SAN-AI OBBLI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥308.36B
• Operating Income: ¥3.78B
• Net Income: ¥4.94B
• EPS: ¥45.38

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

San-Ai Obbli (80970) reported FY2026 Q2 consolidated results under JGAAP with stable top-line but significantly weaker profitability and strained operating cash generation. Revenue rose 0.4% YoY to 308.4 billion yen, while operating income fell 31.6% YoY to 3.8 billion yen, indicating notable margin compression amid largely flat volumes or pricing. Gross profit was 29.0 billion yen, translating to a gross margin of 9.4%, while EBITDA was 6.5 billion yen (2.1% margin), both consistent with the structurally thin margins typical of the energy distribution sector. Net income declined 37.0% YoY to 2.8 billion yen, with EPS of 45.38, reflecting weaker operating leverage and possibly less favorable non-operating or extraordinary items versus the prior year. DuPont analysis highlights a low net profit margin of 0.92%, asset turnover of 1.574x, and financial leverage of 1.63x, yielding an ROE of 2.36%, a modest level for the sector and below cost of equity for most distributors. Despite low profitability, the balance sheet appears strong: total assets were 195.9 billion yen, equity 119.9 billion yen, implying an equity ratio around 61% (calculated from the balance sheet since the reported equity ratio field is unreported). Liquidity remains adequate with a current ratio of 134.5% and quick ratio of 120.5%, supported by 24.7 billion yen of working capital. Operating CF was negative 9.7 billion yen, a weak outcome versus 2.8 billion yen net profit (OCF/NI of -3.43x), suggesting a sizable working capital outflow typical of the sector during price or volume swings. Financing CF was an outflow of 5.8 billion yen, likely reflecting debt repayment and/or shareholder returns, though dividend amounts are unreported. Interest expense was minimal at 42 million yen with interest coverage of 90x, indicating low financial risk from borrowing costs. The effective tax rate field is unreported; income tax expense was 2.46 billion yen, but the relationship to pre-tax earnings cannot be precisely reconciled from the available line items. Inventory stood at 10.0 billion yen; without prior-period comparatives, the magnitude of inventory-related working capital movement cannot be quantified, but the negative OCF points to a build in receivables and/or inventory. Dividend data (DPS and payout ratio) are unreported, so dividend sustainability cannot be directly assessed this quarter. Overall, results show resilient sales but weaker operating margins and cash conversion, with a solid capital structure cushioning near-term financial risk. Key watchpoints include gross margin recovery, working capital normalization, and the trajectory of operating income into the second half.

Profitability Analysis

ROE decomposition shows: Net profit margin 0.92% × Asset turnover 1.574 × Financial leverage 1.63 = ROE 2.36%, confirming low returns primarily driven by thin margins. Operating income fell 31.6% YoY despite a 0.4% revenue increase, implying negative operating leverage and higher cost pressure and/or lower unit margins. Gross margin at 9.4% appears compressed relative to the operating margin, suggesting SG&A absorption and possibly weaker non-operating contributions compared to prior year. EBITDA margin of 2.1% underscores a narrow operating cushion characteristic of fuel and energy distribution. Interest coverage is very strong at 90.1x, implying that profitability headwinds are operational rather than financial-cost driven. The decline in net income (-37.0% YoY) outpaced the decline in operating income, indicating either weaker non-operating items, higher tax/extraordinary charges, or mix effects; exact drivers are not fully discernible from the provided data. Overall, profitability quality is pressured by margin compression and limited operating leverage benefits, with returns on equity below typical sector hurdles.

Growth Assessment

Revenue grew 0.4% YoY to 308.4 billion yen, indicating stable demand or offsetting price effects in core energy distribution. However, operating income declined 31.6% YoY, implying deterioration in unit economics or higher fixed cost burden at roughly flat sales. Net income fell 37.0% YoY, signaling weaker bottom-line conversion and possibly less favorable non-operating/extraordinary outcomes. The sustainability of revenue appears intact given the scale and diversification typical of the business, but profit quality is currently weak given thin EBITDA margin (2.1%) and significant YoY contraction. Without segment disclosure, it is difficult to isolate drivers (e.g., gasoline, LP gas, industrial fuels, ancillary services), but the margin profile suggests pressure from competitive pricing, input cost volatility, or mix. Outlook hinges on gross margin normalization and tighter SG&A control; given the solid balance sheet, the company has flexibility to pursue margin repair. Monitoring second-half seasonality, price pass-through effectiveness, and volumes will be critical for assessing growth durability.

Financial Health

Total assets were 195.9 billion yen, total liabilities 87.1 billion yen, and total equity 119.9 billion yen, implying an equity ratio of approximately 61% (derived from the balance sheet). Liquidity appears adequate: current ratio 134.5%, quick ratio 120.5%, and working capital of 24.7 billion yen. Debt-to-equity (using total liabilities as a proxy) is 0.73x, indicating moderate leverage and ample headroom. Interest expense is very low at 42 million yen, with interest coverage of 90.1x, pointing to minimal near-term solvency risk from interest burdens. The negative operating CF, however, signals reliance on balance sheet capacity to absorb working capital swings; persistent negative OCF would be a concern despite the strong equity base. Cash and equivalents are unreported in this dataset; thus, immediate liquidity buffers (cash on hand and committed lines) cannot be assessed here.

Cash Flow Quality

Operating cash flow was -9.7 billion yen versus net income of 2.8 billion yen, yielding an OCF/NI ratio of -3.43x, indicative of poor cash conversion this period. Given the nature of the business, the shortfall is likely driven by working capital outflows (receivables and/or inventory), though itemized movements are not provided. Depreciation and amortization of 2.74 billion yen and EBITDA of 6.52 billion yen imply positive non-cash add-backs, so the negative OCF points squarely to changes in working capital and possibly timing of tax payments. Investing cash flow is unreported (shown as 0), making free cash flow estimation uncertain; using the provided figure yields FCF approximately equal to operating CF, i.e., about -9.7 billion yen. Financing CF was an outflow of 5.76 billion yen, suggesting debt repayment and/or shareholder returns; with DPS unreported, allocation cannot be verified. Overall, earnings quality is weak this quarter given the divergence between accrual earnings and cash, and normalization of working capital is the key swing factor for FCF.

Dividend Sustainability

Dividend per share, payout ratio, and FCF coverage are unreported in this dataset, so a direct assessment of dividend sustainability for FY2026 Q2 cannot be made from the provided figures. Given negative operating cash flow and unreported investing cash flows, free cash flow appears negative on the available data, which would not support cash dividends absent balance sheet flexibility or draw on cash. However, the company’s strong equity base and low interest burden indicate capacity to sustain shareholder returns in the near term if policy prioritizes stability; actual policy and guidance are not disclosed here. We therefore treat the dividend outlook as data-limited and contingent on second-half cash flow normalization and profitability recovery.

Risk Assessment

Business Risks:

• Commodity price volatility affecting sales, inventory valuation, and margins
• Competitive pricing pressure in fuel and energy distribution compressing gross margin
• Demand variability due to seasonality, weather, and macroeconomic activity
• Energy transition (EV adoption, efficiency gains) pressuring long-term fuel volumes
• Regulatory and tax changes impacting fuel pricing and distribution economics
• Counterparty credit risk from commercial customers in B2B channels

Financial Risks:

• Working capital swings driving negative operating cash flow and funding needs
• Potential reliance on short-term financing lines for receivables/inventory
• Exposure to interest rate increases on floating-rate borrowings (though current interest burden is low)
• Inventory price risk leading to write-downs during rapid price declines

Key Concerns:

• Sharp YoY decline in operating and net income despite flat revenue
• Negative OCF versus positive net income indicating weak cash conversion
• Thin EBITDA margin (2.1%) leaving limited buffer for shocks
• Visibility on dividends and capital allocation limited by unreported DPS and investing CF

Investment Implications

Key Takeaways:

• Revenue stable YoY but profitability weakened significantly, reflecting margin compression and negative operating leverage
• ROE of 2.36% is subdued, driven by low net margins despite adequate asset turnover and moderate leverage
• Balance sheet strength (derived equity ratio ~61%) mitigates solvency risk
• Operating CF was materially negative (-9.7 billion yen), highlighting working capital pressure
• Interest burden is minimal (coverage ~90x), so earnings headwinds are operational rather than financial

Metrics to Watch:

• Gross profit margin and operating margin recovery trajectory
• OCF/Net income ratio and working capital metrics (days receivable, inventory turnover)
• Asset turnover and volume trends by major product categories
• SG&A-to-sales ratio and cost control initiatives
• Leverage (net debt/EBITDA) and liquidity buffers (cash, committed facilities) when disclosed
• Capex and investing cash flows once reported

Relative Positioning: Within Japan’s fuel and energy distribution peers, San-Ai Obbli shows a strong equity base and low interest burden but currently lags on profitability and cash conversion; margins are thin even by sector standards, and ROE is below typical peer medians, though balance sheet resilience provides flexibility to stabilize performance.

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