Morinaga & Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥121.87B
• Operating Income: ¥13.35B
• Net Income: ¥10.73B
• EPS: ¥130.82

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

Morinaga & Co., Ltd. (consolidated, JGAAP) delivered steady topline growth in FY2026 Q2, with revenue of ¥121.9bn, up 2.5% YoY, amid a challenging input cost environment. Gross profit reached ¥48.7bn, implying a gross margin of 39.9%, which is solid for confectionery but suggests ongoing cost discipline and/or price realization. Operating income was ¥13.35bn, down 3.7% YoY, indicating slight operating deleverage despite the revenue increase. Operating margin stands at roughly 11.0%, reflecting resilient profitability but some pressure versus the prior year. Ordinary income of ¥13.45bn outpaced operating income, supported by net non-operating gains; interest expense remains minimal at ¥55m. Net income grew 3.8% YoY to ¥11.03bn, lifting net margin to 9.05%. DuPont decomposition shows ROE of 8.37%, driven by a 9.05% net margin, asset turnover of 0.572x, and financial leverage of 1.61x. On the balance sheet, total assets are ¥212.9bn and total equity ¥131.9bn; while the disclosed equity ratio shows 0.0% (undisclosed), the recalculated equity ratio is approximately 61.9%, indicating a conservative capital structure. Liquidity is strong, with a current ratio of 201.7% and a quick ratio of 160.5%, supported by working capital of ¥52.8bn. Cash flow quality appears healthy: operating cash flow of ¥10.80bn is roughly 0.98x net income, suggesting earnings are well-backed by cash generation. EBITDA is ¥18.12bn (14.9% margin), and interest coverage is very robust at ~242.7x, underscoring low financial risk. Investing cash flow and cash balances were not disclosed in this dataset, limiting free cash flow assessment and cash liquidity visibility. Reported dividend per share and payout ratios show as zero, which should be treated as undisclosed rather than actual zero; thus, dividend sustainability cannot be concluded from the provided data. Inventory stands at ¥21.39bn; based on H1 COGS, this implies roughly mid‑50s days of inventory on hand, a reasonable level for the category. Overall, Morinaga shows stable growth, resilient margins, strong liquidity, low leverage, and solid cash conversion, offset by modest ROE (high‑single digit) and some operating deleverage in the half. Data gaps (notably investing CF, cash, dividends, and share count) require caution in interpreting FCF and payout dynamics.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 9.05%
• asset_turnover: 0.572
• financial_leverage: 1.61
• calculated_ROE: 8.37%
• commentary: ROE is primarily driven by a solid net margin and moderate asset turnover, with conservative leverage (assets/equity ~1.61x) tempering return volatility. margin_quality:
• gross_margin: 39.9%
• operating_margin: 10.95%
• ordinary_income_margin: 11.04%
• net_margin: 9.05%
• drivers: Price realization and product mix likely supported gross margin; however, higher input costs (cocoa, sugar, dairy, energy) and SG&A growth led to YoY compression at the operating level.
• tax_burden_note: Disclosed effective tax rate of 0.0% reflects data omission. Based on income tax expense of ¥4.32bn on ordinary income of ¥13.45bn, the implied tax rate is roughly low‑30s%, consistent with historical norms. operating_leverage: Revenue +2.5% YoY versus operating income -3.7% YoY indicates negative operating leverage in H1, suggesting cost inflation and/or higher marketing/logistics costs outpaced revenue growth.

Growth Assessment

revenue_sustainability: Topline growth of 2.5% YoY suggests steady demand and/or pricing pass-through. Sustainability hinges on continued price-cost management and consumer acceptance amid a competitive confectionery market. profit_quality: Net income +3.8% YoY despite operating profit decline reflects non-operating support and disciplined tax/financial costs. Core profitability remains solid but slightly pressured at the operating level. outlook: Assuming input costs stabilize and price/mix actions persist, margins could improve in subsequent periods; however, continued volatility in cocoa and dairy prices and competitive pricing behavior present near-term headwinds.

Financial Health

liquidity:

• current_ratio: 201.7%
• quick_ratio: 160.5%
• working_capital: ¥52.78bn
• commentary: Ample short-term liquidity supported by robust receivables and inventory coverage; room to manage seasonality and procurement needs. solvency:
• debt_to_equity: 0.59x (liabilities/equity)
• interest_coverage: 242.7x
• equity_ratio_recalculated: 61.9%
• commentary: Low financial risk with strong equity buffer and minimal interest burden. Balance sheet provides flexibility for capex and potential shareholder returns. capital_structure: Assets ¥212.9bn, equity ¥131.9bn, liabilities ¥77.6bn. Leverage is conservative (A/E 1.61x), consistent with a defensive consumer staples profile.

Cash Flow Quality

earnings_quality:

• OCF: ¥10.80bn
• net_income: ¥11.03bn
• OCF_to_NI: 0.98
• commentary: Cash conversion is strong; earnings are well-supported by operating cash flows in H1. FCF_analysis:
• free_cash_flow: Not assessable (investing cash flows undisclosed)
• capex_proxy: Depreciation & amortization ¥4.77bn offers a rough proxy for maintenance capex, but actual capex is unknown due to missing investing CF.
• commentary: Without investing CF and cash balance data, true FCF and cash coverage cannot be determined for the period. working_capital:
• inventories: ¥21.39bn (~mid‑50s days on H1 COGS estimate)
• observations: Inventory levels appear reasonable; continued monitoring of inventory days and receivables turnover is warranted to preserve cash conversion.

Dividend Sustainability

payout_ratio_assessment: Reported DPS and payout ratio at 0.0% are undisclosed placeholders; no conclusion can be drawn on payout from the provided dataset. FCF_coverage: Indeterminable given missing investing CF and cash data; OCF is healthy, but capex requirements are unknown. policy_outlook: Sector norms often target stable and progressive dividends; with EPS of ¥130.82 and low leverage, capacity appears available, but confirmation requires actual DPS and capex/cash data.

Risk Assessment

Business Risks:

• Commodity price volatility (cocoa, sugar, dairy) impacting gross margins
• Consumer price sensitivity and elasticity to recent/future price hikes
• Competitive intensity in domestic confectionery and snacks
• Channel mix shifts (CVS, drugstores, e-commerce) affecting promo intensity
• Brand and product refresh risk; innovation cadence
• Quality control/recall risk inherent in food manufacturing
• Seasonality and weather effects on demand for chocolate/ice products

Financial Risks:

• Input cost spikes not fully hedgeable despite procurement strategies
• FX fluctuations impacting imported raw materials
• Potential working capital build (inventory/receivables) constraining OCF
• Capex upcycles for capacity or automation compressing near-term FCF

Key Concerns:

• Negative operating leverage in H1 despite revenue growth
• Incomplete disclosure on investing cash flows and cash balances
• Undisclosed dividend data limiting assessment of shareholder return policy

Investment Implications

Key Takeaways:

• Steady revenue growth (+2.5% YoY) with resilient gross margin (39.9%)
• Operating profit decline (-3.7% YoY) signals near-term margin pressure
• ROE of 8.37% is supported by solid margins and conservative leverage
• Strong liquidity (current ratio ~2.0x) and low financial risk (interest coverage ~243x)
• Healthy cash conversion (OCF/NI ~0.98) but FCF not assessable due to missing investing CF
• Balance sheet strength (equity ratio ~61.9%) provides flexibility

Metrics to Watch:

• Gross and operating margin trajectory versus input cost trends (cocoa, dairy, sugar)
• Price-cost spread and promotional intensity
• Inventory days and receivables turnover (cash conversion)
• Capex levels and disclosed investing cash flows (to assess FCF)
• ROE progression via margin and asset turnover improvements
• Actual DPS/payout announcements and capital allocation guidance

Relative Positioning: Within Japanese food & confectionery peers, Morinaga exhibits above-average balance sheet strength and solid EBITDA margins, with ROE in the mid-to-high single digits—below the top quartile but consistent with a conservative, low-leverage profile.

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