FULUHASHI EPO CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.87B
• Operating Income: ¥504M
• Net Income: ¥445M
• EPS: ¥31.81

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

Furuhashi EPO (TSE: 92210) delivered solid top-line growth in FY2026 Q2, with revenue up 8.8% year over year to ¥4.873bn, indicating healthy demand and execution. Gross profit of ¥1.999bn implies a robust gross margin of 41.0%, supporting the view that pricing and mix remained favorable despite cost inflation. Operating income rose 13.6% YoY to ¥504m, outpacing sales growth and demonstrating positive operating leverage and disciplined cost control. Ordinary income was ¥498m, essentially aligned with operating profit, suggesting limited non-operating drag and manageable financing costs. Net income declined 17.2% YoY to ¥368m despite higher operating profit, pointing to tax timing, extraordinary items, or minority interest effects rather than core-operating weakness. Using reported income tax of ¥221m and net income of ¥368m, the implied effective tax rate is approximately 37–38%, which contrasts with the presented 0.0% metric and indicates a data artifact in the precompiled ratio. Cash generation was strong: operating cash flow (OCF) was ¥670m, 1.82x net income, signaling high earnings quality and supportive working capital dynamics in the period. EBITDA was ¥781m (16.0% margin), providing ample coverage over interest expense of ¥19.9m (interest coverage ~25x), which underscores low near-term financial stress. The balance sheet shows total assets of ¥12.56bn and total equity of ¥5.82bn, implying an equity ratio around 46% and financial leverage (assets/equity) of 2.16x; the displayed equity ratio of 0% is an unreported placeholder. Liquidity indicators are a watch point: current ratio at 74.7% and quick ratio at 72.9% reflect negative working capital of approximately ¥875m, which may be structural to the business model but warrants monitoring. Asset turnover at 0.388 suggests an asset-intensive model; the company converts a modest portion of its asset base into sales but compensates with healthy margins. DuPont decomposition yields an ROE of 6.33% (Net margin 7.55% x Asset turnover 0.388 x Leverage 2.16), consistent with the reported figure, indicating balanced contributions from profitability and leverage, though turnover is a limiting factor. Dividend data show DPS and payout ratio as 0, likely unreported; EPS was ¥31.81, confirming positive earnings capacity even as YoY net profit declined. Investing and cash balances are shown as zero placeholders, so free cash flow (FCF) cannot be reliably derived despite strong OCF. Overall, the quarter exhibits resilient core profitability and solid cash conversion, offset by weaker bottom-line YoY due to non-operating/tax effects and tighter liquidity metrics. Data limitations (unreported cash, investing flows, share counts, and equity ratio) temper precision but do not change the positive read on core operations.

Profitability Analysis

ROE is 6.33%, driven by a 7.55% net margin, 0.388x asset turnover, and 2.16x financial leverage. Gross margin of 41.0% indicates strong pricing power and/or favorable input costs; operating margin is ~10.3% (¥504m/¥4,873m), showing good cost discipline. EBITDA margin of 16.0% provides a cushion for fixed costs and supports robust interest coverage (25.3x). Year over year, revenue grew 8.8% while operating income grew 13.6%, signaling positive operating leverage; fixed-cost absorption improved. Ordinary income closely tracks operating income (¥498m vs. ¥504m), confirming minimal non-operating drag. Net income declined 17.2% YoY despite stronger operations, indicating headwinds below operating line (tax/extraordinary/minority). Margin quality appears high given OCF/NI of 1.82x, suggesting low accrual intensity and supportive working-capital movements. Asset turnover at 0.388 is modest, consistent with an asset-heavy or project-based model; sustaining ROE improvement will likely require either further margin expansion or better turnover. Interest expense is only ¥19.9m, a small fraction of EBITDA, limiting financial burden. Overall profitability is healthy, with the key swing factor being non-operating items and tax, not core operations.

Growth Assessment

Revenue growth of 8.8% YoY demonstrates sustained demand across the company’s core activities. Operating income growth of 13.6% outpacing sales suggests efficiency gains and operating leverage. The decline in net income (-17.2% YoY) is likely due to higher taxes (implied ~37–38% ETR) and/or non-recurring items rather than a deterioration in business fundamentals. Gross margin at 41.0% and EBITDA margin at 16.0% provide headroom to navigate cost volatility, supporting sustainability of profits if volumes hold. Ordinary margin (~10.2%) aligns with operating margin, indicating limited reliance on non-operating income to drive growth. Asset turnover (0.388) constrains top-line scalability relative to asset base; growth will benefit from incremental utilization and disciplined capex. With strong OCF (¥670m, 1.82x NI), the company has internally generated funding capacity for growth, though actual capex plans are not disclosed in this dataset. Outlook hinges on maintaining pricing, mix, and utilization while managing tax/one-offs; if these normalize, EPS growth should better track operating profit growth. Given data gaps (no investing cash flow detail, no backlog/segment data), visibility on growth drivers and capital deployment is limited.

Financial Health

Total assets are ¥12.56bn and total equity is ¥5.82bn, implying an equity ratio near 46% (not the 0% shown) and leverage (Assets/Equity) of 2.16x. Total liabilities are ¥6.58bn, and the reported debt-to-equity ratio is 1.13x, indicating moderate leverage. Liquidity metrics are tight: current ratio 74.7% and quick ratio 72.9%, with negative working capital of about ¥875m. Inventories are low at ¥60m relative to current liabilities, suggesting a service/project orientation or rapid turnover; however, the low current ratio elevates short-term refinancing/rollover risk. Interest coverage is strong at 25.3x, mitigating near-term solvency concerns. Cash and cash equivalents are shown as 0 (unreported), preventing precise short-term liquidity assessment. Overall, the capital structure appears balanced with manageable leverage, but liquidity discipline and working-capital management are key watch points.

Cash Flow Quality

Operating cash flow of ¥669.7m exceeds net income of ¥368.0m (OCF/NI 1.82x), indicating strong earnings quality and favorable working-capital movements or non-cash charges (D&A ¥277.5m). EBITDA of ¥781.5m comfortably covers interest expense (¥19.9m), supporting cash interest serviceability. Investing cash flow is unreported (0 placeholder), so free cash flow cannot be reliably calculated; the displayed FCF of 0 should not be interpreted as an actual result. Without capex detail, we cannot separate maintenance vs. growth capex, limiting conclusions on sustainable FCF. Working capital appears a net user structurally (negative working capital on the balance sheet), but within the period, cash conversion was strong given OCF outperformance versus earnings. Overall, cash flow quality is good, but full FCF assessment awaits disclosure of investing flows and capex.

Dividend Sustainability

Dividend data show DPS 0 and payout 0%, which are likely unreported placeholders given positive EPS of ¥31.81. In the absence of confirmed dividends and capex, FCF coverage of dividends cannot be assessed. On fundamentals, OCF strength (¥670m) and moderate leverage would generally support a dividend if the company elects to pay; however, tight liquidity ratios and potential capex for asset-heavy operations may constrain payouts. Policy outlook cannot be inferred from this dataset; investors should reference the company’s dividend policy and guidance. Until actual DPS and capex are disclosed, payout sustainability cannot be determined.

Risk Assessment

Business Risks:

• Margin sensitivity to input cost inflation and pricing discipline despite high gross margin
• Asset-intensity and low asset turnover (0.388) limiting scalability and returns
• Potential project timing/seasonality affecting quarterly earnings and working capital
• Regulatory and environmental policy changes impacting operating requirements and capex needs
• Customer concentration or contract risk (not disclosed) that could affect revenue visibility

Financial Risks:

• Tight liquidity: current ratio 74.7% and negative working capital of ~¥875m
• Data gaps on cash and investing flows limit visibility on FCF and capex funding
• Refinancing and interest rate risk, albeit mitigated by 25.3x interest coverage
• Tax rate volatility; implied ~37–38% in this period pressured net income
• Potential for higher capex given asset intensity, which could elevate leverage if debt-funded

Key Concerns:

• Net income down 17.2% YoY despite stronger operating profit, implying below-the-line headwinds
• Unreported cash and investing CF obscure true FCF and liquidity buffer
• Sustaining growth with low asset turnover may require incremental capex and careful capital allocation

Investment Implications

Key Takeaways:

• Core operations are strong: revenue +8.8% YoY, operating income +13.6% YoY, gross margin 41.0%
• High earnings quality: OCF/NI 1.82x and EBITDA margin 16.0%
• ROE 6.33% balanced by good margins and moderate leverage but constrained by low asset turnover
• Liquidity is the primary watch area: current ratio 74.7% and negative working capital
• Net income decline driven by tax/other below-the-line items rather than operating weakness

Metrics to Watch:

• Operating margin and EBITDA margin trajectory versus input cost trends
• OCF/NI ratio and working-capital days (AR, AP, inventory) when disclosed
• Capex levels and investing cash flows to ascertain sustainable FCF
• Effective tax rate normalization and impact on EPS
• Leverage (D/E) and interest coverage amid rate environment
• Equity ratio (calculated ~46%) and any changes from asset growth or financing

Relative Positioning: Within Japanese environmental/services or materials recycling peers, Furuhashi EPO exhibits stronger-than-average gross and operating margins with moderate leverage, but lower asset turnover and tighter liquidity, implying a quality earnings profile supported by cash conversion but with higher sensitivity to working-capital management and capex planning.

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