YUKIGUNI FACTORY CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.77B
• Operating Income: ¥431M
• Net Income: ¥75M
• EPS: ¥2.05

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Verdict: Weak quarter with sharp profit compression and negative operating cash flow despite modest gross margin, pointing to heightened balance-sheet risk. Revenue fell to 197.73, down 8.3% YoY, while operating income plunged 67.2% to 4.31, taking operating margin down to 2.2%. Using the YoY rates, last year’s revenue was roughly 215.67 and operating income about 13.14, implying an operating margin near 6.1% then; margin compressed by approximately 391 bps YoY. Net income dropped 89.0% to 0.81, a net margin of 0.4%, versus an estimated 3.4% a year ago, a compression of roughly 300 bps. Gross profit was 47.46 for a 24.0% gross margin, but SG&A of 43.79 absorbed nearly all gross profit (SG&A-to-sales 22.2%), leaving little operating cushion. EBITDA was 15.56 (margin 7.9%), supported by 11.25 of D&A, but this did not translate to cash: operating cash flow was -26.46. OCF/Net income was -32.7x, signaling severe earnings quality deterioration and likely heavy working-capital outflows. Free cash flow was -33.40 after -6.94 investing CF and -7.27 capex, indicating external financing reliance (financing CF +3.23). Balance sheet leverage is elevated with D/E at 1.97x and equity ratio at 33.5%, and Debt/EBITDA stands at a high 10.6x. Total assets were 358.55 with current assets of 94.65; short-term loans were 17.00 and long-term loans 147.24, underscoring debt dependence. Effective tax rate was unusually high at 79.8%, exacerbating the drop from operating profit to net profit. ROE calculated at 0.7% reflects the combination of thin net margins (0.4%), low asset turnover (0.551), and high leverage (2.97x). ROIC of 0.8% is far below a 7–8% benchmark, indicating value-dilutive deployment of capital this period. Dividend capacity looks strained: the payout ratio was 739.1% and FCF coverage was -5.58x, implying payouts exceeded underlying earnings and free cash flow. With OCF deeply negative and leverage high, near-term priorities likely shift to cash preservation and working capital normalization. Forward-looking, stabilization hinges on SG&A control, margin recovery (pricing/mix), normalization of tax burden, and working-capital release to restore cash flow.

Profitability Analysis

ROE decomposition: ROE 0.7% = Net profit margin (0.4%) × Asset turnover (0.551) × Financial leverage (2.97x). The largest driver of deterioration is net margin, which compressed by roughly 300 bps YoY (to 0.4%) versus an estimated 3.4% last year; operating margin also contracted by ~391 bps to 2.2%. Business drivers likely include weaker top line (-8.3% YoY), limited gross margin flexibility (24.0%), and SG&A rigidity (43.79, 22.2% of sales), leaving minimal operating headroom. The spike in effective tax rate (79.8%) further depressed net income relative to operating profit. Asset turnover at 0.551 appears subdued, consistent with heavy fixed assets (noncurrent assets 263.90, 74% of total), limiting operating leverage benefits when sales fall. The margin compression looks partially cyclical (demand softness and possible input cost pressures) but also reflects cost stickiness; absent structural cost actions or price/mix improvement, full recovery is uncertain. Watch for SG&A growth outpacing revenue; in this period, SG&A absorption remained high relative to a shrinking top line—an adverse operating leverage effect.

Growth Assessment

Revenue declined 8.3% YoY to 197.73, indicating demand softness or weaker volumes/mix. Operating income fell 67.2% to 4.31, with operating margin dropping to 2.2% as SG&A remained high against lower sales. Net income collapsed 89.0% to 0.81, reflecting margin compression and an elevated effective tax rate. EBITDA margin of 7.9% provides some buffer but is not converting to cash (OCF -26.46), implying working-capital stress and/or inventory build. With ROIC at 0.8%, current investments are not earning cost of capital, pressuring medium-term value creation. Near-term outlook for growth depends on price pass-through, channel mix, and normalization of working capital; sustained revenue growth without SG&A realignment may not lift margins materially. Given the debt load and cash burn, management likely prioritizes profitability and cash over expansion.

Financial Health

Liquidity: Current ratio not calculable due to unreported current liabilities; current assets are 94.65, with accounts receivable 28.63 and inventories 18.10, and short-term loans 17.00, suggesting reliance on short-term funding. Solvency: D/E is 1.97x, close to the 2.0x warning threshold; equity ratio is 33.5%, indicating moderate capitalization but with high leverage. Debt profile: Loans total 164.24 (ST 17.00, LT 147.24); Debt/EBITDA is high at 10.6x, pointing to elevated financial risk and limited debt capacity. Maturity mismatch: Short-term loans (17.00) are more than covered by current assets, but with CL unreported, full assessment is constrained. Off-balance items: None reported in the provided data.

Cash Flow Quality

Earnings quality is weak: OCF/Net income is -32.67x (<0.8 threshold), indicating profits are not backed by cash and likely reflect significant working-capital outflows. Free cash flow is -33.40 after -6.94 investing CF and -7.27 capex, implying the business required external financing (+3.23) to bridge the gap. Dividend and buybacks (-4.79 and -0.32) were not covered by FCF, adding to funding needs. Potential working capital red flags include the combination of negative OCF with declining sales, which may signal inventory build or slower receivable collections; detailed components are not disclosed to confirm. Sustainability hinges on releasing working capital and improving operating margins.

Dividend Sustainability

The calculated payout ratio is 739.1%, far above the <60% sustainability benchmark, driven by low net income (0.81). FCF coverage is -5.58x, indicating dividends were not funded by free cash generation this period. With OCF negative and leverage high (D/E 1.97x; Debt/EBITDA 10.6x), maintaining dividends at recent levels would likely require balance sheet support or increased debt, which is risky. DPS details are unreported, but given the cash profile, a conservative stance or recalibration of shareholder returns would be prudent until cash flow normalizes.

Risk Assessment

Business Risks:

• Margin compression from weak demand and limited pricing power (operating margin 2.2%)
• High SG&A burden (22.2% of sales) creating adverse operating leverage
• Elevated effective tax rate (79.8%) depressing net earnings
• Potential input cost inflation (raw materials, energy) squeezing gross margins
• Execution risk in working-capital management leading to negative OCF

Financial Risks:

• High leverage (D/E 1.97x) near warning threshold
• Debt/EBITDA at 10.6x, indicating constrained debt capacity and refinancing risk
• Negative OCF (-26.46) and negative FCF (-33.40) requiring external financing
• Interest coverage not disclosed; potential vulnerability to interest rate increases
• Liquidity visibility limited due to unreported current liabilities

Key Concerns:

• ROIC at 0.8% well below 5% warning threshold
• OCF/Net income at -32.7x indicates poor earnings quality
• Dividend outlays not covered by FCF (FCF coverage -5.58x)
• Maturity profile reliance on short-term loans (17.00) amid weak cash generation
• Potential covenant pressure if EBITDA weakens further

Investment Implications

Key Takeaways:

• Substantial profit deterioration with operating margin down ~391 bps YoY to 2.2%
• Earnings quality weak: OCF deeply negative despite positive EBITDA
• Balance sheet leverage elevated (D/E 1.97x; Debt/EBITDA 10.6x)
• ROIC 0.8% signals value-dilutive capital deployment this period
• Dividend coverage poor; payouts exceeded both earnings and FCF

Metrics to Watch:

• Working capital (receivable days, inventory days, payable days) and OCF recovery
• Gross margin trajectory and SG&A-to-sales ratio
• Debt/EBITDA and any refinancing or covenant disclosures
• Effective tax rate normalization toward structural levels
• Capex discipline versus cash generation

Relative Positioning: Versus typical domestic food/process peers, profitability and cash conversion are currently weaker, leverage is higher, and ROIC sits well below sector norms; near-term focus must be on restoring operating margin and releasing working capital to stabilize credit metrics.

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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