Fuyo General Lease Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥343.52B
• Operating Income: ¥3.57B
• Net Income: ¥24.02B
• EPS: ¥51.27

Income Statement

Balance Sheet

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

Fuyo General Lease (8424) reported FY2026 Q2 consolidated results under JGAAP that show resilient top-line growth but a sharp deterioration in profitability. Revenue rose 3.5% year over year to ¥343.5 billion, indicating continued demand and sustained leasing volumes. Gross profit reached ¥59.2 billion, translating to a gross margin of 17.2%, which is reasonable for a diversified leasing portfolio. However, operating income fell to ¥3.57 billion, down 89.0% year over year, compressing the operating margin to roughly 1.0% and signaling a material escalation in operating costs, credit costs, residual-related losses, or other non-GP operating items. Ordinary income was ¥5.92 billion, implying some support from non-operating items, but net income declined 79.7% to ¥4.62 billion, with EPS at ¥51.27 for the period. The DuPont profile reflects a thin net margin of 1.35%, low asset turnover of 0.095 typical of lease-heavy balance sheets, and high financial leverage of 6.97x, culminating in a low ROE of 0.89%. The balance sheet remains large and funding-intensive with total assets of ¥3.63 trillion and total liabilities of ¥3.04 trillion, while total equity is ¥521.3 billion. Liquidity indicators are solid on reported figures, with current assets of ¥2.22 trillion versus current liabilities of ¥1.48 trillion, yielding a current ratio of 150.1% and working capital of ¥739.1 billion. Solvency is consistent with sector norms: the reported debt-to-equity ratio is 5.82x, and the equity-to-asset ratio, while not disclosed in the dataset, is calculable at about 14.35% (¥521.3b/¥3.633t). Interest expense was ¥1.29 billion and interest coverage was 2.8x, which is adequate but trending cautious given the sharp drop in operating income. Several important cash flow and dividend datapoints are unreported (zeros indicate non-disclosure), limiting assessment of operating cash conversion and capital allocation. EBITDA is not meaningful here due to unreported depreciation, which is typically significant for lessees and lessors under JGAAP. The effective tax rate shown as 0.0% in the derived metrics is likely distorted by classification or timing and should not be interpreted as an economic tax rate. Overall, the business shows steady revenue but materially weaker profitability and returns, with leverage and liquidity remaining within sector norms. The near-term focus should be on diagnosing the drivers of operating income compression and monitoring funding costs, credit costs, and residual value impacts. While the franchise scale and liquidity look solid, earnings visibility is currently reduced due to margin pressure and limited cash flow disclosure.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.35%
• asset_turnover: 0.095x
• financial_leverage: 6.97x
• calculated_ROE: 0.89%
• interpretation: Low margin and low turnover (leasing model) combined with high leverage produce sub-1% ROE for the period; the primary drag is the abrupt collapse in operating margin. margin_quality: Gross margin is 17.2% (¥59.2b/¥343.5b), but operating margin fell to ~1.0% as operating expenses and/or credit/residual costs absorbed most of GP (SG&A and other operating items implied at ~¥55.7b). Ordinary margin of ~1.7% (¥5.92b/¥343.5b) indicates some non-operating support, but the net margin at 1.35% remains compressed. operating_leverage: The 3.5% YoY revenue increase contrasted with an 89% YoY decline in operating income implies very high negative operating leverage this period. Fixed-cost intensity and variable items (credit costs, residual losses, valuation losses) likely amplified the profit drop. Interest coverage at 2.8x is adequate but leaves less buffer if operating income remains weak.

Growth Assessment

revenue_sustainability: Top-line growth of +3.5% YoY suggests stable origination and leasing activity, consistent with a diversified book. The low asset turnover (0.095x) is structurally typical for leasing, so revenue growth tends to be gradual rather than volatile. profit_quality: Profit quality is currently weak given the steep decline in operating income relative to gross profit. The compression indicates elevated non-GP operating items (e.g., credit costs, residual value losses, or other provisions). With ordinary income exceeding operating income, non-operating factors partially offset core weakness. outlook: Absent detail on the drivers of operating deleveraging, near-term earnings visibility is reduced. If the cost spike is temporary (e.g., one-off provisions), margins may normalize; if structural (e.g., persistently higher funding costs or credit costs), recovery could be slower. Monitoring the second half trend in operating income and credit cost disclosures will be key.

Financial Health

liquidity: Current assets ¥2.215 trillion vs current liabilities ¥1.476 trillion yields a current ratio of 150.1% and working capital of ¥739.1 billion, indicating solid short-term liquidity. Quick ratio equals current ratio due to lack of inventory reporting. solvency: Total equity ¥521.3 billion on assets ¥3.633 trillion implies an equity ratio of ~14.35% (not disclosed but derivable). Debt-to-equity is 5.82x, in line with a balance-sheet-intensive leasing model. Interest coverage is 2.8x, which is acceptable but could tighten if operating weakness persists. capital_structure: Leverage (A/E) at 6.97x and liabilities of ¥3.036 trillion underscore reliance on wholesale funding and bank lines typical of the sector. Maintaining diversified funding sources and matched asset-liability tenors remains crucial; maturity profile is not disclosed here.

Cash Flow Quality

earnings_quality: Operating cash flow is unreported, preventing an assessment of cash conversion (OCF/Net income shows 0.00 solely due to non-disclosure). Given the leasing model, timing differences and working capital swings can be material; absence of OCF data limits conclusions. free_cash_flow_analysis: FCF is not disclosed (reported as 0). Capex versus disposals and lease asset investments are key drivers but are unavailable; thus FCF coverage of dividends cannot be assessed from this dataset. working_capital: Reported working capital is ¥739.1 billion and current ratio 150.1%, indicating cushion. However, for lessors, receivables and lease assets dominate, making traditional WC metrics less indicative of true liquidity without cash flow detail.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.0 due to non-disclosure. With EPS at ¥51.27 for the period, an assessment of payout cannot be made from the provided figures. FCF_coverage: FCF is undisclosed; FCF coverage ratio of 0.00x reflects missing cash flow data rather than actual inability to fund dividends. policy_outlook: No dividend policy details are provided in this dataset. Sustainability would depend on the recovery of operating income, stability of credit costs, and funding cost management; insufficient data to conclude.

Risk Assessment

Business Risks:

• Residual value risk on operating lease assets if secondary market prices weaken.
• Credit risk from corporate customers amid macro slowdown or sector-specific stress.
• Margin compression from competitive pricing in lease rates.
• Execution risk in handling asset disposals and end-of-lease remarketing.
• Regulatory or accounting changes affecting lease classification and capital requirements.
• Concentration risk in specific industries or large clients (not disclosed here).

Financial Risks:

• Funding cost increases pressuring spreads and ordinary income.
• High leverage typical of leasing increases sensitivity to earnings shocks.
• Liquidity risk if market funding tightens; reliance on bank lines and securitizations.
• Interest rate mismatch risk if asset yields reprice slower than liabilities.
• Potential increases in credit costs impacting operating income and coverage ratios.

Key Concerns:

• Operating income down 89% YoY despite revenue growth, indicating severe margin pressure.
• Net profit margin at 1.35% and ROE at 0.89% highlight depressed returns.
• Interest coverage at 2.8x leaves less buffer if profitability weakens further.
• Limited visibility due to unreported cash flow and dividend data.
• Effective tax rate shown as 0.0% appears non-economic due to classification/timing.

Investment Implications

Key Takeaways:

• Top-line growth remains intact at +3.5% YoY, but profitability deteriorated sharply.
• ROE of 0.89% reflects thin margins and low turnover despite high leverage.
• Liquidity is solid on current ratios, and solvency is consistent with sector norms.
• Interest coverage is adequate but trending cautious amid operating income compression.
• Data gaps (OCF, FCF, DPS, depreciation) constrain assessment of cash conversion and payout capacity.

Metrics to Watch:

• Operating income trajectory and operating margin in H2.
• Credit costs and impairment/provision trends.
• Residual value gains/losses and disposal results on lease assets.
• Funding cost trends and interest spread management.
• Interest coverage ratio and ordinary income stability.
• Equity ratio and leverage (A/E, D/E) changes.
• Asset turnover and growth in earning assets versus revenue.
• Any disclosure on dividend policy and cash flow from operations.

Relative Positioning: Within Japan’s leasing peer set, leverage and asset turnover are typical, but current-period profitability and ROE appear weaker than peers’ steady-state levels due to pronounced margin compression; recovery depends on normalizing operating items and managing funding costs.

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