MEITO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.24B
• Operating Income: ¥1.04B
• Net Income: ¥3.40B
• EPS: ¥129.89

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

For FY2026 Q2 (consolidated, JGAAP), 株式会社meito delivered steady top-line growth and stronger operating profitability, while headline net profit declined year over year due to non-recurring factors. Revenue increased 3.1% YoY to ¥14.239bn, with gross profit of ¥4.284bn and a gross margin of 30.1%, indicating reasonable pricing power and/or improved input cost management. Operating income rose 12.3% YoY to ¥1.037bn, lifting the operating margin to 7.3%, reflecting operating leverage and cost discipline. Ordinary income reached ¥1.786bn, materially exceeding operating income, implying sizeable non-operating gains (roughly ¥0.75bn), such as investment income or other financial/non-core items. Net income was ¥2.199bn (−35.3% YoY), meaning prior-year net profit likely benefited from larger extraordinary gains; despite this decline, current-period net margin is still a high 15.4% due to non-recurring gains. EPS was ¥129.89, but share count data is not disclosed in the provided figures, limiting per-share cross-checks. The DuPont breakdown shows net margin of 15.44%, asset turnover of 0.149x, and financial leverage of 1.60x, yielding an ROE of 3.68%, which is modest and below typical Japanese food sector cost of equity benchmarks. Cash generation is solid at the operating level, with OCF of ¥2.022bn, equating to an OCF/Net Income ratio of 0.92—suggesting broadly aligned earnings and cash flow, with limited working-capital drag. Liquidity appears strong (current ratio 196.8%, quick ratio 175.2%), and leverage is conservative (debt-to-equity 0.48x as proxied by total liabilities/equity). Interest expense is minimal at ¥24m, and interest coverage is robust at 43.2x based on EBIT, providing ample cushion against rate or earnings shocks. Financing CF was an outflow of ¥3.375bn, indicating distributions to shareholders and/or debt repayment; DPS and FCF data are not disclosed in a way that allows precise attribution. Effective tax rate is shown as 0.0% in the metric summary, which is inconsistent with reported income tax expense of ¥1.349bn and thus should be treated as a data limitation, not an analytical conclusion. Several balance-sheet and cash-related items (e.g., cash and equivalents, investing CF, equity ratio) are undisclosed in the feed, so conclusions rely on the available non-zero datapoints. Overall, the underlying operating trend is positive, but reported net profit is elevated by non-operating/extraordinary items and is lower YoY due to tougher comps. The company’s conservative balance sheet and solid OCF support resilience, yet structurally low ROE and reliance on non-operating gains temper the quality of earnings. Outlook hinges on sustaining pricing/mix and cost control while normalizing the contribution from non-core gains.

Profitability Analysis

ROE decomposes as 3.68% = 15.44% net margin × 0.149x asset turnover × 1.60x leverage. Net margin (15.4%) is high for a food producer, but it is boosted by non-operating/extraordinary factors since ordinary income (¥1.786bn) is substantially above operating income (¥1.037bn). Operating margin stands at 7.3% (¥1.037bn/¥14.239bn), up YoY with operating income growth of 12.3% outpacing sales growth of 3.1%, indicating positive operating leverage. Gross margin of 30.1% reflects reasonable input cost pass-through and/or mix improvement; the spread from gross to operating margin (roughly 22.8ppt) captures SG&A intensity consistent with a branded/processed foods model. EBITDA is ¥1.945bn (13.7% margin), providing additional cushion for investment and financing. Interest expense is very low (¥24m), and EBIT/interest coverage is 43.2x, underscoring minimal financial drag on profitability. The gap between operating and ordinary income (~¥749m) suggests material non-core income; while accretive to reported margins, it reduces the repeatability of the net margin. ROE is constrained more by low asset turnover (0.149x) than by leverage, implying a capital-heavy or underutilized asset base relative to current revenue. Overall profitability quality is improving at the core (gross/operating levels), but headline profitability depends on non-operating contributions and one-offs.

Growth Assessment

Revenue grew 3.1% YoY to ¥14.239bn, a moderate pace consistent with stable demand and/or modest price/mix improvement. Operating income expanded 12.3% YoY to ¥1.037bn, indicating operating leverage from cost actions and scale benefits. Ordinary income at ¥1.786bn and net income at ¥2.199bn reflect meaningful contributions beyond core operations; the 35.3% YoY decline in net income implies the prior-year base included larger extraordinary gains. Profit quality is best assessed at the operating level, where margin expansion suggests improvements are more likely sustainable than the non-operating and extraordinary portions. Asset turnover (0.149x) remains low, constraining ROE; growth that improves utilization or sheds underproductive assets could be accretive to returns. With OCF at ¥2.022bn and OCF/NI at 0.92x, cash realization of earnings is solid, supporting reinvestment capacity. Near-term outlook hinges on maintaining gross margin (input costs such as sugar, cocoa, dairy, and energy) and controlling SG&A, while normalizing non-operating income. Financing CF outflow (¥3.375bn) indicates active balance sheet and/or shareholder return actions; sustaining growth investments will require stable OCF and prudent capex (investing CF not disclosed). Overall, core growth momentum is positive but masked by lower YoY net due to tougher one-off comps.

Financial Health

Total assets are ¥95.563bn and total equity is ¥59.677bn, implying leverage of 1.60x (assets/equity) and liabilities/equity of ~0.48x, a conservative capital structure. Liquidity is strong: current assets ¥17.395bn vs. current liabilities ¥8.838bn (current ratio 196.8%); quick ratio is 175.2% as inventories are ¥1.915bn. Working capital is ¥8.557bn, providing headroom for seasonal swings. Interest expense is only ¥24m and coverage is 43.2x, indicating minimal refinancing risk under current earnings. The disclosed equity ratio is 0.0%, which should be treated as undisclosed rather than actual, given the balance sheet data implies a healthy equity buffer. Cash and equivalents are undisclosed in the feed; however, liquidity metrics based on current assets indicate adequate near-term solvency. Financing CF of −¥3.375bn suggests debt repayment and/or shareholder returns; without detailed breakdown, the impact on leverage cannot be fully assessed, but the liabilities/equity proxy remains conservative.

Cash Flow Quality

Operating cash flow of ¥2.022bn compares to net income of ¥2.199bn, yielding an OCF/NI ratio of 0.92x—consistent with reasonable earnings quality and limited working-capital build in the period. EBITDA of ¥1.945bn provides an additional lens on cash operating capacity; D&A is ¥0.908bn, indicating a meaningful non-cash component in operating expenses. Free cash flow is listed as 0 in the summary because investing CF is undisclosed (0 indicates not reported), so a true FCF assessment cannot be made from the provided data. Working capital appears well managed given the strong quick ratio and positive OCF; inventories are modest relative to current assets (about 11%). The sizable gap between operating and ordinary income points to non-cash or financial gains contributing to earnings; OCF alignment with NI mitigates concern but does not eliminate reliance on non-core items in reported net. Overall, cash conversion from core activities is sound, albeit full FCF visibility is limited by missing investing cash flows.

Dividend Sustainability

Reported annual DPS is 0.00 and payout ratio 0.0%, which should be interpreted as undisclosed rather than an actual zero dividend policy based on the stated data guidance. Financing CF outflow of ¥3.375bn could reflect dividends and/or buybacks and/or debt repayment, but the composition is not provided. With OCF at ¥2.022bn and a conservative balance sheet, the company appears capable of funding ordinary distributions alongside maintenance investments, subject to capex needs (investing CF undisclosed). FCF coverage metrics cannot be reliably calculated without investing CF and confirmed DPS. Policy outlook is therefore uncertain from the data provided; however, improving operating earnings and strong liquidity would be supportive of sustainable distributions if such a policy is in place.

Risk Assessment

Business Risks:

• Raw material price volatility (sugar, cocoa, dairy) impacting gross margin
• Energy and logistics cost inflation exerting pressure on cost of goods and distribution
• Competitive pricing from larger domestic peers and private label
• Demand variability in confectionery and related categories due to consumer sentiment
• Product quality and food safety risks, including recall or compliance costs
• Channel mix shifts (CVS, mass retail, e-commerce) affecting pricing power
• FX fluctuations on imported inputs
• Talent and labor cost pressures in manufacturing and sales

Financial Risks:

• Dependence on non-operating gains to lift ordinary and net income
• Potential volatility in extraordinary items leading to uneven net results
• Limited visibility on capex and investing cash flows, obscuring FCF sustainability
• Tax charge volatility; effective tax rate reporting inconsistency in the feed
• Working-capital swings that can affect quarterly cash conversion
• Interest rate normalization, albeit current interest burden is very low

Key Concerns:

• Net profit declined 35.3% YoY despite stronger operating income, indicating tougher non-recurring comps
• Headline net margin is elevated by non-operating/extraordinary gains, reducing earnings quality
• Low asset turnover (0.149x) constrains ROE to 3.68%, below sector norms
• Incomplete disclosure of investing cash flows and cash balances limits assessment of FCF and liquidity depth

Investment Implications

Key Takeaways:

• Core operations improved with operating income up 12.3% YoY and operating margin at 7.3%
• Gross margin of 30.1% suggests effective pricing/mix and/or input cost management
• Ordinary and net income remain influenced by non-operating and extraordinary items
• OCF of ¥2.022bn (0.92x of NI) indicates solid cash realization of earnings
• Balance sheet is conservative with liabilities/equity ~0.48x and strong liquidity ratios
• ROE at 3.68% is constrained by low asset turnover, signaling scope for asset efficiency improvements
• Financing CF outflow (¥3.375bn) signals active capital allocation though details are not disclosed
• Data limitations on investing CF, DPS, and cash balance temper the precision of FCF and dividend analysis

Metrics to Watch:

• Gross and operating margin trends versus input cost inflation (sugar, cocoa, dairy, energy)
• Non-operating income and extraordinary items as a share of pre-tax profits
• Asset turnover and utilization metrics (revenue-to-asset ratio, inventory turns)
• Operating cash flow versus net income and working-capital movements
• Capex and investing cash flows to assess true FCF
• Leverage and interest coverage, particularly if financing activities remain large
• Effective tax rate normalization and its impact on net income

Relative Positioning: Relative to Japanese packaged food peers, meito exhibits conservative leverage and strong liquidity, improving core operating margins, but below-average ROE driven by low asset turnover and a greater reliance on non-operating gains to support headline profitability.

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