IMURAYA GROUP CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥26.24B
• Operating Income: ¥1.97B
• Net Income: ¥1.45B
• EPS: ¥113.49

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

Verdict: A solid FY2026 Q2 with double-digit profit growth and clear margin expansion, albeit with tight liquidity and negative free cash flow due to elevated capex. Revenue rose 7.6% YoY to 262.37, while operating income grew 37.6% YoY to 19.72, lifting operating margin to 7.5%. Ordinary income increased 44.4% YoY to 20.41, and net income advanced 37.3% YoY to 14.52, taking net margin to 5.5%. We estimate operating margin expanded by roughly 165 bps YoY (from ~5.9% to ~7.5%), reflecting improved cost pass-through and operating leverage. Net margin expanded by about 119 bps YoY (from ~4.3% to 5.5%). Gross margin stands at 36.4%, though the YoY change cannot be assessed due to lack of prior-period disclosure. Earnings quality is healthy: OCF of 16.19 exceeds net income (OCF/NI 1.12x), indicating cash-backed profits. However, free cash flow is negative when subtracting disclosed capex (FCF ≈ -7.41), implying investment-led cash absorption. Liquidity is tight with a current ratio of 1.06 and quick ratio of 0.80, heightening near-term funding sensitivity despite very strong interest coverage (59x). Balance sheet leverage is moderate (D/E 0.73x), and working capital remains only modestly positive at 9.12. ROE is 6.2% via improved margins and moderate leverage; ROIC of 5.6% trails the 7–8% target range, indicating room for efficiency gains. Dividend capacity looks reasonable with a calculated payout ratio of 32.4%, but current negative FCF suggests temporary reliance on cash or debt for shareholder returns while capex is elevated. Forward-looking, sustained price discipline, stable input costs, and successful ramp of recent investments are key to converting margin gains into structurally higher ROIC and FCF.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.2% = Net Profit Margin 5.5% × Asset Turnover 0.649 × Financial Leverage 1.73x. The largest change driver YoY appears to be margin expansion, as revenue grew 7.6% while operating income rose 37.6% and net income rose 37.3%, implying materially higher profitability per yen of sales. Business drivers likely include improved pricing/mix, cost normalization (ingredients/energy), and operating leverage from volume growth. This improvement seems partly sustainable if pricing power and cost discipline hold, but some tailwinds (e.g., easing input inflation) can be cyclical. Asset turnover at 0.649 is typical for a branded foods/confectionery company and likely stable; any improvement would require stronger sales growth or better working capital turns. Leverage at 1.73x provides a moderate amplification to ROE without undue risk. We cannot verify whether SG&A grew faster than revenue due to unreported SG&A breakdown and prior-period SG&A; however, the operating margin expansion suggests SG&A was controlled relative to gross profit growth.

Growth Assessment

Top line growth of 7.6% is healthy for a mature food company, indicating resilient demand and/or effective pricing. Profit grew faster than sales (operating +37.6%, ordinary +44.4%, net +37.3%), evidencing strong operating leverage. Non-operating contributions were modest (non-op income 1.22; non-op expenses 0.54), with dividends of 0.53, so earnings quality leans toward operating rather than one-time gains. EBITDA of 30.09 (11.5% margin) supports the profit improvement narrative. Sustainability hinges on maintaining pricing against retail/private-label pressure and managing input costs (sugar, beans, wheat, packaging, utilities). The capex step-up (-23.60) likely targets capacity/efficiency; if executed well, it can support mid-term growth and ROIC, but near-term FCF is suppressed. Outlook: expect margin resilience if cost environment remains benign and price discipline holds; risks include input cost rebounds and softer consumer demand.

Financial Health

Liquidity: Current ratio 1.06 (warning threshold <1.0) and quick ratio 0.80 (<1.0) indicate tight near-term liquidity; cash and deposits are 16.29 versus current liabilities of 144.18. Solvency: D/E 0.73x is moderate; interest coverage is very strong at 59.4x, suggesting low near-term refinancing stress. Maturity profile: Short-term loans of 21.50 within current liabilities raise some rollover risk, though working capital is positive at 9.12 and receivables of 77.20 provide conversion potential. No off-balance sheet obligations are disclosed in the provided data. No explicit long-term loans or total interest-bearing debt breakdown is reported, limiting full leverage assessment.

Cash Flow Quality

OCF/NI is 1.12x, above the 0.8 threshold, indicating good earnings-to-cash conversion. Estimated FCF is negative at approximately -7.41 (OCF 16.19 minus capex 23.60), reflecting investment-led cash outflow. Given tight liquidity metrics, sustained negative FCF would likely require incremental debt or cash drawdowns unless OCF inflects upward. Working capital: with receivables at 77.20 and inventories at 38.14, conversion of current assets will be important; no clear signs of working capital manipulation can be inferred without comparative data. Financing CF of 6.97 suggests some external funding to bridge investment needs this period.

Dividend Sustainability

Calculated payout ratio is 32.4%, comfortably within a typical <60% sustainability benchmark. However, FCF is currently negative due to elevated capex, so dividends in the near term may be funded by cash/short-term borrowings rather than internally generated FCF. Interest coverage is ample and leverage moderate, supporting dividend continuity if profitability holds. Visibility is constrained by unreported DPS and dividends paid; policy commentary is not provided, so we assume a stable-to-progressive stance contingent on earnings and capex normalization.

Risk Assessment

Business Risks:

• Raw material and packaging cost volatility (sugar, beans, wheat, oils, paper/plastic, energy).
• Pricing power risk against retailers and private-label competition.
• Demand sensitivity to weather/seasonality for frozen desserts and confectionery.
• Execution risk on recent capex to deliver targeted efficiency and capacity benefits.
• Product quality/recall risk inherent in food manufacturing.

Financial Risks:

• Tight liquidity (current ratio 1.06, quick ratio 0.80) and reliance on short-term loans (21.50).
• Negative free cash flow this period due to high capex, potentially requiring external funding.
• Potential working capital swings given high receivables (77.20) relative to cash (16.29).
• Interest rate sensitivity on short-term borrowings (albeit mitigated by strong coverage).

Key Concerns:

• ROIC at 5.6% below the 7–8% target range, needing further improvement.
• Sustainability of margin gains if input costs re-inflate or price competition intensifies.
• Data gaps (investing CF details, DPS/total dividends, long-term debt) limit full risk quantification.

Investment Implications

Key Takeaways:

• Strong YoY profit growth with clear operating and net margin expansion.
• Earnings quality solid (OCF/NI 1.12x), but FCF negative due to capex.
• Liquidity tight; monitor working capital and short-term debt rollovers.
• Moderate leverage and very strong interest coverage reduce solvency risk.
• ROE 6.2% aided by margins and moderate leverage; ROIC 5.6% indicates scope for efficiency gains.

Metrics to Watch:

• Operating margin and gross margin trajectory vs input costs.
• Free cash flow and capex payback/returns (ROIC uplift).
• Working capital turns: receivables and inventory days.
• Pricing/mix and volume growth by category and channel.
• Short-term debt levels and effective interest rate.
• Dividend disclosures (DPS, total payout) and coverage by FCF.

Relative Positioning: Within Japanese packaged foods/confectionery peers, the company shows above-peer profit growth this quarter and healthy operating leverage, with moderate leverage and strong coverage providing balance sheet safety. However, liquidity is tighter than larger peers and ROIC trails leading operators, making successful capex execution and sustained pricing discipline critical to closing the efficiency gap.

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