Mitsui O.S.K.Lines,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥869.77B
• Operating Income: ¥71.82B
• Net Income: ¥248.53B
• EPS: ¥337.25

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

For FY2026 Q2 (consolidated, JGAAP), Mitsui O.S.K. Lines reported revenue of ¥869.8bn, down 3.4% YoY, signaling a softer rate environment and/or mix headwinds. Gross profit was ¥167.9bn with a gross margin of 19.3%, showing reasonable spread retention despite top-line pressure. Operating income fell 19.6% YoY to ¥71.8bn, compressing the operating margin to 8.3%, indicative of operating leverage and cost pass-through frictions. Ordinary income of ¥114.6bn significantly exceeded operating income, implying sizeable non-operating contributions (e.g., equity-method gains, financial/FX effects), adding volatility to earnings quality. Net income declined 53.3% YoY to ¥116.2bn, with a net margin of 13.4%; the larger drop versus operating income points to non-recurring items or tougher comps in non-operating gains YoY. DuPont ROE printed at 4.44%, driven by a modest asset turnover of 0.161, moderate leverage of 2.06x, and a mid-teens net margin, underscoring capital intensity and cyclical earnings. EBITDA was ¥132.1bn (15.2% margin), providing solid operating cash-generating capacity relative to revenue. Cash flow quality looks healthy: operating cash flow was ¥172.8bn, at 1.49x net income, suggesting earnings are backed by cash conversion this period. Liquidity is adequate with a current ratio of 1.09x and quick ratio of 0.98x, and working capital of ¥46.7bn, though the buffer is not large for a cyclical, capital-intensive sector. Balance sheet leverage is moderate with liabilities-to-equity at 0.86x and total assets of ¥5.40tn against equity of ¥2.62tn. Interest coverage is comfortable at 8.4x, cushioning against rate volatility. The effective tax rate in provided metrics shows 0.0%, but reported tax expense of ¥13.3bn suggests a low, not zero, rate; tax disclosures may include one-offs or timing differences. Dividend information is unreported (DPS and payout shown as 0 indicate non-disclosure), so distribution policy and cash returns cannot be assessed from this dataset. Free cash flow cannot be determined because investing cash flows/capex were not disclosed; reported FCF of 0 in the metrics reflects missing data, not zero spending. Overall, the quarter shows resilient cash generation, margin pressure at the operating level, and material reliance on non-operating items for earnings, within a solid but not overly conservative balance sheet. Data limitations (notably investing CF, cash balance, equity ratio, and share data) constrain full assessment of capital allocation, FCF coverage, and per-share metrics.

Profitability Analysis

ROE of 4.44% is decomposed as Net Margin (13.36%) × Asset Turnover (0.161) × Leverage (2.06x). The relatively low asset turnover reflects shipping’s capital intensity, while leverage is moderate, keeping ROE subdued despite a double-digit net margin. Operating margin of 8.3% trails the ordinary margin of 13.2%, indicating meaningful non-operating uplift; this raises earnings quality considerations, as repeatability may be lower. Gross margin of 19.3% suggests basic spread control, but the 19.6% YoY decline in operating income versus a 3.4% revenue decline indicates negative operating leverage. EBITDA margin at 15.2% versus operating margin at 8.3% highlights sizeable D&A (¥60.2bn), consistent with a heavy asset base. Interest coverage of 8.4x indicates manageable financing costs relative to EBIT. Margin quality appears mixed: core operations face pressure, but consolidated profitability is supported by non-operating gains.

Growth Assessment

Revenue contracted 3.4% YoY to ¥869.8bn, pointing to softer freight rates/volumes or mix changes. Operating income declined 19.6% YoY, exceeding the revenue drop, implying margin compression and negative operating leverage. Ordinary and net income dynamics indicate heavier reliance on non-operating items versus the prior year, and the 53.3% decline in net income suggests tougher comps and/or absence of prior one-offs. EBITDA of ¥132.1bn demonstrates continued capacity to generate operating earnings, but the trend is down. Sustainability of revenue depends on rate/volume normalization and cost pass-through, which are inherently cyclical in shipping. Profit quality is mixed: OCF/NI at 1.49x is supportive, yet the gap between operating and ordinary income introduces volatility risk. Outlook near term is cautious given margin sensitivity to rates, bunker costs, and FX; stabilization in these drivers would be necessary to arrest the profit decline.

Financial Health

Liquidity is adequate with current ratio 1.09x and quick ratio 0.98x; working capital stands at ¥46.7bn, leaving a modest buffer for volatility. Total liabilities of ¥2.26tn against equity of ¥2.62tn imply liabilities-to-equity of 0.86x, reflecting moderate balance sheet risk. Total assets are ¥5.40tn, with asset-to-equity leverage at 2.06x. Interest expense of ¥8.55bn is well covered by operating income (8.4x), providing resilience to rate moves. The reported equity ratio is shown as 0.0% in the dataset, which should be treated as undisclosed, not zero. Cash and equivalents are undisclosed, limiting precision on immediate liquidity. Overall solvency is sound, with moderate leverage and solid interest coverage, but the modest current buffer warrants monitoring in a cyclical sector.

Cash Flow Quality

Operating cash flow of ¥172.8bn exceeds net income of ¥116.2bn (OCF/NI 1.49x), indicating strong cash conversion and limited accrual risk this period. EBITDA (¥132.1bn) is well above interest expense, supporting internal funding capacity. Investing cash flow is undisclosed (reported as 0), preventing assessment of capex intensity and true free cash flow; the FCF metric shown as 0 reflects missing data, not zero FCF. Working capital appears contained given the quick ratio of 0.98x and moderate inventory level (¥56.4bn), but detailed drivers (receivables/payables timing) are not available. Depreciation of ¥60.2bn underscores ongoing capital consumption; without capex data, replacement spending sufficiency cannot be evaluated. Earnings quality overall appears reasonable, bolstered by cash generation, but visibility on sustainability is constrained by absent investing cash flow detail.

Dividend Sustainability

Dividend data (DPS, payout, and FCF coverage) are shown as 0 in the dataset and should be treated as undisclosed. With EPS at ¥337.25 and positive OCF, capacity for distributions cannot be judged without capex, net debt movement, or cash balance details. Policy stance, interim distributions, and guidance are not available in this dataset. Consequently, payout ratio assessment and FCF coverage cannot be reliably computed. Any view on dividend sustainability would be speculative absent investing cash flows and confirmed DPS.

Risk Assessment

Business Risks:

• Freight rate and volume cyclicality impacting revenue and operating margins
• Fuel (bunker) price volatility and decarbonization compliance costs
• Foreign exchange exposure (USD/JPY) affecting revenue and costs
• Geopolitical and supply chain disruptions (route closures, port congestion, conflicts)
• Vessel supply dynamics and charter rate fluctuations
• Reliance on non-operating income (e.g., equity-method, FX) to bridge earnings
• Regulatory tightening (IMO emissions, environmental and safety standards)

Financial Risks:

• Modest liquidity buffer (current ratio ~1.09x; quick ratio ~0.98x) in a cyclical industry
• Capex intensity and fleet renewal needs not observable due to undisclosed investing CF
• Potential interest rate sensitivity despite current 8.4x coverage
• Working capital swings tied to freight cycles and fuel costs
• Tax volatility given low apparent effective tax rate subject to one-offs or timing

Key Concerns:

• Operating income down 19.6% YoY versus revenue down 3.4%, evidencing negative operating leverage
• Net income down 53.3% YoY and dependence on non-operating gains for ordinary income
• Inability to assess free cash flow and dividend cover due to missing investing cash flow and DPS data

Investment Implications

Key Takeaways:

• Top-line softness (-3.4% YoY) and margin compression drove an 19.6% YoY decline in operating income
• Ordinary income materially above operating income signals non-operating reliance and earnings volatility
• Cash conversion robust (OCF/NI 1.49x), supporting balance sheet resilience
• Leverage moderate (liabilities/equity 0.86x) with solid interest cover (8.4x)
• Liquidity adequate but not ample (current 1.09x; quick 0.98x), warranting close monitoring
• ROE of 4.44% constrained by low asset turnover and moderate leverage

Metrics to Watch:

• Freight rate indices and volume trends driving revenue and operating margin
• Spread between ordinary and operating income to gauge reliance on non-operating items
• Operating cash flow versus net income and working capital movements
• Investing cash flow/capex once disclosed to assess FCF and capital intensity
• Interest coverage and liabilities-to-equity for balance sheet risk
• Bunker costs and FX (USD/JPY) sensitivity on margins

Relative Positioning: Within the capital-intensive marine transportation sector, the company exhibits moderate leverage and solid interest coverage, with decent gross/EBITDA margins but negative operating leverage in the period. Earnings quality is mixed due to dependence on non-operating income. Cash conversion is supportive, yet limited disclosure on investing cash flows constrains FCF and dividend visibility.

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