KYOEI TANKER CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥7.59B
• Operating Income: ¥683M
• Net Income: ¥4.90B
• 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

Kyoei Tanker Co., Ltd. reported FY2026 Q2 consolidated results under JGAAP showing resilient topline and solid cash generation amid weaker profitability. Revenue grew 0.7% year over year to ¥7,586 million, indicating stable fleet utilization and rate environment despite industry volatility. Operating income declined 26.8% YoY to ¥683 million, reflecting margin compression from higher operating costs or lower charter spreads, even though detailed cost lines were not disclosed. Ordinary income came in at ¥521 million, implying modest non-operating headwinds, likely interest burden and limited non-operating gains. Net income was ¥442 million, down 91.0% YoY, signaling one-off factors or prior-year exceptional gains; the large reported income tax figure likely reflects timing or classification items not aligned with the period’s pretax profit under available data. EBITDA was ¥3,018 million (39.8% margin), highlighting the capital-intensive, depreciation-heavy nature of the tanker business and offering a cushion for debt service. Interest expense totaled ¥238 million, with interest coverage at 2.9x based on operating income, adequate but leaving limited buffer if earnings soften further. DuPont decomposition shows a net margin of 5.83%, asset turnover of 0.100x, and financial leverage of 3.08x, delivering a calculated ROE of 1.79%, which is modest for the sector and constrained by slow asset turns and margin pressure. The balance sheet shows total assets of ¥76.04 billion and total equity of ¥24.66 billion, implying an equity ratio of approximately 32.4% (despite the equity ratio item being unreported), which is typical for asset-heavy shipping. Current assets of ¥10.65 billion versus current liabilities of ¥10.91 billion yield a current ratio of 97.6% and negative working capital of ¥257 million, signaling tight short-term liquidity. Operating cash flow was strong at ¥2,004 million, about 4.5x net income, supported by non-cash charges and working capital movements. Investing cash flow is unreported, and free cash flow is shown as zero in the dataset, limiting visibility on capex and fleet renewal timing, a critical driver for future cash obligations and earnings. Financing cash flow was a net inflow of ¥1,684 million, suggesting new borrowings or reduced repayments, consistent with capital structure management in a fleet-intensive business. Dividends were not paid (DPS ¥0; payout 0%), which conserves cash given leverage and visibility needs on capex. Overall, the company exhibits stable revenue and robust operating cash generation, but profitability softness, tight liquidity, and moderate leverage merit monitoring, especially given shipping cycle sensitivity. Data limitations around cost breakdown, investing cash flows, and share data constrain deeper granularity; analysis focuses on the disclosed non-zero items and derived ratios.

Profitability Analysis

ROE of 1.79% is driven by a net profit margin of 5.83%, asset turnover of 0.100x, and financial leverage of 3.08x, indicating low asset efficiency and moderate leverage are key ROE constraints. Operating margin compression is evident with operating income at ¥683 million on ¥7,586 million revenue, while EBITDA margin of 39.8% highlights heavy depreciation (¥2,335 million) typical of shipping. The spread between EBITDA and operating income (¥2,335 million) underscores meaningful fixed cost absorption and asset intensity; operating leverage can amplify earnings volatility if rates weaken. Ordinary income (¥521 million) below operating income reflects interest burden (¥238 million) and limited non-operating offsets. Interest coverage at 2.9x (operating income/interest expense) is adequate but not generous; a modest decline in operating profit would pressure coverage. Profitability quality is mixed: strong cash earnings capacity via depreciation supports EBITDA, but net income is depressed, and YoY net income fell sharply (−91.0%), likely affected by non-recurring items or tax timing. With gross profit and cost of sales not disclosed, margin mix analysis by voyage/charter type is not possible; conclusions rely on operating-level data. Overall, profitability rests on maintaining charter rates and utilization, with depreciation drag and interest costs limiting bottom-line flow-through.

Growth Assessment

Revenue growth of 0.7% YoY suggests stable demand and fleet deployment, albeit without pricing or volume acceleration. Operating income fell 26.8% YoY, indicating cost inflation (crewing, maintenance, insurance, bunker adjustments) or softer time charter equivalents. Net income declined 91.0% YoY, pointing to large non-operating factors or one-offs in the comparison base; underlying cash earnings appear healthier than accounting profit due to high depreciation and strong OCF. Asset turnover at 0.100x is low but typical for tanker owners; sustained growth requires either higher utilization/rates or a larger operating fleet, both sensitive to global oil trade and fleet supply. EBITDA margin near 40% is solid and should support steady operations if rates remain stable. With investing cash flows unreported, visibility on fleet growth/renewal is limited; newbuild or retrofit cycles will affect medium-term capacity and cost structure. Near-term outlook hinges on charter rate trends, regulatory costs (environmental compliance), and FX impacts on USD-linked revenues versus JPY costs and debt service. Sustainability of revenue appears reasonable given stable top line, but earnings growth will require margin recovery and disciplined cost control.

Financial Health

Total assets are ¥76.04 billion and total equity ¥24.66 billion, implying an equity ratio of roughly 32.4% (the equity ratio item itself was unreported). Total liabilities are ¥52.23 billion, yielding a debt-to-equity ratio of 2.12x, consistent with industry leverage but above many non-asset-heavy sectors. Liquidity is tight: current assets ¥10.65 billion vs current liabilities ¥10.91 billion produce a current ratio of 97.6% and working capital of −¥256.6 million. Quick ratio equals current ratio (97.6%), as inventories were unreported, suggesting limited buffer for short-term shocks. Interest expense is ¥238 million; with operating income of ¥683 million, coverage is 2.9x, acceptable but vulnerable to earnings volatility. The capital structure relies on debt to finance fleet assets; refinancing and interest rate exposure are key considerations given global rate levels. With positive financing cash inflow of ¥1.68 billion, the company appears to be actively managing maturities or funding needs, though the lack of cash balance disclosure limits assessment of immediate liquidity headroom.

Cash Flow Quality

Operating cash flow of ¥2,004 million versus net income of ¥442 million yields an OCF/NI ratio of 4.53x, indicating strong cash conversion driven by significant non-cash depreciation and likely favorable working capital movements. EBITDA of ¥3,018 million corroborates solid cash-generating capacity before interest and tax. Free cash flow is shown as zero due to unreported investing cash flows; thus, true FCF after maintenance capex cannot be determined from the dataset. Given shipping’s typical maintenance and dry-dock capex, actual FCF could be meaningfully lower than OCF; clarity on capex is essential for sustainability assessment. Working capital is slightly negative (−¥257 million) and current ratio is below 1.0, so cash generation timing is important to meet near-term obligations. Earnings quality appears reasonable as cash profits exceed accounting profits, but the gap also underscores the importance of depreciation and capex cycles in translating EBITDA to equity cash flows.

Dividend Sustainability

The company paid no dividends in the period (DPS ¥0; payout 0%), prioritizing balance sheet and funding flexibility. With OCF at ¥2.0 billion and interest expense at ¥0.24 billion, internal cash before capex appears adequate; however, investing cash flows were unreported and FCF is shown as zero, preventing a reliable coverage analysis. Given leverage of 2.12x D/E and interest coverage of 2.9x, preserving liquidity is prudent until capex visibility (fleet maintenance/renewal and regulatory upgrades) is clearer. Future dividend capacity will depend on sustaining EBITDA margins near 40%, stabilizing operating income, and capex intensity. Policy-wise, the current stance appears conservative and consistent with shipping cycle uncertainty; resumption or increase would likely follow improved earnings visibility and clearer FCF after maintenance capex.

Risk Assessment

Business Risks:

• Charter rate and utilization volatility tied to global oil trade and fleet supply-demand balance
• Bunker cost pass-through and fuel price volatility affecting voyage economics
• Regulatory and environmental compliance costs (e.g., emissions, retrofits) impacting capex and opex
• Counterparty and credit risk with charterers in cyclical markets
• FX exposure from USD-linked revenues/assets versus JPY costs/debt
• Operational risks including accidents, maintenance downtime, and dry-docking schedules

Financial Risks:

• Tight liquidity with current ratio at 97.6% and negative working capital of ¥257 million
• Moderate interest coverage at 2.9x sensitive to earnings declines
• Leverage of 2.12x D/E increasing refinancing and interest rate risk
• Potentially significant maintenance and renewal capex not disclosed in the period
• Earnings volatility from depreciation-heavy asset base and potential impairment risk if market weakens

Key Concerns:

• Unreported investing cash flows obscure true free cash flow and capex requirements
• Sharp YoY decline in net income (−91.0%), suggesting one-off effects or non-operating headwinds
• Below-1.0 current ratio indicates limited short-term cushion
• Dependence on debt financing with interest expense of ¥238 million and coverage at 2.9x

Investment Implications

Key Takeaways:

• Top line stable (+0.7% YoY) but operating income contracted (−26.8% YoY), pressuring ROE to 1.79%
• EBITDA margin strong at 39.8%, supported by high depreciation (¥2.34 billion)
• OCF robust at ¥2.00 billion (4.5x net income), indicating solid cash profits
• Leverage meaningful (D/E 2.12x) with interest coverage of 2.9x; liquidity tight (current ratio 97.6%)
• Capex visibility limited as investing cash flows were unreported; true FCF unclear
• Dividend suspended (DPS ¥0), consistent with preserving cash amid leverage and capex needs

Metrics to Watch:

• Time charter equivalent rates and fleet utilization trends
• Operating income and EBITDA progression versus interest expense (coverage ratio)
• Capex disclosures (maintenance/dry-dock and newbuild commitments) and resulting FCF
• Liquidity metrics (current ratio, working capital movements, cash balance)
• Leverage trajectory (net debt/EBITDA if available) and refinancing schedule
• FX exposure management and bunker adjustment mechanisms

Relative Positioning: Within Japan-listed tanker peers, the company exhibits typical asset intensity and leverage, solid EBITDA margins, and adequate but not ample interest coverage; short-term liquidity is tighter than ideal, and dividend stance is conservative pending clearer capex and cash flow 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
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