FUKUYAMA TRANSPORTING CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥153.57B
• Operating Income: ¥3.61B
• Net Income: ¥5.45B
• EPS: ¥80.87

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

Fukuyama Transporting (TSE: 9075) reported consolidated FY2026 Q2 results under JGAAP with revenue of ¥153.6bn (+4.6% YoY), but profitability deteriorated as operating income fell 19.5% YoY to ¥3.6bn. Gross profit was ¥9.0bn, implying a thin gross margin of 5.8%, and EBITDA was ¥11.9bn (7.7% margin), highlighting the asset- and labor-intensive nature of the business. Net income declined 44.3% YoY to ¥3.0bn, driving a net margin of 1.98% and a very low calculated ROE of 1.08%. The DuPont breakdown shows low asset turnover (0.303x) and modest leverage (1.80x) as the main constraints on ROE, with margin compression amplifying the impact. Despite weaker earnings, cash conversion was strong: operating cash flow reached ¥11.3bn, equivalent to 3.73x net income, suggesting robust working capital inflows or conservative non-cash charges. Liquidity is tight with current ratio at 82.5% and negative working capital of ¥15.7bn, but solvency appears solid with total liabilities of ¥212.9bn against equity of ¥281.7bn (D/E 0.76x) and healthy interest coverage of 19.6x. Ordinary income of ¥4.46bn exceeded operating income, indicating non-operating gains or income partially offsetting operating weakness. The implied effective tax burden based on available figures appears high (about 67% using income tax divided by ordinary income as a proxy for pre-tax), which pressured net income; however, exact pre-tax earnings and tax drivers are not disclosed. Revenue growth alongside a drop in operating income indicates negative operating leverage this period, likely driven by cost inflation (fuel, labor) and/or pricing lag effects common in transportation. The equity ratio is shown as 0.0% and several items such as investing cash flows, cash and equivalents, dividends, and share data show as zero; per disclosure limitations, these should be treated as unreported rather than actual zeros. The absence of investing cash flow and capex data prevents a full free cash flow assessment; reported FCF as zero likely reflects missing investing numbers. Dividend information is also not disclosed; thus, payout and FCF coverage cannot be reliably evaluated. Overall, the company demonstrates stable top-line momentum and strong cash conversion, offset by thin margins, negative operating leverage, and tight liquidity. Balance sheet leverage is moderate, supporting solvency, but the low ROE underscores structural profitability constraints. Key uncertainties include cost pass-through effectiveness, tax impacts, and the trajectory of operating margin recovery.

Profitability Analysis

ROE of 1.08% (Net margin 1.98% × Asset turnover 0.303 × Leverage 1.80) reflects a combination of low margins and low asset turnover with only modest financial leverage. Gross margin is 5.8% (¥9.0bn/¥153.6bn), signaling limited pricing power relative to cost inflation in an asset-heavy logistics model. EBITDA margin of 7.7% (¥11.9bn) versus operating margin of 2.4% (¥3.6bn) indicates substantial depreciation burden (¥8.26bn), consistent with fleet and facility intensity. Operating income fell 19.5% YoY despite 4.6% revenue growth, evidencing negative operating leverage and margin compression in the period. Ordinary income (¥4.46bn) exceeding operating income implies net non-operating gains (e.g., investment income, subsidies, or FX) partially cushioning operating weakness. Interest expense is modest at ¥184m with interest coverage of 19.6x (operating income basis), so financial costs did not materially weigh on profit. The net margin of 1.98% is pressured further by a high apparent tax burden (see caveats), leading to a 44.3% YoY decline in net income. Overall profitability quality is mixed: underlying operations are weak this quarter, but cash earnings before depreciation remain reasonable, highlighting the difference between accounting and cash performance.

Growth Assessment

Revenue grew 4.6% YoY to ¥153.6bn, indicating stable underlying demand. However, operating income decreased 19.5% YoY to ¥3.6bn, demonstrating that cost inflation and/or pricing lag outweighed volume and/or pricing gains. The gap between revenue growth and profit decline suggests negative operating leverage and margin compression. Ordinary income at ¥4.46bn provides some buffer from non-operating items, but does not offset the operating shortfall at the net level given the tax burden. EBITDA of ¥11.9bn (7.7% margin) remains relatively stable on a cash operating basis, providing a platform for recovery if cost pass-through improves. Sustainability of revenue growth likely depends on macro freight trends, e-commerce and B2B volumes, and the company’s ability to maintain network utilization. Profit quality appears pressured by depreciation drag and cost structure rigidity; operating margin recovery will hinge on fuel surcharge mechanisms, wage and subcontracting cost control, and yield management. Near-term outlook is cautious given the negative operating leverage in the half, but strong OCF suggests working capital discipline that may support earnings stabilization if top-line momentum persists.

Financial Health

Total assets are ¥506.8bn, equity is ¥281.7bn, and liabilities are ¥212.9bn, resulting in a debt-to-equity ratio of 0.76x and leverage (assets/equity) of 1.80x—moderate for the sector. Liquidity is tight: current assets of ¥74.0bn versus current liabilities of ¥89.8bn yield a current ratio of 82.5% and negative working capital of ¥15.7bn. With inventories unreported, the quick ratio equals the current ratio (82.5%), reinforcing the liquidity constraint. Interest expense is low at ¥184m and interest coverage is strong at 19.6x, indicating low refinancing risk in the near term. The reported equity ratio of 0.0% should be treated as unavailable (not zero). Overall solvency appears sound due to the substantial equity base, but short-term funding needs require careful working capital and cash management.

Cash Flow Quality

Operating cash flow of ¥11.34bn is 3.73x net income (¥3.04bn), indicating strong cash conversion supported by non-cash charges (¥8.26bn depreciation) and/or favorable working capital movements. EBITDA of ¥11.88bn broadly reconciles with OCF scale, suggesting consistent cash earnings generation from operations in the half. Investing cash flow is reported as zero, which likely reflects missing disclosure; therefore, free cash flow cannot be reliably computed from the provided dataset. The reported FCF of zero should be treated as unavailable, not an actual cash outcome. Without capex data, we cannot assess maintenance versus growth investment intensity or sustainability of cash generation post-investment. Working capital appears to be a positive contributor to OCF this period given the divergence between OCF and net income, but detailed components are not disclosed. Overall, earnings quality is better on a cash basis than on an accounting profit basis, yet the absence of investing data limits full FCF assessment.

Dividend Sustainability

Dividend per share is shown as ¥0.00 and payout ratio as 0.0%, but these are likely unreported placeholders rather than actual figures. With EPS at ¥80.87 for the half, the capacity to pay dividends would depend on full-year earnings, capex needs, and free cash flow after investments; however, investing cash flow and capex are not disclosed. OCF of ¥11.34bn suggests internal cash generation, but without capex and net debt changes, FCF coverage of potential dividends cannot be determined. Policy outlook and payout stability cannot be assessed from the provided data. Conclusion: dividend sustainability is indeterminable this period due to missing dividend and investment disclosures.

Risk Assessment

Business Risks:

• Fuel and energy cost volatility impacting margins if pass-through lags
• Labor cost inflation and driver shortages increasing fixed cost base
• Pricing pressure and competitive intensity in domestic freight and LTL networks
• Demand cyclicality tied to industrial production and e-commerce volumes
• Network utilization risk leading to negative operating leverage
• Regulatory changes (work-hour constraints, safety, emissions) raising costs
• High depreciation burden from fleet and facilities constraining operating margin

Financial Risks:

• Tight liquidity with current ratio at 82.5% and negative working capital of ¥15.7bn
• Potentially high effective tax burden reducing net income and cash available for distribution
• Capex requirements not disclosed; investment needs could pressure FCF
• Exposure to interest rate changes limited but present via borrowings and leases
• Reliance on non-operating income to support ordinary income in weak quarters

Key Concerns:

• Negative operating leverage despite revenue growth (OP -19.5% YoY vs revenue +4.6%)
• Very low ROE at 1.08% driven by thin margins and low asset turnover
• Data gaps on investing cash flows, cash balances, and dividends hindering full FCF and payout analysis

Investment Implications

Key Takeaways:

• Top-line grew 4.6% YoY to ¥153.6bn, but operating income dropped 19.5% YoY to ¥3.6bn
• Net margin compressed to 1.98% and ROE to 1.08%, highlighting structural profitability constraints
• EBITDA margin at 7.7% and OCF of ¥11.34bn indicate solid cash generation vs accounting earnings
• Liquidity is tight (current ratio 82.5%, negative working capital ¥15.7bn) though solvency is sound (D/E 0.76x)
• Ordinary income exceeded operating income, implying supportive non-operating items
• High apparent tax burden further weighed on net income
• Multiple disclosures (investing CF, cash balance, dividends, shares) appear unreported, limiting completeness

Metrics to Watch:

• Operating margin trajectory and cost pass-through (fuel, labor, subcontracting)
• Unit pricing/yield and volume growth to gauge operating leverage
• Working capital movements and OCF sustainability
• Capex and investing cash flows to derive true FCF
• Interest coverage and debt/lease profile amid rate changes
• Effective tax rate normalization and drivers of tax expense
• Ordinary vs operating income gap (recurrence of non-operating support)

Relative Positioning: Within Japan’s asset-intensive transportation and logistics space, the company exhibits thin operating margins, low asset turnover, and modest leverage, resulting in low ROE, but maintains solid cash generation and healthy interest coverage; near-term positioning hinges on restoring operating margin through effective cost pass-through and utilization.

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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