YAMAZAKI BAKING CO.,LTD. FY2026 Q2 Earnings Report

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Executive Summary

Yamazaki Baking’s interim period results posted higher revenue and higher earnings, with Ordinary Income growing at a faster pace than Operating Income. Revenue was ¥676.64B (+4.0% year on year), Operating Income was ¥35.85B (+3.3%), Ordinary Income was ¥37.88B (+6.8%), and Net Income attributable to owners of the parent was ¥24.197B (+5.3%). While higher revenue and earnings in the core Food Business drove consolidated performance, the Operating Income margin remained essentially flat at 5.3%, compared with 5.3% in the previous year, while contributions from non-operating income boosted the earnings growth rate below the Operating Income level.

Factors Affecting Results

【Revenue】The Food Business, which accounted for 93.6% of the revenue mix, drove consolidated revenue with a 4.1% increase, while major categories such as sweet breads (¥254.64B) and Western-style confectionery (¥84.16B) remained firm. The Distribution Business was ¥43.71B, essentially flat at -0.0%.

【Profitability】Operating Income increased by +3.3%, but the Operating Income margin remained essentially flat at 5.3%, compared with 5.3% in the previous year. The SG&A ratio rose by +0.1pt to 28.0% from 27.9% in the previous year, as increases in personnel and logistics costs partially offset the cost absorption effects of price revisions and improved product mix. Supported by non-operating income, including ¥1.18B in dividend income, Ordinary Income increased by +6.8%, exceeding the growth in Operating Income. Extraordinary losses of ¥1.31B, comprising ¥0.98B in losses on disposal and sale of fixed assets and ¥0.29B in impairment losses, were recorded as temporary factors, although their scale was limited. In conclusion, the interim period posted higher revenue and higher earnings.

Segment Analysis

The Food Business generated revenue of ¥63.69B (+4.1%) and Operating Income of ¥34.81B (+5.3%), with a profit margin of 5.5%, a slight improvement from 5.4% in the previous year, making it the earnings pillar that generates the majority of consolidated profit. The Distribution Business remained broadly flat at revenue of ¥43.71B (-0.0%), but its Operating Loss widened to ¥0.96B from a loss of ¥0.24B in the previous year, and its profit margin deteriorated to -2.2% from -0.6%. The structure is one in which higher revenue and earnings in the Food Business absorb the widening losses in the Distribution Business, while the approximately 770bp gap in profit margins between the two segments remains a structural drag on the consolidated margin.

Key Financial Indicators

【Profitability】The Operating Income margin was 5.3%, essentially flat from 5.3% in the previous year, while the Net Income margin, based on income attributable to owners of the parent, improved slightly to 3.6% from 3.5%. The gross margin rose slightly to 33.3% from 33.2% in the previous year, absorbing the increase in the SG&A ratio to 28.0% from 27.9%.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥62.41B, equivalent to 2.58 times Net Income attributable to owners of the parent of ¥24.197B, indicating a favorable level of earnings conversion into cash.【Investment Efficiency】ROE was 4.8%.【Financial Soundness】The Equity Ratio improved by +2.2pt to 51.5% from 49.3% in the previous year, while cash and deposits stood at ¥174.63B, providing a substantial liquidity buffer.

Cash Flow Analysis

Operating Cash Flow was ¥62.41B, essentially flat at +0.6% year on year, maintaining a level equivalent to 2.58 times Net Income attributable to owners of the parent of ¥24.197B. Investing Cash Flow was -¥33.18B, of which ¥27.74B consisted of capital expenditures, indicating continued growth investment. Financing Cash Flow was -¥22.79B, with dividend payments of ¥11.80B and share repurchases of ¥2.22B representing the primary cash outflows. Free Cash Flow (Operating Cash Flow + Investing Cash Flow) was positive at ¥29.23B, indicating sufficient financial capacity to fund both shareholder returns, including dividends and share repurchases, and capital expenditures.

Earnings Quality

Profit for the interim period was primarily generated by recurring business activities, while the scale of extraordinary gains and losses was limited. Extraordinary gains of ¥0.16B and extraordinary losses of ¥1.31B, including ¥0.98B in losses on disposal and sale of fixed assets and ¥0.29B in impairment losses, were recorded, but their impact relative to Ordinary Income of ¥37.88B was minor. Non-operating income of ¥3.29B represented approximately 0.5% of revenue, with dividend income of ¥1.18B and foreign exchange gains of ¥0.37B as the main components. The difference between Ordinary Income of ¥37.88B and Net Income attributable to owners of the parent of ¥24.197B was attributable to income taxes of ¥11.57B, representing an effective burden rate of approximately 31.5% against Profit Before Tax of ¥36.72B, and Net Income attributable to non-controlling interests of ¥0.96B; there were no particular abnormalities. Comprehensive Income was ¥27.71B, including ¥25.92B attributable to owners of the parent. The difference from Net Income attributable to owners of the parent resulted from positive contributions from foreign currency translation adjustments of +¥2.94B and valuation differences on securities of +¥1.33B, partially offset by a negative contribution of -¥1.73B from adjustments related to retirement benefits.

Earnings Forecast and Guidance

Progress against the full-year forecast was 50.6% for Revenue (¥676.64B/¥1,338.00B), 56.0% for Operating Income (¥35.85B/¥64.00B), 56.5% for Ordinary Income (¥37.88B/¥67.00B), and 56.9% for Net Income (¥24.197B/¥42.50B). Compared with the standard first-half progress benchmark of 50%, profit progress was ahead by approximately 6 percentage points, and neither the earnings forecast nor the dividend forecast has been revised.

Shareholder Returns

The full-year dividend forecast remains unchanged at ¥60, at the same level as the previous fiscal year’s actual result. The Payout Ratio against forecast EPS of ¥215.73 is approximately 27.8%. Share repurchases of ¥2.22B were conducted during the period, and combined with dividend payments of ¥11.80B, total shareholder returns amounted to approximately ¥14.02B. The Total Return Ratio against Net Income attributable to owners of the parent of ¥24.197B was approximately 58.0%. Returns were implemented within Free Cash Flow of ¥29.23B, indicating that funding sources for shareholder returns were secured.

Risk Factors

1. Deterioration in the profitability of the Distribution Business: Against revenue of ¥43.71B, an Operating Loss of ¥0.96B was recorded, representing a profit margin of -2.2%, with the loss widening from ¥0.24B in the previous year.

2. Increase in the SG&A ratio: The SG&A ratio rose by +0.1pt to 28.0% from 27.9% in the previous year, with increases in personnel and logistics costs restraining improvement in the Operating Income margin.

3. Concentration of the business portfolio: The Food Business accounts for 93.6% of consolidated revenue, resulting in a structure with a high degree of dependence on a single business segment.

Industry Benchmark (Reference; Company Analysis)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin are close to typical levels for the food industry, with no significant deviation observed.

Growth and Capital Efficiency

Revenue growth also remained at a standard rate within the industry.

※Source: Company compilation

Key Takeaways from the Results

1. The growth rate of Ordinary Income (+6.8%) exceeded that of Operating Income (+3.3%), highlighting the increased contribution of non-operating income, including dividend income and foreign exchange gains, to the earnings structure.

2. Progress against the full-year forecast was 56.0% for Operating Income and 56.9% for Net Income, slightly exceeding the standard first-half level of 50%. Maintaining the pace of revenue growth in the second half will be a key focus going forward.

3. The Operating Loss in the Distribution Business widened from ¥0.24B in the previous year to ¥0.96B, meaning that the pace of profitability improvement in this business will influence the direction of the consolidated margin.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥2,563–¥2,715 at ±1% for the cost of equity, and ¥2,636–¥2,638 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥8.6 per share is added back to earnings (due to its nature as a non-cash expense and to facilitate comparability with IFRS companies).
• 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, resulting in a timing difference relative to the full-year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value is not intended to 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 release data. It does not recommend investment in any specific security. 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, where necessary, after consulting with a professional advisor.

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