CROPS CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥31.23B
• Operating Income: ¥1.42B
• Net Income: ¥303M
• EPS: ¥-2.13

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: Core operations improved markedly in FY2026 Q2, but bottom-line swung to a slight net loss due to below-the-line factors, masking an otherwise solid quarter. Revenue rose 6.9% YoY to 312.31, with gross profit of 82.50 and operating income surging 79.1% YoY to 14.19. Ordinary income increased 45.7% YoY to 14.60, indicating stronger recurring profitability beyond pure cost control. Operating margin improved to 4.5% (14.19/312.31), from roughly 2.7% a year ago by our back-calculation, an expansion of about 180 bps. Ordinary margin improved to 4.7% from roughly 3.4% YoY, an expansion of about 120 bps. Despite stronger operating metrics, profit before tax of 9.02 and a high effective tax expense of 5.99 did not translate into net profit, with reported net income at -0.20. The divergence between positive PBT and negative net suggests material below-the-line impacts (e.g., non-controlling interests or items not fully visible in the disclosed line items). Operating cash flow was robust at 19.12 versus the small net loss, indicating cash earnings remained healthy. Capex was modest at 1.02, implying ample internal funding capacity in the quarter. Liquidity remains strong with a current ratio of 188% and cash/deposits at 92.61 against current liabilities of 111.51. Leverage (D/E 1.51x using total liabilities to equity) is moderate and within tolerance, with interest coverage extremely strong at 157.7x given low interest burden. ROE is currently slightly negative (-0.1%) due to the small net loss, despite decent asset turnover (0.879) and leverage (2.51x). Earnings quality metrics flag OCF/NI as anomalously low due to the negative denominator; in substance, cash generation outpaced accounting earnings. Forward-looking, if the non-recurring or below-the-line drags abate, the improved cost structure and operating leverage point to better earnings conversion in 2H. Monitoring extraordinary items, tax normalization, and minority interest impacts will be key to confirming that the operating rebound can flow through to shareholders’ profit.

Profitability Analysis

ROE decomposition: ROE (-0.1%) = Net Profit Margin (-0.1%) × Asset Turnover (0.879) × Financial Leverage (2.51x). The largest swing factor is Net Profit Margin, which turned negative despite higher operating and ordinary income, indicating material non-operating/after-tax headwinds. Asset turnover at 0.879 is reasonable for the business and broadly stable; leverage at 2.51x supports ROE but cannot offset a negative margin. Business driver: Operating margin strengthened to 4.5% on improved operating leverage (SG&A 68.30 vs gross profit 82.50), but below-the-line items (high effective tax rate at 66.4% and other undisclosed factors) pushed the bottom line into a slight loss. Sustainability: The operating margin expansion appears more sustainable than the net loss, which likely reflects one-time or seasonal items; however, confirmation requires future disclosures on extraordinary losses or minority interests. Watchpoints: If SG&A growth were to exceed revenue growth, margin gains could reverse; for this quarter, operating income growth (+79.1% YoY) far outpaced revenue growth (+6.9%), implying positive operating leverage rather than SG&A pressure.

Growth Assessment

Top-line grew 6.9% YoY to 312.31, a healthy pace given the scale. Operating income rose 79.1% YoY to 14.19, evidencing strong operating leverage and/or mix improvements. Ordinary income increased 45.7% YoY to 14.60, confirming recurring profitability improvement beyond one-time cost cuts. Gross margin is 26.4% this quarter; prior-period gross margin is not disclosed, limiting precise mix analysis. The conversion of revenue growth into operating profit (OPM 4.5%) suggests better cost discipline and possibly improved product/service mix. The negative net income despite higher PBT highlights non-operating/after-tax drags; if these normalize, earnings growth should better align with operating trends. Outlook hinges on visibility into extraordinary items, tax rate normalization, and minority interest allocations; absent structural headwinds, the run-rate OPM appears improved versus last year (+180 bps by our estimate). Near-term catalysts would include stabilization of effective tax rate, absence of impairments/special losses, and continued cost control sustaining mid-single-digit OPM.

Financial Health

Liquidity is solid: current assets 209.63 vs current liabilities 111.51 yield a current ratio of 188% and quick ratio of 188%, with cash/deposits at 92.61 covering 83% of current liabilities. No warning for liquidity (Current Ratio well > 1.0). Solvency: total liabilities/equity at 1.51x indicates moderate leverage; below the explicit warning threshold (D/E > 2.0), though near our general benchmark cap. Interest-bearing debt detail is partial (short-term loans 14.00, long-term loans 5.84), implying low absolute financial debt burden relative to cash. Interest coverage is very strong at 157.7x, indicating ample buffer against rate moves. Maturity mismatch risk appears low: current assets exceed current liabilities by 98.12, and cash plus receivables (143.97) exceed all loans (19.84). No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF was 19.12 versus net income of -0.20, yielding an OCF/NI metric of -95.6x; this mathematically triggers a quality flag but is not economically concerning given the very small negative NI and strong cash generation. Working capital appears to have supported OCF, though detailed components are unreported; no signs of aggressive working capital manipulation are evident from the limited data. Capex of 1.02 is modest, implying substantial headroom for maintenance and selective growth spend within OCF. While full investing cash flows are unreported, OCF readily covers capex, suggesting underlying FCF was positive in the quarter. Given financing CF of -9.76, the company likely used internally generated cash to repay debt or distribute cash; details on dividends and buybacks are unreported. Overall, cash conversion looks healthy at the operating level; the disconnect with NI likely reflects below-the-line items, taxes, or non-cash charges rather than weak cash earnings.

Dividend Sustainability

Dividend data are unreported for the period, and the calculated payout ratio (-959.7%) is not meaningful due to negative NI. From a capacity standpoint, OCF (19.12) comfortably covers modest capex (1.02), implying room for dividends if policy remains unchanged, subject to actual distributions. Retained earnings stand at 104.48, providing balance sheet flexibility. Without DPS and total dividend paid, FCF coverage cannot be precisely assessed, but the operating cash profile suggests near-term capacity is intact. Sustainability will hinge on normalization of bottom-line profitability and avoidance of extraordinary losses that depress accounting earnings.

Risk Assessment

Business Risks:

• Margin pressure if SG&A creeps up faster than revenue, eroding the recent OPM gains.
• Potential regulatory and pricing changes in end markets that could affect commission/margin structures.
• Execution risk in sustaining operating leverage after a sharp YoY profit rebound.

Financial Risks:

• Earnings volatility from below-the-line items (e.g., extraordinary losses, minority interests), which turned PBT into a net loss.
• High effective tax rate (66.4%) reducing earnings conversion from PBT to net.
• Moderate leverage (liabilities/equity 1.51x); while manageable, leverage could amplify downside in a downturn.

Key Concerns:

• Mismatch between strong operating/ordinary income and negative net income obscures true run-rate profitability.
• Limited disclosure on non-operating breakdown (e.g., extraordinary items) and dividends constrains clarity on shareholder returns.
• Data gaps (investing CF, dividend payments, equity-method income) limit assessment of recurring vs one-time drivers.

Investment Implications

Key Takeaways:

• Core profitability recovered strongly with OPM rising to ~4.5% and ordinary income up 45.7% YoY.
• Net loss appears driven by below-the-line factors rather than operating weakness.
• Cash generation is solid; OCF far exceeds capex, supporting financial flexibility.
• Liquidity healthy (current ratio 188%); leverage moderate with strong interest coverage.
• Normalization of tax rate and clarity on extraordinary/minority items are pivotal for EPS recovery.

Metrics to Watch:

• Operating margin trend and SG&A-to-gross-profit ratio.
• Ordinary income vs non-operating/extraordinary items to gauge earnings quality.
• Effective tax rate normalization and reconciliation from PBT to net income.
• OCF versus NI and working capital movements.
• Debt trajectory (short-term loans) and financing cash flows (dividends/buybacks).

Relative Positioning: Within small/mid-cap peers, CROPS shows improved operating leverage and strong liquidity, but bottom-line visibility is weaker this quarter due to non-operating and tax effects; confirmation that these are non-recurring would enhance its relative standing.

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