Quick View
| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥1204.6B | ¥1165.9B | +3.3% |
| Operating Income | ¥100.9B | ¥109.1B | −7.5% |
| Ordinary Income | ¥156.5B | ¥171.9B | −9.0% |
| Net Income | ¥149.6B | ¥132.3B | +13.0% |
| ROE | 2.3% | 2.0% | - |
Executive Summary
FY2027 Q1 resulted in higher revenue but lower earnings, with the key takeaway being that revenue growth was not sufficiently converted into operating income. Revenue was ¥1204.6B (+3.3% YoY), Operating Income was ¥100.9B (△7.5% YoY), and Ordinary Income was ¥156.5B (△9.0% YoY). Meanwhile, Net Income attributable to owners of the parent increased to ¥135.9B (+17.2% YoY), primarily due to extraordinary income including a ¥52.9B gain on the sale of investment securities and a ¥23.2B foreign exchange gain, contrasting with the decline in core operating profitability.
Factors Behind Earnings Fluctuations
【Revenue】Consolidated Revenue increased by +3.3% YoY. By segment, the Americas increased to ¥257.5B (+18.7% YoY), Asia and Oceania to ¥336.9B (+14.4% YoY), and Europe to ¥36.6B (+14.2% YoY), all posting revenue growth. In contrast, Japan declined to ¥553.7B (△7.2% YoY), weighing on consolidated growth.
【Profit and Loss】Operating Income was ¥100.9B (△7.5% YoY), and the Operating Income Margin was 8.4%, approximately 1pt lower than the previous year. Domestic segment profit fell sharply to ¥56.6B (△35.6% YoY), while Europe continued to experience deteriorating profitability, recording an Operating Loss of ¥1.8B. In contrast, the Americas improved significantly to ¥69.2B (+9.0% YoY; 26.9% margin), and Asia and Oceania to ¥31.4B (+145.8% YoY; 9.3% margin), partially offsetting the decline in domestic earnings. Ordinary Income declined by △9.0% YoY despite the recognition of a ¥23.2B foreign exchange gain and ¥17.7B interest income. Net Income increased by +13.0% YoY (+17.2% on an attributable-to-owners-of-the-parent basis) due to extraordinary income including a ¥52.9B gain on the sale of investment securities, but dependence on temporary factors is high. In conclusion, the Company achieved higher revenue but lower earnings.
Segment Analysis
Japan recorded Revenue of ¥553.7B (△7.2% YoY) and profit of ¥56.6B (△35.6% YoY; 10.2% margin), with weak domestic demand and deteriorating fixed-cost absorption serving as the main factors weighing on consolidated profit. The Americas maintained high profitability, with Revenue of ¥257.5B (+18.7% YoY) and profit of ¥69.2B (+9.0% YoY; 26.9% margin), although profit growth trailed revenue growth, requiring confirmation of cost trends. Asia and Oceania recorded Revenue of ¥336.9B (+14.4% YoY) and profit of ¥31.4B (+145.8% YoY; 9.3% margin, compared with 4.3% in the previous year), demonstrating a notable improvement in profitability accompanying scale expansion. Europe recorded Revenue of ¥36.6B (+14.2% YoY) but an Operating Loss of ¥1.8B (compared with ¥0.2B profit in the previous year), leaving monetization as an ongoing challenge.
Key Financial Indicators
【Profitability】The Operating Income Margin was 8.4%, approximately 1pt lower than the same period of the previous year (approximately 9.4%), with the high Gross Margin of 59.5% offset by an SG&A Ratio of 51.1%. The Net Profit Margin was 12.4%; however, this figure includes extraordinary income such as the ¥52.9B gain on the sale of investment securities, and must be distinguished from underlying profitability based on Operating Income.【Cash Flow Quality】Pre-tax Income of ¥214.3B reached 2.1 times Operating Income, with a ¥23.2B foreign exchange gain, ¥17.7B interest income, and ¥66.4B in extraordinary income serving as upward contributors.【Investment Efficiency】ROE was 2.3% on a quarterly actual-results basis, corresponding to an estimated annualized level of approximately 8%.【Financial Soundness】The Equity Ratio was 70.9% (on a total-assets basis, as stated among the financial indicators), while Cash and Deposits of ¥2170.5B exceeded Current Liabilities of ¥1595.5B, indicating a stable financial base.
Cash Flow Analysis
As the figures in the statement of cash flows cannot be directly confirmed from the disclosed information, cash trends are analyzed based on changes in the balance sheet. Cash and Deposits were ¥2170.5B, down from ¥2314.6B in the same period of the previous year, but remained well above Current Liabilities of ¥1595.5B, indicating sound short-term payment capacity. Of Net Income of ¥135.9B, income from asset sales, including the ¥52.9B gain on the sale of investment securities and the ¥12.4B gain on the sale of fixed assets, contributed to cash generation; these factors must be distinguished from the Company’s underlying cash-generation capacity from operating activities. Construction in Progress expanded to ¥1162.1B, equivalent to 31.7% of Property, Plant and Equipment, suggesting that ongoing capital expenditures may be affecting the cash position. Long-Term Debt was ¥509.6B and remained almost flat, with no significant movements in financing or repayments observed.
Quality of Earnings
It should be noted that the increase in Net Income was not attributable to improvement in the core business, but was supported by non-operating and temporary income. Ordinary Income of ¥156.5B included non-operating income such as a ¥23.2B foreign exchange gain (equivalent to 23.0% of Operating Income), ¥17.7B interest income, and ¥14.6B dividend income; these are highly volatile items affected by market conditions and the composition of held assets. Furthermore, ¥52.9B of the ¥66.4B in extraordinary income was a gain on the sale of investment securities and should be distinguished as a temporary factor with low recurrence. Consequently, Pre-tax Income of ¥214.3B reached 2.1 times Operating Income of ¥100.9B, making it necessary to focus on the Operating Income Margin of 8.4% when assessing the earnings power of recurring business activities. Accounts Receivable were ¥594.3B, equivalent to 49.3% of Revenue, and developments in accruals from a working-capital perspective should also be monitored going forward.
Earnings Forecast and Guidance
The full-year earnings forecast is Revenue of ¥5270.0B (+8.3% YoY), Operating Income of ¥440.0B (△2.6% YoY), and Ordinary Income of ¥575.0B (△5.9% YoY), with no revisions to either the current-period earnings or dividend forecasts. The Q1 progress rate was 22.9% for both Revenue and Operating Income, approximately 2.1pt below the 25% benchmark for simple linear phasing. Since the Company’s plan itself incorporates a decline in profit margins relative to revenue growth, the delay in progress does not immediately indicate downside risk; however, the pace of recovery in the domestic business and the sustainability of growth in overseas segments will be key to achieving the full-year plan.
Shareholder Returns
The full-year dividend forecast is ¥72.00 per share, implying a Payout Ratio of approximately 41.3% based on the full-year EPS forecast of ¥174.21, with no revision made. Compared with the previous-year dividend of ¥33 (based on the interim dividend), the Company appears to be on a dividend-growth trend. While the financial base—including Cash and Deposits of ¥2170.5B, an Equity Ratio of 70.9%, and low interest-bearing debt—supports stable dividend payments, Net Income includes temporary factors such as gains on the sale of investment securities. Accordingly, assessing the sustainability of dividend funding requires confirmation of the degree of recovery on an Operating Income and Ordinary Income basis.
Risk Factors
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Declining profitability in the domestic business: The Japan segment recorded Revenue of ¥553.7B (△7.2% YoY) and Operating Income of ¥56.6B (△35.6% YoY), representing a significant decline and serving as the main factor weighing on consolidated profit. The key focus is whether weak domestic demand and deteriorating fixed-cost absorption will continue.
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Unestablished profitability in the European business: Europe achieved higher Revenue of ¥36.6B (+14.2% YoY) but recorded an Operating Loss of ¥1.8B (compared with ¥0.2B profit in the previous year). Recording losses amid continued revenue growth suggests a cost-structure issue and delays in recovering local investments.
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Dependence on temporary profit factors: The increase in Net Income (+17.2% YoY on an attributable-to-owners-of-the-parent basis) was supported by non-recurring items such as the ¥52.9B gain on the sale of investment securities and the ¥23.2B foreign exchange gain. Attention should be paid to recurring earnings power, excluding these factors, as reflected in the Operating Income Margin of 8.4% (approximately 1pt lower than the previous year).
Industry Benchmark (Reference; Compiled by the Company)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 8.4% | 5.3% (1.7%–6.6%) | +3.1pt |
| Net Profit Margin | 12.4% | 3.7% (0.7%–4.9%) | +8.7pt |
Within the industry, profitability is substantially above the median, reflecting the high Gross Margin and brand strength.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 3.3% | 5.2% (2.9%–10.1%) | −1.9pt |
The Revenue Growth Rate was slightly below the industry median, with weak domestic demand reflected in the relatively slower growth pace.
※Source: Compiled by the Company
Key Takeaways from the Earnings Results
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The Operating Income Margin declined by approximately 1pt from the same period of the previous year, with SG&A expenses offsetting the high Gross Margin of 59.5%. Recovery in the domestic segment’s profit margin will determine the trend in consolidated earnings power.
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The increase in Net Income depended substantially on non-recurring items such as gains on the sale of investment securities and foreign exchange gains, and must be evaluated separately from the core-business earnings trend.
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High profitability in the Americas and rapid improvement in profitability in Asia and Oceania are offsetting lower domestic earnings and the European deficit, resulting in greater diversification of the earnings structure across regions. The progress rate against the full-year forecast was 22.9%, slightly below the standard 25%.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear (bearish) | ¥2,080 |
| base (base case) | ¥2,124 |
| bull (bullish) | ¥2,167 |
| Calculation Assumption | Value |
|---|---|
| Book Value per Share (BPS) | ¥2,266 |
| Adjusted Forecast EPS | ¥159.1 |
| Cost of Equity r | 9.27% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 0.50%) |
| Persistence Coefficient of Residual Income ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 41.3% |
| Forecast EPS Confidence Adjustment | ×0.913 (based on the Company’s historical track record of achieving guidance) |
| implied PBR / PER | 0.94x / 13.3x |
Sensitivity: ¥2,065–¥2,185 at Cost of Equity ±1%, and ¥2,119–¥2,127 at ω±0.1.
Notes:
- As forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
- Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
- As 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 / This is a mechanically calculated value based solely on publicly disclosed data and is neither a forecast of the market share price nor a recommendation of any specific investment action, and does not predict or guarantee future share prices.)
This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. 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 with professionals as necessary.
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AI Financial Analysis
Executive Summary
FY2027 Q1 results were operationally softer despite higher reported net income, as overseas growth and a stronger gross margin were more than offset by a sharp rise in SG&A and sizeable non-recurring gains. Revenue increased 3.3% YoY to ¥120.5bn. Operating income declined 7.5% to ¥10.1bn, and ordinary income fell 9.0% to ¥15.6bn. The operating margin compressed 98bp YoY to 8.4% from 9.4%. Gross margin improved 61bp to 59.5%, demonstrating continued pricing and/or product-mix resilience well above typical food-industry gross-margin benchmarks. However, SG&A increased 6.7% YoY to ¥61.6bn, outpacing revenue growth and lifting the SG&A-to-sales ratio by 159bp to 51.1%. Japan, the largest revenue region, recorded an 8.2% decline in external sales and a 35.6% decline in segment profit. In contrast, the Americas delivered 18.7% sales growth and remained the core business by segment-profit contribution, generating ¥6.9bn of profit. Asia and Oceania was the strongest improving region, with sales up 14.4% and segment profit up 145.8% to ¥3.1bn. Reported profit attributable to owners rose 17.2% to ¥13.6bn, but this was primarily supported by ¥66.4bn of extraordinary income, including a ¥52.9bn gain on the sale of investment securities. Net extraordinary gains of ¥57.9bn explain the substantial gap between ordinary income and profit before tax. Foreign-exchange gains of ¥2.3bn also represented a meaningful 23.0% of operating income, increasing earnings sensitivity to currency movements. The balance sheet remains conservatively funded, with a 208.3% current ratio, 0.41x debt-to-equity ratio, and cash equal to 3.60x short-term debt. Construction in progress increased to ¥1,162.1bn and accounts for 31.7% of PPE, indicating a substantial investment pipeline whose execution and return profile warrant monitoring. Q1 revenue and operating-income progress against full-year guidance were both 22.9%, modestly below the standard 25% first-quarter pace, while profit attributable to owners reached 29.2% due to non-recurring gains. Full-year guidance has not been revised and continues to imply 8.3% revenue growth but a 2.6% decline in operating income. The principal forward-looking issue is whether international volume and profit growth can sustain group earnings while the domestic business restores margin and the elevated construction program converts into productive capacity.
Profitability Analysis
The reported annualized DuPont ROE is 8.3%, comprising an 11.3% net profit margin, 0.524x annualized asset turnover, and 1.41x financial leverage. The low leverage component confirms that ROE is generated predominantly from operating assets and profitability rather than balance-sheet gearing. The reported net margin is flattered by extraordinary gains: profit before tax was ¥21.4bn versus ordinary income of ¥15.6bn, reflecting net extraordinary gains of ¥5.8bn. Operationally, the more relevant operating margin fell to 8.4% from 9.4%, placing profitability within the stated 8-15% good range but showing clear negative operating leverage in the quarter. Gross margin increased to 59.5% from 58.9%, a 61bp improvement and evidence of considerable brand and pricing strength relative to standard food-sector benchmarks. This benefit was outweighed by SG&A growth of 6.7%, versus revenue growth of 3.3%, causing a 159bp increase in the SG&A ratio to 51.1%. The greatest earnings pressure came from Japan, where segment profit fell to ¥5.7bn from ¥8.8bn and segment margin declined by approximately 450bp to 10.2% on total segment sales. The Americas remained the core business by operating-profit contribution, providing ¥6.9bn of segment profit, although its margin declined by approximately 239bp to 26.9% despite strong sales growth. Asia and Oceania showed the strongest positive operating leverage, with its segment margin improving by approximately 498bp to 9.3%. Interest coverage of 15.57x is strong, and net interest and investment-related income supports ordinary income, although FX gains add volatility. The 30.2% effective tax rate is broadly normal; the 0.634 tax burden is lower than a normalized threshold because the quarter's profit mix includes gains that do not fully translate into attributable profit at the same rate.
Growth Assessment
Group revenue growth of 3.3% was led by international markets rather than Japan. External sales were ¥52.5bn in Japan, ¥25.8bn in the Americas, ¥33.7bn in Asia and Oceania, ¥3.7bn in Europe, and ¥4.9bn in other businesses. Japan represented 43.6% of group revenue, while the three overseas beverage and food regions together represented 53.0%, illustrating a geographically diversified revenue base. Americas sales increased 18.7% YoY and Asia and Oceania sales increased 14.4%, more than offsetting Japan's 8.2% decline. Asia and Oceania's segment-profit increase to ¥3.1bn from ¥1.3bn provides the clearest evidence of improving scale economics. Americas profit rose 9.0% to ¥6.9bn, but its slower profit growth than sales indicates some margin dilution. Europe grew sales 14.3% but moved to a ¥0.2bn segment loss from a small profit, showing that growth there has not yet produced reliable earnings leverage. Other businesses recorded a small ¥0.8bn segment profit after a prior-year loss, although revenue declined 3.6%. Full-year revenue guidance of ¥527.0bn implies 8.3% YoY growth, requiring an acceleration from the first-quarter 3.3% growth rate. Q1 revenue progress was 22.9%, 2.1 percentage points below the standard 25% quarterly run rate. Full-year operating-income guidance of ¥44.0bn implies a 2.6% YoY decline; Q1 operating-income progress was likewise 22.9%, 2.1 percentage points below the standard pace. Profit attributable to owners reached 29.2% of the ¥46.5bn forecast, but the above-standard progress rate is driven by security-sale gains rather than operating momentum.
Financial Health
Liquidity is strong, with current assets of ¥332.4bn versus current liabilities of ¥159.5bn, producing a 208.3% current ratio and a 201.8% quick ratio. Working capital was ¥172.8bn, providing a substantial cushion for normal operating requirements and debt maturities. Cash and deposits of ¥217.0bn exceeded short-term loans of ¥60.2bn by 3.60x. Total interest-bearing debt was ¥111.2bn, equal to a conservative 0.41x debt-to-equity ratio and 14.6% debt-to-capital. Interest coverage of 15.57x confirms ample servicing capacity. Short-term debt nevertheless accounted for 54.2% of total borrowings, above the 40% monitoring threshold. This refinancing-risk flag is mitigated by cash coverage of short-term debt, but it makes continued access to short-term funding and the maturity profile relevant. Short-term loans increased ¥11.0bn, or 22.3% YoY, while cash declined ¥14.4bn, or 6.2% YoY. Total debt increased ¥10.9bn, or 10.8% YoY, whereas total equity was broadly stable at ¥651.8bn. Capital adequacy remained high at 65.4%. Net defined-benefit liability was ¥5.5bn and asset-retirement obligations were ¥1.9bn, modest relative to the equity base.
Notable B/S Changes
Construction in progress: +¥19.8bn (+20.5%) to ¥116.2bn, representing 31.7% of PPE - substantial capital projects increase execution, completion, and return-on-investment risk. Property, plant and equipment: +¥20.4bn (+5.9%) to ¥366.5bn - confirms an expanding fixed-asset base and raises the importance of future capacity utilization. Short-term loans: +¥11.0bn (+22.3%) to ¥60.2bn - increases reliance on short-dated financing, though cash coverage remains strong at 3.60x. Total interest-bearing debt: +¥10.9bn (+10.8%) to ¥111.2bn - leverage remains conservative at 0.41x debt-to-equity, but funding costs and debt maturity management warrant monitoring. Accounts receivable: +¥4.4bn (+8.0%) to ¥59.4bn - growth exceeded revenue growth and should be monitored alongside collection performance. Investment securities: -¥5.9bn (-7.4%) to ¥74.5bn - consistent with the ¥52.9bn gain on sale of investment securities recognized in extraordinary income. Cash and deposits: -¥14.4bn (-6.2%) to ¥217.0bn - liquidity remains very strong but declined while short-term loans increased. Raw materials: +¥1.2bn (+5.3%) to ¥24.7bn - indicates a larger commodity-input inventory position and associated exposure to raw-material cost movements.
Cash Flow Quality
Dividend Sustainability
The full-year dividend forecast is ¥72.0 per share, compared with forecast EPS of ¥174.21. The implied dividend payout ratio is 41.3%, below the 60% sustainability benchmark and therefore moderate on an earnings basis. The unchanged dividend forecast alongside unchanged full-year earnings guidance indicates management has maintained its planned shareholder-return framework. The large cash balance of ¥217.0bn and low 0.41x debt-to-equity ratio support financial flexibility. The key consideration for dividend capacity is the scale of ongoing construction investment, with construction in progress of ¥116.2bn, rather than an elevated stated payout ratio.
Risk Assessment
Business risks include Domestic demand and profitability risk: Japan revenue declined 8.2% YoY and segment profit declined 35.6%, making a recovery in the largest revenue region central to restoring group operating momentum., International execution risk: Asia and Oceania and the Americas are driving growth, but Americas margin declined despite 18.7% sales growth, and Europe shifted to a ¥0.2bn segment loss., Food and beverage input-cost risk: raw-material inventories were ¥24.7bn, leaving earnings exposed to agricultural commodity, packaging, energy, and imported-input cost movements where pricing pass-through may lag., Food-safety, product-quality, and brand-reputation risk: a consumer health beverage and food franchise depends on manufacturing quality, regulatory compliance, and sustained consumer trust., FX exposure: foreign-exchange gains of ¥2.3bn equaled 23.0% of operating income, above the 20% alert threshold. This contribution supported ordinary income in Q1 but may reverse with currency movements, particularly given the substantial overseas revenue base..
Financial risks include Refinancing risk: the short-term debt ratio is 54.2%, above the 40% alert threshold, and short-term borrowings increased 22.3% YoY. The risk is currently contained by cash equal to 3.60x short-term debt and a 208.3% current ratio., Investment-execution risk: construction in progress rose ¥19.8bn, or 20.5% YoY, to ¥116.2bn and represents 31.7% of PPE, above the 20% alert threshold. Delays, budget overruns, or weak utilization would depress future returns on capital., Non-recurring earnings risk: ¥52.9bn of gains on sales of investment securities and total net extraordinary gains of ¥57.9bn materially lifted reported attributable profit, limiting the comparability of the 17.2% YoY net-income increase., Interest-rate and funding-cost risk: interest expense more than doubled to ¥6.5bn from ¥3.1bn as debt increased and funding costs rose, although current interest coverage remains strong at 15.57x..
Key concerns include Highest priority is the divergence between a 7.5% decline in operating income and a 17.2% increase in attributable profit; reported earnings growth does not represent equivalent improvement in recurring profitability., The increase in SG&A of 6.7% versus 3.3% revenue growth compressed the operating margin by 98bp, requiring evidence that spending will generate future sales and margin recovery., The high construction-in-progress balance requires monitoring of project completion, capital intensity, capacity utilization, and incremental returns., Currency gains and gains on security sales increased first-quarter profit volatility and should be separated from the underlying performance of the beverage and food operations..
Investment Implications
Key takeaways include Underlying Q1 operating performance weakened: revenue increased 3.3%, but operating income fell 7.5% and operating margin contracted to 8.4%., International operations are the principal growth engine, led by Asia and Oceania profit growth of 145.8% and Americas sales growth of 18.7%., Japan's 8.2% revenue decline and 35.6% segment-profit decline are the largest operational drag., Reported attributable-profit growth was supported by ¥52.9bn of security-sale gains and should not be interpreted as a like-for-like improvement in core earnings., The balance sheet is strong, but the combination of elevated construction in progress and a majority short-term debt mix raises capital-allocation and execution-monitoring requirements..
Metrics to watch include Japan revenue growth, segment margin, and the pace of SG&A normalization, Americas segment margin relative to its 26.9% Q1 level, Asia and Oceania sales growth and whether its 9.3% segment margin can be retained, Operating-income progress against the ¥44.0bn full-year forecast, Foreign-exchange gains or losses relative to operating income, Construction-in-progress completion, capex deployment, and asset-utilization outcomes, Short-term debt balance, cash-to-short-term-debt coverage, and interest expense.
Regarding relative positioning, Yakult combines an exceptionally high 59.5% gross margin, a globally diversified revenue base, strong liquidity, and conservative leverage. Relative to food and beverage peers, brand-driven gross-profit resilience is a notable strength; however, the current 8.4% operating margin is constrained by a high 51.1% SG&A ratio, and reported Q1 net-profit growth is less representative of recurring performance because of substantial asset-sale gains.