MITSUI-SOKO HOLDINGS Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥147.01B
• Operating Income: ¥11.63B
• Net Income: ¥7.39B
• EPS: ¥74.69

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

Verdict: Solid top-line-to-operating performance with robust cash conversion, but bottom-line softness and sub-target ROIC temper the outlook. Revenue reached 1,470.09 (100M JPY) and operating income rose 22.9% YoY to 116.28, indicating healthy operating momentum. Ordinary income increased 21.0% YoY to 115.01, supported by non-operating income of 8.83 against 10.10 in non-operating expenses. Despite stronger operations, net income declined 4.4% YoY to 55.89, pointing to a widening gap between operating and final profits due to non-operating items, taxes, and possibly minority interests or special losses. Operating margin is approximately 7.9% (116.28/1,470.09), while net margin stands at 3.8%, implying a margin compression of about 410 bps from operating to net level. EBITDA was 171.21 with an EBITDA margin of 11.6%, reinforcing operational resilience and cost control. Cash flow quality is notably strong with operating cash flow of 160.81, translating to OCF/NI of 2.88x. Free cash flow (proxied as OCF minus capex) is positive at about 106.14, providing balance sheet flexibility despite dividend data gaps. Liquidity remains healthy: current ratio 160.3% and quick ratio 158.4% with cash and deposits of 437.52 against modest short-term loans of 5.50. Leverage is moderate with D/E at 1.14x and debt/EBITDA at 3.29x, supported by interest coverage of 24.74x. ROE is 4.1% per DuPont (NPM 3.8%, asset turnover 0.50x, leverage 2.14x), reflecting conservative leverage and modest profitability on a relatively asset-heavy base. ROIC at 5.4% is below the 7–8% management target often cited across the logistics sector, indicating room for further asset efficiency and pricing improvements. Effective tax rate is 31.0%, which, along with non-operating headwinds, weighed on the bottom line. Dividend payout ratio is shown as 195.9% (calculated) but dividend amounts are unreported, so sustainability cannot be confirmed and the figure likely embeds estimates; if accurate, it is unsustainably high versus earnings. Forward-looking, strong OCF and liquidity position the company to continue investing in facilities and digitalization, but delivering ROIC uplift and stabilizing below-the-line items will be critical to re-accelerate EPS growth.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.1% = Net profit margin (3.8%) × Asset turnover (0.50x) × Financial leverage (2.14x). The largest drag within the components is the modest net profit margin at 3.8% relative to a decent operating margin (~7.9%), signaling leakage below operating profit (non-operating costs, taxes, and potential minority interests). Business context: non-operating expenses (10.10) exceeded non-operating income (8.83), and the effective tax rate (31.0%) further reduced net income despite a strong 22.9% YoY uplift in operating income. Sustainability: operating-level strength looks sustainable given EBITDA growth and coverage metrics, but the below-the-line pressure could persist absent actions to reduce financial and equity-method volatility or optimize tax/structure. Operating leverage appears positive (OI +22.9% YoY with revenue base stable to growing), but we cannot quantify SG&A intensity due to lack of gross profit data; absolute SG&A was 116.20. Watchouts: net income contracted 4.4% YoY while OI and ordinary income grew, implying rising non-operating burden and/or minority interests; maintaining cost discipline is key to prevent SG&A growth from outpacing revenue over time.

Growth Assessment

Revenue scale is large at 1,470.09, but YoY revenue growth is not provided, limiting conclusions on demand trajectories by segment (contract logistics, forwarding, port operations). Operating income growth of 22.9% YoY and ordinary income growth of 21.0% suggest improved mix, pricing, or utilization and effective cost control. Net income decline of 4.4% YoY reflects bottom-line headwinds (non-operating costs, tax rate, and possibly special items or minority interests). EBITDA margin at 11.6% and OPM around 7.9% indicate resilient profitability for an asset-heavy logistics platform. With ROIC at 5.4%, returns remain below the 7–8% target range, implying further room to optimize asset turnover and pricing. Outlook hinges on sustaining volume/mix and mitigating below-the-line drags; continued capex (54.67) appears measured relative to OCF, supporting organic growth and facility modernization. Absent clear YoY revenue and segment detail, we assume stable to modest growth with operational efficiency as the main earnings driver near term.

Financial Health

Liquidity is solid: current ratio 160.3% and quick ratio 158.4% comfortably exceed benchmarks, and cash (437.52) far exceeds short-term loans (5.50). No warning on current ratio (<1.0) or D/E (>2.0); D/E is 1.14x, a moderate leverage level for logistics. Total assets are 2,942.69 against total liabilities of 1,570.41 and equity of 1,372.27, indicating a balanced capital structure. Long-term loans of 558.52 dominate the debt stack, aligning funding tenor with long-lived warehouse and infrastructure assets and limiting maturity mismatch risk; near-term refinancing pressure appears low. Interest coverage is strong at 24.74x, providing cushion against rate increases. Intangibles total 132.22 and goodwill 22.73, modest relative to equity, but still imply some impairment risk in a downturn. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF/Net income is 2.88x, indicating high earnings quality with strong conversion to cash, likely supported by disciplined working capital. Using OCF less capex, FCF is approximately 106.14, which is healthy and suggests capacity to fund maintenance capex and selective growth projects. Working capital looks conservative with 353.68 of positive working capital; inventories are small (11.07), consistent with a service-centric logistics portfolio, reducing obsolescence risk. No signs of working capital manipulation can be inferred due to limited disclosure on receivables/payables; however, the strong OCF relative to NI reduces concern. Financing CF is -19.75, indicating net repayment or dividends/interest outflows, consistent with deleveraging and/or shareholder returns.

Dividend Sustainability

The calculated payout ratio is shown as 195.9%, which would be unsustainably high relative to earnings if accurate. However, dividend amounts are unreported, and we cannot reconcile this figure to cash distributions; data limitations apply. On a cash basis, the estimated FCF of ~106.14 could cover moderate dividends, but a payout near 200% of NI would likely require drawing on past retained earnings or balance sheet capacity, which is not a prudent long-term policy. Retained earnings stand at 817.93, providing theoretical cover, but sustainability depends on aligning dividends with normalized FCF and earnings. Policy outlook: expect management to prioritize balance between stable dividends and ROIC-driven reinvestment, especially given ROIC at 5.4% below target.

Risk Assessment

Business Risks:

• Volume sensitivity to macro cycles affecting manufacturing, consumer demand, and trade flows.
• Cost inflation risk (labor, utilities, facility maintenance) potentially pressuring margins.
• Contract repricing and customer concentration risk typical in contract logistics.
• Operational disruption risks in ports/warehouses (natural disasters, labor shortages).

Financial Risks:

• Sub-target ROIC (5.4%) indicating pressure on capital efficiency and returns.
• Exposure to interest rate increases despite strong coverage, given LT loans of 558.52.
• Potential impairment risk in intangibles/goodwill (132.22 + 22.73) under downturn.
• Below-the-line volatility (non-operating expenses > non-operating income) weighing on net profit.

Key Concerns:

• Net income declined 4.4% YoY despite stronger operating profit, highlighting leakage below EBIT.
• Dividend payout ratio shown at 195.9% (calculated) conflicts with unreported dividend amounts, creating uncertainty about policy sustainability.
• ROE at 4.1% remains modest given asset intensity; further improvement needed to meet investor return expectations.
• Limited disclosure on gross profit and segment drivers constrains visibility into margin sustainability.

Investment Implications

Key Takeaways:

• Operating momentum is solid (OI +22.9% YoY) with healthy EBITDA margin of 11.6%.
• Cash conversion is strong (OCF/NI 2.88x) and supports positive FCF (~106.14).
• Balance sheet is sound: current ratio 160%, D/E 1.14x, interest coverage 24.7x.
• Bottom-line softness (-4.4% YoY NI) reflects non-operating and tax headwinds.
• ROIC at 5.4% underscores the need for asset efficiency and pricing initiatives.

Metrics to Watch:

• Net margin vs operating margin gap (currently ~410 bps).
• Working capital trends and OCF sustainability.
• Capex intensity vs FCF and impact on ROIC.
• Interest expense trajectory and debt tenor/structure.
• Dividend communications and actual payout vs earnings/FCF.

Relative Positioning: Within Japanese logistics peers, Mitsui-Soko shows robust cash generation and conservative liquidity with moderate leverage, but trails best-in-class operators on ROIC and bottom-line consistency; execution on cost discipline and asset turnover improvements will be key to closing the gap.

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