TAKIZAWA HAM CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥13.26B
• Operating Income: ¥-226M
• Net Income: ¥-230M
• EPS: ¥-111.89

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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: FY2026 Q2 was weak with a net loss and negative operating margin, despite positive operating cash flow. Revenue declined 5.1% YoY to 132.56, indicating soft demand or pricing pressure in meat processing and prepared foods. Gross profit was 17.38, yielding a gross margin of 13.1%, which was insufficient to cover SG&A of 19.65 (14.8% of sales), resulting in operating income of -2.26 and an operating margin of roughly -170 bps. Ordinary income was -2.20 and net income was -2.29, with EPS at -111.89 yen, highlighting a deterioration in profitability. EBITDA was barely positive at 0.42, implying limited cash earnings capacity before depreciation of 2.68. Non-operating items were small (income 0.40 vs expenses 0.34), and thus did not alter the loss-making core picture. Leverage is elevated with D/E at 2.71x and total equity of 33.30 against total assets of 123.38, amplifying the ROE to -6.9% via high financial leverage (3.71x). Liquidity is tight: current ratio is 0.87 and quick ratio 0.70, and short-term loans of 33.17 are large relative to cash (16.75) and receivables (25.68). Interest coverage is deeply negative at -7.15x, reflecting a loss before interest against interest expense of 0.32. Earnings quality presents a mixed picture: OCF was positive at 2.90 despite the net loss (-2.29), implying add-backs and/or working capital release; however, with negative earnings, the OCF/NI ratio is not a clean quality signal. ROIC of -3.9% is below a typical cost of capital, indicating value destruction in the period. Capex was modest (-0.40), and OCF more than covered this, producing positive implied FCF this quarter, but sustainability is questionable given loss-making operations. Margin trend in basis points cannot be quantified YoY due to lack of prior-period margin disclosure, but absolute levels are weak and below breakeven. Forward-looking, stabilization requires either gross margin recovery (input cost normalization and pricing actions) or SG&A rationalization, alongside de-leveraging to reduce interest burden. Near-term focus should be on liquidity management, refinancing risk around short-term borrowings, and restoring operating margin to positive territory.

Profitability Analysis

ROE decomposition: ROE (-6.9%) = Net Profit Margin (-1.7%) × Asset Turnover (1.074x) × Financial Leverage (3.71x). The dominant negative driver is the net profit margin turning negative, while asset turnover remains around 1.1x and leverage is high, magnifying losses. Business explanation: gross margin (13.1%) could not cover SG&A (14.8% of sales), producing an operating margin of approximately -1.7%; limited non-operating gains were insufficient to offset this. Sustainability: the loss looks driven by core margin pressure rather than one-time effects; whether it is sustainable depends on raw material costs, pricing power, and SG&A discipline—none of which show clear improvements yet. Concerning trends: revenue fell 5.1% YoY while SG&A of 19.65 appears high relative to gross profit (17.38), indicating negative operating leverage; interest expense (0.32) is material relative to EBITDA (0.42), further straining bottom line.

Growth Assessment

Top-line contracted 5.1% YoY to 132.56, suggesting weak demand or pricing pressure in meat/protein categories. Operating loss (-2.26) versus modest non-operating net income (+0.06) confirms profit decline is core-driven rather than financial. EBITDA of 0.42 (0.3% margin) indicates minimal buffer against volatility in raw materials and energy. Depreciation of 2.68 signals capital intensity; without margin recovery, future depreciation will continue to weigh on EBIT. ROIC at -3.9% points to returns below cost of capital, flagging unsustainable value creation without course correction. Non-operating income includes dividend income of 0.20, modest and not a structural offset. The quarter’s positive OCF (2.90) amid a net loss may reflect working capital tailwinds; absent sustained operating profit, this is unlikely to repeat consistently. Outlook hinges on cost pass-through, product mix improvement, and procurement efficiencies; given current leverage and liquidity, execution risk is high. No guidance was provided in the data; therefore, near-term growth visibility is limited.

Financial Health

Liquidity is weak: current ratio 0.87 and quick ratio 0.70 (warning thresholds breached). Short-term loans are 33.17 against cash 16.75, AR 25.68, and inventory 11.34—current assets (58.91) are below current liabilities (67.69), indicating potential refinancing and rollover dependence. Working capital is negative (-8.79), and accounts payable of 22.97 suggests some supplier financing reliance. Solvency is stretched with D/E at 2.71x; total liabilities are 90.09 against equity of 33.30. Interest coverage is negative (-7.15x), showing insufficient operating earnings to service interest from operations. Maturity mismatch risk is notable given the large short-term debt load and limited liquidity buffer. No off-balance sheet obligations were reported in the provided data.

Cash Flow Quality

OCF of 2.90 versus net income of -2.29 yields an OCF/NI ratio of -1.27x; with negative earnings, the ratio is not a clean indicator, but positive OCF despite losses suggests non-cash add-backs (depreciation 2.68) and likely working capital release. Capex was modest at -0.40, implying positive implied FCF this quarter (OCF 2.90 minus capex 0.40 ≈ 2.50). Sustainability is uncertain: absent operating profit recovery, reliance on working capital improvements is finite. Potential working capital red flags include possible payables stretch given negative working capital, but detailed movements are not disclosed, limiting assessment. Financing CF was small (0.19), suggesting limited incremental borrowing in the quarter.

Dividend Sustainability

Dividend data were not disclosed. With negative earnings (net loss -2.29) and weak operating profitability, a cash dividend would need to be funded from operating cash flow and/or balance sheet. While OCF covered modest capex this quarter, elevated leverage (D/E 2.71x) and tight liquidity (current ratio 0.87) argue for balance-sheet preservation. Without a reported DPS or payout ratio, we cannot quantify coverage, but prudence would suggest limited dividend capacity until earnings normalize.

Risk Assessment

Business Risks:

• Gross margin compression (13.1% vs SG&A 14.8%) leading to operating losses
• Input cost volatility in meat/raw materials and energy affecting margins
• Demand/pricing pressure evidenced by -5.1% YoY revenue decline
• Execution risk in cost pass-through and SG&A containment

Financial Risks:

• Low liquidity: current ratio 0.87 and quick ratio 0.70
• High leverage: D/E 2.71x and interest coverage -7.15x
• Refinancing risk on short-term loans of 33.17 amid limited cash (16.75)
• Negative ROIC (-3.9%) implying value erosion if prolonged

Key Concerns:

• Operating loss (-2.26) with minimal EBITDA (0.42), leaving little cushion
• Dependence on working capital dynamics to generate OCF despite losses
• Potential supplier pressure due to negative working capital
• No disclosed guidance or dividend policy clarity, limiting visibility

Investment Implications

Key Takeaways:

• Core operations loss-making with operating margin about -1.7%
• Revenue down 5.1% YoY; weak top-line undermines operating leverage
• Liquidity tight and leverage high, increasing refinancing and interest burden risk
• Positive OCF this quarter driven by non-cash items/working capital; sustainability uncertain
• ROIC (-3.9%) below cost of capital, necessitating margin recovery or asset optimization

Metrics to Watch:

• Gross margin progression and pricing pass-through to offset input costs
• SG&A as % of sales and absolute cost reductions
• Operating margin and EBITDA margin normalization toward positive territory
• Working capital movements (AR, inventory, AP turnover) and OCF consistency
• Net debt levels, short-term loan rollover, and interest coverage improvement

Relative Positioning: Within Japanese packaged meat and processed foods peers, the company currently sits in the weaker quadrant on profitability and balance sheet resilience, given negative operating margin, high leverage, and sub-par liquidity; recovery would require visible gross margin improvement and deleveraging.

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