KOYOSHA INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.19B
• Operating Income: ¥-8M
• Net Income: ¥453,000
• EPS: ¥0.86

Income Statement

Balance Sheet

Cash Flow Statement

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: FY2026 Q2 was a marginal operational improvement at the operating line but a weaker quarter on ordinary profit and cash generation, leaving earnings quality mixed and capital efficiency subdued. Revenue was essentially flat at 21.90, down 0.1% YoY, with gross profit of 4.71 and a gross margin of 21.5%. SG&A of 4.80 exceeded gross profit, resulting in an operating loss of -0.08, though operating income improved 15.7% YoY (less negative). Non-operating income of 0.23 (including 0.01 interest income) offset the operating loss, lifting ordinary income to 0.12, which declined 25.4% YoY due to a smaller non-operating tailwind versus last year. Operating margin was approximately -0.37%, an estimated improvement of about +5 bps YoY given flat sales and a slightly smaller operating loss. Ordinary margin compressed from roughly 0.73% to 0.55%, about -18 bps YoY, reflecting lower non-operating contribution. The effective tax rate printed an unusual 96.3%, effectively eliminating pre-tax profit and suggesting tax adjustments and/or the absence of loss carryforwards at the consolidated level. EPS (basic) was a near-breakeven 0.86 yen, consistent with very small net profit, but net income was not disclosed in the XBRL. Operating cash flow was -0.10 against near-breakeven earnings, flagging a divergence between accounting profit and cash generation. Free cash flow is estimated at -0.34 (OCF -0.10 minus capex 0.24), constrained by weak OCF. The balance sheet remains conservative with a current ratio of 358.6%, cash of 9.08 and accounts receivable of 7.02 against current liabilities of 5.29. Leverage is moderate (D/E 0.66x) but interest coverage is weak at -5.24x given negative operating income. ROIC of -0.3% is below cost of capital, highlighting under-earning assets and low capital efficiency. Financing cash outflow of -0.62 suggests debt repayment and/or distributions, though dividends are unreported. Overall, the quarter underscores ongoing pressure from SG&A absorption with limited top-line momentum, dependence on non-operating gains to report ordinary profit, and negative free cash flow. Near-term priorities are stabilizing operating profitability, improving cash conversion, and protecting liquidity.

Profitability Analysis

ROE decomposition (directional): ROE = Net Profit Margin × Asset Turnover × Financial Leverage. Net Profit Margin is approximately breakeven (net income not disclosed; EPS 0.86 yen implies very small profit), Asset Turnover is 0.747, and Financial Leverage is 1.66x. The component that changed most YoY appears to be Net Profit Margin driven by a smaller non-operating lift and a high effective tax rate, collapsing ordinary profit to near-zero net profit. Business reason: gross margin at 21.5% could not cover SG&A of 4.80, leaving an operating loss; non-operating income (0.23) partially offset, but tax expense (0.12) consumed most of PBT (0.12). Sustainability: reliance on non-operating items to offset operating losses is not a durable earnings model; unless SG&A is right-sized or gross margin improves, margin recovery is fragile. Operating leverage remains unfavorable as SG&A runs ahead of gross profit; SG&A grew faster than revenue in absolute terms (SG&A 4.80 > gross profit 4.71), a concerning sign for cost absorption and fixed cost burden.

Growth Assessment

Revenue was flat (-0.1% YoY) at 21.90, implying limited volume/price momentum. Operating income improved 15.7% YoY to -0.08, but still negative, indicating only incremental efficiency gains and/or mix improvement. Ordinary income fell 25.4% YoY to 0.12 as non-operating contributions normalized. Gross margin stands at 21.5%; with SG&A exceeding gross profit, the core business lacks operating leverage at current scale. EBITDA was 0.56 (2.6% margin), modest for covering interest and capex. Outlook hinges on cost control and cash conversion; with ROIC at -0.3%, incremental growth without margin uplift may dilute returns. Near term, expect management to prioritize SG&A discipline and working capital optimization over aggressive expansion.

Financial Health

Liquidity is strong: Current Ratio 358.6% and Quick Ratio 358.6% with cash of 9.08 and receivables 7.02 versus current liabilities of 5.29; no warning on liquidity thresholds. Solvency is moderate with D/E at 0.66x and long-term loans of 3.09; no D/E red flag (>2.0). Interest coverage is weak at -5.24x due to operating losses; this is a debt service risk if sustained. Maturity mismatch risk appears low given current assets (18.95) comfortably exceed current liabilities (5.29), but noncurrent liabilities (6.35) require steady cash generation over time. Off-balance sheet obligations are not disclosed in the provided data.

Cash Flow Quality

OCF was -0.10 against near-breakeven earnings (EPS 0.86 yen; net income not disclosed), indicating cash earnings lag accounting profit this quarter. Free cash flow is estimated at -0.34 (OCF -0.10 minus capex 0.24), implying internal cash was insufficient to fund investment. Financing CF of -0.62 suggests debt repayment and/or distributions; dividends were not disclosed, so we cannot separate. Given negative OCF, FCF coverage of any dividend would be weak in this quarter. Working capital details by component (inventories, payables timing) were limited; however, negative OCF alongside positive ordinary income hints at working capital outflow or non-cash profit components. No clear signs of aggressive working capital manipulation are evident from the limited data, but the divergence (OCF < NI) warrants monitoring.

Dividend Sustainability

Dividend disclosures (DPS, total dividends paid) are unreported, so payout ratios cannot be calculated. With estimated FCF at -0.34, coverage of any cash dividend in the quarter would be strained from internal cash generation and would rely on cash on hand. The balance sheet cash position (9.08) provides a cushion, but recurring negative OCF would erode capacity to sustain distributions. Policy outlook cannot be inferred from the data; sustainability depends on restoring positive OCF and turning operating profit positive.

Risk Assessment

Business Risks:

• Persistent operating losses as SG&A (4.80) exceeds gross profit (4.71), limiting operating leverage
• Flat revenue (-0.1% YoY) suggesting weak demand/pricing power
• High effective tax rate (96.3%) compressing net profit from already low PBT
• Low ROIC (-0.3%) indicating under-earning asset base

Financial Risks:

• Negative interest coverage (-5.24x) despite moderate leverage, reflecting weak operating earnings
• Negative OCF (-0.10) and negative FCF (-0.34) raising cash generation risk if repeated
• Dependence on non-operating income (0.23) to support ordinary profit

Key Concerns:

• Ordinary income down 25.4% YoY despite improved operating loss, highlighting reliance on non-core gains
• Potential earnings volatility if non-operating income normalizes lower
• Data gaps (net income, dividend payments, inventories, interest-bearing debt total) limit full assessment

Investment Implications

Key Takeaways:

• Operating loss narrowed YoY but remains negative at -0.08; core margin recovery remains incomplete
• Ordinary profit fell to 0.12 as non-operating tailwinds moderated and taxes were unusually high
• Cash generation weak with OCF -0.10 and FCF -0.34; financing outflow -0.62 further reduced cash
• Balance sheet liquidity is solid (current ratio 358.6%) and leverage moderate (D/E 0.66x)
• Capital efficiency is low (ROIC -0.3%), requiring margin uplift or asset rationalization

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio
• OCF to net income conversion (>1.0 over multi-quarter horizon)
• Ordinary income composition (core vs non-operating) and sustainability
• Effective tax rate normalization
• Cash balance versus debt service and capex needs

Relative Positioning: Within small-cap manufacturing/printing peers, liquidity is stronger-than-average and leverage moderate, but profitability and cash conversion lag due to insufficient gross margin to cover fixed SG&A and reliance on non-operating income.

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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