IWATSUKA CONFECTIONERY CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥13.58B
• Operating Income: ¥156M
• Net Income: ¥2.37B
• EPS: ¥145.37

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Iwatzuya Seika (22210) delivered solid top-line growth in FY2026 Q2, with revenue up 16.9% YoY to ¥13.58bn, but profitability at the operating level remained weak. Gross profit of ¥3.14bn implies a gross margin of 23.1%, indicating cost pressures persist despite higher sales. Operating income fell 46.2% YoY to ¥156m, translating to a thin operating margin of roughly 1.1%, suggesting limited price-cost pass-through and/or higher selling, distribution, and administrative expenses. Ordinary income, however, stood at ¥2.12bn, far above operating income, indicating substantial non-operating gains (e.g., dividends, securities-related income), which supported pre-tax earnings. Net income was ¥1.50bn, down 36.8% YoY, implying last year benefited from stronger non-operating income or lower taxes, or both. The DuPont breakdown shows an 11.03% net margin, 0.141x asset turnover, and 1.34x financial leverage, yielding an ROE of 2.08%, which is modest given the company’s large equity base. Asset turnover appears low, reflecting a sizable balance sheet relative to revenue, potentially due to strategic investments and/or conservative capitalization. Cash generation is strong relative to earnings: operating cash flow of ¥3.26bn is 2.18x net income, indicating good earnings quality this period. Liquidity is robust with a current ratio of 252% and quick ratio of 241%, providing ample buffer for working capital needs. Leverage is conservative; total liabilities are roughly 0.32x equity, and interest expense is minimal at ¥2.97m with coverage at about 52.5x on an EBIT basis. Working capital of ¥7.31bn underscores balance-sheet resilience. While the effective tax rate was shown as 0.0% in the summary metrics, the disclosed income tax of ¥986.9m versus ordinary income suggests an effective rate near the mid-40% range; tax effects materially influence bottom-line volatility. Reported equity ratio was 0.0% due to non-disclosure under this data extract; nonetheless, equity is substantial at ¥71.89bn. Free cash flow cannot be determined as investing cash flows were not disclosed, but the strong OCF suggests capacity to fund capex and conservative shareholder returns. Overall, fundamentals show healthy liquidity and cash conversion but subdued core operating profitability, with bottom-line support from non-operating items and a very conservative capital structure.

Profitability Analysis

ROE_decomposition: ROE 2.08% = Net margin 11.03% × Asset turnover 0.141 × Financial leverage 1.34. The low asset turnover and low leverage constrain ROE despite a double-digit net margin driven by non-operating items. margin_quality: Gross margin at 23.1% aligns with disclosed gross profit, but operating margin is only ~1.1% (¥156m/¥13,582m), indicating elevated operating costs (raw materials, energy, logistics, and/or SG&A). Net margin of 11.03% is significantly above operating margin, implying heavy reliance on non-operating gains to support bottom-line results. operating_leverage: Revenue grew 16.9% YoY while operating income declined 46.2% YoY, suggesting negative operating leverage this period. Cost inflation and/or higher fixed costs and campaign spending likely offset scale benefits. EBITDA margin of 6.8% (¥921m) shows some buffer from depreciation, but operating profit conversion remains weak.

Growth Assessment

revenue_sustainability: Top-line growth of +16.9% YoY indicates healthy demand and/or pricing, likely aided by product mix and distribution. Sustainability depends on continued price acceptance and competitive positioning in the rice cracker/snack category. profit_quality: Earnings quality at the operating level is weak; the gap between ordinary income and operating income indicates non-operating items are a significant earnings driver. With an implied effective tax burden near mid-40%, net profit is sensitive to non-operating mix and tax timing. outlook: Further margin recovery hinges on stabilizing input costs (rice, edible oils, packaging, utilities) and successful, sustained price/mix improvements. Absent stronger operating profitability, earnings will remain vulnerable if non-operating gains normalize.

Financial Health

liquidity: Current ratio 252.4%, quick ratio 241.0%, working capital ¥7,312.9m. Liquidity is ample to meet near-term obligations. solvency: Total liabilities/Equity ≈ 0.32x (¥23,152.6m/¥71,893.0m). Interest expense is minimal at ¥3.0m with EBIT/interest ~52.5x, indicating very strong debt service capacity. capital_structure: Financial leverage is low (assets/equity 1.34x). The reported equity ratio was not disclosed in this extract (shown as 0.0%), but equity of ¥71.89bn versus assets of ¥96.33bn implies a high true equity ratio.

Cash Flow Quality

earnings_quality: OCF/Net income is 2.18x (¥3,263m/¥1,498m), indicating robust cash realization relative to accounting earnings in this period. FCF_analysis: Investing cash flow is undisclosed (shown as 0), so free cash flow cannot be reliably computed. Given D&A of ¥765m and strong OCF, the company likely generated positive pre-investment cash flow, but capex intensity is unknown. working_capital: High liquidity and quick ratio suggest manageable inventory and receivables positions; inventories reported at ¥546.5m within current assets of ¥12,112.6m indicate limited inventory risk on balance sheet, but turnover metrics are not disclosed.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is undisclosed (shown as 0.00) and payout ratio is shown as 0.0%, so dividend information is not available in this extract. EPS for the period is ¥145.37. FCF_coverage: Free cash flow is not determinable due to missing investing cash flows; therefore, FCF coverage of dividends cannot be assessed from the provided data. policy_outlook: With strong OCF and low leverage, capacity for distributions exists, but weak operating margins and reliance on non-operating income suggest a conservative stance until core profitability improves.

Risk Assessment

Business Risks:

• Input cost inflation (rice, edible oils, packaging materials, utilities) compressing gross and operating margins.
• Price elasticity and competitive reactions in the snack/confectionery market potentially limiting price pass-through.
• Channel mix risks (convenience stores, supermarkets) affecting promotional intensity and margins.
• Brand and product renewal execution risk affecting volume and mix.
• Potential normalization of non-operating income (e.g., dividends, securities gains) reducing net margin.

Financial Risks:

• Tax burden volatility; implied effective tax rate appears high relative to ordinary income.
• Earnings sensitivity to non-operating items; if these decline, net profit may fall materially given thin operating margin.
• Capex visibility is low due to undisclosed investing cash flows; unexpected capex could compress cash generation.
• Asset turnover is low, increasing pressure on margins to drive ROE.

Key Concerns:

• Operating margin deterioration despite strong revenue growth (negative operating leverage).
• Large divergence between operating and ordinary income implying reliance on non-core earnings.
• Limited transparency on investing cash flows and dividend policy in the provided data.

Investment Implications

Key Takeaways:

• Top-line momentum is solid (+16.9% YoY), but core profitability is weak (OPM ~1.1%).
• Net profit is supported by non-operating income; sustainability is uncertain.
• Balance sheet and liquidity are very strong (current ratio >250%, liabilities/equity ~0.32x).
• Cash conversion is strong (OCF/NI 2.18x), but FCF cannot be confirmed without investing data.
• ROE is modest (2.08%) due to low asset turnover and low leverage.

Metrics to Watch:

• Gross and operating margin progression (price-cost spread, SG&A ratio).
• Composition of non-operating income and its recurrence.
• OCF versus NI trend and any disclosure of capex/investing cash flows.
• Inventory and receivables turns (if/when disclosed) to assess asset efficiency.
• Effective tax rate and any structural tax changes.
• Operating income growth relative to revenue (operating leverage).

Relative Positioning: The company exhibits a conservative balance sheet and strong cash conversion relative to many domestic food/snack peers, but trails on core operating margin resilience and ROE, with greater reliance on non-operating income to sustain net 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