Japan Oil Transportation Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥17.89B
• Operating Income: ¥630M
• Net Income: ¥507M
• EPS: ¥153.41

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

Verdict: A solid rebound quarter with strong operating leverage and high-quality cash generation, albeit still low capital efficiency. Revenue rose 4.7% YoY to 178.85, while operating income surged 143.1% YoY to 6.30, driving ordinary income up 125.4% to 7.52 and net income up 55.0% to 5.07. Gross profit reached 19.65, yielding an 11.0% gross margin, and operating margin improved to 3.5% (operating income 6.30 on sales 178.85). Based on last year’s implied operating margin of roughly 1.5%, operating margin expanded by about 200 bps, evidencing material efficiency gains and pricing/volume mix improvements. Net margin stood at 2.8%, up meaningfully YoY alongside ordinary income growth and despite a 32.4% effective tax rate. Non-operating income of 2.27 (notably 1.21 in dividend income) provided a supplementary boost, though reliance on non-operating items remains meaningful. Cash flow quality was strong: operating cash flow of 20.92 was 4.13x net income, indicating robust earnings-to-cash conversion. Liquidity is healthy with a current ratio of 166%, cash and deposits of 53.26 comfortably exceeding short-term loans of 3.59, and interest coverage of 9.55x. Balance sheet leverage is conservative with D/E at 0.64x and working capital at 46.75, limiting refinancing risk. Depreciation and amortization of 18.85 (well above operating income) underscores the asset-intensive model and helps support OCF, but also highlights the need for disciplined capex. ROE calculated at 1.9% and ROIC at 1.9% remain weak versus typical 7–8% targets, signaling capital efficiency challenges despite the earnings rebound. Total comprehensive income of 12.59 exceeded net income materially, implying valuation gains in investment securities that lift equity but are non-cash and potentially volatile. With capex of 11.01, implied OCF-capex suggests positive free cash generation this period, supporting balance sheet strength and potential shareholder returns. Forward-looking, sustaining the improved operating margin while managing cost inflation and maintaining utilization will be key to lifting ROIC; continued dependence on non-operating income (dividends) should be monitored. Overall, the quarter shows momentum and quality cash flow, but structural returns remain subpar and capital intensity high.

Profitability Analysis

ROE decomposition (DuPont): ROE 1.9% = Net Profit Margin 2.8% × Asset Turnover 0.403 × Financial Leverage 1.64x. The most notable change vs last year appears to be net margin expansion, inferred from operating income +143% on sales +4.7%, driving an estimated ~200 bps increase in operating margin (from ~1.5% to ~3.5%). Business driver: improved operating leverage (gross profit growth outpacing SG&A), likely aided by better pricing/mix and utilization in core transport services; non-operating tailwinds (dividend income 1.21) supported ordinary profit as well. Sustainability: operating improvements can persist if pricing discipline and utilization hold, but non-operating gains (dividends/valuation) are less predictable. Asset turnover remains low at 0.403, reflecting an asset-heavy model (D&A 18.85 vs OI 6.30) that constrains ROE; this is structural unless asset intensity is optimized. Watch for concerning trends: SG&A at 13.35 equals ~7.5% of sales, and while we lack YoY SG&A detail, any acceleration in SG&A above revenue growth would pressure margins; similarly, rising maintenance capex could cap operating leverage.

Growth Assessment

Top-line grew 4.7% YoY to 178.85, a steady pace consistent with incremental volume and/or pricing gains. Operating income growth of 143.1% indicates pronounced operating leverage and margin recovery from a weak prior-year base. Ordinary income (+125.4%) and net income (+55.0%) growth were supported by both stronger core operations and non-operating income (dividends 1.21). Revenue sustainability hinges on continued demand in petroleum/chemical logistics and effective pass-through of costs; the earnings mix remains partly reliant on non-operating items. With D&A of 18.85 and capex 11.01, asset refresh appears ongoing but moderate; capacity additions should align with demand to avoid dilution of asset turnover. Outlook: if current utilization and pricing persist, operating margins can stabilize above prior-year levels; however, low ROIC (1.9%) underscores the need for further efficiency and disciplined capital allocation to enhance structural returns.

Financial Health

Liquidity is solid: current ratio 166.2% and quick ratio 166.2% indicate ample short-term coverage; no warning thresholds breached (Current Ratio > 1.0). Cash and deposits of 53.26 comfortably exceed short-term loans of 3.59, limiting near-term refinancing risk. Solvency is conservative with D/E at 0.64x (Total Liabilities 173.28 vs Equity 270.40), and interest coverage at 9.55x indicates strong capacity to service debt. Maturity mismatch risk appears low given sizable cash and working capital (46.75), though long-term loan details are unreported, which limits full assessment of the debt tenor profile. No off-balance sheet obligations are disclosed in the provided data. Equity increased aided by strong total comprehensive income (12.59), but the valuation component can reverse if markets weaken.

Cash Flow Quality

Earnings quality is strong: OCF of 20.92 is 4.13x net income (well above the 0.8x caution threshold), indicating robust conversion supported by non-cash D&A (18.85). While full investing cash flows are unreported, capex was 11.01; implied free cash flow (OCF minus capex) is positive at approximately 9.91, suggesting capacity to fund maintenance and some shareholder returns. Working capital details are not disclosed, limiting the ability to assess timing effects; however, the magnitude of OCF relative to NI reduces concerns about aggressive working capital management. Sustainability: given the asset-heavy nature, maintaining OCF will depend on stable margins and utilization; elevated maintenance capex could constrain future free cash if margins soften.

Dividend Sustainability

Payout ratio (calculated) is 65.5%, modestly above the <60% benchmark for comfort and therefore a mild caution. With positive implied FCF this period (~9.91), dividends appear fundable near term, but lack of reported DPS, total dividends paid, and full investing/financing cash flows limits precision. Balance sheet strength (cash 53.26, D/E 0.64x) provides a buffer; however, structurally low ROIC (1.9%) argues for prioritizing investments that raise returns before materially increasing payouts. Policy outlook cannot be inferred from the data provided; any upward dividend trajectory should be paced with sustained OCF and improved ROIC.

Risk Assessment

Business Risks:

• Demand cyclicality in petroleum and chemical logistics impacting volumes and pricing
• Cost inflation (fuel, labor, maintenance) potentially outpacing pass-through mechanisms
• Operational and safety risks inherent to hazardous materials transport
• Asset intensity leading to high fixed costs and sensitivity to utilization rates

Financial Risks:

• Low ROIC (1.9%) signaling weak capital efficiency and potential value dilution if capex is not disciplined
• Reliance on non-operating income (dividends 1.21; non-operating income ratio 44.8%) which is less controllable
• Potential volatility in comprehensive income from investment securities valuation
• Interest rate risk on floating-rate debt (tenor mix unreported)

Key Concerns:

• Structural returns below typical 7–8% targets despite earnings rebound
• Margin gains may be vulnerable if SG&A or maintenance costs rise faster than revenue
• Limited disclosure on investing cash flows and debt maturity profile obscures full risk view

Investment Implications

Key Takeaways:

• Strong operational rebound with ~200 bps operating margin expansion and high-quality cash conversion
• Balance sheet healthy (current ratio 166%, D/E 0.64x) and interest coverage strong at 9.6x
• Capital efficiency remains the weak link: ROE 1.9%, ROIC 1.9%
• Non-operating income (notably dividends) materially supports ordinary profit and adds volatility
• Positive implied FCF after capex supports financial flexibility, but payout ratio (65.5%) bears monitoring

Metrics to Watch:

• Operating margin trajectory and SG&A as a percentage of sales
• Asset turnover and ROIC improvement versus capex intensity
• Breakdown and stability of non-operating income (dividends, others)
• Working capital movements and OCF sustainability
• Debt tenor/interest mix once disclosed; interest coverage resilience

Relative Positioning: Within Japanese asset-intensive logistics peers, the company shows improving profitability and superior cash conversion this quarter with conservative leverage, but lags on structural capital efficiency (low ROIC/ROE). Its reliance on non-operating income and asset-heavy profile place it mid-pack on earnings quality durability despite near-term momentum.

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