RINKO CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.86B
• Operating Income: ¥180M
• Net Income: ¥391M
• EPS: ¥150.42

Income Statement

Balance Sheet

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

FY2026 Q2 was a mixed quarter with solid operating progress but headline profit inflated by one-off gains. Revenue rose 3.2% YoY to 68.63, while operating income grew 21.7% YoY to 1.80, indicating cost discipline and some operating leverage. Gross profit came in at 8.57 for a gross margin of 12.5%. SG&A was 6.77, implying an SG&A ratio of 9.9%, which compressed versus revenue growth. Operating margin improved to 2.6%, up roughly 40 bps from an estimated 2.2% in the prior-year period. Ordinary income increased 15.5% YoY to 2.52, implying an ordinary margin of 3.7% and an estimated ~40 bps YoY expansion. Net income surged 120.1% YoY to 3.90 (net margin 5.7%), but this was largely driven by non-operating and special factors, not core operations. Non-operating income was sizable at 1.30, dominated by dividend income of 1.21, while non-operating expenses were 0.59 (interest expense 0.53). Profit before tax of 4.54 is materially above ordinary income (2.52), implying around 2.0 of special/extraordinary gains that amplified bottom-line growth. The effective tax rate of 13.8% further supported net profit. On the balance sheet, leverage is moderate (assets/equity 2.14x), but liquidity is weak with a current ratio of 0.56 and quick ratio of 0.53, and working capital of -33.72. Interest coverage of 3.42x is adequate but below strong benchmarks (5x). ROE is 2.1% and ROIC is 0.7%, both low, reflecting modest core profitability and heavy asset base. Cash flow data is unreported, limiting our ability to validate earnings quality or free cash flow coverage for dividends. The payout ratio is calculated at 27.7%, likely sustainable in normal conditions, but liquidity constraints and unknown OCF are caution flags. Looking forward, sustaining operating margin gains while reducing reliance on non-operating/one-off items will be key for quality improvement. Rebuilding short-term liquidity, improving ROIC toward cost of capital, and managing interest costs will heavily influence medium-term valuation and financial resilience.

Profitability Analysis

ROE (2.1%) = Net Profit Margin (5.7%) × Asset Turnover (0.174) × Financial Leverage (2.14x). The largest change YoY is in net profit margin, which expanded from roughly 2.7% to 5.7%, driven by sizable non-operating income (dividends) and approximately 2.0 of special gains lifting profit before tax, plus a low effective tax rate. Operating margin improved from an estimated 2.2% to 2.6% (~+40 bps), reflecting improved cost control relative to revenue growth, while asset turnover (0.174) remains low given a heavy noncurrent asset base. Financial leverage (2.14x) is stable and not the main driver of ROE changes. The margin uplift at the ordinary level appears partially sustainable if cost discipline holds, but the bottom-line surge is not, given its reliance on non-operating and special items. A potential concern is earnings mix: non-operating income (especially dividends) made a meaningful contribution to profitability, and interest costs (0.53) are material relative to operating income (1.80), capping operating leverage. We also note that SG&A growth appears contained versus revenue, but disclosure granularity is limited, and further wage/cost inflation could pressure margins.

Growth Assessment

Top-line growth of 3.2% YoY is modest and likely volume-mix driven in logistics/port operations, with limited pricing power evident in a gross margin of 12.5%. Operating income grew 21.7% YoY, outpacing revenue, signaling some cost leverage and/or mix improvement. Ordinary income growth (+15.5% YoY) benefitted from non-operating income inflows (notably dividend income of 1.21). Net income growth (+120.1% YoY) is not reflective of underlying run-rate earnings due to special gains (~2.0 boosting PBT) and a low tax rate. Sustainability: revenue growth appears steady but constrained; operating profit improvements could continue if cost discipline persists, but sensitivity to wage, energy, and subcontracting costs remains. External income streams (dividends) can be volatile and may not be reliable growth drivers. Without cash flow data, we cannot confirm whether working capital supported or hindered growth this period. Near-term outlook hinges on maintaining operating margin near 2.5–3.0%, stabilizing interest costs, and avoiding a reversal of special gains.

Financial Health

Liquidity is weak: current ratio 0.56 and quick ratio 0.53, both below 1.0, warrant explicit caution. Working capital is negative at -33.72, indicating reliance on short-term funding. Short-term loans of 13.00 exceed cash and deposits of 5.21, signaling a maturity mismatch; current assets (42.28) are well below current liabilities (76.00). Solvency is moderate: debt-to-equity is 1.14x (total liabilities/equity), with long-term loans of 42.74; assets/equity leverage is 2.14x. Interest coverage is 3.42x (operating income/interest expense), adequate but sensitive to any operating downturn or rate increases. No off-balance sheet obligations are disclosed in the provided data; absence of disclosure does not imply absence of such commitments.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow are unreported, so OCF/Net Income and FCF coverage cannot be assessed. This is a key limitation for validating earnings quality, especially given the reliance on non-operating income and special gains. Warning indicators: low liquidity, negative working capital, and meaningful interest expense could pressure cash generation if receivables collection or inventory turnover slows. Without working capital detail, we cannot identify potential manipulation, but the dependency on non-operating income (dividends) suggests a portion of reported earnings may not translate into operating cash.

Dividend Sustainability

The calculated payout ratio is 27.7%, which is conservative versus the <60% benchmark. However, cash coverage is unknown due to unreported OCF and FCF, and balance-sheet liquidity is tight (current ratio 0.56). Interest expense is meaningful relative to operating income, and net debt is approximately 50.53 (interest-bearing debt ~55.74 minus cash 5.21), which could constrain future distributions if rates rise or earnings soften. Given the apparent contribution of one-off gains to net income this quarter, a normalized earnings base would likely imply a higher effective payout ratio than headline suggests. Policy outlook cannot be inferred from the data provided; monitoring guidance and full-year cash flow will be essential.

Risk Assessment

Business Risks:

• Moderate top-line growth with low operating margin (2.6%) indicates limited pricing power and vulnerability to cost inflation.
• Dependence on non-operating income (dividends 1.21) to support profits; volatility in investment income could pressure earnings.
• Potential one-off/special gains (~2.0) boosted PBT; absence in future periods could create a high YoY comp base.
• Operational cost risks: wages, energy, and subcontracting expenses could erode margins.
• Logistics/port throughput cyclicality tied to macro trade volumes and industrial activity.

Financial Risks:

• Low liquidity (current ratio 0.56; quick ratio 0.53) and negative working capital (-33.72) heighten refinancing and rollover risk.
• Interest expense (0.53) relative to operating income (1.80) yields modest coverage (3.42x), vulnerable to rate hikes or EBIT softness.
• Net debt around 50.53 with reliance on short-term borrowings (13.00) increases maturity mismatch risk.
• ROIC of 0.7% is well below typical WACC, implying value dilution if sustained.

Key Concerns:

• Quality of earnings: heavy contribution from non-operating and special gains to net income.
• Unreported cash flow data obscures OCF conversion and FCF sufficiency for dividends and capex.
• Concentration risk in dividend income sources (investment securities 59.25) if payouts fluctuate.
• Sensitivity to macro/trade downturns affecting cargo volumes and utilization.

Investment Implications

Key Takeaways:

• Core operations improved modestly with ~40 bps operating margin expansion.
• Headline net income strength is non-recurring in nature due to special gains and low tax rate.
• Liquidity is the most acute weakness (current ratio 0.56; negative working capital), elevating short-term risk.
• Earnings mix relies on non-operating income (dividends), which may be volatile.
• Capital efficiency remains low (ROE 2.1%, ROIC 0.7%), signaling the need for structural improvement.

Metrics to Watch:

• Operating margin and SG&A ratio trajectory versus revenue growth.
• Ordinary income vs. profit before tax gap (to identify special gains/charges).
• Interest coverage and effective interest rate trends.
• Current ratio, net working capital, and disclosed OCF when available.
• Dividend income stability from investment securities and any changes in portfolio.
• ROIC progression relative to management targets and WACC.

Relative Positioning: Within domestic logistics/port operators, the company shows modest operating improvement but lags on liquidity and capital efficiency. Its profitability appears more reliant on investment income and special gains than peers with stronger recurring operating margins and cash conversion.

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