicating value erosion unless margins recover
• Dividend cash requirement (~0.66) is manageable from cash but not covered by earnings

Metrics to Watch:

• Order intake and backlog trends
• Gross margin and paper/energy cost indices
• SG&A-to-sales ratio and cost reduction initiatives
• Operating margin and interest coverage trajectory
• Operating cash flow and free cash flow once disclosed
• Short-term debt rollover activity and funding costs

Relative Positioning: Versus domestic printing peers, profitability is weaker (negative EBIT, low ROIC) but capital structure is more conservative with ample cash; the near-term thesis hinges on cost control and demand stabilization rather than balance sheet repair.

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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