Kotobuki Spirits Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥35.79B
• Operating Income: ¥7.44B
• Net Income: ¥4.99B
• EPS: ¥32.49

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

Kotobuki Spirits (2222) delivered solid topline momentum in FY2026 Q2 with revenue of ¥35.787bn, up 8.8% YoY, while operating income was essentially flat at ¥7.441bn (-0.5% YoY), indicating softer operating leverage this period. Gross profit reached ¥20.376bn, implying a strong gross margin of 56.9%, which remains a competitive hallmark for the company. The operating margin was 20.8%, with the slight YoY decline in operating profit suggesting higher SG&A intensity despite robust sales growth. Ordinary income of ¥7.517bn exceeded operating income modestly, pointing to small net non-operating gains. Net income rose 0.5% YoY to ¥5.016bn, translating to a net margin of 14.0%, and EPS was ¥32.49. DuPont analysis indicates ROE of 12.45% driven by a high net margin (14.02%), moderate asset turnover (0.702x), and low financial leverage (1.26x). Liquidity is a clear strength: current ratio stands at 386.7% and quick ratio at 357.1%, supported by current assets of ¥37.649bn versus current liabilities of ¥9.735bn. The balance sheet is conservative with total liabilities of ¥11.894bn and equity of ¥40.305bn (implied equity ratio around 79% despite the reported 0.0% placeholder). Operating cash flow of ¥5.252bn modestly exceeded net income, yielding an OCF/NI ratio of 1.05, supportive of earnings quality. Depreciation and amortization were ¥0.625bn, making up a low 1.7% of sales, consistent with an asset-light or well-sweated asset base. Financing cash flow was an outflow of ¥4.358bn, suggesting shareholder returns and/or debt reduction, although dividends are undisclosed this period. Free cash flow is shown as 0 in the dataset due to unreported investing cash flows; thus true FCF cannot be determined from the provided figures. Tax expense was ¥2.524bn; while the table shows an effective tax rate of 0.0% (placeholder), an implied tax rate around the low 30%s is consistent with net and ordinary income levels. Overall, the company exhibits high margins, solid ROE in the low teens, strong cash conversion, and a very healthy liquidity position. Key caveat: several items are unreported (cash balance, investing cash flows, share count, dividends), which limits precision of cash and shareholder return analysis. Despite these limitations, the core earnings, margin profile, and balance sheet resilience appear intact, with the main watchpoint being operating cost discipline as growth continues.

Profitability Analysis

ROE of 12.45% is decomposed into: net profit margin 14.02% × asset turnover 0.702 × financial leverage 1.26, indicating returns are predominantly margin driven rather than leverage. Implied ROA (NPM × AT) is ~9.8%, reflecting strong profitability on assets. Gross margin is high at 56.9%, supported by brand strength and premium product mix; the gap between gross margin and operating margin (20.8%) implies an SG&A burden of roughly ¥12.94bn in the half. Operating income declined slightly (-0.5% YoY) despite 8.8% revenue growth, pointing to negative operating leverage this period, likely from wage inflation, distribution costs, marketing, or store-related expenses. EBITDA was ¥8.066bn (22.5% margin), and D&A at ¥0.625bn (1.7% of sales) underscores low capital intensity. Ordinary income exceeded operating income by ¥76m, suggesting minor non-operating gains and no material interest drag (interest expense unreported). The effective tax rate shown as 0.0% in the table is a placeholder; tax expense of ¥2.524bn versus ordinary income implies a normalized tax burden in the low 30%s. Overall margin quality remains robust, but near-term operating leverage is soft; maintaining SG&A discipline will be key to translating sales growth into earnings growth.

Growth Assessment

Revenue growth of +8.8% YoY to ¥35.787bn indicates healthy demand momentum, likely supported by tourism recovery and resilient domestic gifting trends. However, operating income (-0.5% YoY) and only slight net income growth (+0.5% YoY) show that cost pressures offset top-line gains in the period. The gross margin remains strong, suggesting limited degradation in product-level economics; the pressure appears concentrated in SG&A. EBITDA growth trails revenue given the slight decline in operating profit, reflecting subdued operating leverage. With asset turnover at 0.702x, capital efficiency is moderate; further scaling of volumes could support improved utilization. Profit quality is good: OCF/NI at 1.05 indicates earnings are backed by cash generation. Outlook hinges on: sustained inbound tourism, holiday/seasonal demand capture, price/mix management to offset cost inflation (raw materials, labor), and store/channel productivity. If SG&A normalization and productivity improvements materialize, earnings growth could reaccelerate relative to revenue growth. Absent disclosures on capex and investing cash flows, visibility on capacity expansion and store openings/remodels is limited.

Financial Health

Total assets are ¥50.985bn with equity of ¥40.305bn and liabilities of ¥11.894bn, implying low leverage (debt-to-equity 0.30x using total liabilities as a proxy). Liquidity is very strong: current assets of ¥37.649bn versus current liabilities of ¥9.735bn yield a current ratio of 3.87x and quick ratio of 3.57x; working capital is ¥27.914bn. Inventories of ¥2.882bn are manageable relative to current assets (7.7%). The reported equity ratio of 0.0% is a placeholder; implied equity ratio is ~79% (equity/total assets), indicating a conservative capital structure. Interest expense is unreported (0 in the data), consistent with minimal financial risk from borrowing. Ordinary income above operating income suggests no non-operating headwinds. Solvency metrics and balance sheet strength provide capacity to absorb shocks and invest for growth.

Cash Flow Quality

Operating cash flow was ¥5.252bn versus net income of ¥5.016bn, producing an OCF/NI ratio of 1.05, supportive of earnings quality. Working capital appears well managed given strong liquidity and the OCF conversion; however, detailed drivers (receivables, payables, inventory changes) are not disclosed. Free cash flow is listed as 0 due to unreported investing cash flows; true FCF cannot be assessed without capex and investment detail. D&A of ¥0.625bn (1.7% of sales) suggests low capital intensity, but capex could differ from D&A; absent investing CF data, we avoid conclusions on maintenance vs. growth spend. Financing cash flow was an outflow of ¥4.358bn, likely reflecting dividends and/or share repurchases and/or debt repayment; cash and equivalents are unreported, preventing end-period liquidity reconciliation. Overall, cash conversion is healthy, but incomplete disclosures constrain full FCF analysis.

Dividend Sustainability

Annual DPS and payout ratio are shown as 0.00%/0.0% in the dataset, which indicates nondisclosure rather than actual zero. Financing cash outflow of ¥4.358bn suggests some form of shareholder return and/or debt service; however, without DPS and share count disclosures, we cannot quantify cash dividends vs. buybacks. Given OCF of ¥5.252bn and a strong balance sheet, coverage of ordinary dividends (if any) would likely be comfortable, but true FCF coverage cannot be determined since investing cash flows are unreported. Policy outlook cannot be inferred from the provided data; prior-year payout practices and capital allocation commentary would be needed. For now, assess sustainability using OCF stability, earnings trajectory, and upcoming capex needs once disclosed.

Risk Assessment

Business Risks:

• Demand volatility tied to domestic tourism and inbound traveler flows affecting souvenir confectionery sales
• Seasonality around holidays and travel peaks causing earnings concentration
• Raw material cost inflation (sugar, dairy, cocoa, packaging) impacting gross margins
• Labor cost pressure and staffing constraints in retail and manufacturing
• Channel mix shifts (airport, station, tourist locations) influencing margins and volumes
• Brand and product innovation risk in a competitive confectionery market
• Food safety and quality control requirements

Financial Risks:

• Limited visibility on capex and investing cash flows hindering FCF forecasting
• Potential currency effects on inbound-driven demand and imported inputs
• Tax rate variability versus implied normalized rate (~low 30%s)
• Concentration of working capital in receivables/cash not disclosed, creating uncertainty on collection and cash buffer

Key Concerns:

• Negative operating leverage despite strong sales growth, indicating rising SG&A intensity
• Incomplete disclosure on cash, investing cash flows, dividends, and share count
• Sensitivity to tourism recovery trajectory and macro conditions

Investment Implications

Key Takeaways:

• Topline grew 8.8% YoY to ¥35.8bn, but operating income was flat (-0.5% YoY), signaling cost pressure
• High margin profile sustained: gross margin 56.9%, operating margin 20.8%, NPM 14.0%
• ROE 12.45% is margin-driven with low leverage (assets/equity 1.26x)
• Strong liquidity and low leverage (current ratio 3.87x; D/E ~0.30x) underpin financial resilience
• Earnings quality solid with OCF/NI at 1.05, though FCF is indeterminable due to missing investing CF
• Financing CF outflow of ¥4.36bn suggests capital returns and/or debt reduction
• Key watchpoint: SG&A control to restore positive operating leverage

Metrics to Watch:

• SG&A ratio and operating margin trajectory
• Same-store sales and inbound tourist contribution to sales
• Gross margin versus raw material and wage inflation
• OCF/NI and working capital movements (receivables, inventories, payables)
• Capex and investing cash flows to gauge true FCF
• Effective tax rate normalization
• Inventory turnover and sell-through during peak seasons

Relative Positioning: Within Japanese confectionery and souvenir peers, Kotobuki Spirits exhibits superior gross margins, a strong balance sheet with low leverage, and ROE in the low teens; near-term profitability trails topline due to SG&A pressure, but cash conversion and liquidity remain differentiators.

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