MARUDAI FOOD CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥120.29B
• Operating Income: ¥4.21B
• Net Income: ¥3.21B
• EPS: ¥130.48

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

Verdict: Solid operational recovery with margin expansion at the operating level, but bottom-line declined year over year due to non-operational factors, resulting in modest ROE and below-target ROIC. Revenue grew 1.4% YoY to 1,202.9, showing modest top-line momentum amid a tough consumption environment. Operating income rose 46.1% YoY to 42.1, reflecting improved pricing discipline and product mix. Ordinary income climbed 41.3% YoY to 44.42, aided by 4.05 in non-operating income (notably 2.16 from dividends). Operating margin expanded to 3.5% from roughly 2.4% a year ago, an improvement of about 107 bps. Gross profit of 201.0 implies a 16.7% gross margin; combined with SG&A restraint (13.2% of sales), this underpinned operating leverage. Despite stronger operations, net income fell 25.2% YoY to 31.94, implying margin compression at the net level, likely due to the absence of prior-year one-offs and/or higher below-the-line charges. Effective tax rate stood at 26.4%, within a normal range, suggesting the YoY net decline is not tax-driven alone. Cash generation was robust: operating cash flow of 77.17 was 2.42x net income, indicating high earnings quality and positive working capital dynamics. The balance sheet remains conservative with a current ratio of 134% and D/E of 0.78x, and interest coverage of 31.2x, leaving ample financial flexibility. ROE printed 4.5% (DuPont: 2.7% margin × 0.951 turns × 1.78x leverage), underscoring modest capital efficiency. ROIC of 4.2% is below the 5% warning threshold, highlighting the need for sustained margin and asset efficiency improvements. Total comprehensive income was a strong 53.44, boosted by valuation gains on investment securities, which do not translate into cash but support equity. With investing cash flows and capex undisclosed, free cash flow sufficiency for dividends cannot be fully assessed, though payout appears moderate (calculated payout ratio 41.5%). Forward-looking, continued pricing/mix management and cost control are key to defend margins against raw material and energy volatility. Overall, the quarter signals operational progress and healthy cash conversion, but capital efficiency and net margin pressure remain watch points.

Profitability Analysis

ROE decomposition: Net Profit Margin (2.7%) × Asset Turnover (0.951) × Financial Leverage (1.78x) = ROE 4.5%. The largest YoY swing appears at the margin level: while operating margin expanded ~107 bps to 3.5%, net income declined 25% YoY with sales up 1.4%, implying net margin contraction (estimated prior net margin ~3.6% vs current 2.7%). The business driver likely includes improved core operations (price pass-through, mix, and SG&A discipline) offset by less favorable below-the-line items versus a stronger prior-year baseline (e.g., fewer extraordinary/valuation gains or higher minority interests/one-offs; detailed breakdown unreported). Asset turnover is decent at 0.95x for a food manufacturer/distributor, with working capital intensity moderate (AR 255.8 and inventories 126.3 against AP 214.0). Leverage at 1.78x is conservative and unlikely the main ROE driver. Sustainability: operating margin gains appear more sustainable given price/mix and cost control, while the net margin drag may normalize if one-off items abate; however, raw material and energy cost volatility could challenge gross margin. Flag: SG&A as a percentage of sales at 13.2% looks contained; without YoY SG&A disclosure, we cannot confirm whether SG&A grew slower than revenue, but operating leverage suggests SG&A discipline contributed positively.

Growth Assessment

Revenue growth of 1.4% YoY is modest but positive, suggesting stable demand and some pricing traction. Operating income growth of 46.1% outpaced sales, indicating strong operating leverage from improved gross spread and SG&A control. Ordinary income (+41.3%) benefited from non-operating income (4.05), notably dividend income of 2.16, but non-operating was not the dominant driver. Net income fell 25.2% YoY despite stronger operations, pointing to unfavorable below-the-line comparisons versus the prior year (details unreported). EBITDA of 65.73 (margin 5.5%) indicates improved earnings capacity versus the operating base. The sustainability of revenue growth depends on continued price optimization and product mix in core categories amid consumer price sensitivity. Cost side risks include meat/raw materials and energy; successful pass-through remains critical for maintaining gross margin near 16.7%. With ROIC at 4.2% (<5% threshold), further mix upgrades and asset efficiency improvements are needed to lift returns to the 7–8% target range typical for quality food manufacturers. Outlook: near-term growth likely remains low single-digit, with profit growth hinging on maintaining cost pass-through and stabilizing non-operating items.

Financial Health

Liquidity: Current ratio 134.4% and quick ratio 104.5%—above the 1.0 threshold but slightly below the >1.5x best-practice benchmark; no immediate liquidity concern. Solvency: D/E 0.78x is conservative, and interest coverage of 31.19x is very strong. Maturity profile: Short-term loans of 77.74 are well covered by cash (92.06) plus receivables (255.84); accounts payable at 213.98 align with inventory levels (126.28), limiting maturity mismatch risk. Total liabilities are 553.84 against equity of 711.23, indicating a solid capital structure. No explicit off-balance sheet obligations were disclosed in the provided data. Warning thresholds: Current ratio is not below 1.0 and D/E is well below 2.0—no explicit warnings triggered.

Cash Flow Quality

OCF/Net Income at 2.42x indicates high earnings quality and likely favorable working capital movements and/or strong add-backs (depreciation 23.63). Free cash flow cannot be calculated due to missing investing cash flows and capex disclosures; dividend coverage by FCF is therefore unassessed. Financing CF was -34.27, reflecting distributions and/or debt movements; share repurchases totaled -2.56. No signs of working capital manipulation are evident from available point-in-time metrics; receivables and inventories appear proportionate to sales, and OCF strength supports quality. Sustainability: Absent capex data, we assume maintenance capex is manageable relative to OCF, but any step-up in strategic capex would tighten FCF.

Dividend Sustainability

Calculated payout ratio is 41.5%, within the <60% benchmark for sustainability. OCF coverage of dividends appears comfortable given OCF of 77.17, but true FCF coverage is unknown due to unreported investing CF/capex and dividends paid. Balance sheet conservatism (D/E 0.78x, strong interest cover) provides additional buffer. Policy outlook: With ROIC at 4.2% and ROE at 4.5%, management may prioritize reinvestment and balance sheet strength over aggressive payout increases unless ROIC improves.

Risk Assessment

Business Risks:

• Raw material price volatility (meat/protein inputs) impacting gross margin
• Energy and logistics cost inflation affecting cost of goods sold and distribution
• Consumer price sensitivity potentially limiting price pass-through in processed foods
• Product mix and channel shifts (e.g., retail vs. foodservice) affecting margin structure
• Food safety/quality control risks that can trigger recalls and brand damage

Financial Risks:

• ROIC at 4.2% below the 5% threshold, indicating suboptimal capital efficiency
• Dependence on non-operating income (dividends 2.16) to support ordinary income, which can be volatile
• Potential exposure to valuation swings in investment securities (TCI 53.44 > NI suggests OCI sensitivity)
• Refinancing/interest rate risk on short-term loans (77.74), albeit mitigated by cash and coverage

Key Concerns:

• Net income decline (-25.2% YoY) despite strong operating recovery implies less favorable below-the-line comparison
• Limited disclosure on investing cash flows and capex obscures FCF visibility
• ROE of 4.5% is modest and below typical cost of equity estimates
• Sustaining operating margin at 3.5% will require continued cost management in a volatile input environment

Investment Implications

Key Takeaways:

• Operating margin expanded ~107 bps to 3.5% on price/mix and SG&A control
• Net income fell 25.2% YoY, compressing net margin to 2.7%
• Cash generation is strong: OCF 77.17 (2.42x net income)
• Balance sheet is conservative (D/E 0.78x; interest cover 31x)
• Capital efficiency remains a challenge (ROIC 4.2%, ROE 4.5%)

Metrics to Watch:

• Gross margin trajectory and price pass-through effectiveness
• SG&A ratio to sales for sustained operating leverage
• Working capital turns (AR and inventory days) and OCF/NI ratio
• Capex and investing cash flows to assess FCF and dividend coverage
• Non-operating items and OCI volatility (dividend income, securities valuation)
• ROIC progression toward 7–8% and ROE improvement

Relative Positioning: Within Japan’s processed food peers, Marudai shows improving operational execution and strong cash conversion with conservative leverage, but trails best-in-class peers on capital efficiency (ROIC/ROE) and exhibits higher sensitivity to below-the-line earnings volatility.

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