Makoto Construction CO,Ltd FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.01B
• Operating Income: ¥-60M
• Net Income: ¥-5M
• EPS: ¥-22.24

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

Sei Construction Industry Co., Ltd. (89950) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth but a continued loss at the operating and net levels. Revenue rose 1.9% year over year to ¥1,011 million, while gross profit was ¥140.8 million, implying a gross margin of 13.9%. Operating income deteriorated to a loss of ¥60 million, with the YoY change (+450.0%) indicating the operating loss widened significantly versus the prior-year period. Ordinary income was a loss of ¥63 million, reflecting limited non-operating offsets and interest expense of ¥7.4 million. Net income was a loss of ¥44 million, which worsened by 30.4% YoY, and EPS was ¥-22.24. EBITDA was negative at ¥-56.2 million, underscoring weak operating cash earnings despite only modest depreciation of ¥3.8 million. DuPont metrics point to a negative ROE of -1.11%, driven mainly by a negative net margin (-4.35%), with modest asset turnover (0.149x) and moderate leverage (1.71x). The balance sheet shows total assets of ¥6,768 million against equity of ¥3,962 million and liabilities of ¥2,963 million, implying an equity ratio near 58.5% by calculation, although the reported equity ratio field was unpopulated. Liquidity appears ample on headline ratios, with current assets of ¥5,602 million and current liabilities of ¥973 million yielding a current ratio of 575.6%, but inventory and cash were not disclosed in XBRL, limiting visibility into the true quick liquidity profile. Operating cash flow was a sizable outflow of ¥-1,511 million, inconsistent with the relatively small accounting loss and likely reflecting large working capital investment typical of the company’s business model; investing cash flow was not reported, and financing inflow of ¥1,121 million partially bridged the operating shortfall. The OCF-to-net-income ratio of 34.35 (on negative values) signals weak cash conversion and reliance on external funding in the period. Debt to equity stood at 0.75x, which is reasonable for the sector, and interest coverage was -8.1x due to negative operating income. No dividend was recorded for the period (DPS 0), consistent with losses and negative operating cash flow. Overall, the quarter reflects slight sales growth but margin pressure and heavy working capital consumption that strained operating cash flow. The company retains balance sheet capacity, but the cash profile depends on the pace of project monetization and collections. Data limitations (notably zeros for cash, inventories, and certain per-share measures) necessitate caution in interpreting liquidity and free cash flow. The near-term outlook hinges on converting current assets into cash and restoring operating profitability in the second half. Execution on project deliveries and cost control will be pivotal to normalizing cash flow and stabilizing earnings trajectory.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: -0.0435
• asset_turnover: 0.149
• financial_leverage: 1.71
• calculated_ROE: -0.0111
• commentary: Negative ROE is primarily driven by a negative net margin despite modest leverage and low asset turnover typical of asset-heavy/project businesses. margin_quality: Gross margin of 13.9% provides limited buffer for SG&A; operating margin was -5.9% (operating loss of ¥60m on ¥1,011m revenue), and EBITDA margin was -5.6%. The modest D&A (¥3.8m) indicates the loss is driven by operating cost structure rather than non-cash charges. operating_leverage: Revenue growth (+1.9% YoY) did not translate into profit improvement; fixed cost absorption appears weak. With small D&A, the negative swing suggests either tighter project pricing, cost overruns, or timing of revenue recognition relative to costs.

Growth Assessment

revenue_sustainability: Top-line growth was modest at +1.9% YoY. Given the business nature, revenue likely depends on project timing and delivery milestones; sustainability hinges on backlog conversion and new order intake (not disclosed). profit_quality: Profitability deteriorated despite growth, implying either mix pressure or cost inflation. Ordinary loss (¥63m) close to operating loss (¥60m) suggests limited non-operating drag; interest burden is small but non-trivial relative to negative EBIT. outlook: To improve earnings, the company must enhance gross margin via pricing and cost control and convert current assets into billed revenue and cash. H2 seasonality and project completions could lift margins, but visibility is constrained by limited disclosure on backlog and inventories.

Financial Health

liquidity: Headline current ratio is 575.6% (¥5,602m CA vs ¥973m CL) with working capital of ¥4,629m, indicating strong short-term coverage. However, cash and inventories were not reported, so true quick liquidity and inventory risk cannot be validated. The quick ratio shown equals the current ratio only because inventories are unreported. solvency: Debt-to-equity of 0.75x (total liabilities ¥2,963m / equity ¥3,962m) points to moderate leverage. Interest expense of ¥7.4m appears manageable if operating profitability normalizes. Calculated equity ratio is ~58.5% (equity/assets), despite the equity ratio field appearing as 0.0% due to non-disclosure. capital_structure: Leverage is primarily from liabilities tied to operations and financing inflows (¥1,121m in the period). The balance sheet provides some cushion for volatility, but persistent OCF deficits would increase dependence on financing.

Cash Flow Quality

earnings_quality: Accounting loss (NI ¥-44m) contrasts with a very large operating cash outflow (¥-1,511m), implying heavy working capital build (e.g., unbilled receivables, work in progress, or real estate for sale). EBITDA is also negative, confirming weak core earnings quality in the quarter. FCF_analysis: Investing CF was not disclosed and FCF is shown as 0 due to missing data; therefore, true FCF cannot be determined. Based on OCF alone, pre-financing cash burn was significant and funded by ¥1,121m financing inflow. working_capital: Current assets grew relative to current liabilities, but the composition was not disclosed (inventories and cash unreported). The magnitude of OCF outflow suggests delayed collections or project cost accumulation ahead of revenue recognition.

Dividend Sustainability

payout_ratio_assessment: With net loss (EPS ¥-22.24) and DPS recorded as 0.00, there is no payout in the period. A sustainable dividend would require positive earnings and improved cash conversion. FCF_coverage: FCF coverage cannot be assessed because investing CF is unreported and OCF is deeply negative. On available data, dividends would not be covered by operating cash flow. policy_outlook: Given losses and reliance on financing inflows this quarter, a conservative stance on shareholder returns is likely until profitability and OCF normalize. Formal dividend policy details were not provided.

Risk Assessment

Business Risks:

• Project timing risk affecting revenue recognition and margins
• Cost inflation and subcontractor availability impacting gross margin
• Customer concentration and order backlog visibility (not disclosed)
• Execution risk on large projects leading to cost overruns
• Regulatory and permitting delays

Financial Risks:

• Significant operating cash outflow requiring continued external financing
• Negative interest coverage (-8.1x) while loss-making
• Working capital concentration in unreported line items (inventories/receivables)
• Potential refinancing risk if cash conversion remains weak

Key Concerns:

• Large OCF deficit (¥-1,511m) versus small accounting loss indicates stressed cash conversion
• Negative EBITDA (¥-56m) and operating loss (¥-60m)
• Limited disclosure of cash and inventory balances constrains liquidity assessment

Investment Implications

Key Takeaways:

• Slight revenue growth but deterioration in operating profitability
• Calculated equity ratio around 58.5% and D/E of 0.75x provide solvency buffer
• Operating cash flow sharply negative, implying heavy working capital build
• Interest burden modest but coverage negative until EBIT turns positive
• Dividend absent; resumption depends on earnings and cash normalization

Metrics to Watch:

• Order backlog and book-to-bill (if disclosed in future reports)
• Gross margin progression and SG&A ratio
• OCF trends and working capital turns (DSO/DIO/DPO, when available)
• Leverage and financing inflows versus cash generation
• Project delivery milestones and revenue recognition timing

Relative Positioning: Within construction/real estate-related peers, leverage appears moderate and equity base adequate, but cash conversion trails due to working capital intensity; near-term positioning hinges on converting current assets to cash and restoring positive EBIT.

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