KYOKUYO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥156.00B
• Operating Income: ¥4.55B
• Net Income: ¥2.72B
• EPS: ¥237.00

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

Kyokuyo Co., Ltd. (TSE:13010) reported FY2026 Q2 consolidated results under JGAAP showing robust topline growth but margin compression and weaker operating leverage. Revenue rose 11.0% YoY to ¥155.996bn, indicating healthy demand and/or price pass-through in its marine products trading and processed foods businesses. Despite higher sales, operating income declined 16.6% YoY to ¥4.555bn, pulling operating margin down to 2.9%, reflecting pressure from cost inflation, unfavorable mix, and/or elevated logistics and procurement costs. Gross profit reached ¥18.828bn with a gross margin of 12.1%, which appears thin for processing but is consistent with a trading-heavy model; the gap between gross and operating margins widened, implying SG&A headwinds. Ordinary income was ¥4.172bn and net income ¥2.814bn (+3.9% YoY), with EPS of ¥237, suggesting non-operating items (e.g., forex or equity method) partly offset operating softness. DuPont analysis indicates a calculated ROE of 3.91% driven by a 1.80% net margin, 0.78x asset turnover, and 2.78x financial leverage—an efficiency- and leverage-led but margin-constrained return profile. Liquidity is adequate with a current ratio of 179%, though the quick ratio of 78.5% highlights a reliance on inventories (¥75.36bn) to support working capital. Solvency is solid: total liabilities of ¥113.77bn versus equity of ¥71.99bn imply an equity ratio near 36% (derived) and debt-to-equity of 1.58x, with strong interest coverage at 13.4x. Operating cash flow was ¥2.101bn (OCF/NI 0.75x), indicating weaker cash conversion likely tied to working capital build, consistent with elevated inventories. EBITDA of ¥5.771bn (3.7% margin) suggests limited buffer against further cost shocks, but interest burden remains manageable given coverage. While the dividend line items are unreported for this period (DPS and payout appear as zero due to disclosure), earnings and OCF would allow for continued distributions if policy remains unchanged; however, free cash flow cannot be assessed without investing cash flow data. The effective tax rate appears closer to ~33% based on tax expense and profit, despite the reported 0.0% field, which is likely an unreported metric placeholder. Overall, Kyokuyo exhibits resilient sales but compressed profitability and moderate ROE, with balance sheet resilience and ample working capital capacity. Key sensitivities remain raw material prices, FX (yen), and inventory valuation dynamics. The outlook hinges on normalization of procurement costs, disciplined inventory management, and SG&A control to restore operating leverage in H2. Data limitations (notably equity ratio, cash balance, investing cash flows, DPS, and share count) constrain precision, but the core conclusions around margin pressure and adequate financial health remain intact.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.80%
• asset_turnover: 0.78x
• financial_leverage: 2.78x
• calculated_ROE: 3.91%
• interpretation: ROE is primarily constrained by thin net margins; asset turnover is reasonable for a trading/processing model, while moderate leverage amplifies returns without stressing covenants. margin_quality:
• gross_margin: 12.1% (gross profit ¥18.828bn on revenue ¥155.996bn)
• operating_margin: 2.92% (operating income ¥4.555bn)
• ordinary_margin: 2.68% (ordinary income ¥4.172bn)
• net_margin: 1.80% (net income ¥2.814bn)
• EBITDA_margin: 3.70% (EBITDA ¥5.771bn)
• commentary: The spread from gross to operating margin indicates elevated SG&A or logistics costs. EBITDA-to-operating gap (D&A ¥1.216bn) is modest, limiting cushioning against further cost shocks. operating_leverage:
• revenue_growth_YoY: +11.0%
• operating_income_growth_YoY: -16.6%
• diagnosis: Negative operating leverage in the period; cost increases and/or mix deterioration outpaced revenue growth. Recovery depends on stabilization of procurement costs and improved product mix.

Growth Assessment

revenue_sustainability: Double-digit revenue growth suggests solid demand and likely price pass-through in seafood trading and processed products. Sustainability will hinge on raw material availability, FX, and ability to maintain pricing amid potential normalization of commodity prices. profit_quality: Net income grew 3.9% YoY despite weaker operating profit, indicating support from non-operating factors. Core profit quality is mixed: lower operating margin offsets topline growth, and OCF/NI at 0.75x implies cash conversion pressure from working capital. outlook: If input costs and freight normalize and inventory levels are actively managed, operating leverage can improve in H2. A weaker yen can inflate sales but pressure import costs; disciplined pricing and hedging are key to defend margins.

Financial Health

liquidity:

• current_ratio: 179%
• quick_ratio: 78.5%
• working_capital: ¥59.265bn
• interpretation: Near-term liquidity is comfortable, but reliance on inventories is high; maintaining turnover is important to keep cash conversion steady. solvency:
• total_assets: ¥200.027bn
• total_liabilities: ¥113.769bn
• total_equity: ¥71.992bn
• equity_ratio_derived: 36.0% (equity/assets)
• debt_to_equity: 1.58x
• interest_coverage: 13.4x (EBIT/interest)
• interpretation: Balance sheet is moderately leveraged with strong coverage. There is room to absorb volatility in working capital and interest rates, assuming profitability stabilizes. capital_structure: Liability load is meaningful but supported by inventory-backed working capital typical of trading-heavy businesses. Equity base provides a solid cushion; refinancing risk appears manageable given coverage metrics.

Cash Flow Quality

earnings_quality: OCF of ¥2.101bn vs NI of ¥2.814bn (OCF/NI 0.75x) signals weaker conversion, likely due to inventory build and receivable expansion from higher sales. Non-cash D&A is modest (¥1.216bn), consistent with an asset-light tilt. free_cash_flow_analysis: Investing cash flow was not disclosed (shown as zero). Therefore, free cash flow cannot be reliably calculated for the period. On a proxy basis, pre-capex operating cash generation is positive but not abundant relative to sales scale. working_capital_dynamics: Inventories are elevated at ¥75.358bn; managing turnover is critical to prevent cash drag. Payables and receivables data are not disclosed, but the quick ratio implies significant funds tied in stock.

Dividend Sustainability

payout_ratio_assessment: Dividend and payout data are unreported for this period (zeros are placeholders). Using earnings as a guide (EPS ¥237 in H1), capacity exists for distributions if policy is unchanged, but payout prudence is warranted given margin pressure. FCF_coverage: Not assessable due to undisclosed investing cash flows. OCF coverage of prospective dividends would depend on capex intensity in H2 and working capital release. policy_outlook: Food sector peers typically target stable dividends; sustainability will hinge on normalizing margins, maintaining interest coverage, and controlling inventory to support cash generation.

Risk Assessment

Business Risks:

• Raw material price volatility for seafood (catch volumes, seasonal and regulatory factors).
• Foreign exchange fluctuations (yen) impacting import costs and export competitiveness.
• Inventory valuation and obsolescence risk amid price swings and demand variability.
• Logistics and freight cost volatility affecting gross-to-operating margin spread.
• Customer mix and private label pricing pressure compressing margins.
• Food safety and compliance risks impacting brand and costs.

Financial Risks:

• Working capital absorption reducing OCF-to-earnings conversion.
• Exposure to interest rate increases given moderate leverage (though coverage is currently strong).
• Potential covenant headroom erosion if operating profit weakens further.
• FX-related non-operating volatility influencing ordinary income.

Key Concerns:

• Negative operating leverage despite double-digit sales growth.
• High inventories relative to current assets, pressuring cash conversion.
• Thin EBITDA margin (3.7%) limiting buffer against cost shocks.
• Limited visibility on capex and free cash flow due to undisclosed investing cash flows.

Investment Implications

Key Takeaways:

• Topline growth is strong (+11% YoY), but operating profit fell 16.6%, signaling margin pressure.
• ROE at 3.91% is constrained by low net margins despite reasonable asset turnover.
• Liquidity is adequate (current ratio 1.79x), but quick ratio of 0.79x indicates inventory dependence.
• Interest coverage of 13.4x supports solvency despite 1.58x debt-to-equity.
• OCF/NI at 0.75x highlights working capital drag; inventory management is pivotal for H2.
• Dividend capacity cannot be fully evaluated without investing CF; earnings support is present but cash coverage is unclear.

Metrics to Watch:

• Gross and operating margin trends (cost pass-through and mix).
• Inventory days and turnover; OCF/NI ratio recovery.
• SG&A ratio to sales as an indicator of operating leverage normalization.
• FX (USD/JPY, EUR/JPY) and key seafood input prices.
• Interest expense trajectory and coverage in a changing rate environment.

Relative Positioning: Within Japanese marine products and food trading peers, Kyokuyo shows competitive sales growth but sits on the lower end of margin and ROE profiles; balance sheet strength and coverage are solid, leaving room for recovery if cost pressures ease and working capital normalizes.

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