OKAMURA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥153.78B
• Operating Income: ¥6.84B
• Net Income: ¥7.89B
• EPS: ¥78.25

Income Statement

Balance Sheet

Cash Flow Statement

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

Okamura (TSE:79940) delivered FY2026 Q2 consolidated results with stable top-line growth and modest profit expansion at the operating level, but weaker bottom-line due to non-operating factors. Revenue rose 5.6% YoY to ¥153.8bn, supported by resilient demand in its core segments. Gross profit of ¥47.2bn implies a solid gross margin of 30.7%, indicating that pricing and mix largely offset input cost pressures. Operating income grew 1.4% YoY to ¥6.84bn, translating into a 4.45% operating margin; this indicates negative operating leverage in the quarter as SG&A growth outpaced gross profit expansion. Ordinary income reached ¥7.70bn, while net income declined 7.1% YoY to ¥7.41bn, compressing the net margin to 4.82%. DuPont metrics show ROE of 3.88%, decomposed into 4.82% net margin, 0.535x asset turnover, and 1.50x financial leverage, pointing to mid-single-digit returns primarily limited by modest turnover and margin. Liquidity remains robust with a current ratio of 259.9% and quick ratio of 244.1%, supported by ¥139.6bn of current assets against ¥53.7bn of current liabilities. Balance sheet strength is notable: total equity is ¥191.1bn versus total assets of ¥287.3bn; while the reported equity ratio is shown as 0.0% (undisclosed), the implied equity ratio is approximately 66.5% based on the provided balance sheet. Leverage is conservative with debt-to-equity at 0.54x and very strong interest coverage of 57.0x, reflecting low financing risk. Cash flow was a weak spot: operating cash flow was negative ¥2.76bn despite positive earnings, indicating a working capital outflow or timing effects on collections and project cash. EBITDA was ¥10.22bn (6.6% margin), and D&A totaled ¥3.39bn, consistent with a capital-intensive but manageable asset base. The effective tax rate metric appears uninformative here given classification differences; income tax expense is ¥4.28bn alongside net income of ¥7.41bn. Dividend data (DPS, payout, FCF coverage) are shown as zero, which should be treated as not disclosed; hence dividend assessment requires caution. Overall, the quarter reflects steady revenue momentum, modest pressure on operating leverage, strong balance sheet resilience, and weaker cash conversion, with outlook hinging on order intake, margin management, and normalization of working capital. Data limitations (e.g., undisclosed equity ratio, cash balance, investing cash flows, and share count) constrain precision in certain assessments. We focus our analysis on the disclosed, non-zero data and derived metrics from those values.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 4.82%
• asset_turnover: 0.535
• financial_leverage: 1.5
• calculated_ROE: 3.88%
• commentary: ROE is capped by modest asset turnover and a mid-single-digit net margin; leverage is conservative and not a primary driver. margin_quality:
• gross_margin: 30.7%
• operating_margin: 4.45%
• ordinary_margin: 5.01%
• net_margin: 4.82%
• EBITDA_margin: 6.6%
• notes: Gross margin is healthy, but operating margin is compressed by SG&A growth. Ordinary margin exceeds operating margin, likely due to non-operating gains or financial income. operating_leverage: Revenue grew 5.6% YoY, while operating income rose only 1.4% YoY, indicating negative operating leverage in the period. This suggests cost creep or deliberate investments in growth/SG&A, partially offsetting gross profit gains.

Growth Assessment

revenue_sustainability: Top-line growth of 5.6% appears steady and consistent with incremental demand in core markets; sustainability will depend on order backlog conversion, project timing, and price/mix retention. profit_quality: Net income declined 7.1% YoY despite revenue growth, pointing to pressure below the gross line and/or non-operating items. EBITDA of ¥10.22bn supports operational profitability, but conversion to cash was weak this quarter. outlook: Focus areas for 2H include preserving price-cost spread, controlling SG&A, and normalizing working capital. If order intake holds and cost pass-through remains effective, operating margin could stabilize; otherwise, the current negative operating leverage may persist.

Financial Health

liquidity:

• current_ratio: 259.9%
• quick_ratio: 244.1%
• working_capital: ¥85.9bn
• commentary: Very strong liquidity with ample current asset coverage of near-term obligations. solvency:
• total_assets: ¥287.3bn
• total_liabilities: ¥102.3bn
• total_equity: ¥191.1bn
• equity_ratio_implied: ≈66.5% (based on provided assets and equity)
• interest_coverage: 57.0x
• debt_to_equity: 0.54x
• commentary: Low balance sheet risk with high equity buffer and minimal interest burden. capital_structure: Leverage is conservative and largely equity-funded; room exists to deploy additional balance sheet capacity if needed without straining coverage metrics.

Cash Flow Quality

earnings_quality: OCF/Net Income of -0.37 indicates poor cash conversion this period; earnings were not supported by operating cash due primarily to working capital outflows or project timing. FCF_analysis: Free cash flow cannot be reliably calculated as investing cash flows and capex are undisclosed (reported as 0). Given negative OCF, baseline FCF is likely negative unless offset by divestments (not disclosed). working_capital: Current assets increased relative to current liabilities, and inventories are modest at ¥8.47bn; the OCF shortfall suggests receivables and contract assets likely absorbed cash. Monitoring DSO, unbilled work, and advance receipts is key.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are shown as 0.00, which should be treated as not disclosed. EPS is ¥78.25 for the period; without an announced DPS, payout cannot be assessed. FCF_coverage: FCF coverage cannot be determined due to undisclosed investing cash flows and DPS. With negative OCF this quarter, near-term dividend coverage from cash generation appears weak absent a rebound in 2H. policy_outlook: No dividend policy details are provided in the data. Sustainability assessment hinges on cash conversion recovery and full-year profitability; management guidance (if any) would be necessary for firm conclusions.

Risk Assessment

Business Risks:

• Demand cyclicality in office furniture and commercial interiors tied to corporate capex and real estate activity
• Price-cost spread risk from raw materials (steel, wood, resin) and logistics volatility
• Project timing and execution risk affecting revenue recognition and cash collections
• Competitive pricing pressure in domestic and overseas markets
• Product mix shifts (e.g., large projects vs. standard products) impacting margins

Financial Risks:

• Negative OCF despite positive earnings, indicating working capital strain
• Potential build-up of receivables/contract assets increasing credit and timing risk
• Exposure to interest rate changes is limited but non-zero; however, coverage is strong
• Currency exposure on overseas procurement/sales could affect margins (not quantified here)

Key Concerns:

• Negative operating cash flow (¥-2.76bn) versus net income (¥7.41bn)
• Operating leverage turned negative as opex growth outpaced revenue
• Lack of disclosure for investing cash flows and dividend details limits visibility

Investment Implications

Key Takeaways:

• Revenue growth of 5.6% with solid gross margin of 30.7%
• Operating margin at 4.45% reflects cost pressure and negative operating leverage
• Net income down 7.1% YoY; net margin 4.82%
• ROE at 3.88% driven by modest turnover and conservative leverage
• Balance sheet robustness with implied equity ratio ≈66.5% and interest coverage 57.0x
• OCF/NI of -0.37 signals weak cash conversion; FCF not ascertainable
• Liquidity is strong: current ratio 2.60x, quick ratio 2.44x

Metrics to Watch:

• Order intake/backlog and book-to-bill ratio
• Gross margin and price-cost spread versus raw material indices
• SG&A trajectory and operating margin progression
• OCF recovery, DSO, and working capital turns
• Capex and investing cash flows (once disclosed)
• Dividend announcements/payout guidance (once disclosed)

Relative Positioning: Within Japan’s office furniture and interiors space, Okamura exhibits strong balance sheet quality and liquidity with moderate profitability; sustaining margins and improving cash conversion would strengthen its relative standing versus domestic peers.

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