Kawasaki Kisen Kaisha,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥500.56B
• Operating Income: ¥42.95B
• Net Income: ¥184.12B
• EPS: ¥108.61

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

Kawasaki Kisen Kaisha (K Line) reported FY2026 Q2 consolidated results under JGAAP showing normalization from prior peaks amid a softer freight environment. Revenue was ¥500.6bn, down 7.0% YoY, reflecting easing container and bulk shipping conditions. Operating income declined 29.7% YoY to ¥43.0bn, compressing the operating margin to roughly 8.6%, while ordinary income of ¥59.7bn indicates material contributions from non-operating items (e.g., equity-method gains, FX). Net income was ¥68.6bn, down 62.5% YoY, implying a significant reduction in one-off gains versus the prior period or mix shifts in equity-method income and extraordinary items. DuPont decomposition yields a net margin of 13.71%, asset turnover of 0.225x, and financial leverage of 1.29x, producing an ROE of 3.99% for the period. The asset turnover level and modest leverage point to a capital-intensive, low-turnover model typical of shipping; profitability is the primary driver of ROE. Cash generation remained solid: operating cash flow (OCF) of ¥127.3bn was 1.85x net income, supporting earnings quality. Liquidity appears strong, with a current ratio of 196.3% and working capital of ¥197.9bn. Balance sheet leverage is low (debt-to-equity 0.31x), and interest coverage is healthy at 12.1x, suggesting ample capacity to withstand rate volatility. Equity appears to account for the bulk of capitalization; using the provided non-zero balances implies an equity ratio of roughly 77% (own calculation), despite the reported equity ratio showing 0.0% (which we treat as unreported). Dividend per share is shown as zero for the period, consistent with a variable or unreported interim payout; payout ratio and FCF coverage are shown as 0.0% and 0.00x, respectively, both likely unreported. Several line items (e.g., cost of sales, inventories, investing cash flow, cash balance, equity ratio, shares outstanding) are disclosed as zero and should be interpreted as unreported, limiting depth of certain analyses. Nonetheless, the combination of lower YoY operating profits, still-solid ordinary income, and robust OCF suggests the business is navigating a mid-cycle cooling with resilient cash generation. Looking ahead, earnings trajectory will hinge on freight rates, vessel availability, fuel costs, and equity-method contributions from affiliates. Regulatory decarbonization requirements and potential fleet renewal capex are medium-term considerations for capital allocation. Overall, K Line’s balance sheet strength provides flexibility, but the earnings run-rate is normalizing from prior windfalls.

Profitability Analysis

ROE is 3.99% for the period, decomposed as Net Margin (13.71%) × Asset Turnover (0.225x) × Financial Leverage (1.29x). The net margin remains solid on a consolidated basis, supported by non-operating income (ordinary income exceeds operating income), but operating margin compressed to about 8.6% on revenue softness. EBITDA was ¥66.6bn (13.3% margin), indicating moderate operating leverage; the ¥23.6bn D&A charge highlights the capital intensity of the fleet. Interest expense of ¥3.55bn against operating income of ¥43.0bn yields 12.1x coverage, underscoring manageable financing costs. The YoY drop in operating income (−29.7%) versus revenue (−7.0%) indicates negative operating leverage in the period as fixed costs and mix weighed on margins. Ordinary income at ¥59.7bn suggests meaningful contributions from affiliates/financial items partially offsetting weaker core operations. Net income (¥68.6bn) significantly above ordinary income implies extraordinary gains and/or low effective taxation in the period; the reported effective tax rate metric shows 0.0% but tax expense of ¥5.46bn suggests a low, not zero, rate—precise rate cannot be confirmed from available data.

Growth Assessment

Top-line contracted 7.0% YoY to ¥500.6bn, consistent with normalization of freight markets post-pandemic peaks. Operating income fell 29.7% YoY to ¥43.0bn, outpacing the revenue decline and pointing to weaker pricing, mix effects, and/or reduced operating efficiency. EBITDA margin of 13.3% remains respectable but down from prior peak conditions, indicating mid-cycle profitability. Ordinary income resilience (¥59.7bn) implies continued equity-method earnings and/or FX tailwinds, tempering the decline in operating profit. Net income decreased 62.5% YoY to ¥68.6bn, likely reflecting fewer extraordinary gains versus a highly elevated base in the prior year and normalization of container JV contributions. Sustainability of revenue will depend on spot and contract rate resets in container shipping, bulk charter dynamics, and cargo demand tied to global industrial activity. Profit quality is supported by OCF exceeding net income (1.85x), but the durability of non-operating contributions is less certain. Near-term outlook remains sensitive to freight indices, vessel supply additions, and bunker fuel trends; any rebound in rates or improved capacity discipline could stabilize margins. FX (USD/JPY) remains a key swing factor for reported revenue and profits. Structural initiatives (cost control, fleet optimization, LNG-fueled/new energy vessels) could underpin medium-term efficiency, though benefits may be gradual.

Financial Health

Liquidity is strong: current assets of ¥403.4bn versus current liabilities of ¥205.5bn produce a current ratio of 196.3% and working capital of ¥197.9bn. Quick ratio equals the current ratio given inventories are unreported, but cash and equivalents are also unreported; thus, precise cash buffer cannot be assessed. Solvency metrics are conservative: total liabilities of ¥532.6bn against total equity of ¥1,721.3bn implies a debt-to-equity of 0.31x. Based on non-zero balances, the equity ratio (equity/total assets) is approximately 77% (own calculation), indicating low leverage, though the disclosed equity ratio field shows 0.0% and should be treated as unreported. Interest coverage (operating income/interest expense) is 12.1x, signaling ample headroom against interest rate increases or earnings volatility. Asset base is large (¥2.23tn), consistent with a capital-intensive fleet; depreciation of ¥23.6bn for the period underpins the need for ongoing reinvestment. No granular maturity profile or secured debt breakdown is provided, limiting assessment of refinancing risk, but overall capitalization appears robust.

Cash Flow Quality

OCF of ¥127.3bn versus net income of ¥68.6bn (OCF/NI = 1.85x) indicates strong cash conversion and low accrual intensity in the period. The positive spread suggests favorable working capital movements and/or non-cash items beyond depreciation supporting cash generation. Free cash flow cannot be determined because investing cash flow and capex are shown as 0 (unreported); thus, reported FCF of 0 should not be interpreted as an actual zero. Financing cash flow of −¥119.4bn implies net outflows (likely debt repayment and/or shareholder returns), but dividends are shown as zero (unreported), so the composition cannot be validated. Working capital stands at ¥197.9bn; the high current ratio suggests a comfortable liquidity cushion, though the lack of detail on cash, receivables, and inventories limits a granular quality assessment. Depreciation of ¥23.6bn is material, reflecting ongoing capital consumption that will require reinvestment over time.

Dividend Sustainability

Annual DPS is disclosed as 0.00 and payout ratio as 0.0%, both likely unreported for the interim period. With OCF at ¥127.3bn and unknown capex, true FCF coverage of dividends cannot be assessed; the provided FCF coverage of 0.00x should not be treated as an actual zero. Historically, shipping companies, including K Line, often employ variable/dividend policies linked to earnings and cash flow, and may use buybacks or special dividends in peak years. Given the low leverage (debt-to-equity 0.31x) and strong OCF, the capacity for distributions appears intact, but visibility depends on forward freight rates, equity-method income, and upcoming capex for fleet renewal and decarbonization. Until capex and policy details are disclosed for the period, the sustainability assessment remains constrained.

Risk Assessment

Business Risks:

• Freight rate volatility in container and bulk segments impacting revenue and margins
• Supply-demand imbalance due to new vessel deliveries affecting pricing power
• Bunker fuel price volatility and scrubber/LNG economics
• Geopolitical disruptions (port congestion, canal restrictions, regional conflicts, Red Sea rerouting)
• Customer demand cyclicality tied to global trade and industrial production
• Regulatory decarbonization requirements (IMO, EU ETS) driving operating and capex burdens
• Operational risks including accidents, downtime, and environmental incidents
• FX fluctuations (USD/JPY) affecting reported results

Financial Risks:

• Potential normalization or volatility of equity-method income affecting ordinary income
• Interest rate changes increasing financing costs despite current coverage headroom
• Large future capex for fleet renewal/decarbonization potentially pressuring FCF
• Asset impairment risk if market values decline for vessels or investments
• Working capital swings tied to freight cycles impacting near-term cash generation

Key Concerns:

• Sharp YoY decline in operating income (−29.7%) versus a modest revenue decline, indicating negative operating leverage
• Net income down 62.5% YoY, highlighting normalization from prior extraordinary gains
• Limited visibility on capex and cash balances due to unreported investing CF and cash lines
• Dependence on non-operating items to support ordinary income amid softer core margins

Investment Implications

Key Takeaways:

• Revenue of ¥500.6bn fell 7.0% YoY, confirming top-line normalization
• Operating margin compressed to ~8.6% with operating income down 29.7% YoY
• Ordinary income (¥59.7bn) exceeded operating income, indicating material non-operating contributions
• Net income of ¥68.6bn declined 62.5% YoY from a high base
• Cash conversion strong: OCF/NI at 1.85x
• Low leverage (debt-to-equity 0.31x) and strong interest coverage (12.1x) support resilience
• Equity ratio estimated ~77% (own calc), despite reported equity ratio being unreported

Metrics to Watch:

• Container and bulk freight indices and contract rate renewals
• Equity-method income trends and FX impacts on ordinary income
• Capex guidance and investing cash flows (fleet and decarbonization)
• Bunker fuel prices and fuel efficiency initiatives
• Working capital movements and OCF sustainability
• Net debt and liquidity (cash balance disclosure)
• Dividend/buyback policy updates and payout framework

Relative Positioning: Within the Japanese shipping peer set, K Line exhibits conservative leverage and robust liquidity, with earnings currently normalizing; profitability remains supported by non-operating income, while core operating margins reflect mid-cycle conditions.

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