SHIGEMATSU WORKS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.39B
• Operating Income: ¥88M
• Net Income: ¥-13M
• EPS: ¥-1.94

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

Shigematsu Works Co., Ltd. (TSE:7980) reported FY2026 Q2 (non-consolidated, JGAAP) revenue of ¥6.39bn, up 2.2% YoY, while operating income fell sharply to ¥88m (-66.0% YoY), indicating significant margin compression despite modest topline growth. Gross profit was ¥1.90bn, implying a gross margin of 29.8%, which is healthy for the industry but down versus a year ago given the steep drop in operating profit. Operating margin declined to 1.4%, signaling SG&A inflation and/or adverse product mix offsetting stable gross profitability. Ordinary income was a loss of ¥10m, implying net non-operating losses of roughly ¥98m relative to operating profit, exceeding reported interest expense (¥14.3m) and suggesting additional non-operating headwinds (e.g., FX losses, investment losses, or other non-operating charges). Net income was a loss of ¥13m (EPS: -¥1.94), improving by 90.1% YoY on a smaller loss base, but still negative. DuPont metrics show a slim negative net margin (-0.20%), asset turnover of 0.336, and financial leverage of 2.19x, resulting in a calculated ROE of -0.15%; on a semiannual basis this indicates modestly negative returns that would annualize to roughly -0.3% absent improvement. Liquidity remains sound with a current ratio of 142.5% and quick ratio of 107.4%, supporting working capital needs amid demand normalization. The balance sheet appears conservatively capitalized with total equity of ¥8.70bn versus total assets of ¥19.04bn (an implied equity ratio near mid‑40% by calculation), despite the presented equity ratio field showing 0.0% (undisclosed in XBRL). Positive working capital of ¥3.11bn and interest coverage of about 6.2x (operating income/interest expense) indicate manageable financial risk from operations. Inventories totaled ¥2.57bn (about 25% of current assets), a level that warrants monitoring against sales momentum to avoid obsolescence risk in specialized safety products. Cash flow statements were not disclosed (zeros indicate unreported), limiting assessment of earnings-to-cash conversion and capex intensity this period. Depreciation and amortization were also undisclosed, constraining EBITDA analysis (the displayed EBITDA of zero reflects lack of disclosure). Dividend per share is reported as zero with a payout ratio of 0.0%, consistent with a loss-making half and potentially a cautious stance while profitability stabilizes. The key issues this quarter are non-operating losses that swung ordinary profit negative, operating margin compression despite steady gross margin, and limited disclosure on cash flows. Looking ahead, recovery depends on SG&A control, pricing/mix improvements in respiratory protection lines, and normalization of non-operating items.

Profitability Analysis

ROE_decomposition: DuPont shows Net Margin -0.20% x Asset Turnover 0.336 x Financial Leverage 2.19 = ROE -0.15% (semiannual). The negative net margin is the primary drag; asset turnover is typical for a H1 period (annualized ~0.67), and leverage is moderate. margin_quality: Gross margin at 29.8% suggests pricing and COGS discipline remain intact, but operating margin compressed to 1.4%, implying higher SG&A (e.g., labor, logistics, R&D, sales expenses) or unfavorable product/geographic mix. The shift from operating profit to ordinary loss indicates additional non-operating pressures, likely FX or investment-related under JGAAP. operating_leverage: With revenue +2.2% YoY but operating income -66.0% YoY, incremental margins were sharply negative. This suggests fixed-cost absorption was weak and/or overhead increased meaningfully; operating leverage worked against the company this half.

Growth Assessment

revenue_sustainability: Topline growth of 2.2% YoY indicates demand resilience in core safety/respiratory products, albeit modest versus pandemic-era peaks. Sustainability depends on industrial demand, government procurement cycles, and replacement/maintenance orders. profit_quality: Profitability deteriorated below the operating line; ordinary loss (‑¥10m) vs. operating profit (¥88m) implies non-operating volatility overshadowed core earnings quality. The presence of income tax expense (¥91m) despite a net loss points to one-off tax effects (e.g., deferred tax valuation adjustments or non-deductible items) under JGAAP, depressing bottom line quality. outlook: H2 typically benefits from seasonal deliveries and pricing actions. If SG&A normalization and non-operating items stabilize, operating margin could recover. However, persistent FX headwinds, input cost inflation, and a return to pre-pandemic demand baselines could cap growth without new product catalysts.

Financial Health

liquidity: Current ratio 142.5% and quick ratio 107.4% indicate adequate near-term liquidity coverage. Working capital of ¥3.11bn provides buffer for inventory and receivables cycles. solvency: Total equity ¥8.70bn vs. total assets ¥19.04bn implies an equity ratio around mid‑40% (the reported 0.0% reflects non-disclosure, not zero). Interest coverage ~6.2x suggests manageable serviceability from operations. capital_structure: Debt-to-equity reported at 1.09x (likely inclusive of broader liabilities; interest-bearing breakdown not disclosed). Leverage is moderate for a mid-cap industrial/safety equipment company.

Cash Flow Quality

earnings_quality: Assessment constrained by undisclosed cash flow statement and D&A. With ordinary loss and tax expense, accruals likely elevated; clarity on non-cash tax and non-operating charges is needed to gauge recurring cash earnings. FCF_analysis: OCF and capex were undisclosed (displayed as zero). Consequently, FCF cannot be reliably calculated. Inventory at ¥2.57bn relative to H1 sales (~40% of half-year revenue) suggests working capital intensity that could weigh on OCF if turnover slows. working_capital: Positive working capital (¥3.11bn) is supportive. Key sensitivities are inventory turnover and receivables collection in a soft-margin environment; any destocking could release cash, while demand softness could tie up cash.

Dividend Sustainability

payout_ratio_assessment: Annual DPS reported at ¥0.00 with a 0.0% payout ratio, aligning with a net loss period. Under JGAAP, sustained dividends generally require stable retained earnings and cash generation; both are currently uncertain given undisclosed OCF and a small net loss. FCF_coverage: FCF coverage cannot be assessed due to undisclosed OCF/capex (zeros denote non-disclosure). Absent visibility, prudent retention of earnings appears consistent with protecting balance sheet strength. policy_outlook: Resumption or increase of dividends likely hinges on restoring operating margin, stabilizing non-operating items, and demonstrating positive OCF in subsequent periods.

Risk Assessment

Business Risks:

• Demand normalization post-pandemic for respiratory protection products reducing volumes and pricing power
• Procurement and budget timing volatility in government and industrial customers
• Input cost inflation (resins, filters, components) and supply chain/logistics volatility
• Product certification/compliance risks (JIS/EN/NIOSH) and potential recall costs
• Competition from domestic and overseas PPE manufacturers pressuring margins
• FX exposure on imported components affecting COGS and non-operating results

Financial Risks:

• Non-operating losses (FX, investments) turning ordinary profit negative despite positive operating income
• Inventory buildup relative to sales creating obsolescence and margin risk
• Limited visibility on cash flows and capex hindering assessment of liquidity resilience
• Tax expense despite net loss indicating possible one-off or structural tax charges affecting earnings quality
• Potential tightening of interest coverage if operating margin weakens further

Key Concerns:

• Sharp YoY decline in operating income (-66%) despite modest revenue growth
• Ordinary loss (‑¥10m) driven by non-operating factors exceeding interest expense
• Undisclosed cash flow data and D&A limiting EBITDA/FCF analysis
• SG&A cost pressure and/or adverse mix compressing operating margin
• Inventory levels that need to align with demand to avoid cash drag

Investment Implications

Key Takeaways:

• Topline grew 2.2% YoY, but operating margin compressed to 1.4%, highlighting cost pressures
• Ordinary loss reflects non-operating volatility beyond interest costs
• Balance sheet remains sound with implied equity ratio in the mid‑40% and interest coverage ~6x
• Liquidity adequate (current ratio 143%, quick 107%) with ¥3.11bn working capital
• Cash flow and capex visibility are insufficient this quarter due to non-disclosure

Metrics to Watch:

• Operating margin trajectory and SG&A as a percent of sales
• Non-operating gains/losses (FX, securities) and their drivers
• Inventory turnover days and receivables collection
• OCF and capex once disclosed; FCF conversion vs. net income
• Gross margin resilience amid input cost and FX changes
• Order backlog and pricing/mix in core respirator and filter lines

Relative Positioning: Within Japan’s PPE/safety equipment space, Shigematsu maintains solid gross margins and a conservative balance sheet, but near-term profitability lags due to SG&A pressure and non-operating volatility; recovery depends on cost control, stable demand, and cash conversion.

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
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