COMO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.63B
• Operating Income: ¥-13M
• Net Income: ¥-19M
• EPS: ¥-5.34

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

Verdict: FY2026 Q2 was weak but slightly improving, with a narrowed operating loss and positive operating cash flow against a backdrop of softer sales. Revenue declined 1.8% year over year to 36.29, while gross profit came in at 9.31, implying a gross margin of 25.7%. SG&A of 9.45 exceeded gross profit, driving an operating loss of -0.13 (operating margin roughly -36 bps). Ordinary income improved but remained negative at -0.10, aided by 0.13 of non-operating income (including 0.07 of dividend income) offset by 0.10 of non-operating expenses. Net income was -0.18 (EPS -5.34 yen), with an unusual negative effective tax rate (-78.9%) due to tax accruals despite a pre-tax loss. EBITDA was positive at 1.34 (3.7% margin), reflecting 1.47 of depreciation and amortization and indicating core cash generation despite the accounting loss. Operating cash flow was positive at 1.34, outpacing net income and signaling decent cash conversion in the half. Liquidity is tight: current ratio stands at 0.735 and quick ratio at 0.700, with short-term loans of 11.03 versus cash of 2.82 and receivables of 9.97. Leverage is moderate to elevated: debt-to-equity is 1.34x, and Debt/EBITDA is a high 11.25x, which, together with negative interest coverage (-1.68x), highlights debt-service strain. Asset efficiency is middling with asset turnover of 0.773, but profitability remains the main drag: net margin is -0.5% and ROE is -0.9% (ROIC -0.4%). Margin dynamics: the period’s gross margin is 25.7% and operating margin is -0.4%; YoY bp change is not disclosed, but the swing in operating income (+141.9% YoY improvement in loss) suggests modest operating margin improvement. Earnings quality is mixed: OCF exceeded NI, but the OCF/NI ratio is mechanically negative (-7.46x) due to negative NI and thus not a red flag by itself. Capex remained light at 0.25, implying an estimated positive free cash flow of about 1.09 (OCF - capex), supporting near-term liquidity. Balance sheet equity is 20.04 against assets of 46.95 (equity ratio estimated around 42.7%), providing some solvency buffer despite weak profitability. Forward-looking, restoring operating margin to positive territory via price/mix and SG&A containment is critical, alongside managing short-term refinancing risk given the heavy reliance on short-term loans. Cost inputs (wheat, sugar, energy) and wage pressure remain key external variables for margin recovery.

Profitability Analysis

ROE decomposition (DuPont): ROE (-0.9%) = Net Profit Margin (-0.5%) × Asset Turnover (0.773) × Financial Leverage (2.34x). The profitability leg (net margin) is the primary drag, with operating margin at about -0.4% and net margin -0.5%, despite a slight lift from non-operating income. Asset turnover of 0.773 is reasonable for a food manufacturer but not strong enough to offset negative margins. Leverage at 2.34x is moderate and magnifies the small negative margin into a negative ROE. The component changing the most is likely the margin (indicated by large YoY % improvement in operating and ordinary income), reflecting early benefits from cost control and perhaps partial price pass-through, though disclosures do not provide exact bp changes. Business drivers: input cost normalization appears incomplete, and SG&A (9.45) still exceeds gross profit (9.31), leaving no operating spread. Sustainability: margin improvement could continue if price/mix and cost containment persist; however, wage and utility cost pressures and sales softness (-1.8% YoY) temper visibility. Concerning trends: SG&A exceeds gross profit, indicating negative operating leverage; with revenue down, even flat SG&A creates pressure. Interest expense (0.08) against negative EBIT keeps ordinary income vulnerable.

Growth Assessment

Top line contracted 1.8% YoY to 36.29, suggesting softer demand or pricing/mix headwinds in the period. Gross margin of 25.7% implies some cost pressures remain or pricing power is limited. Operating income improved but remains negative (-0.13), indicating revenue growth alone will not suffice without SG&A discipline. EBITDA margin of 3.7% shows the core business generates positive cash EBITDA, a base from which to rebuild profitability. Non-operating income (0.13, mainly dividends) provided a small buffer but is not a structural growth driver. Outlook hinges on: price/mix actions to offset raw material and energy costs; volume stabilization in core channels; and incremental efficiency in manufacturing and logistics. With capex light (0.25), capacity-driven growth is unlikely near term; focus likely remains on productivity and utilization. Near-term growth risk skews to the downside if cost inflation re-accelerates or consumer demand weakens; conversely, stable commodity prices and successful price pass-through could nudge OPM back into positive territory.

Financial Health

Liquidity is a key concern: current ratio 0.735 (<1.0 warning) and quick ratio 0.700 indicate reliance on short-term funding. Current liabilities (20.67) exceed current assets (15.19), yielding negative working capital of -5.48. Short-term loans are 11.03 versus cash of 2.82 and receivables of 9.97; while receivables plus cash roughly cover short-term borrowings, the cushion is slim when considering payables (3.72) and other current liabilities. Solvency is acceptable but pressured: equity is 20.04 vs assets 46.95, implying an estimated equity ratio around 42.7% and financial leverage of 2.34x; D/E is 1.34x (below the 1.5x red line but elevated for a low-margin business). Interest coverage is negative (-1.68x), highlighting debt-service strain if operating losses persist. Maturity mismatch risk is present due to the sizeable short-term loan balance relative to liquid assets and negative working capital. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF was 1.34 versus net income of -0.18, producing an OCF/NI ratio of -7.46x; given negative NI, this ratio is not directly interpretable, but the positive OCF indicates solid cash add-backs (notably 1.47 of D&A) and likely benign working capital movements. EBITDA (1.34) aligns with OCF, suggesting limited unusual or non-cash items beyond standard depreciation. Estimated free cash flow is about 1.09 (OCF 1.34 minus capex 0.25), comfortably positive for the half. Working capital appears reasonably controlled: receivables of 9.97 against half-year sales suggest DSO around ~49 days, inventory at 0.73 implies lean holding (fresh product model), and payables of 3.72 imply ~25 days, overall consistent with the business model. No clear signs of working-capital manipulation are evident from the limited data. Sustainability: if EBITDA remains positive and capex stays light, FCF should remain positive, but debt service (interest and potential principal) will compete for cash until operating margins turn positive.

Dividend Sustainability

Dividend data are unreported for the period, and the calculated payout ratio (-141.2%) is not meaningful due to a net loss. With positive estimated FCF (~1.09) but negative operating profit and tight liquidity (current ratio 0.735), dividend flexibility is limited and would likely be subordinate to maintaining liquidity and servicing debt. Policy outlook cannot be inferred from the dataset; absent disclosures, assume a conservative stance until operating margins recover. Coverage of any potential dividends by FCF would depend on maintaining positive OCF and minimal capex; visibility is low.

Risk Assessment

Business Risks:

• Input cost volatility (wheat, sugar, oils, energy) pressuring gross margins
• Demand softness (-1.8% YoY revenue) and pricing/mix risk in core bakery channels
• Operating leverage risk as SG&A (9.45) exceeds gross profit (9.31)
• Execution risk in price pass-through and efficiency initiatives

Financial Risks:

• Low liquidity: current ratio 0.735 and quick ratio 0.700
• High Debt/EBITDA (11.25x) and negative interest coverage (-1.68x)
• Short-term refinancing risk with short-term loans of 11.03 vs cash 2.82
• Negative working capital (-5.48) increases dependence on external funding

Key Concerns:

• Sustained negative operating margin (-0.4%) and net margin (-0.5%)
• ROIC of -0.4% below cost of capital, risking value erosion
• Unusual tax charge with pre-tax loss (effective tax rate -78.9%), reducing net income headroom
• Limited disclosure granularity (SG&A breakdown, investing cash flow, dividend policy), constraining analysis

Investment Implications

Key Takeaways:

• Loss-making but improving trajectory: operating loss narrowed to -0.13 with positive EBITDA and OCF
• Liquidity is tight (current ratio 0.735); cash discipline and refinancing are crucial near term
• Leverage is elevated on a cash basis (Debt/EBITDA 11.25x) with negative interest coverage, heightening sensitivity to execution
• Gross margin at 25.7% provides a base; achieving SG&A below gross profit is the inflection needed for positive OPM
• Estimated positive FCF (~1.09) offers a modest buffer if sustained, but visibility depends on maintaining EBITDA and stable working capital

Metrics to Watch:

• Operating margin progression (target: turn positive over the next quarters)
• Gross margin vs input cost indices (wheat, sugar, energy) and price/mix actions
• OCF sustainability and working capital turns (DSO, DPO, inventory days)
• Refinancing progress on short-term loans and interest coverage trajectory
• Debt/EBITDA trend and capex discipline

Relative Positioning: Within small-cap Japanese food manufacturers, the company exhibits weaker profitability and tighter liquidity than peers with positive OPM and current ratios above 1.0, but maintains an acceptable equity buffer (~43% equity ratio estimated) and positive EBITDA/OCF that could enable recovery if cost pressures abate and SG&A is contained.

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