ITOHAM YONEKYU HOLDINGS INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥542.36B
• Operating Income: ¥13.15B
• Net Income: ¥6.30B
• EPS: ¥167.58

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

Itoham Yonekyu Holdings (TSE:2296, consolidated, JGAAP) delivered solid FY2026 Q2 results with top-line growth translating into outsized profit gains. Revenue rose 10.5% YoY to ¥542.4bn, indicating robust demand and/or effective price pass-through in processed meat and related categories. Gross profit reached ¥65.7bn, with a gross margin of 12.1%, suggesting stable conversion of sales despite cost pressures. Operating income climbed 49.3% YoY to ¥13.2bn, expanding the operating margin to roughly 2.4%, evidencing meaningful operating leverage. Ordinary income was ¥13.6bn, and net income advanced 51.8% YoY to ¥9.5bn, implying a net margin of 1.75% and improved profitability versus the prior year period. EBITDA totaled ¥19.6bn (3.6% margin), providing a clearer view of operating cash generation potential before working capital movements. The DuPont ROE is 3.31%, driven by a 1.75% net margin, asset turnover of 1.141x, and financial leverage of 1.65x; this shows moderate efficiency with conservative leverage. The balance sheet appears strong: total assets are ¥475.3bn and total equity ¥287.7bn, implying an equity ratio of about 60.5% (the disclosed 0.0% is unreported, not zero). Liquidity is solid with a current ratio of 191.9% and quick ratio of 111.5%, underpinned by inventories of ¥116.1bn and ample working capital of ¥132.8bn. Interest coverage is healthy at 11.2x, reflecting manageable financing costs versus operating earnings. Despite earnings growth, operating cash flow was negative at -¥9.2bn, likely due to working capital outflows (e.g., inventory build or receivables), which warrants monitoring. Financing cash flow was +¥14.0bn, possibly supporting liquidity amidst the OCF swing; investing cash flow was not disclosed in this dataset. Dividend data were not provided (DPS and payout shown as 0.00 indicate undisclosed, not actual zero), consistent with interim reporting or missing XBRL items. Overall, the company exhibits improved profitability, prudent leverage, and strong liquidity, though the negative OCF underscores the need to watch inventory and receivables discipline. Data limitations exist for certain line items (e.g., equity ratio, cash balance, investing CF, dividend amounts, and share counts), so interpretations rely on the disclosed non-zero metrics and standard accounting relationships.

Profitability Analysis

ROE decomposition (DuPont): Net margin 1.75% × asset turnover 1.141 × financial leverage 1.65 = ROE 3.31%. The improvement in operating income (+49.3% YoY) versus revenue (+10.5% YoY) indicates positive operating leverage, likely from price optimization and cost control in procurement/processing and SG&A. Gross margin at 12.1% suggests stable unit economics; operating margin at ~2.4% shows thin but improving profitability typical of protein processing/packaged foods. EBITDA margin of 3.6% indicates limited but improving cash earnings capacity. Interest expense of ¥1.17bn is well covered by EBIT (11.2x), reflecting sound financing structure. Ordinary income exceeded operating income, implying minor positive non-operating contributions (e.g., financial income, equity method gains), though details are not provided. The margin mix and leverage indicate that further gains in fixed cost absorption could continue to lift operating profit if volumes are sustained. Effective tax rate recalculated from disclosed figures (¥2.82bn tax on roughly ¥13.6bn pre-tax) is about 20.7%; the listed 0.0% is non-informative due to data omissions.

Growth Assessment

Revenue growth of +10.5% YoY to ¥542.4bn is notable for a mature food company and likely reflects both pricing and resilient demand. Profit growth outpaced sales, with net income up 51.8% YoY, indicating stronger mix and operating efficiency. Sustainability hinges on maintaining pricing amid raw material volatility (pork/beef), FX-driven import costs, and competitive dynamics in retail channels. Ordinary income of ¥13.6bn and EPS of ¥167.58 imply broad-based improvement; however, the negative OCF suggests growth is currently supported by working capital investment. With inventories at ¥116.1bn, normalization could release cash but poses near-term risks if demand slows. Absent disclosure on capex and investing CF, visibility into capacity expansion or efficiency investments is limited. Outlook qualitatively improves given leverage of costs to sales, but mid-single-digit margins remain a structural ceiling near term. Continued pricing discipline, product mix (value-added/ready-to-eat), and procurement synergies are key to sustaining growth.

Financial Health

Liquidity is robust: current ratio 191.9%, quick ratio 111.5%, and working capital of ¥132.8bn provide ample short-term coverage. Solvency is strong with total equity of ¥287.7bn against total assets of ¥475.3bn, implying an equity ratio around 60.5% despite the reported 0.0% placeholder. Debt-to-equity at 0.63x suggests moderate interest-bearing debt, consistent with 11.2x interest coverage. The liability structure is manageable: current liabilities of ¥144.4bn are well covered by current assets of ¥277.2bn. Inventory levels are material at ¥116.1bn, typical for protein processors but a swing factor for cash needs. Ordinary income comfortably exceeds interest expense, limiting refinancing risk in the near term. Overall leverage is conservative, supporting flexibility against commodity and FX shocks.

Cash Flow Quality

Earnings quality is mixed: income growth is strong, but operating cash flow was -¥9.2bn, yielding an OCF/Net Income ratio of -0.97. The negative OCF likely stems from working capital outflows (inventory build and/or receivables growth) rather than weak earnings power, given EBITDA of ¥19.6bn. Free cash flow was not disclosed; investing CF is also undisclosed, limiting full FCF assessment. Depreciation and amortization of ¥6.44bn provides a meaningful non-cash component to EBIT, but cash conversion was impaired this period by working capital. Monitoring the trajectory of inventories (¥116.1bn) and payables will be critical for near-term cash generation. Financing inflows of ¥14.0bn buffered liquidity during the OCF shortfall. We expect OCF to normalize if sales stabilize and inventory days revert toward historical levels, but confirmation is needed in subsequent quarters.

Dividend Sustainability

Dividend information (DPS and payout ratio) is not disclosed in this dataset; the displayed zeros should not be interpreted as actual values. With net income of ¥9.51bn and a strong balance sheet, the capacity for dividends generally exists, but current negative OCF complicates immediate cash coverage. Without investing CF and actual FCF, we cannot compute FCF coverage; the shown 0.00x is non-informative. Historically, food companies target stable dividends with gradual increases, but policy specifics for this issuer are not provided here. Sustainability will depend on normalization of working capital and visibility on capex needs; moderate leverage (D/E 0.63x) supports flexibility. Until FCF trends are confirmed, payout prudence would be consistent with cash flow conditions, but no conclusion can be drawn without actual DPS disclosure.

Risk Assessment

Business Risks:

• Raw material price volatility (pork, beef) affecting gross margins
• FX fluctuations impacting import costs and procurement
• Intense price competition in retail/wholesale channels
• Demand elasticity to price increases potentially limiting pass-through
• Biosecurity and supply disruptions in livestock supply chains
• Logistics and labor cost inflation compressing operating margins
• Inventory obsolescence or markdown risk if demand slows
• Regulatory/food safety compliance and recall risks

Financial Risks:

• Negative operating cash flow driven by working capital expansion
• Inventory concentration (¥116.1bn) tying up liquidity
• Interest rate risk on floating-rate debt given D/E of 0.63x
• Limited visibility on capex and investing needs (undisclosed investing CF)
• Potential FX translation and transaction exposures
• Tax rate variability (recalculated ~20.7%) affecting net margins

Key Concerns:

• Sustainability of operating leverage if sales growth moderates
• Working capital normalization required to restore cash conversion
• Thin operating margin (~2.4%) leaves limited buffer against shocks

Investment Implications

Key Takeaways:

• Revenue up 10.5% YoY to ¥542.4bn with outsized profit gains (OP +49.3% YoY)
• Operating margin improved to ~2.4%; EBITDA margin 3.6%
• ROE 3.31% with conservative leverage (equity ratio ~60.5%)
• Liquidity strong (current ratio 1.92x; quick ratio 1.12x)
• OCF negative at -¥9.2bn, pointing to working capital drag
• Interest coverage solid at 11.2x, limiting near-term financing risk
• Dividend and investing CF data not disclosed; assessment limited

Metrics to Watch:

• Inventory levels and days on hand versus sales trends
• Operating cash flow recovery and OCF/Net Income ratio
• Gross and operating margins amid raw material and FX moves
• Capex and investing cash flows to gauge FCF
• Net debt and interest coverage as rates evolve
• Pricing/mix effects on asset turnover and ROE

Relative Positioning: Profitability is improving but remains thin versus typical packaged food peers; balance sheet strength and liquidity are comparatively solid, positioning the company defensively while it executes margin enhancement and working capital normalization.

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