Air Water (4088) Q2 2026 earnings summary

Executive summary

• Significant inappropriate accounting practices were uncovered, involving top management and multiple group companies, leading to restatements, a qualified audit opinion, and major one-time charges reflected in the quarter's results.

• Major reforms and recurrence prevention measures are being implemented to restore public trust and ensure compliance.

• A Special Investigating Committee was established to address inappropriate accounting treatments, resulting in prior-period adjustments and delayed financial reporting.

Significant events and developments

• Improper accounting related to inventories and revenue recognition was identified across several subsidiaries since FY2019, including deferral of loss recognition and overstatement of sales and inventories.

• The Chairman of the Board resigned, and a Special Investigating Committee was established, resulting in prior-period adjustments and delayed financial reporting.

• The investigation led to planned prior-period adjustments totaling ¥66.7 billion in revenue and ¥33.2 billion in operating profit over multiple years.

• Acquisition of Ci Medical Co., Ltd., increasing ownership to 78.65% and making it a consolidated subsidiary.

• Syndicated commitment line agreement for ¥113,000 million executed to secure working capital.

Financial highlights

• FY2025 1-2Q revenue rose to ¥516.6 billion, up 2.4% year-over-year; operating profit fell to ¥-5.4 billion, a decline of ¥33.1 billion.

• Net profit attributable to owners was ¥-21.2 billion for 1-2Q FY2025, versus a profit of ¥17.2 billion a year earlier.

• Major non-recurring items included impairment losses on fixed assets and goodwill (¥37.8 billion) and finance costs (¥12.0 billion).

• Basic and diluted EPS were both -¥92.42, down from ¥75.18 and ¥75.13, respectively.

• Total assets decreased to ¥1,153,403 million from ¥1,226,240 million at the previous fiscal year-end.