Ezaki Glico Co.,Ltd. FY2026 Q2 Earnings Report

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Executive Summary

Revenue and profit increased, primarily driven by strong growth and improved profitability in the overseas business. Operating income grew by more than 40%, accompanied by an improvement in the operating margin. Revenue was ¥1803.7B (+9.7% year on year), operating income was ¥46.5B (+42.8%), ordinary income was ¥72.2B (+31.1%), and net income attributable to owners of the parent was ¥49.7B (+32.8%), exceeding the previous year at every stage. Although the gross profit margin declined by approximately 90bp year on year to 37.1%, the operating margin increased to 2.6% (2.0% in the previous year) as the SG&A expense ratio improved by approximately 150bp to 34.5%. While the expanding sales mix and higher margins of the overseas business were the main drivers, the continuing loss in the Dairy Business remains a factor weighing on consolidated profits.

Factors Affecting Performance

【Revenue】Revenue of ¥1803.7B (+9.7% year on year) was driven by substantial growth in the overseas business. Segment composition was Overseas 30.0%, Domestic Other 22.3%, Dairy 17.8%, Nutritional Confectionery 16.6%, Health and Food 11.8%, and Food Ingredients 3.6%. The overseas business, at ¥540.6B (+32.3%), was the core driver of company-wide growth. Domestic segments remained broadly flat, with revenue growth ranging from 0.2% to 4.9%, while Food Ingredients was the only segment to record a decline, with revenue of ¥64.2B (-1.7%).

【Profit and Loss】Operating income of ¥46.5B (+42.8%) was achieved as the SG&A expense ratio improved by approximately 150bp (36.0%→34.5%), despite an approximately 90bp year-on-year decline in the gross profit margin (38.0%→37.1%). Ordinary income of ¥72.2B (+31.1%) was boosted by non-operating income of ¥35.3B, including dividend income of ¥4.7B, foreign exchange gains of ¥3.1B, and subsidy income of ¥10.1B. Extraordinary income of ¥5.4B, including ¥5.0B in gains on the sale of investment securities, was a temporary factor and contributed to net income attributable to owners of the parent of ¥49.7B (+32.8%). Revenue and profit increased.

Segment Analysis

The Overseas Business was the largest contributor to company-wide profit, with revenue of ¥540.6B (+32.3%), operating income of ¥75.8B (+66.1%), and an operating margin of 14.0%. Food Ingredients recorded a revenue decline to ¥64.2B (-1.7%), but operating income increased to ¥12.2B (+23.6%), maintaining the highest operating margin among all segments at 19.0%. In contrast, the Dairy Business recorded revenue of ¥321.8B (+4.9%), while its operating loss expanded by approximately 11.2% from the previous year to ¥41.7B, resulting in a loss margin of -13.0% of revenue and representing a structural factor weighing on company-wide profit. The Health and Food Business narrowed its operating loss to ¥14.4B (¥-16.8B in the previous year), while Nutritional Confectionery posted operating income of ¥9.7B (-51.2%) and Domestic Other posted operating income of ¥1.4B (-43.7%), with both segments recording lower profit. The adjustment to company-wide operating income shifted from +¥9.0B in the previous year to -¥3.5B in the current period, including -¥8.1B in company-wide expenses and other items, expanding the discrepancy between the total of reported segments and actual operating income.

Key Financial Metrics

【Profitability】The operating margin was 2.6%, improving by +0.6pt from 2.0% in the previous year, while the net profit margin was 2.8% on a net income attributable to owners of the parent basis, and ROE was 1.8%. 【Cash Quality】Cash and deposits were ¥680.9B, accounting for 17.6% of total assets. The equity ratio was 70.1%, almost unchanged from 70.5% in the previous year, indicating a strong financial foundation. 【Investment Efficiency】Total asset turnover remained low at 0.47x (revenue of ¥180.4B ÷ total assets of ¥386.6B). ROE of 1.8% can be decomposed into a net profit margin of 2.8% × total asset turnover of 0.47 × financial leverage of 1.43x, indicating that low asset turnover is a constraint on capital efficiency. 【Financial Soundness】Cash and deposits of ¥680.9B substantially exceeded interest-bearing debt, consisting of short-term borrowings of ¥171.4B and long-term borrowings of ¥1.1B, enabling the Company to maintain a financial position that is effectively close to debt-free.

Cash Flow Analysis

Because cash flow statement data has not been disclosed, funding trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥680.9B, almost unchanged from ¥686.3B in the same period of the previous year (-0.8%), while short-term borrowings increased sharply to ¥171.4B from ¥0.5B in the previous year, indicating a change in the funding structure. Inventories increased to ¥241.2B (+13.5%), while accounts receivable were reduced to ¥423.4B (-16.1%), indicating a shift in the composition of working capital. Treasury stock increased to ¥269.8B from ¥136.0B in the previous year, suggesting that share repurchases may have contributed to the limited growth in cash and deposits and the increase in short-term borrowings. Investment securities increased to ¥614.8B (+10.1%), slightly raising the weight of financial assets in the asset composition.

Earnings Quality

The recurring source of earnings was operating income of ¥46.5B, while extraordinary income of ¥5.4B, including ¥5.0B in gains on the sale of investment securities, should be distinguished as a temporary factor. Non-operating income of ¥35.3B represented 2.0% of revenue, with items unrelated to the earning power of the core business—including dividend income of ¥4.7B, foreign exchange gains of ¥3.1B, and subsidy income of ¥10.1B—contributing to the increase in ordinary income. Net income attributable to owners of the parent of ¥49.7B was approximately 31% lower than ordinary income of ¥72.2B. This divergence resulted from income taxes of ¥27.6B, representing an effective tax rate of 35.6%, and net income attributable to non-controlling interests of ¥0.3B, and does not represent a substantial divergence caused by unusual factors. Comprehensive income was ¥89.0B, exceeding net income of ¥50.0B on a consolidated basis. Other comprehensive income, including foreign currency translation adjustments of +¥17.8B and valuation differences on securities of +¥26.6B, contributed to the increase. The contribution of valuation gains to comprehensive income in the current period should be noted.

Earnings Forecast and Guidance

Progress against the full-year forecasts—revenue of ¥3900.0B, operating income of ¥120.0B, ordinary income of ¥140.0B, and net income of ¥90.0B—was 46.3% for revenue, 38.8% for operating income, 51.6% for ordinary income, and 55.3% for net income attributable to owners of the parent. Compared with the 50% benchmark for the halfway point of the fiscal year, operating income was behind schedule, while ordinary income and net income exceeded the benchmark, suggesting an early-period contribution from non-recurring items such as non-operating income and extraordinary income. Although the earnings forecast was revised during the current quarter, the dividend forecast was not revised. Revenue is progressing close to plan, supported by growth in the overseas business, while the pace of operating income growth—including the restoration of profitability in the Dairy Business—is the key focus for the second half.

Shareholder Returns

The full-year dividend forecast is ¥95, resulting in a payout ratio of approximately 66.2% against forecast EPS of ¥143.52. There was no revision to the dividend forecast during the current quarter, and the full-year policy remains unchanged. Treasury stock increased to ¥269.8B from ¥136.0B in the previous year, indicating that shareholder returns are being implemented through share repurchases. Because the payout ratio based solely on dividends differs from the Total Return Ratio including share repurchases, the two should be considered separately.

Risk Factors

1. Structural losses in the Dairy Business: The operating loss was ¥41.7B, with the loss widening by approximately 11.2% from the previous year and resulting in a loss margin of -13.0% of revenue. Given its significant impact on company-wide operating income of ¥46.5B, progress in improving profitability is a key monitoring point for the company-wide profit margin.

2. Sharp increase in short-term borrowings: Short-term borrowings increased substantially to ¥171.4B from ¥0.5B in the same period of the previous year. Although cash and deposits of ¥680.9B exceed borrowings and the level remains absorbable from a liquidity perspective, its development requires monitoring as a change in the funding structure.

3. Increased foreign exchange sensitivity accompanying the higher overseas business ratio: The overseas business accounted for 30.0% of revenue, and its contribution to operating income also expanded, with growth of 66.1%. The impact of foreign exchange fluctuations on earnings is relatively increasing as the overseas business expands.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Return

A comparison of profitability levels within the Food and Beverage industry is provided for reference only, as median data is limited.

Growth and Capital Efficiency

The revenue growth rate is presented only for the current-period results, and the relative positioning within the industry awaits further data expansion.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The Overseas Business, with revenue growth of +32.3%, operating income growth of +66.1%, and an operating margin of 14.0%, was the primary driver of company-wide profit growth. The increase in the overseas revenue composition ratio to 30.0% is noteworthy as a structural change in the business portfolio.

2. Despite revenue growth of +4.9% in the Dairy Business, its operating loss expanded by approximately 11.2% from the previous year. Progress in eliminating the loss-making structure is therefore a structural point of focus that will determine the trend in the company-wide profit margin.

3. Full-year progress for ordinary income and net income was 51–55%, exceeding the halfway-point benchmark, while operating income was behind schedule at 38.8%. The differing contributions of core operating profit and non-recurring items may affect the outlook for second-half performance.

Theoretical Share Price (For Reference)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥3,626–¥3,831 at ±1% for the cost of equity, and ¥3,704–¥3,740 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used, creating a timing difference from the full-year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Model used: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific issue. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, and professional advice should be sought as necessary.

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