FUKUTOME MEAT PACKERS,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥11.79B
• Operating Income: ¥-404M
• Net Income: ¥-344M
• EPS: ¥-66.35

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

Fukudome Ham Co., Ltd. (2291) reported FY2026 Q2 consolidated results under JGAAP showing revenue of ¥11.8bn, down 4.3% YoY, with an operating loss of ¥404m (flat YoY) and a net loss of ¥221m. Gross profit was ¥1.735bn, implying a gross margin of 14.7%, but operating margin remained negative at -3.4%, highlighting ongoing cost pressures and/or insufficient price pass-through. Ordinary loss of ¥397m was broadly in line with operating loss, indicating limited non-operating offsets. Depreciation was ¥200m; EBITDA was negative at ¥204m, underscoring weak underlying cash earnings capacity. On the balance sheet, total assets were ¥12.36bn and total equity ¥1.84bn; while the reported equity ratio field shows 0.0% (undisclosed), the computed equity ratio is approximately 14.9%, reflecting a thin capital buffer. Leverage is elevated: debt-to-equity (proxied by total liabilities to equity) is 5.81x, and financial leverage (assets/equity) is 6.73x, amplifying returns but also losses (DuPont ROE of -12.0%). Liquidity is tight with a current ratio of 0.69x and a quick ratio of 0.58x, and working capital of -¥2.50bn highlights reliance on short-term funding. Operating cash flow was negative at -¥190m, equating to an OCF/Net Income ratio of 0.86, suggesting cash losses are somewhat smaller than accounting losses but still material; the delta implies a working capital outflow despite non-cash D&A. Interest expense of ¥33m results in interest coverage of -12.2x (on EBIT), reflecting inadequate operating earnings to service financing costs. The company paid no dividends (DPS ¥0), which is appropriate given the loss and negative OCF; FCF could not be reliably assessed because investing cash flow was undisclosed (reported as 0). Asset turnover was 0.954x, evidencing reasonable efficiency but not enough to overcome weak margins. Overall, profitability remains under pressure, but flat YoY operating loss against declining revenue suggests some cost discipline; however, liquidity and leverage risks are prominent. Data limitations exist: multiple items (e.g., cash and cash equivalents, investing cash flows, equity ratio field) are reported as 0, which indicates nondisclosure rather than true zeros, necessitating caution in interpretation. The near-term outlook hinges on input cost trends, pricing execution, and working capital normalization to stabilize OCF.

Profitability Analysis

ROE decomposition (DuPont): Net margin -1.88% × Asset turnover 0.954 × Financial leverage 6.73 = ROE -12.04% (matches reported). Negative net margin is the principal drag; leverage amplifies the loss. Gross margin of 14.7% is thin for the processed meats category, leaving limited buffer for SG&A and logistics costs; operating margin is -3.4%, indicating overhead absorption and price/mix pressures. EBITDA margin of -1.7% shows core cash earnings are negative; D&A (¥200m) is meaningful relative to gross profit, adding fixed-cost burden. Operating leverage appears unfavorable this period: a 4.3% revenue decline coincided with continued operating losses, suggesting fixed cost intensity and/or incomplete cost flexing. Ordinary income closely tracks operating income (non-operating net roughly neutral), so operating performance is the key earnings driver. Interest expense (¥33m) is modest in absolute terms but not covered by EBIT; financial expenses are not the main swing factor, but negative operating returns make coverage impossible. Effective tax rate appears 0% due to losses; tax does not distort comparability. Margin quality is pressured by raw material costs, energy and freight, and potentially product mix; further price optimization and procurement efficiencies are needed to restore positive operating margins.

Growth Assessment

Revenue declined 4.3% YoY to ¥11.8bn, indicating volume and/or price headwinds. Given the flat YoY operating loss, the company likely executed some cost containment and/or pricing actions to offset the topline pressure, but not enough to reach break-even. Gross profit of ¥1.735bn suggests pricing remains challenged relative to input costs; without prior-period gross profit data, the sustainability of margins is uncertain. Asset turnover of 0.954x signals reasonable utilization of the asset base, but revenue contraction and negative margins limit earnings conversion. Profit quality remains weak as EBITDA is negative and OCF is negative; the small gap between net loss and OCF implies accruals are limited, but working capital outflows persist. Outlook hinges on stabilization of raw material and utility costs, improved product mix, and further price pass-through. Any recovery in foodservice/retail demand seasonality could help H2, but fixed costs will keep break-even sensitive to small topline changes. Strategic focus on higher-margin SKUs and efficiency gains is needed to re-establish positive operating leverage. Given current leverage and liquidity constraints, growth investments may be paced by internal cash generation. Near-term emphasis should be on restoring positive EBITDA and OCF rather than expanding revenue at low margins.

Financial Health

Liquidity: Current ratio 0.69x and quick ratio 0.58x indicate tight short-term liquidity and reliance on supplier credit and short-term borrowings. Working capital is negative at -¥2.50bn, raising refinancing and rollover risk. Cash and equivalents are undisclosed (reported as 0), limiting visibility on immediate liquidity buffers. Solvency: Total liabilities ¥10.67bn vs equity ¥1.84bn yields a debt-to-equity proxy of 5.81x and financial leverage of 6.73x, both high for the sector. The computed equity ratio is ~14.9% (equity/assets), despite the reported field being 0.0% due to nondisclosure; this underscores a thin capital base vulnerable to losses. Interest expense of ¥33m is not excessive, but negative EBIT implies no coverage; sustained losses would erode equity and could pressure covenants. Asset base of ¥12.36bn provides collateral capacity, but rising leverage or working capital strain could constrain flexibility. Overall, balance sheet resilience is limited; reducing net debt and normalizing working capital are priorities.

Cash Flow Quality

OCF was -¥190m versus net income of -¥221m, giving an OCF/NI ratio of 0.86, which indicates losses are largely cash-based with modest accrual distortion. Adding back D&A (¥200m) implies approximately -¥169m of working capital and/or other non-cash negative adjustments in the period, suggesting inventory builds and/or slower collections. EBITDA of -¥204m corroborates weak core cash earnings. Investing cash flow is undisclosed (reported as 0), so Free Cash Flow cannot be reliably calculated; using OCF as a proxy suggests FCF likely negative if any maintenance capex was incurred. Financing cash flow was -¥322m, implying net debt reduction or dividend/lease outflows; combined with negative OCF, this likely reduced liquidity. Cash and equivalents are undisclosed (reported as 0), preventing reconciliation of period-end cash. Overall earnings quality is weak due to negative EBITDA and OCF, with working capital a secondary headwind.

Dividend Sustainability

The company paid no dividends (DPS ¥0; payout ratio 0%) in the period amid losses and negative OCF, which aligns with balance sheet protection. With EBITDA and OCF both negative and investing cash flows undisclosed, we cannot confirm FCF coverage; however, it is unlikely that free cash flow would cover dividends if reinstated near term. Given high leverage (5.81x liabilities/equity) and sub-1.0x liquidity ratios, preserving cash is prudent. Future dividends would depend on restoring positive EBITDA, stabilizing OCF, and improving working capital. Management’s implied policy appears conservative under current conditions; a resumption would likely follow sustained profitability and de-leveraging.

Risk Assessment

Business Risks:

• Raw material cost volatility (meat, energy, packaging) pressuring gross margins
• Price pass-through limitations in retail and foodservice channels
• Fixed-cost intensity leading to unfavorable operating leverage on revenue declines
• Product mix and competition in processed meats compressing margins
• Supply chain and logistics cost fluctuations

Financial Risks:

• Tight liquidity with current ratio 0.69x and negative working capital of ¥2.50bn
• High leverage (liabilities/equity 5.81x; financial leverage 6.73x) magnifying losses
• Negative EBITDA and OCF impairing debt service capacity; interest coverage negative
• Potential covenant pressure and refinancing risk if losses persist
• Limited disclosure on cash and investing flows reduces visibility

Key Concerns:

• Sustained negative operating margin (-3.4%) and EBITDA margin (-1.7%)
• Negative OCF despite non-cash D&A add-back, implying working capital strain
• Thin equity base (~14.9% of assets) vulnerable to further losses
• Revenue decline (-4.3% YoY) amid competitive pricing environment
• Data gaps (cash, investing CF, equity ratio field) constrain assessment precision

Investment Implications

Key Takeaways:

• Profitability remains weak: operating loss ¥404m and EBITDA negative
• Revenue contracted 4.3% YoY; cost actions offset some pressure but not to break-even
• Liquidity and leverage are key constraints (current ratio 0.69x; liabilities/equity 5.81x)
• OCF negative (-¥190m) with working capital outflows; cash generation is the near-term swing factor
• Computed equity ratio ~14.9% indicates a thin cushion; preservation of capital is critical

Metrics to Watch:

• Gross margin progression and pricing/pass-through effectiveness
• EBITDA level and trajectory toward break-even
• Operating cash flow and working capital days (inventory and receivables turns)
• Leverage metrics (liabilities/equity, net debt/EBITDA when positive) and interest coverage
• Current and quick ratios, refinancing timelines, and covenant headroom

Relative Positioning: Within Japan’s processed meat/ham sector, Fukudome Ham currently sits below peers on profitability (negative operating and EBITDA margins) and carries higher balance sheet risk (low computed equity ratio, high liabilities/equity), while asset efficiency (asset turnover ~0.95x) is adequate but insufficient to offset margin weakness.

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