JK Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥193.33B
• Operating Income: ¥3.04B
• Net Income: ¥2.03B
• EPS: ¥67.88

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

JK Holdings (Consolidated, JGAAP) delivered modest topline growth in FY2026 Q2 with revenue of ¥193.3bn, up 1.4% YoY, but profitability softened as operating income fell 7.4% to ¥3.04bn. Gross profit was ¥22.9bn, implying an 11.8% gross margin, while the operating margin compressed to 1.6%, indicating cost pressure and/or SG&A absorption issues despite stable sales. Ordinary income came in at ¥3.32bn, and net income declined 5.8% YoY to ¥1.85bn, resulting in a thin 1.0% net margin. DuPont indicates ROE of 2.83%, driven by low net margin (0.96%), reasonable asset turnover (0.89x), and comparatively high financial leverage (3.31x). The quarter exhibited negative operating leverage: revenue rose slightly but operating profit declined, signaling margin headwinds. Liquidity appears adequate but tight, with a current ratio of 110% and a quick ratio of about 100%; working capital stands at ¥13.5bn. The balance sheet shows total assets of ¥217.2bn and equity of ¥65.5bn, implying an equity ratio of roughly 30% (the reported 0% equity ratio is not disclosed and should not be interpreted as zero). Interest coverage remains solid at 17.1x based on EBIT, suggesting manageable debt service capacity. Operating cash flow was negative at ¥-4.02bn, a notable divergence from positive net income, likely reflecting working capital investment and seasonal dynamics in the building materials distribution business. Investing cash flow was not disclosed, and cash and equivalents were not reported; financing cash flow was an outflow of ¥-4.01bn, suggesting debt reduction and/or shareholder returns. Reported effective tax rate is shown as 0.0%, but given income tax expense of ¥1.39bn and net income of ¥1.85bn, the implied tax burden appears meaningful; the 0% metric likely reflects a calculation or disclosure limitation. Dividend per share was not disclosed for the period (reported as 0.00), and payout ratio similarly shows 0% due to non-disclosure; dividend capacity assessment should instead reference earnings, cash flow, and policy history. Overall, JK Holdings remains a low-margin, high-volume operator with stable sales but pressured profitability and cash flow volatility tied to working capital. Near-term focus should be on margin recapture, inventory discipline, and working capital normalization to restore positive operating cash flow. The company retains headroom on interest coverage and an estimated ~30% equity ratio, but leverage (TL/Equity 2.40x) underscores the need for careful cash management. The outlook hinges on housing starts, lumber price dynamics, and the company’s ability to pass through costs and contain SG&A. Data limitations (notably cash balances, investing CF, share data, and equity ratio disclosure) constrain precision; conclusions are based on available non-zero figures and derived ratios.

Profitability Analysis

ROE of 2.83% decomposes into a net margin of 0.96% × asset turnover of 0.89x × financial leverage of 3.31x. Operating margin is 1.57% (¥3.04bn/¥193.33bn), down YoY as operating income fell 7.4% on a 1.4% sales increase, evidencing negative operating leverage. Gross margin stands at 11.8% (¥22.90bn/¥193.33bn); margin compression at the operating line suggests SG&A absorption or pricing/mix pressure despite relatively stable gross margin levels. EBITDA of ¥4.21bn implies a 2.18% EBITDA margin, highlighting a structurally thin margin profile typical for building materials distribution. Ordinary margin is 1.72%, slightly above operating margin, indicating limited non-operating support. Interest expense of ¥0.18bn is well covered (EBIT/interest ~17.1x), so financing costs are not the primary profitability drag. The primary headwinds are slim gross-to-operating conversion and elevated fixed/semifixed costs that did not flex with volume. Maintaining price discipline and procurement efficiency are pivotal to improving margin quality.

Growth Assessment

Revenue growth of 1.4% YoY to ¥193.33bn reflects stable demand, likely supported by steady renovation and non-residential channels, while new housing-related exposure may cap upside amid soft housing starts. Profit growth lagged, with operating income down 7.4% and net income down 5.8%, indicating weaker profit quality relative to sales growth. Mix and pricing were insufficient to offset cost inflation and SG&A rigidity, resulting in negative operating leverage. Sustainability of revenue growth depends on housing market momentum, lumber/materials price trajectories, and the company’s ability to secure pass-through pricing. Given the thin margins, small shifts in procurement or selling prices can disproportionately impact earnings. With OCF negative despite positive earnings, growth driven by inventory or receivable build is not self-funding this quarter; normalization of working capital is needed to support sustainable growth. Near-term outlook is cautious: stable top line with a focus on profitability restoration through cost control, mix improvement, and disciplined inventory turns.

Financial Health

Total assets are ¥217.18bn against total liabilities of ¥157.26bn and equity of ¥65.52bn, implying an approximate equity ratio near 30% (derived; disclosed metric not provided). Debt-to-equity (using total liabilities) is 2.40x, indicating a leveraged capital structure typical for wholesale/distribution. Liquidity is adequate but tight: current ratio 109.9%, quick ratio 99.6%, and working capital of ¥13.48bn. Interest coverage is strong at 17.1x, suggesting manageable near-term solvency. However, negative OCF in the period elevates liquidity risk if sustained, especially with quick ratio ~1.0 and no disclosed cash balance. The company appears reliant on short-term funding and working capital facilities, making inventory/receivable management critical. Overall solvency is acceptable due to equity base and coverage, but liquidity headroom is modest and sensitive to working capital swings.

Cash Flow Quality

Operating cash flow was ¥-4.02bn versus net income of ¥1.85bn, yielding an OCF/NI ratio of -2.17, which indicates earnings were not cash-converting this quarter. The shortfall is likely driven by working capital investment (e.g., receivables and/or inventory build), which is common seasonally in the sector; inventories stand at ¥14.03bn, but period-to-period movements are not disclosed. Free cash flow was not disclosed, as investing cash flow was not reported; thus FCF coverage metrics cannot be reliably computed. Depreciation and amortization of ¥1.17bn (about 38% of EBIT) supports EBITDA but does not offset working capital drains in the short term. Financing cash flow was an outflow of ¥-4.01bn, implying debt repayment and/or shareholder returns, increasing reliance on internal cash generation going forward. Earnings quality appears pressured in the period due to cash conversion, and normalization of receivables/inventory is needed to validate the sustainability of reported earnings.

Dividend Sustainability

Dividend per share and payout ratio are shown as 0 due to non-disclosure in this interim dataset; therefore, no conclusion should be drawn from the zeros themselves. Assessing capacity from fundamentals: net income is ¥1.85bn for the period, but operating cash flow of ¥-4.02bn indicates weak near-term cash coverage. With investing cash flow not disclosed and financing outflows of ¥-4.01bn, internal cash coverage of distributions (if any) appears limited this quarter. On a policy basis, sustainability depends on full-year earnings, working capital normalization, and available liquidity headroom; interest coverage is healthy, but the quick ratio near 1.0 suggests limited buffer. Until OCF turns positive and stabilizes, prospective dividend coverage by free cash flow is uncertain. Monitoring full-year guidance, cash conversion in H2, and any stated payout policy is essential.

Risk Assessment

Business Risks:

• Housing cycle sensitivity impacting volume and pricing in building materials.
• Lumber/materials price volatility affecting gross margin and inventory valuation.
• Thin margin structure amplifying small cost or price changes.
• Customer credit risk in a wholesale model with large receivables exposure.
• Supply chain and procurement disruptions affecting availability and pricing.
• Competition and price pressure in commoditized product categories.

Financial Risks:

• Tight liquidity with quick ratio ~1.0 and negative OCF in the period.
• Leverage (TL/Equity 2.40x) increases sensitivity to cash flow variability.
• Working capital swings can strain short-term funding needs.
• Potential covenants or refinancing risks if operating conditions weaken.
• Limited disclosed cash balance and undisclosed investing CF obscure liquidity visibility.

Key Concerns:

• Negative operating cash flow despite positive earnings (OCF/NI -2.17).
• Margin compression and negative operating leverage (OP -7.4% vs sales +1.4%).
• High dependency on working capital efficiency to sustain operations and any distributions.

Investment Implications

Key Takeaways:

• Topline resilient (+1.4% YoY) but profitability under pressure with OP margin at 1.6%.
• ROE modest at 2.83%, constrained by thin margins despite fair asset turnover and leverage.
• Liquidity adequate but tight (CR 110%, QR ~100%); negative OCF heightens near-term risk.
• Interest coverage strong (17.1x), helping offset leverage-related risk.
• Data gaps (cash, investing CF, share data, equity ratio disclosure) limit precision; use derived ratios.

Metrics to Watch:

• Operating margin and gross-to-operating conversion (pricing and SG&A control).
• Working capital metrics: inventory days and receivable days; OCF/NI ratio trend.
• Net debt and cash balance disclosure; short-term borrowing levels.
• Lumber/material price indices and pass-through effectiveness.
• Ordinary income vs operating income gap (non-operating contributions).
• Full-year guidance updates and any dividend policy statements.

Relative Positioning: Within Japan’s building materials and housing-related distributors, JK Holdings shows stable sales but below-peer profitability resilience this quarter, with leverage and cash conversion making near-term execution on margin and working capital more critical than for better-capitalized, higher-margin peers.

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