SINANEN HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥120.42B
• Operating Income: ¥695M
• Net Income: ¥159M
• EPS: ¥40.19

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

Shinanen Holdings (8132) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥120.421bn (-2.5% YoY), gross profit of ¥16.962bn, and operating income of ¥0.695bn (+186.8% YoY). Profitability improved markedly at the operating line despite a modest top-line contraction, indicating effective cost control and/or mix improvements. Operating margin rose to roughly 0.6%, while ordinary income of ¥1.046bn exceeded operating income by ¥0.351bn, implying meaningful non-operating gains (net of ¥54m interest expense). Net income was ¥0.437bn (+172.8% YoY), equating to a net margin of 0.36%, still thin for the sector and indicating exposure to fuel distribution-type margin dynamics. DuPont analysis yields ROE of 0.79%, driven by a low net margin, moderate asset turnover (1.372), and moderate financial leverage (1.59x). The balance sheet appears solid: total assets ¥87.763bn, equity ¥55.230bn (implied equity ratio about 63% despite the reported 0.0% field being undisclosed), and working capital of ¥19.614bn support liquidity (current ratio 145%, quick ratio 129%). Interest coverage is comfortable at 12.9x, reflecting low financial risk from interest-bearing debt. Cash flow statements were not disclosed (zeros indicate undisclosed), limiting assessment of earnings quality, cash conversion, and free cash flow. Dividend data also show zero payout and DPS, which we treat as undisclosed rather than actual zero; hence dividend policy and coverage cannot be evaluated from this dataset. The gap between ordinary and operating income suggests reliance on non-operating items this period, while the large drop from ordinary income to net income implies below-the-line items and/or non-controlling interests weighing on the bottom line. Inventory of ¥6.884bn against current liabilities of ¥43.248bn looks manageable, supporting a healthy quick ratio. Overall, profitability is improving off a low base, leverage is moderate, and liquidity is adequate, but sustained value creation hinges on stabilizing operating margins and converting earnings to operating cash flow. The lack of cash flow disclosure is a key limitation, and all period ratios should be interpreted cautiously given potential seasonality and mid-year timing effects. Outlook hinges on price-cost pass-through, demand seasonality (winter), and disciplined SG&A, with close monitoring of non-operating income recurrence and any extraordinary items.

Profitability Analysis

ROE decomposition indicates: net margin 0.36% × asset turnover 1.372 × financial leverage 1.59 ≈ 0.79% ROE. The principal drag is the low net margin, characteristic of energy distribution and lifestyle services. Gross margin is 14.1% (¥16.962bn/¥120.421bn), suggesting stable product-level spreads or improved mix; however, operating margin remains thin at approximately 0.6% (¥0.695bn/¥120.421bn). Despite a 2.5% YoY revenue decline, operating income rose 186.8% YoY, evidencing positive operating leverage this half—likely from SG&A containment and better pricing/hedging. Ordinary income exceeded operating income by ¥0.351bn; after ¥54m interest expense, this implies around ¥0.405bn of non-operating gains (e.g., dividends, equity-method, FX, or other income). The step-down from ordinary income (¥1.046bn) to net income (¥0.437bn) suggests material below-ordinary items and/or higher non-controlling interests and extraordinary factors under JGAAP. Tax expense of ¥128m implies an effective rate of roughly 12% when compared to ordinary income, but true pre-tax is not disclosed; treat the reported 0.0% effective tax metric as non-informative due to disclosure gaps. Overall, improving operating profit momentum is encouraging, but sustainability requires continued cost discipline and reduced dependence on non-operating gains.

Growth Assessment

Revenue declined 2.5% YoY to ¥120.421bn, reflecting softer volumes and/or price normalization after prior-year volatility. Profit growth outpaced sales, with operating income up 186.8% YoY, indicating a higher-quality recovery driven by cost/mix rather than mere volume expansion. Net income rose 172.8% YoY, though the thin 0.36% net margin underscores limited pricing power and potential competitive intensity. With ordinary income exceeding operating income, part of the profit growth may be non-core; normalized growth should be assessed primarily at the operating line. Given seasonality in energy demand (winter heating) and potential fuel price fluctuations, H2 revenue and margin trajectory could differ materially from H1. Structural headwinds include longer-term declines in fossil fuel demand and competition in retail energy, partially offset by potential growth in value-added services and efficiency solutions. Outlook hinges on price pass-through speed, hedging effectiveness, and SG&A discipline; sustaining current momentum would require maintaining gross spread and further improving fixed-cost absorption.

Financial Health

Implied equity ratio is strong at about 62.9% (¥55.230bn/¥87.763bn), despite the disclosed equity ratio field being unreported. Leverage appears moderate with liabilities-to-equity around 0.92x (¥50.704bn/¥55.230bn). Liquidity is solid: current ratio 145.4% and quick ratio 129.4%, supported by ¥19.614bn in working capital and relatively modest inventory (¥6.884bn). Interest burden is light with interest expense at ¥54m and interest coverage of 12.9x, indicating low near-term refinancing risk. Asset turnover of 1.372 suggests efficient use of assets, though interpret with caution due to mid-year timing and potential annualization. Overall solvency and liquidity metrics indicate a conservative capital structure capable of absorbing operating volatility.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed (zeros indicate undisclosed). As such, OCF/Net Income and free cash flow cannot be meaningfully assessed from this dataset, and the reported 0.00 ratios should not be interpreted as actual results. Earnings quality signals from the income statement alone are mixed: operating profit improved materially, but the reliance on non-operating gains and a notable step-down to net income hint at potential non-recurring items. Working capital dynamics cannot be assessed without receivables/payables turnover and cash balance data. Key watchpoints include: conversion of operating income to operating cash flow in H2, inventory management given fuel price volatility, and any one-off items affecting ordinary-to-net reconciliation.

Dividend Sustainability

Dividend per share and payout ratio are shown as 0.00, which we treat as undisclosed rather than actual zeros. Without cash flow data and share count, we cannot calculate payout ratios or FCF coverage. From a balance sheet perspective, a strong implied equity ratio and healthy liquidity provide theoretical capacity to sustain dividends if policy targets stability. However, thin net margins and reliance on non-operating gains this period argue for caution until recurring free cash flow is evidenced. Policy outlook remains unclear from the provided data; monitor management guidance and dividend policy disclosures in the full semiannual report.

Risk Assessment

Business Risks:

• Commodity price volatility affecting gross spread and inventory valuation
• Seasonality and weather-driven demand swings (notably winter heating demand)
• Competitive pressure in fuel and energy retail leading to margin compression
• Long-term structural demand decline for fossil fuels and customer migration to alternatives
• Regulatory and tariff changes in energy markets impacting pricing and pass-through
• Customer credit risk in B2B sales and potential collections delays

Financial Risks:

• Thin operating and net margins magnify earnings volatility
• Dependence on non-operating income to support ordinary profit
• Potential for extraordinary losses under JGAAP to impact bottom line
• Working capital swings tied to commodity price cycles
• Interest rate exposure on floating-rate liabilities (though current interest burden is low)

Key Concerns:

• Sustainability of operating margin gains amid lower revenue
• Gap between ordinary and operating income indicating reliance on non-core items
• Lack of cash flow disclosure limiting assessment of earnings quality and FCF
• Large step-down from ordinary to net income suggesting below-the-line pressures

Investment Implications

Key Takeaways:

• Operating profit recovery (+186.8% YoY) despite a 2.5% revenue decline signals cost discipline and improved mix
• Net margin remains very thin at 0.36%, keeping ROE low at 0.79%
• Ordinary income materially exceeds operating income, highlighting non-operating contribution this period
• Balance sheet appears strong with an implied equity ratio near 63% and ample liquidity
• Cash flow data are undisclosed; free cash flow sustainability cannot be assessed from current inputs

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio in H2
• Gap between ordinary and operating income (quality and recurrence of non-operating gains)
• Gross margin per unit and price-cost pass-through speed amid commodity moves
• Operating cash flow, free cash flow, and working capital turns once disclosed
• Inventory levels relative to price volatility and seasonality
• ROE improvement drivers (margin vs. turnover) and capital allocation

Relative Positioning: Within Japan’s energy distribution and lifestyle services space, Shinanen exhibits conservative leverage and solid liquidity but operates with structurally thin margins. The current period shows better operating discipline than the prior year, yet sustained competitive positioning will depend on preserving gross spreads, limiting SG&A growth, and reducing reliance on non-operating items to support profits.

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