TAKIZAWA HAM CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥13.26B
• Operating Income: ¥-226M
• Net Income: ¥-289M
• 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

Takizawa Ham Co., Ltd. (2293) reported FY2026 Q2 consolidated results under JGAAP showing a revenue decline of 5.1% YoY to ¥13.256bn, with continued operating losses but modest stabilization versus the prior year. Gross profit is reported at ¥1.891bn, implying a gross margin of 14.3%, which remains thin for a processed meats business and leaves limited buffer to absorb fixed costs. Operating income was a loss of ¥226m (essentially unchanged YoY), and ordinary income and net income were losses of ¥220m and ¥229m, respectively. EBITDA was ¥67m (0.5% margin), indicating the core earnings base remains weak despite a sizable non-cash depreciation burden of ¥293m. The DuPont framework indicates ROE at -6.88%, driven primarily by a negative net margin (-1.73%), while asset turnover is reasonable at 1.07x and financial leverage is high at 3.71x. Liquidity tightened, with a current ratio of 89.7% and a quick ratio of 69.4%, and working capital stood at a negative ¥680m, underscoring short-term funding pressure. Operating cash flow was negative at ¥168m despite non-cash add-backs, pointing to working capital outflows and/or timing effects exacerbating cash burn. Interest expense is modest at ¥23m, but EBIT-based interest coverage is -9.8x, reflecting insufficient operating earnings to cover financing costs. The reported debt-to-equity of 2.70x signals elevated leverage at the consolidated level, although a breakdown of interest-bearing debt versus operating liabilities is not available. The company paid no dividend (DPS ¥0) and recorded a 0% payout, which is consistent with loss-making conditions and the need to preserve cash. Several disclosures are missing or flagged as zeros (e.g., cash and equivalents, investing CF, equity ratio, and share counts), which limits granular assessments of cash runway, capex intensity, and per-share valuation diagnostics. There is a minor inconsistency between reported cost of sales and gross profit; the provided gross margin metric (14.3%) appears internally consistent and is used in this analysis. Revenue softness alongside loss containment suggests some cost discipline, but the business remains below break-even on an operating basis. Near-term priorities likely include pricing discipline, mix upgrades, and inventory and receivables control to stabilize gross margin and cash conversion. Overall, the company remains in a fragile financial position mid-year, with sustainability hinging on improving gross profitability and normalizing working capital in the second half.

Profitability Analysis

ROE of -6.88% is explained by: net profit margin -1.73%, asset turnover 1.074x, and financial leverage 3.71x (DuPont). The core drag is margin, not asset utilization. Gross margin at 14.3% is thin for processed meats; it leaves limited coverage for SG&A and logistics costs, leading to an operating margin of -1.7% (operating loss ¥226m on ¥13.256bn revenue). EBITDA margin is only 0.5%, indicating that even before depreciation the economic profit pool is marginal. D&A is sizable at ¥293m, consistent with a capital-intensive production base; this magnifies the gap to EBIT break-even. Interest expense is ¥22.9m, and EBIT-based interest coverage is -9.8x, underscoring limited capacity to absorb financing costs until operating margins improve. Operating leverage appears unfavorable in the period: a 5.1% revenue decline was not offset by sufficient opex reduction, resulting in sustained operating loss. Margin quality is pressured likely by input cost passthrough and mix; absent evidence of pricing gains, the current gross spread is inadequate for sustainable profitability.

Growth Assessment

Revenue declined 5.1% YoY to ¥13.256bn, signaling demand softness and/or pricing/mix headwinds. Ordinary income (-¥220m) and net income (-¥229m) remain negative, implying that revenue quality is insufficient to cover fixed costs at present. The near-flat YoY operating loss suggests some cost containment, but not enough to counteract top-line contraction. Without disclosure of segment details, it is unclear whether declines are volume-driven or price/mix-related; however, the thin gross margin points to limited pricing power in the period. Given the weak EBITDA and EBIT, profit sustainability is low unless gross margin recovery materializes in H2. Depreciation at ¥293m implies recurring capital intensity; to grow profitably, the company must lift unit economics rather than rely on volume alone. Outlook hinges on stabilization of input costs and improved working capital discipline; absent these, even flat revenues could translate into continued losses. Management’s ability to optimize product mix, pass through costs, and rationalize overhead will be critical to re-establish a path toward break-even.

Financial Health

Total assets are ¥12.338bn, liabilities ¥8.986bn, and equity ¥3.33bn, implying a leverage profile consistent with the reported financial leverage (3.71x) and debt-to-equity of 2.70x (note: likely total liabilities/equity, not purely interest-bearing debt). Liquidity is strained: current assets ¥5.94bn vs. current liabilities ¥6.62bn yield a current ratio of 0.90x and a quick ratio of 0.69x. Working capital is negative at ¥-680m, highlighting reliance on short-term funding and/or supplier credit. Interest expense of ¥22.9m is manageable in absolute yen terms but not covered by EBIT (coverage -9.8x), indicating solvency risk if losses persist. Ordinary income remains negative, and equity provides limited loss-absorption capacity given the leverage level. The equity ratio is shown as 0.0% in disclosures, which should be treated as undisclosed rather than zero; based on provided assets and equity, the implied equity ratio is approximately 27%. Financing cash flow was negative ¥86.8m, suggesting net repayments or lease payments; with operating cash outflows, this combination tightens cash. Lack of reported cash and equivalents inhibits assessment of the near-term liquidity buffer.

Cash Flow Quality

Operating CF was -¥168m against net income of -¥229m, yielding an OCF/NI ratio of 0.73, which indicates some non-cash add-backs (notably ¥293m D&A) but was more than offset by working capital outflows and/or other non-cash items. The reconciliation implies an aggregate working capital and other adjustment of approximately -¥232m versus EBIT+D&A, pointing to inventory/receivables build or payables normalization. Investing CF is shown as 0, which we treat as undisclosed for the period; capex levels therefore cannot be assessed. Free cash flow is reported as 0 in the calculated metrics, but given OCF is negative and investing CF is unreported, true FCF cannot be reliably derived; directionally, cash generation is weak. Earnings quality is mixed: gross margin is thin, EBIT is negative, and positive add-backs stem from non-cash charges rather than robust operating earnings. Sustained negative OCF amid losses raises concerns about cash conversion and the need to curtail working capital usage. Monitoring inventory turnover, receivables days, and payables days will be central to validating any improvement in OCF.

Dividend Sustainability

The company paid no dividend (DPS ¥0.00) with a payout ratio of 0%, which aligns with a loss-making position (EPS -¥111.89) and negative operating cash flow. With investing CF undisclosed, free cash flow coverage cannot be confirmed; reported FCF coverage of 0.00x should be treated as not meaningful given missing inputs. Given liquidity constraints (current ratio 0.90x, quick ratio 0.69x) and negative OCF, reinstating dividends would likely be contingent on restoring operating profitability and stabilizing working capital. Historically, capital intensity implied by D&A suggests ongoing maintenance capex needs, which would further constrain distributable capacity until cash generation improves. Policy-wise, preservation of cash and balance sheet resilience likely takes precedence over distributions in the near term.

Risk Assessment

Business Risks:

• Raw material price volatility (pork, beef) impacting gross margins
• Limited pricing power evidenced by thin gross margin and operating losses
• Demand softness and competitive pressures in processed meats
• Execution risk in cost pass-through and product mix optimization
• Supply chain and logistics cost variability
• Food safety and quality control risks inherent to meat processing
• Customer concentration risks with major retailers/wholesalers (not disclosed but typical for the sector)

Financial Risks:

• Tight liquidity: current ratio 0.90x, quick ratio 0.69x, negative working capital
• Negative operating cash flow alongside negative EBIT
• High leverage on a total liabilities/equity basis (2.70x) with weak interest coverage (-9.8x EBIT/interest)
• Potential covenant pressure if interest-bearing debt levels are material (debt composition not disclosed)
• Limited loss-absorption capacity if losses persist

Key Concerns:

• Sustained operating losses with EBITDA margin only 0.5%
• Working capital outflows worsening cash burn despite D&A add-backs
• Inadequate visibility on cash balance and capex due to unreported items
• Need for prompt gross margin improvement to reach break-even

Investment Implications

Key Takeaways:

• Core profitability remains subscale: ROE -6.9% driven by negative net margin despite reasonable asset turnover
• Liquidity is a key pinch point with negative working capital and negative OCF
• Operational focus must be on gross margin restoration and working capital normalization
• Leverage is elevated on a liabilities-to-equity basis, magnifying downside if losses persist
• Dividend suspension is appropriate given current cash generation and balance sheet needs

Metrics to Watch:

• Gross margin trajectory (currently ~14.3%) and SG&A ratio
• Operating income/EBITDA break-even progress
• OCF and working capital movements (inventory, receivables, payables days)
• Interest coverage and any disclosure on interest-bearing debt levels
• Revenue trend and pricing/mix realization in H2

Relative Positioning: Within Japan’s processed meat and ham/sausage peers, the company exhibits weaker profitability (negative EBIT, sub-1% EBITDA margin) and tighter liquidity than more resilient players that successfully passed through cost inflation; asset turnover is in line, but margin structure and cash conversion currently lag sector leaders.

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