KYOEI TANKER CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥7.59B
• Operating Income: ¥683M
• Net Income: ¥443M
• EPS: ¥57.88

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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: FY2026 Q2 was operationally resilient on revenue but profit compressed meaningfully due to higher costs and heavier non-operating burden, with net income also distorted by a large year-ago one-off. Revenue edged up 0.7% YoY to 75.86, while operating income fell 26.8% to 6.83, and ordinary income declined 27.9% to 5.21, indicating margin pressure. Net income was 4.42 (−91.0% YoY), implying the prior-year quarter contained substantial extraordinary gains, making the YoY bottom-line comparison not like-for-like. Operating margin is now 9.0% (6.83/75.86), down from an estimated ~12.4% a year ago, a compression of roughly 340 bps. Ordinary income margin declined to ~6.9% from ~9.6% (≈−270 bps), reflecting a net non-operating drag of −1.62 (1.09 income vs 2.71 expenses), chiefly interest expense of 2.66. EBITDA was 30.65, a margin of 40.4%, sustained by high depreciation (23.82), highlighting the capital-intensive nature of the fleet. Interest coverage is modest at 2.57x (EBIT/interest), leaving limited cushion against rate or earnings volatility. Cash generation was strong relative to earnings: operating cash flow of 31.98 was 7.24x net income, supported by non-cash depreciation. Capex was 25.36; on a derived basis, this implies positive but thin FCF of roughly 6.62 before dividends and debt service. The balance sheet remains highly leveraged with D/E at 2.08x and asset-heavy (total assets 760.40 vs equity 246.60), consistent with industry structure but a risk if rates soften. Liquidity is adequate with a current ratio of 123%, though below the >150% comfort benchmark. Total comprehensive income was negative (−2.45), pointing to OCI losses (e.g., FX or investment securities valuation), which reduced equity despite positive net income. ROE is low at 1.8%, driven by modest net margins and slow asset turnover (0.10), with high leverage the main support. Reported ROIC at 1.0% is below cost of capital, underscoring capital efficiency challenges. Forward-looking, earnings sensitivity to charter rates, bunker fuel, USD/JPY, and interest costs remains high, and deleveraging or rate relief would be needed to lift coverage and ROE. Data gaps (no gross profit or SG&A breakdown) limit diagnostic precision, but the core message is clear: revenue steady, margins tighter, cash flow solid, and leverage still the key watchpoint.

Profitability Analysis

ROE decomposition (DuPont): ROE 1.8% = Net Profit Margin (5.8%) × Asset Turnover (0.100) × Financial Leverage (3.08x). The largest change driver YoY is the net margin, depressed by both operating margin contraction and a heavier non-operating burden, while asset turnover remains structurally low for a tanker operator and financial leverage is elevated but relatively stable. Business reason: operating margin fell as revenue was flat-to-up while operating income dropped 26.8%, implying higher operating costs (crew, repair/drydock, insurance, or bunker-related pass-through timing) and/or lower time-charter equivalents; non-operating expense was dominated by interest (2.66), offsetting limited non-operating gains. Sustainability: the operating margin pressure could moderate if charter rates improve or cost pressures ease; the non-operating drag is likely to persist unless deleveraging or interest-rate declines occur. Concerning trends: ordinary income margin fell by ~270 bps; SG&A details are unreported, but the negative spread between revenue growth (+0.7%) and operating income (−26.8%) signals adverse operating leverage. Overall, ROE remains low as modest profitability and slow asset turnover outweigh the lift from leverage.

Growth Assessment

Top-line growth was modest (+0.7% YoY), suggesting stable utilization/pricing but no strong volume or rate tailwind. Operating profit fell 26.8% YoY, indicating cost inflation or weaker charter rates outweighed revenue stability. Ordinary income declined 27.9%, with net non-operating expenses of −1.62 (notably interest), reinforcing earnings headwinds from balance-sheet intensity. Net income dropped 91% YoY due to a large prior-year non-recurring gain; absent that, underlying profitability appears weaker but not collapsing. EBITDA of 30.65 (40.4% margin) shows robust cash earnings capacity tied to depreciation, consistent with heavy asset base. Outlook hinges on freight rate trajectory, bunker price dynamics and pass-through, fleet availability/drydock schedule, and USD/JPY; modest revenue trends plus cost discipline are needed to rebuild margins. Without deleveraging or lower rates, financing costs will cap ordinary income growth. Near-term growth catalysts would be new contracts at higher rates or improved fleet mix post-drydock; risks include softer global trade or increased supply of tonnage.

Financial Health

Liquidity: current ratio 123.4% and quick ratio 123.4% are above 1.0 but below the >150% comfort level; no immediate red flag, but a thin cushion for a cyclical, capital-intensive sector. Solvency: D/E is 2.08x (warning threshold >2.0), indicating high leverage; financial leverage (assets/equity) is 3.08x. Interest-bearing debt concentration is significant via short-term loans 59.62 and long-term loans 378.06; noncurrent liabilities total 436.22. Maturity mismatch: current assets 95.77 vs current liabilities 77.58 provides positive working capital (18.19), but short-term debt reliance means refinancing discipline is required. Interest coverage at 2.57x is moderate; a downturn could compress coverage toward caution levels. Equity base is 246.60; total comprehensive loss (−2.45) shows OCI volatility can erode equity in spite of positive NI. No off-balance sheet obligations were disclosed in the provided data; typical industry exposures (charter commitments, guarantee obligations) are not reported here.

Cash Flow Quality

OCF of 31.98 versus net income of 4.42 yields OCF/NI of 7.24x, indicating strong cash conversion driven by non-cash depreciation (23.82) and possibly neutral-to-positive working capital. Derived FCF (OCF − capex) is approximately +6.62, positive but modest relative to debt service and potential dividends. With financing CF at −19.02, the period likely included net repayments and/or dividends exceeding FCF, funded by beginning cash or incremental drawdowns earlier in the year; period-end cash stands at 70.54. Earnings quality is good on a cash basis, but sustainability depends on maintaining EBITDA and managing capex cycles (drydock and fleet renewal). No obvious signs of working capital manipulation are visible, though receivables/inventory details are unreported; the cash result is primarily explained by depreciation.

Dividend Sustainability

The calculated payout ratio is 69.2%, above the <60% comfort benchmark for cyclical, asset-heavy sectors. With derived FCF of ~6.62 in the period and no disclosed total dividends paid, coverage cannot be precisely determined; however, given financing outflows of −19.02 and leverage constraints, sustained high payouts could pressure balance sheet flexibility. Policy outlook likely prioritizes balance sheet resilience and fleet investment; if earnings remain compressed and capex persists, a more conservative payout would improve credit metrics. Absent explicit guidance, we treat the payout ratio as a data point subject to revision given the volatile prior-year base.

Risk Assessment

Business Risks:

• Freight rate and fleet utilization volatility directly impacting revenue and operating margin
• Bunker fuel price volatility and pass-through timing risk
• Operational risks including drydock schedules, maintenance, and potential vessel downtime
• Regulatory costs from IMO decarbonization and environmental compliance increasing capex/opex
• FX exposure (USD/JPY) affecting revenues/costs and OCI via translation/hedging

Financial Risks:

• High leverage (D/E 2.08x) with moderate interest coverage (2.57x)
• Refinancing risk tied to 59.62 of short-term loans and large long-term debt stack (378.06)
• Interest rate risk raising financing costs and compressing ordinary income
• OCI volatility (−2.45 total comprehensive income) impacting equity and capital ratios

Key Concerns:

• Operating margin compression (~340 bps YoY) despite flat revenue
• Non-operating drag from interest expense (2.66) outweighing non-operating income
• Low capital efficiency (ROIC 1.0%, ROE 1.8%) below cost of capital
• Data gaps (no cost of sales, SG&A breakdown) limiting identification of cost drivers

Investment Implications

Key Takeaways:

• Revenue stable (+0.7% YoY) but operating profit fell 26.8%, signaling cost pressure and adverse operating leverage
• Operating margin compressed to 9.0% (~−340 bps YoY), ordinary margin to 6.9% (−270 bps)
• Cash earnings robust (EBITDA 30.65; OCF/NI 7.24x) aided by high depreciation
• Leverage elevated (D/E 2.08x), with interest coverage only 2.57x; deleveraging would improve resilience
• Derived FCF positive (~6.62) but thin versus financing outflows (−19.02), suggesting constrained financial flexibility
• Comprehensive loss indicates OCI sensitivity (FX/securities), adding equity volatility

Metrics to Watch:

• Time-charter equivalent rates and fleet utilization
• Operating margin and unit cost trends (crew, maintenance, insurance, bunker pass-through)
• Interest coverage and average borrowing cost
• Capex pipeline (drydock and fleet renewal) and FCF after capex
• USD/JPY and OCI items affecting comprehensive income
• Leverage trajectory (D/E, net debt/EBITDA)

Relative Positioning: As a tanker operator, the company exhibits typical industry characteristics: asset-heavy balance sheet, depreciation-driven cash earnings, and sensitivity to rates and financing costs. Compared with asset-light peers, leverage and capital intensity depress ROIC/ROE; relative standing will improve primarily through rate tailwinds, cost control, and deleveraging rather than incremental revenue growth alone.

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