Meiji Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥574.88B
• Operating Income: ¥40.94B
• Net Income: ¥29.48B
• EPS: ¥79.27

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

Meiji Holdings (2269) reported FY2026 Q2 consolidated results under JGAAP showing modest top-line growth but compressed profitability and weak operating cash generation. Revenue was ¥574.9bn (+1.0% YoY), while operating income declined to ¥40.9bn (-7.8% YoY), pointing to margin pressure despite a stable gross profit margin of 29.8%. EBITDA was ¥68.5bn (11.9% margin), and depreciation and amortization of ¥27.6bn indicates a relatively capital-intensive base. Ordinary income of ¥41.6bn modestly exceeded operating income, suggesting net positive non-operating balance, but net income fell 20.1% YoY to ¥21.5bn as taxes and below-the-line items weighed on the bottom line. DuPont analysis shows a net margin of 3.74%, asset turnover of 0.466x, and financial leverage of 1.55x, driving a reported ROE of 2.71% for the period. On an annualized basis, ROE would be in the mid‑single digits, assuming no major seasonality shifts. Liquidity remains strong with a current ratio of 176% and quick ratio of 134%, supported by ¥233.7bn of working capital. The balance sheet is conservative, with total liabilities of ¥392.7bn against equity of ¥793.9bn; by our calculation, the equity ratio is approximately 64.3% (the disclosed equity ratio field is unreported in this dataset). Interest burden is light (interest expense ¥0.17bn) and coverage ample (EBIT/interest ~237x). Operating cash flow of ¥3.8bn was weak relative to net income (OCF/NI 0.18x), indicating working capital headwinds or timing effects in the half. Financing cash outflow of ¥17.4bn suggests cash uses such as dividends or repayments, though detailed breakdown is not provided. Inventories of ¥127.6bn represent roughly 22% of H1 sales, and will be important for margin and cash conversion in H2. Overall, the company retains strong solvency and liquidity buffers, but faces profit compression and poor H1 cash conversion. Data gaps exist for cash and investment outflows; conclusions prioritize disclosed non-zero items and derived ratios. Near-term focus should be on operating margin recovery, inventory discipline, and normalization of cash conversion into H2.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 3.74% × Asset Turnover 0.466× × Financial Leverage 1.55× = ROE 2.71% for the period. Gross margin was 29.8% (¥171.4bn gross profit on ¥574.9bn revenue), indicating reasonable pricing/purchase balance, but operating margin compressed to 7.1% (¥40.9bn OI), down YoY as operating costs grew faster than revenue. Ordinary margin was 7.24% (¥41.6bn), slightly above operating margin due to net non‑operating gains or lower non‑operating expenses. EBITDA margin at 11.9% shows a meaningful spread to operating margin, but D&A intensity is high (D&A/EBITDA ~40%), reflecting capital intensity in manufacturing and pharma assets. Interest burden remains negligible (interest expense ¥0.17bn; EBIT/interest ~237x), so profit pressure is operational rather than financial. The drop in operating income (-7.8% YoY on +1.0% sales) implies negative operating leverage in H1; fixed cost absorption and mix likely weighed on margin. Estimated effective tax rate, inferred from net income and income tax, is approximately 41% for the period (¥14.8bn tax on an implied pre‑tax result near ¥36.3bn), though the dataset’s reported effective tax field is not populated. Overall profitability is solid at the gross level but soft at operating and net levels, with ROE low due to slim net margins and moderate asset turnover.

Growth Assessment

Top-line growth was modest at +1.0% YoY to ¥574.9bn, indicating stable but subdued demand across core categories. Operating income fell 7.8% YoY, signaling that cost inflation, product mix, or promotional spending outpaced pricing and efficiency gains. EBITDA growth lagged as well, with margin at 11.9%, implying limited ability to leverage fixed costs on near-flat sales. Profit quality is mixed: ordinary income marginally above operating income indicates some non-operating support, but bottom-line declined 20.1% YoY due to taxes/one-offs. Sustainability of revenue growth will hinge on pricing retention in dairy/confectionery and pipeline execution in pharmaceuticals, though segment detail is not disclosed here. The inventory position (¥127.6bn) and weak OCF suggest near-term growth may remain volume- and mix-sensitive. With a strong balance sheet and low interest burden, Meiji has capacity to invest, but H1 cash generation was insufficient to self-fund growth without drawing on existing liquidity. Outlook depends on H2 normalization of working capital and margin recovery via pricing, procurement, and cost control; without this, full-year profit growth could undershoot prior-year levels despite stable sales.

Financial Health

Liquidity is strong: current ratio 176.1%, quick ratio 134.5%, and working capital ¥233.7bn. Inventories are sizeable at ¥127.6bn, representing a significant component of current assets and an area to watch for cash conversion. Solvency is robust: total liabilities ¥392.7bn vs equity ¥793.9bn; calculated equity ratio ~64.3% (the dataset’s equity ratio field is unreported), and total liabilities/equity ~0.49x. Interest expense is minimal at ¥0.17bn, and coverage is ample (EBIT/interest ~237x), indicating minimal refinancing risk. Total assets are ¥1,233.9bn, with asset turnover 0.466x; while conservative leverage supports resilience, it also limits ROE uplift from financial leverage. Capital structure is healthy and provides flexibility to absorb shocks or invest in capacity/innovation.

Cash Flow Quality

Operating cash flow was ¥3.76bn versus net income of ¥21.48bn (OCF/NI 0.18x), pointing to weak cash conversion in H1, likely due to working capital build (inventory and/or receivables) and seasonal timing. Free cash flow cannot be conclusively assessed because investing cash flow is not disclosed in this dataset; thus, any FCF metric based on a zero IF is not meaningful. EBITDA of ¥68.5bn against D&A of ¥27.6bn suggests underlying cash earnings capacity, but the translation into OCF was poor this half. The gap between EBITDA and OCF signals temporary cash absorption; monitoring inventory days and receivables/payables turns in H2 is critical. Financing cash outflow of ¥17.4bn indicates cash uses (e.g., dividends, debt repayment, or buybacks), but the breakdown is not provided. Overall earnings quality appears pressured by working capital dynamics rather than accrual aggressiveness, but confirmation requires a full cash flow statement.

Dividend Sustainability

Dividend data are not disclosed in this dataset (annual DPS and payout appear as zero placeholders). Given net income of ¥21.48bn in H1 and strong balance sheet metrics, capacity to pay dividends likely exists, but sustainability should be judged against full-year earnings and free cash flow, not H1 alone. Financing cash outflow of ¥17.4bn may include dividends, but this cannot be verified here. Without investing cash flow disclosure, FCF coverage of dividends cannot be assessed. Policy insight is not provided; historically, Japanese blue chips often target stable or progressive dividends with moderate payout ratios, but company-specific policy is not disclosed here. For now, dividend sustainability assessment is limited; key will be H2 cash conversion and full-year profit trajectory.

Risk Assessment

Business Risks:

• Input cost inflation (dairy, sugar, cocoa, energy) compressing margins
• Demand elasticity and promotional intensity in domestic food categories
• Product mix shifts and fixed cost absorption driving negative operating leverage
• Regulatory and pricing pressures in pharmaceuticals
• Supply chain and logistics disruptions impacting service levels and costs
• Inventory management risk affecting cash conversion and obsolescence

Financial Risks:

• Working capital build leading to weak operating cash flow
• Potential H2 cash conversion shortfall if inventories/receivables do not normalize
• Currency fluctuations impacting imported raw material costs and translation effects
• Limited ROE given conservative leverage and modest asset turnover

Key Concerns:

• Operating income down 7.8% YoY on only 1.0% sales growth
• OCF/Net income at 0.18x indicating poor cash conversion in H1
• High D&A intensity (~40% of EBITDA) implying ongoing capex needs to sustain assets
• Reliance on H2 for margin recovery to meet full-year earnings expectations

Investment Implications

Key Takeaways:

• Stable revenue but compressed operating margin in H1
• ROE low at 2.71% for the period due to slim net margins and moderate turnover
• Strong liquidity and solvency provide resilience and investment optionality
• Operating cash flow weak; working capital normalization is pivotal for H2
• Interest burden minimal; financial risk low
• Ordinary income above operating income suggests small non-operating tailwind

Metrics to Watch:

• Operating margin trajectory and gross-to-operating spread
• OCF to net income ratio and free cash flow once investing CF is disclosed
• Inventory levels and days on hand
• Pricing realization versus input cost trends
• ROE and asset turnover progression into H2
• Financing cash flow composition (dividends, buybacks, debt movements)

Relative Positioning: Versus Japanese food and consumer peers, Meiji exhibits stronger-than-average balance sheet strength (low leverage, high equity ratio) and very strong interest coverage, but mid-pack profitability with pressured operating margins and below-peer cash conversion this half; improvements in working capital discipline and margin recovery are needed to align ROE with sector averages.

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