RICOH LEASING COMPANY,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥170.89B
• Operating Income: ¥11.11B
• Net Income: ¥6.26B
• EPS: ¥203.00

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

Verdict: Mixed quarter—solid top-line expansion and resilient operating profit but material bottom-line deterioration due to below-the-line items and a higher effective tax, leaving returns and ROIC weak. Revenue rose 11.2% YoY to 1,708.94, while gross profit reached 255.01, implying a gross margin of 14.9%. Operating income declined 2.6% YoY to 111.06, despite the double-digit revenue increase. Ordinary income slipped 2.0% YoY to 113.91, with non-operating income of 5.50 and non-operating expenses of 2.66 (net +2.84) not enough to offset other pressures. Profit before tax came in at 97.91, about 16 below ordinary income, implying notable extraordinary losses. Net income fell sharply by 24.4% YoY to 62.57, pushing the net margin down to 3.7%. Operating margin compressed to 6.5% (111.06/1,708.94) from roughly 7.4% a year ago, a decline of about 90 bps. Interest coverage remained very strong at 71.19x, indicating the interest burden is manageable despite a high leverage profile. The effective tax rate was elevated at 36.1%, exacerbating net profit decline relative to operating trends. Balance sheet shows total assets of 14,291.10 and total equity of 2,413.74, implying financial leverage of 5.92x and a debt-to-equity ratio of 4.92x—high for benchmark norms but typical for leasing models. Liquidity optics look strong with a current ratio of 290.9%, although cash on hand is modest at 34.78 and reliance on market funding remains a structural feature. ROE calculated at 2.6% is weak, and ROIC of 0.8% is well below the 5% warning threshold, underscoring capital efficiency challenges. Dividend payout ratio (calculated) of 89.9% appears stretched versus earnings momentum and absent free cash flow disclosure limits comfort on sustainability. Earnings quality cannot be fully assessed due to unreported operating and free cash flows; however, the gap between ordinary income and PBT hints at one-off charges that lowered bottom line quality for the quarter. Forward-looking, the core franchise appears stable, but improving ROIC, controlling SG&A and credit costs, and normalizing extraordinary items will be key to re-rating returns. Monitoring funding costs amid interest rate normalization and any change in tax/one-off charges will be critical for the second half.

Profitability Analysis

DuPont (ROE = Net Margin × Asset Turnover × Leverage): 2.6% = 3.7% × 0.120 × 5.92. The biggest driver of weak ROE this quarter is the low net profit margin, which compressed alongside a spike in below-the-line charges and a higher effective tax rate. Asset turnover at 0.120 remains structurally low for a leasing balance sheet with large earning assets; leverage at 5.92x amplifies returns but also risk. Business drivers: operating margin fell about 90 bps YoY to 6.5% despite 11.2% revenue growth, suggesting negative operating leverage (higher SG&A and/or credit costs) and limited pricing power amid funding cost pressures. The drop from ordinary income to PBT (~16) indicates extraordinary losses that are non-recurring in nature but materially reduced net income. Sustainability: margin pressure from funding costs and competition could persist, while the extraordinary loss looks one-time; tax rate normalization would help net margin. Watch for SG&A growth versus revenue (data not disclosed), as operating income declined despite strong revenue, implying cost intensity rose.

Growth Assessment

Top-line growth (+11.2% YoY) was strong, signaling healthy lease origination or asset growth. Core profitability underperformed the top line with operating income down 2.6% YoY, pointing to cost pressure and/or higher credit costs (not disclosed) offsetting volume gains. Non-operating results were modestly positive (net +2.84), but extraordinary items drove PBT down below ordinary income, producing a 24.4% YoY decline in net income. Gross margin at 14.9% and operating margin at 6.5% reflect tighter spreads or mix shifts. Outlook: if extraordinary impacts abate and cost discipline improves, ordinary earnings should better translate to net income. Key growth constraints are ROIC at 0.8% and low asset turnover; improving unit economics (pricing, residual management, funding cost control) is necessary to convert asset growth to value accretion. Near-term growth quality depends on stable credit costs, normalization of the tax rate, and avoidance of further one-off losses.

Financial Health

Liquidity appears ample with a current ratio of 290.9% and working capital of 7,483.01, though cash and deposits are modest at 34.78; funding flexibility remains important for a leasing model. Solvency: total liabilities of 11,877.35 and equity of 2,413.74 imply high leverage (D/E 4.92x)—explicit warning as it exceeds 2.0 and elevates refinancing risk. Loans total 6,631.50 (short-term 180.50; long-term 6,451.00), indicating a long-dated funding base relative to asset tenor, which helps mitigate maturity mismatch risk; current assets exceed current liabilities, further reducing near-term pressure. Interest coverage at 71.19x is strong, suggesting manageable interest burden. No off-balance sheet obligations were disclosed in the provided data; leasing businesses may have residual value exposures not captured on the face of the balance sheet.

Cash Flow Quality

Operating cash flow and free cash flow were not disclosed, so OCF/Net Income and FCF coverage cannot be calculated—this is a key limitation. Given net income of 62.57 and absence of OCF, we cannot confirm earnings cash conversion; flag as indeterminate rather than weak. Dividend and capex cash requirements are unknown, constraining sustainability assessment. Working capital manipulation signs cannot be assessed without CF detail; however, the divergence between ordinary income and PBT suggests one-off charges rather than accrual build as the principal bottom-line driver this quarter.

Dividend Sustainability

The calculated payout ratio stands at 89.9%, which is high versus the <60% benchmark and incongruent with declining net income. FCF coverage is not calculable due to missing cash flow data, preventing verification of dividend funding from internal cash generation. With ROE at 2.6% and ROIC at 0.8%, internal return generation is currently low; sustaining a high payout may constrain reinvestment unless earnings recover or leverage increases further (undesirable given already high D/E). Policy outlook: stable-to-cautious unless earnings normalize and cash flow evidence supports coverage; the company may prioritize balance sheet resilience over payout expansion in the near term.

Risk Assessment

Business Risks:

• Margin compression from rising funding costs and competitive lease pricing
• Residual value risk on leased assets affecting disposal gains and impairments
• Credit cost volatility from SME/corporate counterparties in a slowing macro
• Execution risk on cost control as revenue scales (negative operating leverage)
• Tax rate volatility impacting net income conversion

Financial Risks:

• High leverage (D/E 4.92x) elevates refinancing and interest rate risks
• Maturity mismatch risk mitigated but still reliant on continuous market funding
• Low ROIC (0.8%) versus cost of capital, risking value dilution with growth
• Valuation risk on investment securities (517.72) amid market volatility
• Limited cash on hand (34.78) necessitating dependable credit lines

Key Concerns:

• Sharp drop from ordinary income to profit before tax (~16 of likely extraordinary losses)
• Operating margin compression (~90 bps YoY) despite double-digit revenue growth
• High payout ratio (89.9%) against falling net income and absent CF disclosure
• Weak ROE (2.6%) and ROIC (0.8%) indicating poor capital efficiency

Investment Implications

Key Takeaways:

• Core operations resilient but cost/one-off pressures reduced profitability
• Extraordinary losses and higher taxes were the main drags on bottom line
• Leverage is high but interest burden currently well covered
• ROIC and ROE are sub-par; improving spread and efficiency is imperative
• Dividend payout looks elevated relative to earnings trajectory and unknown FCF

Metrics to Watch:

• Credit costs and delinquency trends
• Funding cost vs. asset yield (spread) and any repricing actions
• SG&A growth vs. revenue and productivity per employee
• Extraordinary gains/losses and effective tax rate normalization
• Leverage (D/E), term structure of debt, and liquidity buffers
• ROIC progression and asset turnover

Relative Positioning: Within Japan’s leasing sector, revenue growth is healthy and interest coverage is strong, but returns (ROE/ROIC) and payout sustainability lag best-in-class peers; elevated leverage is typical for the model but above general benchmarks, making disciplined spread management and cost control essential for competitive positioning.

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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