YUKIGUNI FACTORY (1375) FY2027 Q1 Earnings Report

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Executive Summary

During the quarter, the operating loss and net loss narrowed significantly on higher revenue; however, both operating income and net income remained negative. Total revenue was ¥10.20B (+15.4% YoY), including revenue from sales of ¥7.98B. The operating loss was ¥0.43B, improving from ¥0.72B in the same period last year, while the quarterly net loss attributable to owners of the parent was ¥0.31B, improving from ¥0.64B last year. The primary factors behind the narrower loss were higher revenue, an improved gross margin, and a lower SG&A ratio. However, the contribution from gains on fair value changes (¥2.22B, +42.8% YoY) was substantial, requiring a distinction between underlying demand-driven growth and accounting valuation gains.

Factors Affecting Performance

【Revenue】Total revenue was ¥10.20B (+15.4% YoY), including revenue from sales of ¥7.98B (+9.1%). The core Mushroom Business led overall performance, with revenue from sales of ¥7.87B (+9.2%), while Other Businesses achieved high growth from a small base, with revenue from sales of ¥0.11B (+48.6%). Of the increase in total revenue, the increase in gains on fair value changes accounted for ¥0.665B, a similar scale to the ¥0.699B increase in revenue from sales, indicating that the increase in revenue included an uplift from valuation gains.

【Profit and Loss】Cost of sales was limited to ¥8.43B (+13.8%), and the gross margin improved to 17.4% from 16.2% in the previous year. SG&A expenses increased by 2.4% to ¥2.24B, below the rate of revenue growth, and the operating margin improved to negative 4.2% from negative 8.1% in the previous year. The loss before tax was ¥0.47B, while the net loss attributable to owners of the parent was ¥0.31B; both narrowed from the previous year. Rather than a pattern of higher revenue accompanied by lower profit, the company experienced a narrowing of losses driven by higher revenue—a higher-revenue, higher-profit pattern in the sense of reduced losses. Accordingly, the overall conclusion is higher revenue and higher profit, or a narrowing of losses.

Segment Analysis

The Mushroom Business generated revenue from sales of ¥7.87B (+9.2% YoY) and a segment loss of ¥0.42B, an improvement of ¥0.28B from the ¥0.72B loss in the previous year, and is the core business accounting for the majority of the consolidated loss. Other Businesses generated revenue from sales of ¥0.11B (+48.6%) and a segment loss of ¥0.014B, improving from the ¥0.032B loss in the previous year. Although small in scale, the business continues to improve. The improvement in consolidated profit and loss is highly dependent on improved profitability in the Mushroom Business.

Key Financial Indicators

【Profitability】The operating margin was negative 4.2%, improving from negative 8.1% in the previous year, but remained in negative territory. The gross margin was 17.4%, improving from 16.2% in the previous year. ROE (annualized) was negative 8.9%, and the equity ratio was 38.9%.【Cash Flow Quality】Operating cash flow (OCF) was negative ¥0.62B, while EBITDA was estimated at approximately ¥0.15B, indicating that the narrowing of accounting losses has not translated sufficiently into a recovery in cash flow. Payment of income taxes of ¥0.88B was the primary factor weighing on OCF.【Investment Efficiency】Capital expenditures were ¥0.43B, resulting in investing cash flow of negative ¥0.43B. Free cash flow was negative ¥1.05B, indicating that investment and dividends could not be funded solely through internally generated funds.【Financial Soundness】Cash and deposits were ¥1.98B, down from ¥3.97B in the previous year. Cash of ¥1.98B was below long-term borrowings due within one year of ¥4.42B, indicating limited short-term funding capacity.

Cash Flow Analysis

Operating cash flow was negative ¥0.62B, improving by ¥1.66B from negative ¥2.28B in the same period last year, although cash outflows continued. The OCF subtotal, calculated by adding depreciation and amortization of ¥0.59B and other items to the ¥0.47B loss before tax, was positive ¥0.27B. After payment of income taxes of ¥0.88B, OCF ultimately became negative. Within working capital, a decrease in trade receivables (+¥0.50B) and an increase in trade payables (+¥0.18B) contributed to cash inflows, while an increase in inventories (-¥0.09B) was a negative factor. Investing cash flow was negative ¥0.43B, primarily reflecting ¥0.43B in capital expenditures. Financing cash flow was negative ¥0.94B, mainly due to dividend payments of ¥0.75B. Free cash flow was negative ¥1.05B, and cash and cash equivalents declined to ¥1.98B (¥3.97B at the end of the same period last year). The fact that the narrowing of losses has not translated into a recovery in cash generation is a point requiring attention regarding cash flow quality.

Earnings Quality

No one-time income or expenses occurred during the quarter. The primary drivers of changes in profit and loss were the ordinary earning power of the business and fair value changes in biological assets under IAS 41. The increase in gains from fair value changes accounted for ¥0.665B of the increase in total revenue, a figure close to the ¥0.699B increase in revenue from sales. Accordingly, the accounting-driven narrowing of losses includes a considerable contribution from changes in valuation gains, an accounting-specific factor. The OCF subtotal before changes in working capital was positive ¥0.27B, creating a certain divergence from the ¥0.47B loss before tax. This was mainly attributable to the non-cash item of ¥0.59B in depreciation and amortization and fair value changes in biological assets, and does not indicate a significant accrual distortion. Comprehensive income was negative ¥0.30B, nearly equal to the quarterly net loss attributable to owners of the parent of ¥0.31B, indicating that the impact of other comprehensive income, such as foreign currency translation differences, was limited.

Earnings Forecast and Guidance

The full-year company forecast calls for revenue of ¥56.91B (+6.5% YoY), operating income of ¥4.14B (-4.1%), and net income attributable to owners of the parent of ¥2.54B (-14.1%). Total revenue of ¥10.20B for the quarter represents 17.9% progress against the full-year revenue forecast, below the simple one-quarter benchmark of 25%. The company posted a ¥0.43B operating loss as of the current quarter, meaning that no progress has yet been made toward the forecast of full-year profitability. There were no revisions to either the earnings forecast or the dividend forecast, and significant improvement in profitability in the second half of the year is a prerequisite for achieving the plan.

Shareholder Returns

Dividend payments during the quarter were ¥0.75B, up from ¥0.47B in the same period last year. Because the company recorded a net loss for the quarter, the payout ratio based on quarterly results has no meaningful interpretation. No share repurchases were conducted during the quarter, and shareholder returns consisted solely of dividends. Under the full-year forecast, the dividend is expected to be ¥20.0 per share. Based on forecast net income attributable to owners of the parent of ¥2.54B, total dividends are estimated at approximately ¥0.80B, implying a forecast payout ratio of approximately 31%. However, given the operating loss, negative free cash flow, and cash balance of ¥1.98B during the quarter, dividend sustainability depends on a recovery in second-half earnings and OCF.

Risk Factors

1. Concentration risk in the core business: The Mushroom Business is the sole reported segment, and its segment loss of ¥0.42B accounts for the majority of the consolidated loss. This business structure concentrates the impact of fluctuations in selling prices, demand, raw material costs, and labor costs on overall performance.

2. Short-term liquidity risk: Long-term borrowings due within one year amounted to ¥4.42B, exceeding cash and cash equivalents of ¥1.98B. Current liabilities of ¥10.27B also exceeded current assets of ¥8.62B, indicating a level of short-term funding capacity that requires monitoring.

3. Earnings quality risk: Gains from fair value changes accounted for ¥2.22B, or 21.7% of total revenue. Changes in the valuation assumptions for biological assets may increase earnings volatility.

Industry Benchmark (For Reference; Based on Company Research)

Both the company’s operating margin and net profit margin were negative. As comparative data are unavailable, its relative position within the industry cannot be determined.

The revenue growth rate was +15.4% YoY, indicating a certain degree of growth; however, relative evaluation is not possible because industry median data are unavailable.

※Source: Based on company research

Key Points from the Earnings Results

1. During the quarter, the operating loss and net loss narrowed due to higher revenue and improvements in the gross margin and SG&A ratio. However, the operating margin remained in negative territory at negative 4.2%, and no progress has yet been made toward the full-year forecast of profitability (operating income of ¥4.14B).

2. The increase in total revenue was significantly supported by higher gains from fair value changes in biological assets. It is therefore necessary to distinguish revenue growth based on underlying demand from accounting valuation gains.

3. Despite the narrowing of losses, OCF and free cash flow remained negative, and the cash balance declined from the end of the same period last year. Dividends continue to be paid, but a recovery in earnings and cash flow in the second half of the year will be a key development to monitor.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional advisor as necessary.