CONSEC CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.74B
• Operating Income: ¥-109M
• Net Income: ¥-14M
• EPS: ¥26.01

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

Consec (FY2026 Q2, consolidated, JGAAP) reported revenue of ¥4.74bn, down 7.3% YoY, indicating top-line softness in the first half. Gross profit was ¥1,119m, yielding a gross margin of 23.6%, which provides some cushion but was not sufficient to cover operating costs, resulting in an operating loss of ¥109m (operating margin -2.3%). Ordinary income was a smaller loss of ¥26m, and the company ultimately posted positive net income of ¥46m (net margin 0.97%), implying material non-operating and/or extraordinary gains in the period. EBITDA was negative at ¥41m, reflecting limited operating cash generation before depreciation and amortization (¥67.9m). The DuPont breakdown shows very thin profitability, moderate asset turnover (0.387x), and modest leverage (financial leverage 1.51x), culminating in a low ROE of 0.57%. Liquidity is solid with a current ratio of 195.5% and quick ratio of 154.3%, supported by working capital of ¥2,575m. The balance sheet looks conservative: equity of ¥8,138m versus total assets of ¥12,255m implies an equity ratio around 66% (the reported equity ratio field is unreported), and a debt-to-equity ratio of 0.47x indicates moderate leverage. Operating cash flow was negative at ¥201m, resulting in an OCF/Net Income ratio of -4.37, highlighting weak earnings conversion and probable working capital headwinds. Inventories were ¥1,111m; based on first-half COGS, this suggests roughly 51 days of inventory, which appears reasonable but warrants monitoring given the revenue decline. Interest expense was only ¥2.0m; despite the negative EBIT, financial risk from interest appears limited in the near term. Income taxes of ¥45m alongside a net profit of ¥46m imply that extraordinary/non-operating profits drove pre-tax income, masking the core operating loss. Investing cash flows and cash balance were not disclosed in the XBRL (items shown as zero are unreported), limiting full cash analysis and FCF estimation. Dividend data were not disclosed (DPS and payout ratio fields are zero/unreported), so capital return policy for the year-to-date cannot be evaluated. Overall, the picture is of a company with a strong balance sheet and liquidity but experiencing revenue pressure and operating losses in H1, relying on non-operating/extraordinary gains to deliver positive net income, and with weak operating cash conversion.

Profitability Analysis

ROE_decomposition: ROE 0.57% = Net profit margin 0.97% × Asset turnover 0.387 × Financial leverage 1.51. The low ROE is primarily constrained by the slim net margin; asset turnover is modest and leverage is conservative. margin_quality: Gross margin of 23.6% indicates some pricing/purchasing discipline, but operating margin of -2.3% and ordinary margin of -0.55% reveal overhead and/or SG&A burden amid softer sales. Positive net margin (0.97%) appears to be driven by non-operating/extraordinary items rather than core operations. operating_leverage: Revenue declined 7.3% YoY while operating income remained at a similar loss level (flat YoY per disclosure), suggesting the company absorbed top-line pressure with some cost actions but still exhibits negative operating leverage around current volume. EBITDA at -¥41m underscores limited fixed-cost absorption.

Growth Assessment

revenue_sustainability: Top-line contracted by 7.3% YoY to ¥4.74bn in H1, indicating softer demand or pricing pressure. Without disclosure of segment/backlog/order intake, sustainability is uncertain and contingent on H2 recovery. profit_quality: Net profit of ¥46m contrasts with operating and ordinary losses, implying profit quality is low in H1 and dependent on non-operating/extraordinary factors. The OCF/NI ratio of -4.37 further signals weak underlying earnings quality. outlook: For the remainder of FY2026, the key swing factors are gross margin stabilization, SG&A containment, and normalization of working capital to restore OCF. If H2 volumes recover moderately and cost controls persist, ordinary profitability could normalize; absent recovery, the company may remain near breakeven at the bottom line.

Financial Health

liquidity: Current ratio 195.5% and quick ratio 154.3% reflect ample short-term liquidity. Working capital stands at ¥2,574.6m, providing a significant buffer. solvency: Total equity of ¥8,138m versus assets of ¥12,255m implies an equity ratio around 66% (reported field unprovided). Debt-to-equity of 0.47x and low interest expense (¥2.0m) suggest moderate leverage and manageable solvency risk. capital_structure: Financial leverage at 1.51x is conservative. Interest coverage based on EBIT is negative (-53.9x) due to operating loss, but absolute interest burden is small, tempering near-term financial stress.

Cash Flow Quality

earnings_quality: OCF of -¥201.1m versus net income of ¥46.0m (OCF/NI -4.37) indicates poor cash conversion, likely driven by working capital outflows and the non-cash nature of extraordinary gains. FCF_analysis: Investing cash flow is undisclosed (reported as zero), preventing precise FCF calculation. Using available data only, we cannot confirm capex intensity or maintenance requirements for the period. working_capital: Inventories at ¥1,111m against H1 COGS of ¥3,996m imply roughly 51 days of inventory; receivables and payables movements are not disclosed, but the negative OCF suggests net working capital consumption in H1.

Dividend Sustainability

payout_ratio_assessment: EPS is ¥26.01 for H1. Dividend per share and payout ratio are not disclosed in the provided data (zeros indicate unreported), so payout affordability cannot be directly assessed. FCF_coverage: With investing cash flows unreported and OCF negative, FCF coverage of dividends cannot be determined for the period. policy_outlook: Given weak operating profitability and negative OCF in H1, a cautious stance on distributions would be consistent with preserving balance sheet strength; however, no formal policy or guidance is provided in the data.

Risk Assessment

Business Risks:

• Demand softness leading to revenue decline (-7.3% YoY) and under-absorption of fixed costs
• Margin pressure from cost inflation and/or pricing competition reflected in operating loss
• Reliance on non-operating/extraordinary gains to achieve net profitability in H1
• Execution risk in cost control and working capital management
• Potential H2 seasonality or project timing risks impacting revenue recognition

Financial Risks:

• Negative OCF (-¥201m) indicating cash burn in operations
• Negative interest coverage due to operating loss, despite low absolute interest
• Inventory management risk amid softer sales (need to prevent buildup and obsolescence)
• Limited visibility on capex and cash reserves due to unreported investing CF and cash balance

Key Concerns:

• Sustainability of net profit absent extraordinary gains
• Recovery path for operating margin from -2.3% toward breakeven or positive territory
• Normalization of OCF and working capital to support self-funded operations

Investment Implications

Key Takeaways:

• Top-line declined 7.3% YoY to ¥4.74bn; operating loss of ¥109m persists despite stable gross margin.
• Net income of ¥46m appears driven by non-operating/extraordinary items, not core operations.
• ROE is low at 0.57%, constrained by thin margins; leverage is modest (1.51x), limiting ROE amplification.
• Liquidity is strong (current ratio 195.5%, quick 154.3%) and equity base is solid (~66% equity-to-asset).
• Operating cash flow is weak (-¥201m), pointing to earnings quality and working capital challenges.

Metrics to Watch:

• Gross margin trajectory and SG&A ratio in H2
• Operating and ordinary income progression toward breakeven
• OCF/Net income and working capital turns (inventory, receivables, payables)
• Extraordinary/non-operating items and their recurrence
• Debt levels and interest expense trend versus cash generation

Relative Positioning: Based solely on the provided data, Consec exhibits balance-sheet strength and liquidity above typical small-cap peers but weaker mid-year operating profitability and cash conversion, positioning it defensively on solvency but with execution risk on earnings normalization.

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
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