WOOD ONE CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥31.53B
• Operating Income: ¥287M
• Net Income: ¥139M
• EPS: ¥82.38

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

Wood One (7898) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥31.53bn, down 0.9% YoY, indicating a largely flat topline amid a challenging demand environment for building materials. Gross profit was ¥8.35bn, translating to a 26.5% gross margin, which appears stable and suggests reasonable pricing and cost control at the product level. Operating income was ¥0.29bn, up 0.9% YoY, but the operating margin remained slim at roughly 0.9%, highlighting limited operating leverage and cost absorption. Ordinary income of ¥0.67bn exceeded operating income by ¥0.38bn, implying meaningful non-operating gains or income contributions that cushioned weak core profitability. Net income rose sharply to ¥0.77bn (+374.6% YoY), likely supported by non-operating/extraordinary items and a light tax burden. The DuPont bridge indicates a low net margin of 2.43%, slow asset turnover of 0.306x for the period, and financial leverage of 2.22x, culminating in an ROE of 1.65%. Liquidity is tight: the current ratio is 94.7% and working capital is negative ¥1.66bn, with a quick ratio of 76.7%. Leverage is moderate with a debt-to-equity ratio of 1.22x and an implied equity ratio around 45% based on the non-zero balance sheet items (assets ¥102.90bn, equity ¥46.32bn), despite the reported equity ratio field showing 0.0% (undisclosed). Interest expense of ¥0.31bn is sizable relative to operating profit, yielding an interest coverage of 0.9x and underscoring sensitivity to financing costs. Cash flow figures (OCF/FCF) and depreciation were not disclosed in XBRL and appear as zeros; therefore, operating cash generation and capex needs cannot be evaluated from this dataset. EPS was ¥82.38, but share count data was not disclosed, limiting per-share analytics beyond the provided EPS. Inventory stood at ¥5.58bn (about 19% of current assets), a manageable absolute level, but without turnover metrics or OCF we cannot assess working capital efficiency. Overall, the quarter shows stable gross margin but very thin operating profitability, reliance on non-operating items to support ordinary/net income, and tight short-term liquidity. The balance sheet is otherwise reasonably capitalized, yet interest burden relative to EBIT is a clear pressure point. Data limitations around cash flows, depreciation, share base, and dividends constrain assessment of cash earnings quality and distribution policy.

Profitability Analysis

ROE decomposition (DuPont): Net margin 2.43% × Asset turnover 0.306 × Financial leverage 2.22 = ROE 1.65%. The low net margin is the primary drag, with slow asset turnover also weighing on returns. Operating margin is about 0.9% (¥287m/¥31,533m), indicating limited operating leverage; SG&A and other operating costs appear to absorb most gross profit. Margin quality is mixed: gross margin of 26.5% is decent, but conversion to operating profit is weak, implying pressure from fixed costs, logistics, or selling expenses. Ordinary income exceeding operating income by ¥383m points to beneficial non-operating contributions (e.g., financial income, subsidies, equity-method gains), which enhances reported profitability but reduces quality of earnings from core operations. Interest expense of ¥307m is larger than operating income, resulting in interest coverage of 0.9x; this is a structural constraint on profitability. The net margin of 2.43% and net profit growth (+374.6% YoY) likely reflect extraordinary/non-operating gains and a light tax burden rather than fundamental operational improvement. With D&A undisclosed, EBITDA and cash profit assessments cannot be validated; however, EBITDA margin displayed as 0.0% is not meaningful due to missing D&A.

Growth Assessment

Revenue declined marginally by 0.9% YoY to ¥31.53bn, implying relatively stable demand but no clear growth catalyst in the period. Operating income grew 0.9% YoY but off a low base and remains thin; the operating trajectory suggests the business has not achieved sufficient operating leverage. Net income surged to ¥766m, but given the gap between ordinary and operating income and low taxes, this growth likely stems from non-core items rather than sustainable operational gains. Without OCF/FCF and D&A, we cannot corroborate earnings growth with cash generation or investment intensity. The stability of gross margin suggests pricing and product mix held up, but cost inflation or overheads continue to cap operating margin expansion. Outlook hinges on ability to improve SG&A efficiency and pass through costs to lift operating margin, as well as on interest cost management. Near-term revenue sustainability appears flat to modest, with profitability more sensitive to cost control and financing costs than to topline growth.

Financial Health

Liquidity is tight: current assets ¥29.45bn vs. current liabilities ¥31.11bn yield a current ratio of 94.7% and negative working capital of ¥1.66bn. The quick ratio of 76.7% indicates reliance on inventory or continued revolving facilities to meet short-term obligations. Solvency and capital structure are moderate: total liabilities ¥56.49bn vs. equity ¥46.32bn imply a debt-to-equity ratio of 1.22x and financial leverage (assets/equity) of 2.22x. Based on the non-zero balance sheet figures, the implied equity ratio is approximately 45% (equity/asset), suggesting an adequate capital cushion despite the disclosed equity ratio field showing 0.0% (undisclosed). Interest burden is heavy relative to EBIT, with interest coverage at 0.9x; sustained low operating profit would pressure covenant headroom and refinancing flexibility. No cash and cash equivalents data was disclosed, preventing assessment of immediate liquidity buffers.

Cash Flow Quality

Cash flow statements were undisclosed (all zeros signify not reported), so OCF, capex, and FCF cannot be assessed. The displayed OCF/Net Income ratio of 0.00 and FCF of 0 are placeholders and not indicative of actual performance. Earnings quality appears mixed: ordinary and net income exceed operating income by a meaningful margin, implying reliance on non-operating/extraordinary items rather than recurring operating cash earnings. Working capital dynamics cannot be evaluated without OCF and turnover metrics; however, negative working capital suggests potential liquidity strain if payables exceed receivables/inventory support. Depreciation was not disclosed, so the non-cash component of earnings and maintenance capex needs are unknown, limiting the ability to reconcile accrual profit with cash generation.

Dividend Sustainability

Dividend per share and payout ratio fields show 0.00/0.0%, indicating nondisclosure rather than actual zero. Without OCF/FCF or a reported DPS, we cannot assess dividend coverage or policy execution in this period. Given thin operating margin (c. 0.9%), low ROE (1.65%), and tight liquidity (current ratio 94.7%), a conservative distribution stance would be consistent with balance sheet preservation; however, there is insufficient disclosed data to draw firm conclusions. Future dividend sustainability will depend on improvements in operating cash flow, stabilization of interest burden, and maintenance capex requirements, none of which are disclosed here.

Risk Assessment

Business Risks:

• Cyclical housing and renovation demand affecting volume and pricing.
• Raw material cost volatility (e.g., lumber, resins, metals) pressuring gross margin.
• Limited operating leverage with a high fixed-cost base constraining margin expansion.
• Execution risk in cost pass-through to offset input inflation and logistics costs.
• Supply chain and freight disruptions impacting lead times and costs.
• Product mix shifts toward lower-margin SKUs reducing profitability.
• Competition in building materials compressing margins.
• Natural disaster risk in Japan affecting operations and demand seasonality.

Financial Risks:

• Tight liquidity with current ratio below 1.0 and negative working capital.
• High interest burden relative to EBIT (interest coverage 0.9x).
• Refinancing and interest rate risk given moderate leverage and low operating profit.
• Earnings quality risk from reliance on non-operating/extraordinary items.
• Limited visibility on cash flows, capex, and cash balances due to nondisclosure.

Key Concerns:

• Sustainability of profits given thin operating margin and dependence on non-operating income.
• Short-term liquidity management amid negative working capital and unknown cash balances.
• Ability to reduce interest burden or lift EBIT to restore comfortable coverage.

Investment Implications

Key Takeaways:

• Topline essentially flat (-0.9% YoY) with stable gross margin (26.5%).
• Operating margin remains very thin at ~0.9%, limiting operating leverage.
• Ordinary and net income are supported by non-operating/extraordinary items.
• ROE is low at 1.65% due to low margins and slow asset turnover.
• Liquidity is tight (current ratio 94.7%, working capital -¥1.66bn).
• Interest expense (¥307m) nearly equals operating profit, interest coverage 0.9x.
• Leverage moderate (D/E 1.22x) with implied equity ratio around 45%.
• Cash flow, depreciation, and dividend data were not disclosed, constraining analysis.

Metrics to Watch:

• Operating margin and SG&A ratio to gauge core profitability improvement.
• Gross margin stability versus input cost trends and pricing actions.
• Interest coverage and absolute interest expense trajectory.
• Ordinary-to-operating income gap to assess dependence on non-operating items.
• Working capital (AR/AP/inventory days) and operating cash flow once disclosed.
• Capex and depreciation to evaluate maintenance needs and cash earnings.
• Equity ratio/net debt and refinancing profile amid rate environment.
• Order intake/backlog and renovation demand indicators for revenue visibility.

Relative Positioning: Relative to domestic building materials peers, Wood One exhibits comparable gross margins but weaker operating margins and interest coverage, with moderate leverage and tighter short-term liquidity; near-term returns are constrained by low operational profitability and reliance on non-operating contributions.

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