Kotobuki Spirits (2222) FY2026 Q3 Earnings Report

Quick View

Executive Summary

Cumulative results for Q3 of the fiscal year ending March 2026 showed increases in both revenue and earnings; however, the growth in operating income failed to keep pace with revenue growth, resulting in a decline in the operating margin from the year-ago period. Revenue was ¥58.49B (+8.7% YoY), operating income was ¥14.01B (+3.4%), ordinary income was ¥14.11B (+3.7%), and net income was ¥9.33B (+3.4%). While inbound sales (¥8.01B, +8.2%) and the expansion of the Kotobuki Seika Group into Okinawa drove revenue growth, higher raw material prices and an increase in SG&A expenses (+8.9% YoY) pressured margins.

Factors Affecting Results

【Revenue】Revenue increased 8.7% YoY to ¥58.49B. In addition to steady inbound sales of ¥8.01B (+8.2%), the core Kotobuki Seika Group posted the highest growth among all segments, with revenue increasing +12.3% due to its expansion into Okinawa. The Shukurei Group also contributed to revenue growth, with revenue increasing +7.0% on factors including the opening of new brand locations.

【Profit and Loss】Operating income increased only +3.4% YoY to ¥14.01B, falling 5.3pt below the revenue growth rate. The gross profit margin declined from 62.1% to 61.0% due to higher raw material prices, while SG&A expenses increased +8.9% due to higher personnel, logistics, and advertising expenses. Ordinary income was ¥14.11B and net income was ¥9.33B, with only a small divergence from operating income and limited impact from extraordinary items (loss on disposal of fixed assets of ¥0.09B). In conclusion, although the Company achieved increases in both revenue and earnings, the efficiency of converting revenue growth into profit declined, and the earnings growth rate decelerated.

Segment Analysis

The Shukurei Group, which has the largest revenue composition ratio (¥27.29B, composition ratio of 46.7%), is the core business, and its operating income of ¥5.35B accounts for 38.2% of the total. However, its revenue growth rate was limited to +7.0%, while its operating income growth rate was +3.2%. The Kotobuki Seika Group (¥12.96B, +12.3%) was the primary driver of revenue growth, with operating income also increasing +13.6%, the highest earnings growth rate among all segments, supported by its expansion into Okinawa. Meanwhile, KCC (¥16.89B, +8.1%) recorded operating income of ¥3.49B, a decline of -7.3% YoY, and its operating margin decreased to 20.7%. Among the segments, the Kotobuki Seika Group had the highest operating margin at 24.3%, while sales subsidiaries had the lowest at 14.0%; differences in the business mix affected the overall margin.

Key Financial Indicators

Profitability: ROE of 20.9% and operating margin of 24.0% (down from the equivalent 24.6% in the year-ago period)
Cash quality: Equity Ratio of 80.6% and cash and deposits of ¥25.41B (45.9% of total assets)
Financial soundness: Current assets of ¥40.35B versus current liabilities of ¥8.54B; total liabilities of ¥10.75B are extremely small relative to equity of ¥44.63B
Per-share indicators: EPS of ¥60.43 (¥57.99 in the year-ago period, +4.2%) and BPS of ¥288.96

Cash Flow Analysis

As this data does not include cash flow statement items (Operating Cash Flow, Investing Cash Flow, and Financing Cash Flow), the analysis is limited to the balance sheet cash and deposits balance of ¥25.41B (essentially unchanged compared with ¥25.41B in the year-ago period and slightly down from ¥26.08B at the end of the previous fiscal year). Cash and deposits account for 45.9% of total assets, and together with an Equity Ratio of 80.6%, indicate a high level of financial safety.

Quality of Earnings

The difference between ordinary income of ¥14.11B and net income of ¥9.33B was primarily attributable to income taxes of ¥4.69B, resulting in an effective tax rate of approximately 33.5%. Non-operating income and expenses were small at a net ¥0.10B, indicating only a minor divergence from the recurring earnings structure. Although an extraordinary loss of ¥0.09B (loss on disposal of fixed assets) was recorded, its impact relative to pretax income of ¥14.02B was limited, and earnings quality was generally stable. Comprehensive income of ¥9.33B was almost identical to net income of ¥9.33B, indicating only a small divergence attributable to valuation differences on other securities and foreign currency translation adjustments.

Earnings Forecast and Guidance

Progress toward the full-year forecast was 73.4% for revenue, 71.3% for operating income, and 71.6% for ordinary income, below the standard progress level of 75%. In particular, operating income progress is below revenue progress, requiring an operating margin of 26.6% in Q4, above the cumulative actual result of 24.0%. Management expects to recover in Q4 through price revisions, the launch of new brands, and productivity improvements.

Shareholder Returns

The full-year dividend forecast is ¥35.00 per share, representing a Payout Ratio of 40.3% against forecast EPS of ¥86.81. As a medium- to long-term policy, the Company has set a Total Return Ratio target of 50% or more, which is distinct from the Payout Ratio based solely on dividends. The Q2 dividend was ¥0, reflecting a structure centered on the year-end dividend.

Catalysts

【Short Term】The focus will be on the contribution to inbound sales from the opening of duty-free and food-area stores at the international terminal of Fukuoka Airport (opened on November 18, 2025), as well as the effectiveness of promotional activities and price revisions during the busy season in Q4.

【Long Term】Progress on the new factory in Miyakojima, Okinawa Prefecture (scheduled to begin operations in summer 2027), and Value Up Vision 2030, which targets an ordinary income margin of 30% and ROE of 30% or higher in the fiscal year ending March 2030, will be key areas of medium- to long-term focus.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (food_beverage)

Profitability and Returns

The Company’s profitability is significantly above the industry median and stands out within the food and beverage industry.

Growth and Capital Efficiency

The revenue growth rate also exceeds the industry median, indicating a relatively high pace of revenue growth within the industry.

※Source: Compiled by the Company

Risk Factors

1. Margin pressure from higher raw material costs and SG&A expenses: The gross profit margin declined from 62.1% to 61.0%, while SG&A expenses increased +8.9% YoY to ¥21.67B. The cumulative operating margin has declined from the year-ago period, and the key issue is whether cost increases can be absorbed through price pass-through and mix improvement.

2. Dependence on inbound demand: International terminal sales were ¥8.01B (+8.2%), creating a structure that is susceptible to fluctuations in travel demand, foreign exchange rates, and seasonality.

3. High Q4 profitability required to achieve the full-year plan: Achieving the full-year plan requires a Q4 operating margin of 26.6%, and whether the Company can exceed the cumulative actual level of 24.0% will be a key determinant of results.

Key Earnings Highlights

1. The operating margin of 24.0% and net profit margin of 16.0% significantly exceed the industry median, but both declined from the year-ago period, indicating a change in the efficiency of converting revenue growth into profit.

2. Achieving the full-year forecast requires a Q4 operating margin of 26.6%, and the fact that cumulative progress rates (revenue 73.4%, operating income 71.3%) are below the standard progress level of 75% is a key point of focus in the earnings data.

3. An Equity Ratio of 80.6% and a financial structure in which current assets substantially exceed current liabilities provide a foundation for growth investments, including the new Miyakojima factory, and shareholder returns under the policy of a Total Return Ratio of 50% or more.

Theoretical Share Price (For Reference)

Sensitivity: ¥488–¥518 at ±1% for the cost of equity, and ¥497–¥512 at ±0.1 for ω.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual income model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated values based solely on publicly disclosed data; these figures do not constitute a forecast of the market price or a recommendation of any specific investment action and do not predict or guarantee future share prices.)

---

This report is an earnings analysis document automatically generated by AI through an integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting a professional where necessary.

---End of Report---