ROKKO BUTTER CO.,LTD. FY2026 Q2 Earnings Report

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Executive Summary

In 1H FY2026, revenue increased, but the low-margin structure persisted, leaving both Operating Income and Net Income at modest absolute levels. Revenue was ¥269.1B, Operating Income was ¥7.8B (Operating Margin: 2.9%), Ordinary Income was ¥8.3B, and Interim Net Income attributable to owners of the parent was ¥6.1B. Progress against the full-year plan (Revenue: ¥550.0B, Operating Income: ¥15.0B, Ordinary Income: ¥16.0B, Net Income: ¥14.0B) was 48.9% for Revenue, 52.4% for Operating Income, 51.9% for Ordinary Income, and 43.8% for Net Income. While progress at the operating level slightly exceeded the standard 50% mark, Net Income fell below this level due to the impact of income taxes. The Gross Margin of 18.0% is below the generally healthy range for the food and beverage industry (25~40%), making the company’s ability to pass through raw material, packaging, and logistics costs a key focus going forward.

Factors Affecting Performance

【Revenue】Revenue was ¥269.1B, comprising the main businesses of the Cheese Business at ¥212.6B (79.1% of total) and the Nuts Business at ¥57.0B (21.2%). The Cheese Business accounted for 76.3% of total segment profit and was the primary driver of performance. The Nuts Business’s profit margin was 3.1%, slightly above the Cheese Business’s 2.8%.

【Profit and Loss】The Cost of Sales ratio was high at 82.0%. After deducting SG&A expenses of ¥40.5B (SG&A ratio: 15.1%) from Gross Profit of ¥48.4B (Gross Margin: 18.0%), Operating Income was ¥7.8B, resulting in an Operating Margin of 2.9%. Non-operating income of ¥2.6B, including dividend income of ¥0.9B and foreign exchange gains of ¥0.9B, supported Ordinary Income of ¥8.3B and contributed to the increase from Operating Income to Ordinary Income. Extraordinary income and losses were net positive by slightly more than ¥0.1B, mainly due to gains on the sale of investment securities of ¥0.2B, and had a negligible impact on Net Income. The difference between Ordinary Income of ¥8.3B and Net Income of ¥6.1B after deducting income taxes of ¥2.3B was primarily attributable to the tax burden. Although the results reflect both revenue and profit growth, profit growth remains limited due to the low Gross Margin.

Segment Analysis

The Cheese Business was the largest segment, with Revenue of ¥212.6B, segment profit of ¥6.0B, and a profit margin of 2.8%, accounting for 79.1% of total Revenue and 76.3% of segment profit. The Nuts Business had Revenue of ¥57.0B, segment profit of ¥1.7B, and a profit margin of 3.1%. Although its scale was approximately one-fourth that of the Cheese Business, its profit margin was slightly higher. Both businesses had profit margins of around 3%, creating a structure in which the ability to pass through increases in raw material, packaging, and logistics costs determines segment profitability.

Key Financial Metrics

【Profitability】The Operating Margin of 2.9%, Net Profit Margin of 2.3%, and Gross Margin of 18.0% were all below generally healthy levels in the food and beverage industry (Gross Margin benchmark: 25~40%), indicating limited capacity to absorb costs.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥76.5B, exceeding Net Income of ¥6.1B by more than 12 times. However, the primary reason was the temporary release of working capital resulting from a ¥65.3B decrease in accounts receivable, and caution is required when extrapolating this figure as a measure of recurring earnings power.【Investment Efficiency】Annualized ROE was 3.8%, while the Equity Ratio was 54.5%. Although the capital base was solid, capital efficiency remained low. Capital expenditures of ¥5.8B were approximately half of depreciation and amortization expense of ¥11.2B, indicating a gradual pace of asset replacement.【Financial Soundness】Current assets were ¥315.4B versus current liabilities of ¥190.9B, resulting in a favorable current ratio of approximately 165%. Cash and deposits increased substantially year on year to ¥104.4B, while long-term borrowings increased to ¥47.2B, indicating a shift in the interest-bearing debt structure from short-term to long-term borrowings.

Cash Flow Analysis

OCF was ¥76.5B, substantially exceeding Net Income of ¥6.1B. However, the primary factor was the temporary release of working capital resulting from a ¥65.3B decrease in accounts receivable, requiring caution when evaluating this figure as recurring cash-generation capacity. Investing Cash Flow was positive at ¥5.1B, as fund management activities, including the withdrawal of time deposits, offset capital expenditures of ¥5.8B. Financing Cash Flow was an outflow of ¥16.7B, including share repurchases of ¥12.0B and an increase in long-term borrowings. As a result, Free Cash Flow reached ¥81.6B, and cash and deposits increased by ¥53.6B year on year to ¥104.4B, expanding short-term financial flexibility.

Earnings Quality

Of the ¥8.3B in Ordinary Income, non-operating income of ¥2.6B included dividend income of ¥0.9B and foreign exchange gains of ¥0.9B, providing a certain degree of support to the core Operating Income of ¥7.8B. Extraordinary income and losses were net positive by slightly more than ¥0.1B, mainly due to gains on the sale of investment securities of ¥0.2B, and had a negligible impact on Net Income of ¥6.1B; temporary factors were not the primary driver of performance. The ¥2.2B difference between Ordinary Income and Net Income was primarily attributable to income taxes of ¥2.3B, with no unusual factors other than the tax burden identified. Comprehensive Income was ¥7.8B, approximately in line with Net Income, with no significant divergence arising from other comprehensive income, such as valuation differences on securities or foreign currency translation adjustments. The substantial dependence of OCF on the working-capital factor of accounts receivable collection is a point to consider when assessing the sustainability of the period’s high cash-generation capacity from an accrual perspective.

Earnings Forecasts and Guidance

The company revised its earnings forecasts and set the full-year plan at Revenue of ¥550.0B (+27.0% year on year), Operating Income of ¥15.0B (+4.5%), Ordinary Income of ¥16.0B (+20.6%), and Net Income of ¥14.0B. While 1H progress was above the standard 50% level for Revenue at 48.9%, Operating Income at 52.4%, and Ordinary Income at 51.9%, Net Income was below this level at 43.8%. Trends in the tax burden and financial income and expenses in 2H will therefore be key to achieving the plan. The full-year forecast assumes an Operating Margin of 2.7%, slightly below the 2.9% recorded in 1H.

Shareholder Returns

The Q2 dividend was ¥0 per share, while the full-year dividend forecast is ¥20 per share. Based on the full-year forecast EPS of ¥72.44, the forecast Payout Ratio is approximately 27.6%, a conservative level below the generally cited sustainability benchmark of 60%. There was no revision to the dividend forecast, and no change was made to the dividend plan during the quarter. Meanwhile, the company conducted share repurchases of ¥12.0B in 1H. When dividends and share repurchases are considered together as shareholder returns, the effective level of shareholder returns is higher than indicated by the Payout Ratio alone.

Risk Factors

1. Raw Material, Foreign Exchange, and Logistics Cost Pass-Through Risk: With a Gross Margin of 18.0% and an Operating Margin of 2.9%, the profit buffer is thin. If the company is unable to sufficiently pass through increases in the cost of raw materials for cheese and nuts, foreign exchange fluctuations affecting imported materials, and increases in packaging, energy, and logistics costs, the impact on profit margins could be substantial.

2. Earnings Concentration in the Cheese Business: The Cheese Business had Revenue of ¥212.6B and segment profit of ¥6.0B, accounting for 76.3% of total segment profit. This structure makes consolidated profit susceptible to slowing demand or intensifying competition in the core category, as well as unsuccessful price revisions.

3. Interest-Bearing Debt Structure and Refinancing Trends: Interest-bearing debt was approximately ¥105.0B, of which short-term borrowings accounted for ¥57.8B. Although cash and deposits of ¥104.4B provide a buffer, the debt burden relative to EBITDA is relatively high, and financing conditions amid changes in the financial environment require close monitoring.

Industry Benchmark (For Reference; Company Research)

Both the Operating Margin and Net Profit Margin were thin in absolute terms, confirming the low-margin structure of the food and beverage industry.
Source: Company research

Key Points from the Earnings Results

1. The 1H progress rates for Operating Income at 52.4% and Ordinary Income at 51.9% were broadly in line with the full-year plan. However, the Net Income progress rate of 43.8% was below the standard 50% level, making trends in the tax burden and financial income and expenses in 2H the key determinant of full-year achievement.

2. The Gross Margin of 18.0% and Operating Margin of 2.9% were below generally healthy levels in the food and beverage industry. The earnings data indicate that, rather than revenue growth itself, structural improvement in profit margins through pricing power and cost management is the key challenge.

3. OCF of ¥76.5B substantially exceeded Net Income, but the primary factor was the temporary working-capital effect of a ¥65.3B decrease in accounts receivable. Whether this high level of cash-generation capacity will continue at a similar pace must be confirmed through data in subsequent periods, including trends in trade receivables.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥1,464–¥1,549 at Cost of Equity ±1%, and ¥1,496–¥1,511 at ω±0.1.

Notes:

• 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 (there is 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 (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market price or a recommendation of any specific investment action, and does not predict or guarantee future stock prices.)

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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 discretion and, where necessary, after consulting a professional advisor.

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