Hayashikane Sangyo Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥22.37B
• Operating Income: ¥787M
• Net Income: ¥241M
• EPS: ¥87.49

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

Hayashikane Sangyo (2286) delivered a sharp earnings rebound in FY2026 Q2 despite top-line contraction, highlighting material margin recovery and tighter cost control. Revenue declined 9.4% YoY to ¥22.37bn, yet operating income increased 298% YoY to ¥0.79bn, demonstrating strong operating leverage. Gross margin printed at 11.0%, and operating margin improved to roughly 3.5%, reflecting improved input cost trends and/or favorable product mix and SG&A discipline. Ordinary income of ¥0.97bn exceeded operating income, indicating a positive contribution from non-operating items (e.g., financial income or FX). Net income reached ¥0.74bn (+205% YoY), with a net margin of 3.29%. DuPont analysis shows ROE at 5.99%, driven by modest profitability, moderate asset turnover (0.753x), and leverage of 2.42x. Liquidity appears adequate with a current ratio of 143.7% and quick ratio of 125.1%, supported by ¥4.66bn in working capital. Solvency is acceptable; using reported totals, equity/asset is approximately 41.3% (12.264/29.694), even though the equity ratio metric is shown as 0.0% in the dataset due to non-disclosure formatting. Interest coverage is solid at 16.4x, mitigating near-term refinancing risk despite a reported debt-to-equity of 1.29x. Cash flow quality is the main concern: operating cash flow was a sizable outflow of ¥2.70bn against positive earnings, likely reflecting working capital build (receivables/inventories) and timing effects. Financing inflows of ¥1.60bn likely helped bridge the OCF gap, underscoring reliance on short-term funding in the period. Investing CF was not disclosed (shown as 0), limiting visibility on capex and structural cash generation. Dividend data are undisclosed (DPS shown as 0.00), and payout ratios based on this should not be interpreted as an active zero payout policy. Overall, the quarter signals improved profitability and low earnings-based financial risk, but the negative OCF and data gaps on cash and investing activities temper confidence in the sustainability of the earnings rebound. Key monitoring items include normalization of OCF, inventory and receivable turns, raw material cost trends (fishmeal/meat/grains), and FX. Given the company’s exposure to imported inputs, yen movements and commodity volatility remain central drivers of margins and cash conversion.

Profitability Analysis

ROE of 5.99% decomposes into a net margin of 3.29%, asset turnover of 0.753x, and financial leverage of 2.42x. The primary driver of YoY improvement appears to be margin expansion, as operating income rose 298% despite a 9.4% revenue decline, indicating strong operating leverage and cost normalization. Gross margin at 11.0% and operating margin at roughly 3.5% suggest improved input cost conditions or favorable mix/SKU discipline. EBITDA of ¥1.16bn implies an EBITDA margin of 5.2%, adequate for a processor/distributor business with limited pricing power. Ordinary income (¥0.97bn) exceeding operating income (¥0.79bn) points to supportive non-operating items (e.g., FX gains, dividends), which may not be recurring; underlying core profitability should be evaluated on operating trends. Interest coverage at 16.4x (EBIT/interest) signals ample buffer and indicates that financial leverage is not currently constraining operations. Overall profitability quality has improved, but sustained gains will depend on maintaining gross spread amid input cost and FX volatility.

Growth Assessment

Top-line contracted 9.4% YoY, suggesting either weaker volumes, price normalization after prior inflation, or portfolio pruning. Profit growth was strong, with net income up 205% YoY, driven by margin recovery and non-operating tailwinds. The sustainability of profit growth hinges on maintaining improved gross spreads and continued SG&A discipline, as well as normalization of working capital to align earnings with cash. With ordinary income above operating income, part of the YoY uplift may be non-core; thus, core growth should be judged on operating margin trajectory and volume/pricing dynamics. Near-term outlook is cautiously constructive on margins given the demonstrated cost leverage, but visibility is limited by undisclosed investing CF and cash balances. Continued revenue softness would require further efficiency gains to support earnings growth. Monitoring raw material indices (fishmeal, pork/meat, grains), contract pricing pass-through, and FX (USD/JPY) will be key to assessing sustainability.

Financial Health

Liquidity is adequate: current ratio 143.7%, quick ratio 125.1%, and working capital of ¥4.66bn suggest a comfortable near-term buffer. Solvency is reasonable with debt-to-equity at 1.29x, balanced by strong interest coverage of 16.4x. Using reported totals, the implied equity ratio is approximately 41.3% (equity/asset), despite the dataset flagging equity ratio as 0.0% due to non-disclosure. Total assets are ¥29.69bn and total liabilities ¥15.84bn, implying moderate leverage at the consolidated level. The gap between negative OCF (¥-2.70bn) and positive earnings indicates greater reliance on working capital financing in the period, corroborated by ¥1.60bn of financing inflows. Cash and equivalents were not disclosed, limiting assessment of immediate liquidity buffers. Overall, the balance sheet appears resilient, but sustained negative OCF would pressure liquidity if not reversed.

Cash Flow Quality

Earnings quality is mixed: despite net income of ¥0.74bn, operating CF was ¥-2.70bn (OCF/Net Income ratio of -3.67), pointing to significant working capital outflows and/or timing effects. Investing CF was undisclosed (shown as 0), restricting visibility into capex; absent disclosed capex, indicative FCF approximates OCF at ¥-2.70bn for the period. EBITDA of ¥1.16bn and depreciation of ¥0.38bn indicate non-cash support to earnings, but cash conversion was weak. Inventory stood at ¥1.98bn; without prior-period comparatives, we infer that receivable and/or inventory builds likely drove OCF pressure given revenue seasonality and input price dynamics. Financing CF of ¥1.60bn suggests incremental borrowings to fund working capital, which is not a sustainable source of cash if earnings do not convert. Key to improved cash flow quality will be normalization of receivable days, inventory turnover, and stable procurement cycles.

Dividend Sustainability

Dividend per share is shown as 0.00 with a reported payout ratio of 0.0%, but these are undisclosed items rather than confirmed zeros. With positive earnings but negative OCF in the period, cash coverage of dividends would be weak if distributions were made. Absent disclosed investing CF and cash balances, we cannot precisely assess FCF coverage; indicative FCF (≈OCF) was negative at ¥-2.70bn. Historically, payout policy for small-cap food/processors tends to be conservative and tied to stable cash generation; given current cash conversion, near-term capacity would depend on working capital normalization and available cash/credit lines. Policy outlook remains unclear due to missing disclosures; watch for year-end guidance on dividends and capital allocation.

Risk Assessment

Business Risks:

• Raw material price volatility (fishmeal, meat, grains) impacting gross margins
• FX exposure (imported inputs) with USD/JPY fluctuations affecting cost base
• Demand softness in processed foods/marine products and channel inventory adjustments
• Potential biological/quality risks in seafood and feed supply chains
• Customer concentration and contract pricing/pass-through lags
• Competition and private-label pricing pressure

Financial Risks:

• Negative operating cash flow requiring increased short-term financing
• Working capital volatility (receivables/inventory) impacting cash conversion
• Leverage at 1.29x D/E could rise if cash flow remains weak
• Interest rate and credit spread risk on refinancing
• Sensitivity to non-operating income (ordinary income > operating income)

Key Concerns:

• Sustainability of margin gains amid commodity and FX volatility
• Alignment of earnings with cash flow; need for OCF normalization
• Limited disclosure on cash and investing CF obscures capex and liquidity buffers

Investment Implications

Key Takeaways:

• Earnings rebound with operating income up ~3x on lower revenue demonstrates strong operating leverage
• ROE at ~6% reflects improved profitability but remains reliant on leverage and asset turnover
• Liquidity acceptable, solvency sound; interest coverage strong at 16.4x
• Cash flow quality is weak this period with ¥-2.70bn OCF and reliance on financing inflows
• Non-operating gains boosted ordinary income above operating income; sustainability uncertain
• Data gaps (cash balance, investing CF, dividend details) limit full visibility

Metrics to Watch:

• Operating cash flow and free cash flow recovery
• Inventory and receivable turnover days
• Gross and operating margin trajectory
• Raw material price indices and pass-through effectiveness
• USD/JPY and import cost impacts
• Net debt/EBITDA and interest coverage
• Composition of non-operating income

Relative Positioning: Within Japanese food and marine-related processors, Hayashikane shows improving profitability and robust interest coverage but lags on cash conversion this quarter; balance sheet leverage is moderate with an implied equity ratio around low-40%, placing it in a middle tier for financial resilience while near-term execution focus is on working capital normalization.

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