SANRITSU CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥9.95B
• Operating Income: ¥408M
• Net Income: ¥234M
• EPS: ¥41.05

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

Verdict: A mixed FY2026 Q2 with resilient top line but margin pressure at the operating level, offset by better ordinary and bottom-line results, while OCI losses weakened equity. Revenue grew 3.7% YoY to 99.53, evidencing steady demand in core logistics/warehousing services. Gross profit reached 20.51, translating to a gross margin of 20.6%. SG&A was 16.42, or 16.5% of sales, leaving operating income at 4.08 (-7.1% YoY). Operating margin compressed to 4.1% from roughly 4.6% a year ago (about 47 bps compression), indicating weaker operating leverage and cost pass-through. Despite the operating decline, ordinary income rose 13.5% YoY to 3.56, aided by a YoY improvement in non-operating items versus last year, though this quarter still shows a net non-operating loss (income 1.08 vs expenses 1.59). Net income increased 15.8% YoY to 2.30, with an effective tax rate of 34.6%. EPS (basic) was 41.05 yen on average shares of 5.62 million. Interest coverage stands at 5.10x (4.08 OI / 0.80 interest), adequate but not excessive for a capital-intensive operator. Liquidity is acceptable with a current ratio of 124% and positive working capital of 12.97, though below our 150% comfort benchmark. Balance sheet leverage is moderate with D/E at 1.08x and assets/equity at 2.08x. However, total comprehensive income was negative (-2.09), implying sizable OCI losses, likely from investment securities valuation and/or FX, which partially offsets retained earnings accretion. ROE is low at 2.0% and ROIC is just 1.5%, pointing to subdued capital efficiency. Cash flow statements were not disclosed, so we cannot verify earnings quality via OCF; this is a key limitation. Forward-looking, margin restoration through better pricing, utilization, and cost control is required to defend full-year targets and improve ROIC; managing interest costs and OCI volatility will be important for equity stability.

Profitability Analysis

ROE (2.0%) decomposes into Net Profit Margin (2.3%) × Asset Turnover (0.418x) × Financial Leverage (2.08x). The main constraint on ROE is the low net margin and modest asset turnover rather than leverage. Operating margin compressed by about 47 bps YoY to 4.1%, as revenue grew 3.7% but operating income fell 7.1%, indicating unfavorable cost dynamics (e.g., labor, utilities, or subcontracting) and limited price pass-through. Ordinary income rose 13.5% YoY despite the weaker operating line, implying a YoY improvement in non-operating items versus last year (even though this quarter shows a net non-operating expense of 0.51). Given the business model’s capital intensity, the 0.418x asset turnover (H1 sales vs period-end assets) is on the low side, weighing on ROE. The driver that changed the most appears to be operating margin (compression), as implied by the divergence between revenue growth and operating income decline. This likely reflects cost inflation and mix shifts in logistics projects; sustainability depends on the company’s ability to pass through costs and improve utilization—near-term, this looks challenging but improvable with pricing/efficiency measures. SG&A ratio sits at 16.5% of revenue; without YoY SG&A disclosure, we cannot confirm whether SG&A grew faster than revenue, but the margin compression suggests operating cost growth outpaced sales.

Growth Assessment

Top-line momentum is steady at +3.7% YoY to 99.53, consistent with firm volume/activity in logistics services. Gross margin at 20.6% is workable but leaves limited buffer against cost inflation; operating margin of 4.1% indicates subdued operating leverage. Profit growth is quality-mixed: operating income declined (-7.1% YoY), but ordinary income (+13.5%) and net income (+15.8%) improved due to better non-operating balance vs last year and tax rate effects. With non-operating income (dividends 0.11, interest 0.14) and expenses (interest 0.80) material, headline profit is somewhat sensitive to financial items. The negative total comprehensive income (-2.09) highlights equity volatility from OCI, likely securities/FX valuation, which could persist given market conditions. Overall, recurring operating momentum needs improvement, while bottom-line growth looks less repeatable if non-operating tailwinds fade. Outlook hinges on cost pass-through, resource utilization, and rate environment; absent operating margin recovery, full-year ROE/ROIC targets risk undershoot.

Financial Health

Liquidity is adequate but not robust: current ratio 124% (>1.0, but below our 150% comfort level). Quick ratio is also 124%, though inventory data were not disclosed, limiting precision. Short-term loans total 31.59 versus current assets of 67.09, indicating manageable near-term refinancing/liquidity risk; cash and deposits are 21.71 and accounts receivable 32.01, together covering current liabilities of 54.12. Solvency is moderate with D/E 1.08x and assets/equity leverage at 2.08x. Interest-bearing debt detail is split across short- and long-term (31.59 ST, 48.63 LT), suggesting a balanced maturity profile; however, we cannot fully assess maturities without notes. No off-balance sheet obligations were disclosed in the provided data. Explicit warnings: none for current ratio (<1.0) or D/E (>2.0), but we note the current ratio sits below the >1.5 healthy benchmark, and interest coverage at 5.10x is acceptable yet sensitive to rate moves.

Cash Flow Quality

Operating cash flow data were not disclosed, so we cannot compute OCF/Net Income or free cash flow; therefore, we cannot validate accruals or working capital behavior quantitatively. As such, we cannot assess FCF coverage of dividends and capex. Earnings quality flags include: reliance on non-operating items to lift ordinary and net income versus weaker operating income, and negative total comprehensive income (-2.09) reducing equity despite positive net income. Without cash flow details, we cannot identify working capital manipulation or confirm cash conversion; this is a key limitation.

Dividend Sustainability

The calculated payout ratio is elevated at 81%, which is above our <60% comfort threshold for sustainability, increasing risk if operating trends remain soft. DPS and total dividends paid were not disclosed for the period, and FCF coverage is not calculable due to missing cash flows. With ROE at 2.0% and ROIC at 1.5%, internal capital generation is modest; sustaining a high payout may constrain balance sheet flexibility unless cash conversion is strong. Cash and deposits (21.71) provide some buffer, but leverage (D/E 1.08x) and interest costs (0.80) argue for a cautious stance until operating margin improves. Policy outlook: absent explicit guidance, we assume stability bias but flag risk of payout pressure if operating recovery lags or if OCI losses persist.

Risk Assessment

Business Risks:

• Operating margin pressure from labor, energy, and subcontracting cost inflation
• Limited pricing power/pass-through in certain logistics contracts
• Utilization and mix risk across warehousing and transport services impacting asset productivity
• Customer concentration risk typical in logistics (not disclosed, but industry-common)
• Execution risk on efficiency and digitalization initiatives needed to lift ROIC

Financial Risks:

• Interest rate sensitivity with 0.80 interest expense and interest coverage of 5.10x
• Refinancing exposure on 31.59 of short-term loans
• Equity volatility from OCI (total comprehensive income -2.09), likely from securities/FX valuation
• Low capital efficiency (ROIC 1.5%), raising risk of value dilution if reinvestment returns do not improve

Key Concerns:

• Operating income decline (-7.1% YoY) despite revenue growth (+3.7%)
• Negative comprehensive income eroding equity despite positive net income
• Payout ratio at 81% appears high relative to current profitability and undisclosed FCF
• Liquidity only modestly above minimum (current ratio 124%), below our >150% comfort level

Investment Implications

Key Takeaways:

• Top line is resilient, but operating margin compressed ~47 bps to 4.1%
• Ordinary and net income improved YoY, aided by non-operating balance versus last year
• Interest coverage at 5.10x is adequate; D/E 1.08x indicates moderate leverage
• Negative total comprehensive income (-2.09) signals valuation/FX headwinds
• ROE 2.0% and ROIC 1.5% underscore need for operating and capital efficiency improvements
• Dividend payout appears high at 81% with FCF unknown, implying potential sustainability risk

Metrics to Watch:

• Operating margin trajectory and SG&A/cost inflation trends
• OCF/Net income and free cash flow once disclosed
• Interest expense run-rate and refinancing of short-term loans (31.59)
• OCI drivers (securities valuation, FX) and impact on equity
• Asset turnover improvements (utilization, mix) to lift ROIC

Relative Positioning: Within Japanese logistics/warehousing peers, Sanritsu shows steady sales but weaker operating momentum and capital efficiency, with moderate leverage and only adequate liquidity; margin recovery and stronger cash conversion are needed to narrow performance gaps.

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