| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3346.1B | ¥3026.8B | +10.5% |
| Operating Income / Operating Profit | ¥107.3B | ¥110.8B | -3.1% |
| Ordinary Income | ¥100.3B | ¥108.6B | -7.6% |
| Net Income / Net Profit | ¥57.4B | ¥72.3B | -20.6% |
| ROE | 7.3% | 10.6% | - |
For the fiscal year ended March 2026, Kyokuyo recorded Revenue of ¥3346.1B (YoY +¥319.3B +10.5%), achieving double-digit top-line growth, while Operating Income was ¥107.3B (YoY -¥3.5B -3.1%), Ordinary Income was ¥100.3B (YoY -¥8.3B -7.6%), and Net Income was ¥57.4B (YoY -¥14.9B -20.6%), resulting in a three-tier decline in profitability. Top-line was driven by the Fisheries Business with +12.6% growth (sales mix 58%) and Overseas sales expanded to ¥547.9B (prior ¥325.6B) for +68.3%, but gross margin compressed to 12.4% (prior 12.8% -0.4pt) and SG&A increased to ¥306.1B (prior ¥277.4B, +10.3%), resulting in an Operating Margin decline to 3.2% (prior 3.7% -0.5pt). At the ordinary level, interest expense surged to ¥14.2B (prior ¥8.4B, +68.6%), pushing Ordinary Margin down to 3.0% (prior 3.6% -0.6pt). Net Income contraction was largest, with a partial offset from a swing in Non-controlling Interests (-¥3.1B, prior +¥12.7B), but tax burden and higher non-operating expenses compressed earnings. Operating Cash Flow (OCF) turned negative at -¥7.5B (prior +¥58.4B), driven mainly by inventory build of ¥125.6B; Free Cash Flow was -¥59.6B, and Financing Cash Flow was +¥90.8B (including short-term borrowings +¥88.0B) to cover funding. The company delivered revenue growth but profit decline.
Revenue: Revenue expanded to ¥3346.1B (YoY +10.5%). By segment, the Fisheries Business contributed most with ¥2200.9B (YoY +12.6%), representing 65.8% of company sales. External sales in that business were ¥1950.4B (prior ¥1686.7B), supported by overseas expansion and FX effects. Fresh Products Business continued to grow to ¥791.4B (YoY +6.4%) with steady demand for sushi toppings and sashimi. Food Business edged up to ¥744.7B (YoY +0.8%) as frozen and canned food market conditions remained flat. Logistics Services were ¥30.2B (YoY +1.3%) and Others ¥23.9B (YoY +9.7%), small but stable growth. Regionally, Domestic Japan was ¥2798.2B (prior ¥2701.3B, +3.6%) with only modest growth, while Overseas sales surged to ¥547.9B (prior ¥325.6B, +68.3%), making global expansion the main driver of revenue increase.
Profitability: Cost of sales rose to ¥2932.7B (prior ¥2638.6B, +11.1%), outpacing revenue growth and compressing Gross Margin to 12.4% (prior 12.8% -0.4pt). Procurement cost increases and product mix shifts pressured gross margin. SG&A rose to ¥306.1B (prior ¥277.4B, +10.3%), with SG&A ratio slightly improving to 9.1% (prior 9.2% -0.1pt), but gross margin compression lowered Operating Margin to 3.2% (prior 3.7% -0.5pt) and Operating Income to ¥107.3B (YoY -3.1%). By segment, the Fisheries Business Operating Income declined to ¥57.5B (prior ¥61.1B, -5.9%), with Operating Margin down to 2.6% (prior 3.1% -0.5pt), weighing on consolidated profit. Fresh Products posted Operating Income ¥38.6B (YoY +6.7%), Food Business ¥25.3B (YoY +3.6%), Logistics Services ¥3.5B (YoY +18.0%), all increased profits but could not fully offset Fisheries decline. Non-operating items: Interest and dividends received increased to ¥4.0B (prior ¥2.9B) while Interest Expense jumped to ¥14.2B (prior ¥8.4B, +68.6%), worsening financial results to -¥10.2B (prior -¥5.5B). The interest burden increase stemmed from a shift to short-term borrowings of ¥411.7B (prior ¥287.7B, +43.1%) and changes in the interest rate environment. Ordinary Income was ¥100.3B (YoY -7.6%), Ordinary Margin fell to 3.0% (prior 3.6% -0.6pt). Extraordinary items were net +¥0.1B (extraordinary gains ¥4.0B - extraordinary losses ¥3.9B), showing limited one-off impact. Profit before tax was ¥100.4B (prior ¥108.5B, -7.5%); after corporate taxes of ¥35.1B (effective tax rate 35.0%) and the swing in Non-controlling Interests (-¥3.1B, prior +¥12.7B) partially lifting Net Income, Net Income was ¥57.4B (YoY -20.6%). In summary, revenue increased but profitability declined, and top-line expansion did not translate into improved margins.
Fisheries Business: Revenue ¥2200.9B (YoY +12.6%), Operating Income ¥57.5B (YoY -5.9%), Operating Margin 2.6% (prior 3.1% -0.5pt). Despite revenue growth, procurement cost increases and delayed price pass-through compressed margins, causing a decline in profit. This segment accounts for 53.6% of consolidated Operating Income and is the core segment; improving its profitability is a company-wide priority.
Fresh Products Business: Revenue ¥791.4B (YoY +6.4%), Operating Income ¥38.6B (YoY +6.7%), Operating Margin 4.9% (prior 4.9% unchanged), achieving revenue and profit growth supported by steady demand for sushi toppings and sashimi.
Food Business: Revenue ¥744.7B (YoY +0.8%), Operating Income ¥25.3B (YoY +3.6%), Operating Margin 3.4% (prior 3.3% +0.1pt), slight profit increase with price revisions in frozen and canned foods contributing.
Logistics Services: Revenue ¥30.2B (YoY +1.3%), Operating Income ¥3.5B (YoY +18.0%), Operating Margin 11.5% (prior 9.9% +1.6pt), maintained high profitability due to improved warehouse utilization.
Others: Revenue ¥23.9B (YoY +9.7%), Operating Income ¥2.8B (YoY +9.4%), Operating Margin 11.6% (prior 11.6% unchanged), stable.
Corporate adjustments were -¥20.4B (prior -¥16.4B), with higher headquarters administrative costs weighing on consolidated profit.
Profitability: Operating Margin was 3.2% (prior 3.7% -0.5pt), Ordinary Margin was 3.0% (prior 3.6% -0.6pt), with Gross Margin compression (12.4%, prior 12.8% -0.4pt) and higher interest burden pressuring profitability. ROE was 7.3% (prior 10.7% -3.4pt), deteriorated by lower Net Income and expanded total assets (¥2141.3B, YoY +17.6%), reducing capital efficiency. ROA (Ordinary Income basis) was 5.1% (prior 6.3% -1.2pt), indicating weaker asset profitability.
Cash Quality: OCF / Net Income was -0.13x (prior 0.81x), a material deterioration; OCF turned negative to -¥7.5B (prior +¥58.4B). The main cause was working capital cash outflows: Inventory increase ¥125.6B and Trade Receivables increase ¥13.7B. Free Cash Flow was -¥59.6B (prior -¥30.9B), as CapEx ¥32.3B and acquisition outlays ¥6.1B could not be covered by OCF; Financing Cash Flow +¥90.8B (including short-term borrowings +¥88.0B) supplemented liquidity.
Investment Efficiency: Total Asset Turnover was 1.56x (prior 1.66x), indicating lower asset efficiency. Inventory turnover days remained high at approximately 80 days (Inventory ¥644.6B ÷ Annual Revenue ¥3346.1B × 365) and Cash Conversion Cycle (CCC) was about 105 days (Receivables days ~43 + Inventory days ~80 - Payables days ~18), deteriorating from prior year.
Financial Soundness: Equity Ratio was 36.8% (prior 37.5% -0.7pt), and leverage (Debt dependence) rose to 1.72x (Debt ¥1352.6B ÷ Equity ¥788.7B). Current Ratio was healthy at 158.6% (Current Assets ¥1567.1B ÷ Current Liabilities ¥988.2B), but Quick Ratio was 93.3% ((Current Assets - Inventory) ÷ Current Liabilities), slightly below 100%, indicating high inventory dependency. Interest-bearing debt was ¥716.1B (Short-term borrowings ¥411.7B + CP ¥200.0B + Long-term borrowings ¥304.4B), up from ¥553.7B prior (+29.3%), Debt/Equity was 0.91x (prior 0.81x), rising, and short-term debt ratio was 85.5% (Short-term interest-bearing debt ¥611.7B ÷ Total interest-bearing debt ¥716.1B), indicating increased refinancing risk. Cash and deposits increased to ¥110.5B (prior ¥75.1B, +47.0%), but cash coverage of short-term interest-bearing debt was only 18.1% (Cash ¥110.5B ÷ Short-term interest-bearing debt ¥611.7B).
OCF turned negative at -¥7.5B (prior +¥58.4B). Starting from Profit before tax ¥100.4B, adding Depreciation ¥30.3B and Goodwill amortization ¥1.0B produced an OCF subtotal of ¥39.9B (prior ¥76.8B), but Inventory increase of ¥125.6B (prior ¥27.1B) and Receivables increase of ¥13.7B (prior ¥5.3B) heavily strained working capital. Payables increase of ¥31.5B (prior ¥1.0B) partially offset this, but tax payments ¥38.6B (prior ¥14.3B) and interest payments ¥14.2B (prior ¥8.3B) contributed to a substantial OCF deficit. The inventory build mainly reflects strategic procurement accumulation of fisheries raw materials and higher merchandise inventories at period end; improving working capital management is urgent. Investing Cash Flow was -¥52.2B (prior -¥90.4B), driven by CapEx ¥32.3B (prior ¥61.6B) and acquisition of subsidiary shares ¥6.1B (prior ¥21.2B). CapEx decreased YoY but exceeded depreciation ¥30.3B, indicating maintained growth investments. Free Cash Flow was -¥59.6B (prior -¥30.9B), further weakened by OCF turning negative. Financing Cash Flow was +¥90.8B (prior +¥21.5B), with net increase in short-term borrowings +¥88.0B (prior -¥48.9B), CP increase ¥50.0B, and long-term borrowings +¥6.5B as primary funding sources. Offsetting outflows included long-term debt repayments ¥94.1B (prior ¥81.4B) and dividend payments ¥15.5B (prior ¥11.9B), increasing reliance on short-term liabilities. Cash and deposits rose by ¥35.3B from ¥75.1B at the beginning to ¥110.5B at period end, with foreign exchange effects contributing ¥4.2B.
Earnings quality is centered on recurring operating income; extraordinary items were net +¥0.1B (extraordinary gains ¥4.0B - extraordinary losses ¥3.9B), thus limited one-off impact. Extraordinary gains include gain on sale of investment securities ¥0.1B and insurance proceeds ¥0.96B; extraordinary losses include loss on disposal of fixed assets ¥0.4B, disaster losses ¥0.2B, and impairment of investment securities ¥0.1B, all small. Of Non-operating Income ¥9.2B, dividends received ¥3.2B and interest income ¥0.7B are stable financial returns, and equity-method investment income ¥0.1B contributed. Non-operating expenses ¥16.2B were mostly Interest Expense ¥14.2B (prior ¥8.4B +68.6%), driven by increased short-term borrowings and changing interest rates. Comprehensive Income was ¥120.2B, well above Net Income ¥57.4B, aided by Other Comprehensive Income gains: valuation difference on available-for-sale securities ¥49.4B (reflecting equity market appreciation), actuarial adjustments related to retirement benefits ¥5.2B, and deferred hedge gains ¥2.7B, partly offset by foreign currency translation adjustments -¥2.4B. Accumulated valuation gains increased Equity to ¥141.5B (prior ¥86.1B), but market fluctuation risk on unrealized gains warrants attention. From an accrual perspective, OCF / Net Income at -0.13x shows large divergence, indicating earnings quality deterioration due to working capital increases. Normalizing inventory valuation and turnover will be decisive for earnings sustainability.
For FY ending March 2027, the company forecasts Revenue ¥3650.0B (YoY +9.1%), Operating Income ¥120.0B (YoY +11.8%), Ordinary Income ¥110.0B (YoY +9.7%), and Net Income ¥72.0B (YoY +25.4%), expecting revenue and earnings growth. Progress rates versus full-year forecast are: Revenue 91.7% (Current ¥3346.1B ÷ Full-year forecast ¥3650.0B), Operating Income 89.4% (¥107.3B ÷ ¥120.0B), Ordinary Income 91.2% (¥100.3B ÷ ¥110.0B), and Net Income 79.7% (¥57.4B ÷ ¥72.0B), with Net Income lagging somewhat. Full-year assumptions incorporate Operating Margin 3.3% (Full-year Operating Income ¥120.0B ÷ Full-year Revenue ¥3650.0B), a slight improvement from current 3.2% (+0.1pt); Ordinary Margin 3.0% (¥110.0B ÷ ¥3650.0B) unchanged; Net Margin 2.0% (¥72.0B ÷ ¥3650.0B), improved from 1.7% this period (+0.3pt). Growth assumptions include price pass-through and normalization of procurement costs in the Fisheries Business, revenue increases in Fresh Products and Food Businesses, sustained high profitability in Logistics Services, and working capital normalization via improved inventory turnover. Continued upward pressure on interest costs means ordinary-level improvement assumes containment of financial expenses (longer-term financing and hedging). Dividend forecast is annual ¥160 (year-end ¥160), with forecast payout ratio 26.4% (Dividend ¥160 ÷ EPS forecast ¥606.20), maintaining a conservative stance. Achieving guidance requires inventory reduction and CCC shortening to generate cash.
This period's dividend was year-end ¥150 (prior year-end ¥130), with payout ratio 26.0% (Dividend ¥150 ÷ EPS ¥576.02), maintaining a conservative level. Total dividends were ¥15.5B (prior ¥11.9B), representing 27.0% of Net Income ¥57.4B returned to shareholders. The full-year forecast assumes Dividend ¥160 (payout ratio 26.4%), indicating a stance of continued dividend increases. However, Free Cash Flow was -¥59.6B this period and could not internally fund dividend payments of ¥15.5B, with FCF/Dividend at -3.85x, indicating negative dividend coverage. Dividends were effectively supplemented by increased short-term borrowings (+¥88.0B) and Financing Cash Flow +¥90.8B; sustainability of dividends next year depends on inventory turnover normalization and OCF improvement. No share buybacks were executed; Total Return Ratio equals the payout ratio at 26.0%. With Cash and Deposits ¥110.5B (5.2% of total assets) and interest-bearing debt ¥716.1B (Debt/Equity 0.91x), dividend sustainability depends on working capital management and cash generation capability.
Inventory build and working capital management risk: Inventory increased to ¥644.6B (prior ¥580.5B, +11.0%), pressuring OCF by -¥125.6B. Inventory turnover days of about 80 days and extended CCC of about 105 days worsen capital efficiency. If fisheries raw material prices decline or demand weakens, inventory write-downs and stagnation risk may materialize, further deteriorating profitability and cash generation.
Dependence on short-term liabilities and refinancing risk: Short-term interest-bearing debt is ¥611.7B (short-term borrowings ¥411.7B + CP ¥200.0B), accounting for 85.5% of total interest-bearing debt ¥716.1B. Cash coverage of short-term debt is only 18.1% (Cash ¥110.5B), raising refinancing risk if interest rates rise or funding conditions deteriorate. Long-term borrowings decreased to ¥304.4B (prior ¥356.0B), shifting the term structure toward the short-term and increasing maturity mismatch risk.
Earnings deterioration risk in the Fisheries Business: The core Fisheries Business (sales mix 65.8%) has seen Operating Margin compress to 2.6% (prior 3.1% -0.5pt) with Operating Income ¥57.5B (prior ¥61.1B, -5.9%). Procurement cost increases and delayed price pass-through are primary drivers; due to high segment concentration, impacts on consolidated earnings are significant. Overseas expansion also increases FX exposure, raising earnings volatility from both raw material cost increases under yen weakness and revenue declines under yen strength.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.2% | 14.6% (7.2%–39.4%) | -11.4pt |
| Net Margin | 1.7% | 11.9% (7.2%–35.4%) | -10.2pt |
Both Operating Margin and Net Margin are well below industry medians, indicating low relative profitability. This is attributable to thin margins in fisheries/food distribution and delayed price pass-through in the core Fisheries Business.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 10.5% | 10.1% (7.3%–12.1%) | +0.4pt |
Revenue growth is in line with the industry median; top-line expansion is average within the sector.
※Source: Company compilation
Improving profitability in the Fisheries Business is the top priority. The segment accounts for 65.8% of sales and 53.6% of Operating Income but saw Operating Margin decline to 2.6% from 3.1% (-0.5pt) and a profit decrease. Procurement cost increases and delayed price pass-through are primary causes; achieving next year’s targets requires thorough price revisions and mix improvements. Given the high segment concentration, overall margin improvement is difficult without recovery in Fisheries profitability.
Normalizing inventory turnover and shortening CCC are keys to capital efficiency and cash generation. This period saw inventory increase of ¥125.6B, turning OCF to -¥7.5B and worsening Free Cash Flow to -¥59.6B. With inventory turnover days ~80 and CCC ~105 days, there is significant scope to compress working capital. Strengthening inventory valuation and turnover controls and accelerating receivables collection to normalize OCF would secure dividend sustainability and investment capacity.
High dependence on short-term liabilities necessitates urgent term extension and refinancing risk management. Short-term interest-bearing debt ¥611.7B (85.5% of total) contrasts with cash coverage of 18.1%. Long-term borrowings decreased to ¥304.4B (prior ¥356.0B), while CP ¥200.0B (prior ¥150.0B) and short-term borrowings ¥411.7B (prior ¥287.7B) increased. Interest expense surged to ¥14.2B (prior ¥8.4B, +68.6%); in a rising-rate environment, financial costs will further pressure Ordinary Income. Extending maturities (refinancing/term-out) and hedging interest rates are essential to stabilize capital structure and contain financing costs for earnings preservation in coming years.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from publicly disclosed financial statements. Investment decisions are your responsibility; consult professionals as needed before making investment choices.