SG HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Operating Income: ¥38.55B
• Net Income: ¥25.46B
• EPS: ¥38.44

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 Integrated Analysis

Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)

Executive Summary

SG Holdings (TSE: 9143) reported FY2026 Q2 consolidated results under JGAAP with operating income of ¥38.5bn, down 1.5% YoY, and net income of ¥23.2bn, down 8.8% YoY. Revenue was not disclosed in the dataset, so margin-based KPIs tied to sales cannot be validated; however, cost discipline appears intact given modest operating profit slippage. Ordinary income of ¥38.1bn is close to operating income, indicating limited non-operating gains/losses and manageable financial costs. Depreciation and amortization were ¥17.9bn, bringing EBITDA to ¥56.4bn and supporting a strong interest coverage of 33x on ¥1.17bn interest expense. Cash conversion is solid: operating cash flow (OCF) of ¥52.0bn exceeds net profit by 2.24x, implying healthy earnings quality and positive working capital dynamics or non-cash add-backs beyond D&A. Liquidity is robust with a current ratio of 166.5% and working capital of ¥148.0bn; inventories are minimal at ¥0.6bn, consistent with an asset-light logistics mix. The balance sheet shows total assets of ¥1.17tn and reported equity of ¥532.0bn, implying financial leverage (assets/equity) of 2.21x; a reported D/E of 0.86x and strong interest cover point to conservative solvency. The effective tax estimate derived from disclosed figures is approximately 36.9% for the period (¥13.6bn tax on ¥36.8bn pre-tax profit). Investing cash flows and revenue were not disclosed in the XBRL snapshot, and cash & equivalents were also not provided; these omissions limit granular margin and free cash flow analysis. Financing cash flow was a net inflow of ¥42.6bn, suggesting incremental funding or reduced capital returns in the period, though the components are not disclosed. Dividend data show DPS and payout as zero in this dataset, which likely reflects non-disclosure at Q2 rather than a policy change; therefore, payout assessment must rely on capacity rather than declared distributions. Operationally, the modest YoY contraction in operating and net income is consistent with industry-wide cost pressures (labor and fuel) and parcel mix normalization, offset by ongoing price/mix initiatives. The company’s strong cash generation and liquidity provide buffers against near-term macro and cost headwinds. With revenue undisclosed, we cannot perform full DuPont margin diagnostics; however, profitability resilience at the operating level, high cash conversion, and ample liquidity indicate stable underlying fundamentals. Overall, the period reflects slight profit headwinds but healthy balance sheet and cash flow strength, with data limitations around sales, capex, and cash balances being the main constraints to deeper analysis.

From Earnings Presentation: For Q2 of fiscal year ending March 2026, operating revenue was ¥782.5 billion (-1.4% vs. plan), and operating profit was ¥38.5 billion (+4.2% vs. plan), with revenue underperforming but profit exceeding expectations. The Delivery business achieved higher-than-expected parcel volume growth through cross-border EC and cold-chain logistics, turning positive on a cumulative 2Q basis. The Logistics business saw Meito/Hutech achieve proper pricing and productivity improvements, with operating profit exceeding plan. In Global Logistics, however, air and ocean freight rates softened due to U.S. tariff impacts from mid-August onward, causing Expolanka's results to fall short of plan, while Morrison performed as initially expected. Full-year operating revenue guidance was revised down to ¥1.635 trillion (¥-18 billion from previous), operating profit maintained at ¥92 billion, and net income attributable to parent company raised to ¥59 billion (+¥2 billion) incorporating asset efficiency measures. ROE forecast was raised to 10.5% (+0.2pt). Regarding the medium-term management plan, Delivery and Logistics are solid, while Global Logistics faces short-term market challenges but maintains strategic direction.

Financial Analysis

Profitability

• ROE decomposition: Full DuPont analysis is constrained by the absence of revenue and reported ROE. Using available data, financial leverage (Assets/Equity) is 2.21x. Net margin cannot be computed from sales, but net income on assets (period ROA) is ~2.0% (¥23.242bn/¥1,173.429bn); ROE for the half-year would mechanically be ~4.4% if simply NI/Equity (¥23.242bn/¥531.968bn), noting intra-period averaging is unavailable and annualization is not applied.
• Margin quality and operating performance: Operating income declined 1.5% YoY to ¥38.546bn; net income declined 8.8% to ¥23.242bn, suggesting pressure below the operating line (higher tax or other items). EBITDA of ¥56.401bn (OI + D&A) indicates healthy operating cash earnings. Ordinary income (¥38.12bn) close to operating income implies limited non-operating distortion.
• Cost structure and operating leverage: The modest decline in operating income suggests manageable operating leverage in the face of cost inflation. D&A of ¥17.9bn underscores ongoing asset base utilization; with inventories at only ¥0.6bn, fixed/contracted costs (labor, transportation, facilities) likely drive leverage. Absent revenue, we cannot quantify incremental margins, but the small YoY OI contraction indicates controlled cost pass-through.
• Interest burden: Interest expense is ¥1.17bn; interest coverage is a strong 33x, implying low financial drag on profitability.
• Taxation: Estimated effective tax rate is ~36.9% (¥13.591bn tax on ~¥36.833bn pre-tax), higher than the decline in operating income, contributing to the larger YoY decline in net income.

Growth

• Revenue sustainability: Revenue is not disclosed; consequently, volume/price contributions and sales growth cannot be quantified. Industry context points to stable e-commerce parcel flows with pricing gains offsetting cost inflation, but this cannot be validated here.
• Profit trajectory: Operating income fell 1.5% YoY and net income fell 8.8% YoY, indicating slight pressure from taxes/financials or mix. Ordinary income tracking operating income suggests core business trends are the main driver rather than non-operating swings.
• Profit quality: EBITDA of ¥56.4bn and OCF/NI of 2.24x indicate robust cash-backed earnings. The OCF uplift beyond NI and D&A (~¥10.9bn) points to favorable working capital or other non-cash items.
• Outlook framing (qualitative): Key determinants include wage inflation, transport/fuel costs, parcel mix, and price pass-through. Given the strong liquidity and cash conversion, the company appears positioned to navigate near-term cost headwinds, though the lack of revenue data tempers visibility on top-line momentum.

Financial Health

• Liquidity: Current assets ¥370.6bn vs current liabilities ¥222.6bn yields a current ratio of 166.5% and quick ratio of 166.2%, indicating strong near-term coverage. Working capital stands at ¥148.0bn. Cash & equivalents were not disclosed.
• Solvency and capital structure: Financial leverage of 2.21x (Assets/Equity) and D/E of 0.86x indicate moderate leverage. Interest coverage at 33x underscores ample debt-servicing capacity. Total assets are ¥1.17tn and reported equity is ¥532.0bn.
• Balance sheet notes: Reported total liabilities (¥456.0bn) differ from Assets minus Equity, suggesting classification or disclosure differences in this dataset; leverage and coverage ratios provided are used as the primary solvency indicators.

Cash Flow

• Earnings quality: OCF of ¥51.991bn exceeds net income (¥23.242bn) by 2.24x, a strong sign of cash-backed profits. The delta beyond D&A (~¥10.9bn) implies positive working capital contribution or other non-cash items.
• Free cash flow: Capex/investing cash flows were not disclosed; the displayed FCF of zero should not be interpreted as actual zero. Without capex data, FCF cannot be reliably computed. Nonetheless, EBITDA and OCF levels suggest capacity to fund routine investments.
• Working capital: Inventories are minimal at ¥0.629bn, typical for a logistics operator. The large working capital base and strong current ratios indicate disciplined receivables/payables management in the period.

Dividend Sustainability

• Payout ratio assessment: DPS and payout ratio are shown as zero in this dataset, likely reflecting non-disclosure at Q2 rather than an absence of dividends. Therefore, a formal payout ratio cannot be derived.
• FCF coverage: Not assessable due to missing investing/capex data; the displayed 0.00x should not be interpreted as actual coverage. On capacity, OCF of ¥52.0bn and modest interest burden suggest room for distributions, subject to capex and policy.
• Policy outlook: With incomplete disclosures at Q2, we cannot comment on changes to dividend policy; sustainability should be reassessed at FY results when full-year cash flows and declared dividends are available.

Business Outlook

For the full year, Delivery business revised parcel volume upward to 1.34 billion units (+20 million from previous) by capturing growth markets of cross-border EC and cold-chain logistics, and revised average unit price downward to ¥660 (¥-14) due to increase in small parcels, but revised operating profit upward by +¥0.5 billion to ¥70.5 billion through TMS expansion (¥138 billion, +¥3 billion). Logistics revised operating profit upward by +¥0.5 billion to ¥6.0 billion through proper pricing and productivity improvements at Meito/Hutech and domestic 3PL. Global Logistics revised operating revenue and profit downward to ¥3.5 billion (¥-1 billion) as U.S. tariff impacts materialized during Expolanka's peak period, but maintains Morrison's initial forecast. Exchange rate assumption revised to $1=¥145 (from ¥140 previously). Expect improved cargo movement for Christmas season in October-November, though may not reach typical seasonal peaks, with continued uncertainty from U.S.-China relations and tariff trends. Medium to long-term, aims to improve Expolanka's productivity using Morrison's IT infrastructure and accelerate synergies through Meito/Hutech capacity expansion.

Management Guidance

Management evaluates the positive turn in Delivery parcel volume and progress in cross-border EC capture, maintaining the long-term policy of "continuing to receive appropriate rates commensurate with costs based on parcel volume growth, and improving Delivery profitability through TMS expansion." For cold-chain logistics, specified "capacity expansion to accelerate cold-chain logistics synergies" as a future initiative. For Global Logistics, positioned as "recovery considering current business environment and medium to long-term growth," accelerating short-term cost control measures and medium to long-term initiatives for productivity and business scale expansion. Leveraging Morrison's advanced IT infrastructure to redesign Expolanka's business processes, explaining "while preserving EFL's strengths, achieve early productivity improvements and connect to medium to long-term growth." Incorporated asset efficiency measures for capital efficiency improvement in second half, setting ROE target of 10.5% (+0.2pt). Organizationally, plans to rebuild three lines of defense structure to enhance group governance, establishing Risk Management Office and Governance Control Department to improve effectiveness.

Strategic Initiatives

• Delivery: Continue capturing growth markets centered on cross-border EC, cold-chain logistics, and real commerce. Increased real commerce locations by approximately 1,900 (YoY difference), expanding services focused on hotels and airports
• Delivery: Established SD Trans Line (August 2025) and business succession of trunk transport partner company (November) to maintain and strengthen sustainable transportation infrastructure. Plan to provide comprehensive support program during fiscal year ending March 2027
• Delivery: Expand revenue base by acquiring regular contracts and expanding cold-chain TMS. Sagawa Express established dedicated contact points at Meito/Hutech (sequentially from July 2025), enabling nationwide response to cold-chain logistics needs
• Logistics: Promote seven initiatives at Meito/Hutech (cold-chain EC, cold-chain TMS, cold-chain joint delivery, shared resource utilization, BtoB lot delivery, overseas cold-chain logistics, existing customer expansion). 2Q cumulative synergy effect of +¥0.89 billion in operating profit
• Logistics: Cold-chain EC and cold-chain TMS progressing favorably. Consider expanding logistics capacity such as warehouses and vehicles based on investment returns, aiming for further growth through synergy realization
• Global Logistics: Improve Expolanka's labor productivity through Morrison's IT infrastructure integration. Advance standardization and API integration to achieve industry-leading productivity
• Global Logistics: Create synergies through fusion of Morrison and Expolanka know-how and resources. Generated operating profit of USD1,100k+USD10k+USD126k etc. in first half, centered on procurement strengthening, resource utilization efficiency, and new area development
• Global Logistics: Accelerate short-term cost control measures and medium to long-term initiatives for productivity and business scale expansion at Expolanka
• Governance: Rebuild three lines of defense structure (effective October 1, 2025). Clarify roles of business execution (1st line), indirect management (2nd line: Risk Management Office), and internal audit (3rd line: Governance Control Department) to enhance effectiveness of group-wide governance and risk management

Risk Assessment

Business Risks:

• Cost inflation in labor and fuel potentially squeezing operating margins
• Parcel mix normalization post-pandemic affecting yield
• Competitive pricing dynamics in Japan’s parcel and logistics market
• Regulatory and labor environment pressures (workstyle reforms, delivery density)
• Macroeconomic softness impacting B2B shipment volumes

Financial Risks:

• Potential increase in leverage if financing inflows (¥42.6bn) reflect new debt
• Revenue non-disclosure limits visibility into margin resilience
• Tax rate volatility (estimated ~36.9%) influencing net income sensitivity
• Refinancing risk modest but present despite strong coverage

Key Concerns:

• Lack of revenue and investing cash flow disclosure limits margin and FCF analysis
• YoY decline in net income (-8.8%) outpacing operating income (-1.5%), indicating pressure below operating line
• Positive financing cash flow suggests capital structure changes not yet detailed

Risk Factors from Presentation:

• Overall transport demand decline and freight rate deterioration due to U.S. tariff impacts, etc. Uncertainty that U.S.-China relations and tariff trends will continue to affect transport demand and freight rates
• Possibility that cargo movement for Christmas season in October-November may not reach typical seasonal peaks
• Rising external costs such as labor and fuel costs. Cost increases such as commission rate hikes from beginning of fiscal year (Delivery)
• Downward pressure on average unit price due to increase in small parcels such as cross-border EC. Size mix fluctuations
• Need for careful response in price negotiations with customers under stagnant real consumption, premised on maintaining medium to long-term business relationships
• Timing of capital investment execution (automation, vehicle renewal, facility reorganization) and lag in effect realization
• Operational disruptions and damage to image/credibility due to natural disasters, supply chain disruptions, rumors, etc.
• Rising recruitment and operation costs due to tight labor supply-demand
• New risks from business scope expansion and M&A (integration costs, system integration, cultural friction, etc.)

Investment Implications

Key Takeaways:

• Core profitability resilient with only a 1.5% YoY decline in operating income
• Strong cash conversion (OCF/NI 2.24x) supports earnings quality
• Robust liquidity (current ratio 166.5%) and high interest coverage (33x)
• Moderate leverage (Assets/Equity 2.21x; D/E 0.86x)
• Data gaps (revenue, capex, cash) constrain full margin and FCF diagnostics
• Tax rate near 37% contributed to a larger YoY decline in net income

Metrics to Watch:

• Revenue growth and yield per parcel (once disclosed)
• Capex and investing cash flows to derive true FCF
• Unit labor and fuel costs vs. price pass-through
• Working capital movements (receivables days, payables days)
• Effective tax rate and non-operating items
• Net debt and interest costs following the ¥42.6bn financing inflow

Relative Positioning: Within Japan’s listed logistics/parcel peers, SG Holdings appears defensively positioned on liquidity and coverage with moderate leverage and solid cash conversion; however, the absence of revenue and capex data this quarter limits confidence in relative margin and FCF comparisons.

Supplementary Insights (Key Highlights)

• Parcel volume turned positive from 2Q as initially planned (2Q cumulative 101.8%), exceeding expectations. Cross-border EC handling volume +25% YoY, performing strongly
• Average unit price was ¥658 (¥-14 vs. plan) below expectations due to increase in small parcels like cross-border EC, but TMS revenue was ¥66.7 billion (+10.4% YoY), performing well. Overall Delivery profitability maintained
• Synergy creation from Meito/Hutech's cold-chain TMS and cold-chain EC progressed ahead, with 2Q cumulative operating profit of +¥3.8 billion (including goodwill amortization +¥2.2 billion and royalty expenses +¥0.4 billion)
• Morrison progressed as initially expected, with 2Q cumulative operating profit of +¥1.5 billion (including goodwill amortization +¥1.3 billion). Air volume +3.9%, ocean volume +0.9%, both solid
• Expolanka experienced declines with air volume -11.6% and ocean volume -1.6% due to U.S. tariff impacts from mid-August. Combined with freight rate declines, operating profit was -¥1.4 billion (-71.5% YoY)
• Postponed the planned 2Q transfer of stake in Shanghai Hongdi Logistics Technology to second half (changing timing of extraordinary loss recognition to 3Q), resulting in upward revision to net income forecast
• Revised full-year parcel volume forecast to 1.34 billion units (+20 million), average unit price to ¥660 (¥-14), and TMS revenue to ¥138 billion (+¥3 billion). Logistics operating profit also revised up +¥0.5 billion
• ROE forecast raised to 10.5% (+0.2pt from previous) through asset efficiency measures. Dividend: interim ¥26, year-end ¥27, total ¥53 (+¥1 YoY)
• To enhance group governance, organizational restructuring of SG Holdings effective October 1, 2025, clarifying three lines of defense roles
• As part of maintaining and strengthening transportation infrastructure, SD Trans Line acquired shares in a trunk transport partner company on November 7 for business succession (impact on consolidated results is minimal)

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