Kakiyasu Honten Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

In FY2027 Q1, both operating income and net income declined significantly, as the decline in revenue was compounded by fixed-cost burdens and a high tax burden. Revenue was ¥84.5B (-2.4% YoY), operating income was ¥0.7B (-72.8%), ordinary income was ¥0.9B (-65.6%), and net income was ¥0.2B (-89.1%). The decline in the gross margin and increase in the SG&A ratio reduced the operating margin from 2.8% in the same period of the previous year to 0.8%. In addition, the high tax burden, with an effective tax rate of 81.4%, significantly constrained the conversion of ordinary income into net income.

Factors Affecting Performance

【Revenue】Revenue was ¥84.5B, down -2.4% YoY. By segment, the Meat Business (36.9% of total revenue) declined -2.9%, the Prepared Foods Business (36.0%) declined -2.0%, the Food Products Business (5.1%) declined -6.3%, and the Restaurant Business (3.0%) declined -27.4%, with all major businesses recording lower revenue. The Japanese Confectionery Business (18.9%) was the sole exception, securing revenue growth of +4.4%.

【Profit and Loss】Gross profit was limited to ¥44.6B, with a gross margin of 52.8%, down from 53.5% in the previous year. Meanwhile, SG&A expenses remained elevated at ¥43.9B, roughly in line with the previous year, resulting in operating income of ¥0.7B, with an operating margin of 0.8%, down from 2.8% in the previous year. Ordinary income reached ¥0.9B, supported by ¥0.2B in non-operating income, primarily interest and dividend income. However, corporate income taxes and other taxes amounted to ¥0.7B against pretax income of ¥0.9B, representing an effective tax rate of 81.4%, and net income was limited to ¥0.2B. By segment, the decline in profit in the Prepared Foods Business (-46.3%) significantly exceeded the decline in revenue, while the Restaurant Business also moved into an operating loss. Overall, this was a decline-in-revenue and decline-in-profit result in which profitability deteriorated more sharply than revenue.

Segment Analysis

The Meat Business, with revenue of ¥31.2B and a 36.9% revenue composition ratio, recorded a revenue decline of -2.9% and operating income of ¥1.3B, down -22.3%. The Prepared Foods Business, with revenue of ¥30.4B and a 36.0% composition ratio, recorded a revenue decline of -2.0%, while operating income was ¥1.2B, down -46.3%; the decline in profit significantly exceeded the decline in revenue. The Japanese Confectionery Business, with revenue of ¥16.0B and an 18.9% composition ratio, was the only business to achieve revenue growth, at +4.4%, but operating income remained flat at ¥0.2B, indicating that revenue growth was not converted into profit growth. The Food Products Business, with revenue of ¥4.3B and a 5.1% composition ratio, recorded a revenue decline of -6.3% and operating income of ¥0.4B, down -22.4%; however, its profit margin of 8.9% was the highest among all segments. The Restaurant Business, with revenue of ¥2.5B and a 3.0% composition ratio, recorded the largest revenue decline at -27.4% and fell into an operating loss of ¥0.2B. Deteriorating profitability in the core Meat and Prepared Foods Businesses was the primary cause of the decline in company-wide profit.

Key Financial Indicators

【Profitability】The operating margin was 0.8%, contracting by approximately 2.0pt from 2.8% in the same period of the previous year, while the net margin also declined to 0.2% from 1.7% in the previous year. Annualized ROE was 0.4% and annualized ROIC was 1.7%, both at low levels, indicating that the high gross margin of 52.8% was not being sufficiently converted into bottom-line profit.【Cash Flow Quality】Corporate income taxes and other taxes of ¥0.7B were recognized against pretax income of ¥0.9B, resulting in an effective tax rate of 81.4%; the tax burden is amplifying fluctuations in profit. Non-operating income of ¥0.2B, primarily interest and dividend income, represents recurring supplementary income.【Investment Efficiency】Total asset turnover was approximately 1.8x on an annualized basis, with no major change in asset efficiency itself. The primary cause of the decline in profitability was deterioration in margins.【Financial Soundness】The equity ratio was 79.2%, a slight decline from 79.6% in the previous year. Cash and deposits of ¥70.4B accounted for 37.8% of total assets, indicating that the financial foundation remains strong.

Cash Flow Analysis

As no cash flow statement has been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥70.4B, down ¥10.2B from ¥80.5B at the end of the same period of the previous year. Accounts receivable were ¥27.1B, an increase of ¥2.9B YoY; the increase despite declining revenue may suggest a slowdown in the collection cycle. Inventories were ¥4.2B, roughly unchanged from the previous year. Property, plant and equipment were ¥55.3B, down ¥0.7B from the previous year, suggesting that large-scale investment was restrained. Net assets were ¥147.4B, down ¥7.6B from the previous year, indicating that the decline in profit levels and the impact of treasury share purchases and dividend payments somewhat reduced financial flexibility.

Earnings Quality

Profit for the current period consisted almost entirely of recurring operating profit and loss, with only minor extraordinary gains and losses recognized; no gain or loss on the sale or disposal of fixed assets was reported. Non-operating income of ¥0.2B consisted of interest income of ¥0.1B and dividend income of ¥0.1B, both of which are recurring income from held assets. Comprehensive income was ¥0.5B, exceeding net income of ¥0.2B. The difference was attributable to a ¥0.5B increase in valuation difference on securities, indicating that valuation-related factors unrelated to operating performance contributed to earnings. The high effective tax rate of 81.4% resulted from the tax burden becoming relatively heavy in absolute terms while pretax income was low. From an earnings-quality perspective, normalization of the tax burden will be a key focus going forward.

Earnings Forecast and Guidance

The full-year company plan calls for revenue of ¥360.0B (-0.2% YoY), operating income of ¥14.0B (-1.9%), and ordinary income of ¥14.5B (-1.6%), with no revision to the earnings forecast. While the Q1 progress rate for revenue was 23.5%, broadly in line with a standard level, operating income and ordinary income progress rates were only 4.6% and 6.0%, respectively, substantially below expected levels. Progress against the plan therefore assumes a recovery scenario weighted toward the second half of the fiscal year in terms of profit. Improving profitability in the Meat and Prepared Foods Businesses and reducing the Restaurant Business’ loss will be key to achieving the full-year plan.

Shareholder Returns

The company plan calls for annual dividend guidance of 85.00 yen and annual EPS guidance of 83.50 yen. Based on these figures, the payout ratio is approximately 101.8%, meaning that dividends alone exceed planned net income. There has been no revision to the dividend forecast. EPS for Q1 was limited to 1.72 yen, and profit progress against the full-year plan remains low. Retained earnings of ¥176.4B and cash and deposits of ¥70.4B indicate substantial internal reserves and cash on hand, providing sufficient resources for short-term dividends. However, depending on the degree to which the full-year profit plan is achieved, dividend coverage by earnings may weaken further.

Risk Factors

1. Deterioration in profitability of core businesses: The Meat and Prepared Foods Businesses account for approximately 73% of revenue, but both businesses recorded declines in revenue and profit. In particular, the Prepared Foods Business posted a revenue decline of -2.0% against a -46.3% decline in operating income, indicating a pronounced drop in profit. Any delay in the recovery of profitability in the core businesses would have a significant impact on company-wide performance.

2. Reduced profitability buffer: The operating margin of 0.8% and annualized ROIC of 1.7% are both low, creating a structure in which even a slight decline in revenue or an increase in raw material and energy costs can readily worsen operating profit and loss. The Restaurant Business has already moved into an operating loss.

3. Dual risks from the tax burden and payout ratio: The effective tax rate of 81.4% amplifies fluctuations in pretax income at the net income level. In addition, the planned payout ratio is approximately 101.8%; if the full-year profit plan is not achieved, dividend coverage by earnings may weaken further.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (food_beverage)

Profitability and Return

Both the operating margin and net margin were significantly below the industry median, placing the company’s profitability toward the lower end of the industry.

Growth and Capital Efficiency

While many companies in the industry are experiencing revenue growth, the company recorded a decline in revenue and also lagged in terms of growth.

Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Although the gross margin of 52.8% exceeds the general industry level, the burden of SG&A expenses reduced the operating margin to 0.8%. The earnings data indicate that, structurally, the company is unable to convert its high gross margin into bottom-line profit.

2. Both the Meat and Prepared Foods Businesses, which have large revenue composition ratios, recorded declines in profit, while revenue growth in the Japanese Confectionery Business did not translate into profit growth. Variations in profitability across the business portfolio are evident.

3. The high effective tax rate of 81.4%, together with full-year operating income and net income progress rates of only 4.6% and 2.0%, respectively, will be important factors in assessing the extent to which profitability improvements can be achieved in the second half of the fiscal year.

Theoretical Share Price (Reference Value)

Sensitivity: 1,338 yen–1,410 yen for ±1% in the cost of equity, and 1,368 yen–1,376 yen for ±0.1 in ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used; there is a timing difference from the full-year forecast.
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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