Asahi Group Holdings,Ltd. FY2026 Q1 Earnings Report

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Executive Summary

The first quarter of FY2026 was characterized by higher revenue but lower profit, as growth in overseas businesses was insufficient to fully absorb the increase in domestic costs. Revenue was ¥6,471.2B, not ¥647.1B (+2.6% year on year), Operating Income was ¥328.9B (-3.1%), Profit Before Tax was ¥299.6B (-5.8%), and Net Income attributable to owners of the parent was ¥214.3B (-0.4%). SG&A expenses increased +6.8% year on year, outpacing revenue growth, and the Operating Income margin declined to 5.1% from 5.4% in the previous year. However, higher profit in Asia Pacific and increased financial income provided support.

Factors Affecting Earnings

【Revenue】Revenue was ¥6,471.2B, representing a +2.6% year-on-year increase. By region, overseas businesses led growth, with Asia Pacific up +15.8% and Europe up +11.2%, while Japan and East Asia declined -9.6%. By composition, Japan and East Asia accounted for 43.0% of revenue (down year on year), Asia Pacific accounted for 32.0%, and Europe accounted for 23.9%, indicating that the center of gravity of the regional portfolio is shifting overseas.

【Profit and Loss】Operating Income was ¥328.9B, a year-on-year decline of -3.1%. The gross margin improved to 36.0% from 35.4% in the previous year, but the SG&A ratio increased to 30.6% from 29.4%, offsetting the increase in revenue. By segment, Asia Pacific posted the largest growth in Operating Income at ¥163.4B (+29.5%), while Japan and East Asia experienced a significant decline to ¥157.4B (-34.8%), apparently primarily due to higher promotional and logistics costs. Financial expenses increased to ¥120.8B from ¥92.9B in the previous year, weighing on Profit Before Tax, but Net Income secured a modest increase to ¥219.9B (+1.3%). Overall, the results are classified as higher revenue but lower profit.

Segment Analysis

Asia Pacific was the segment with the largest increase in Operating Income, at ¥163.4B (+29.5% year on year), and its profit margin of 7.9% exceeded the company-wide average. Japan and East Asia recorded revenue of ¥2,778.3B (-9.6%) and Operating Income of ¥157.4B (-34.8%), representing a significant decline in profit, with the profit margin falling to 5.7%. Europe recorded revenue of ¥1,542.6B (+11.2%) and Operating Income of ¥4.5B (+200.7% from ¥0.2B in the previous year). Although its profit remained in the black and expanded, the profit margin of 0.3% remained low. The disparity in profit margins between regions is widening, and improving the cost structure in Japan and East Asia will be key to restoring company-wide profitability.

Key Financial Metrics

【Profitability】The Operating Income margin was 5.1%, down 0.3pt from 5.4% in the previous year, while the Net Income margin was 3.4%, virtually unchanged from 3.4% in the previous year. The gross margin improved to 36.0% from 35.4% in the previous year, but the increase in the SG&A ratio (30.6%, compared with 29.4% in the previous year) was the primary cause of the decline in profit margins.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥504.2B, exceeding Net Income of ¥219.9B, and OCF/Net Income was approximately 2.3 times, indicating sound cash backing.【Investment Efficiency】ROE was 0.7% (on a quarterly basis, before annualization). Total asset turnover remained low, while goodwill and intangible assets accounted for approximately 62% of total assets, with this asset composition weighing on asset efficiency.【Financial Soundness】The Equity Ratio was 51.0%, improving from 49.8% in the previous year. However, current assets of ¥9,253.7B compared with current liabilities of ¥1兆7,078.8B resulted in a current ratio below 1x, making short-term liquidity management an ongoing monitoring point.

Cash Flow Analysis

Operating Cash Flow was ¥504.2B, a significant improvement from -¥1,515.3B in the previous year, securing a level above Net Income of ¥219.9B. The primary factor was the decrease in trade receivables, which generated +¥577.4B in cash, while the increase in inventories (-¥150.6B) and decrease in trade payables (-¥494.1B) were sources of cash outflow in terms of working capital. Investing Cash Flow was -¥322.1B, of which capital expenditures accounted for ¥315.0B. Relative to depreciation and amortization of ¥414.0B, the level of investment can be considered restrained. Financing Cash Flow was -¥999.8B, with bond redemptions of ¥1,000B and dividend payments of ¥380.3B serving as the primary sources of outflow, while Free Cash Flow remained positive at ¥182.1B. Cash and cash equivalents declined to ¥745.7B, making cash management, taking into account funding requirements such as bond redemptions and seasonality, increasingly important.

Earnings Quality

Earnings were centered on recurring business activities, with the impact of temporary extraordinary gains and losses limited. In non-operating income and expenses, financial income of ¥94.3B was offset by financial expenses of ¥120.8B. Compared with the previous year (¥73.4B and ¥92.9B, respectively), expenses increased more significantly, and the deterioration in net financial income and expenses weighed on Profit Before Tax. Equity in earnings of affiliates was -¥2.8B, a minor amount that did not materially affect the quality of recurring earnings. The fact that OCF exceeded Net Income is favorable from an accrual perspective, confirming cash backing for earnings.

Earnings Forecast and Guidance

The full-year forecast remains unchanged at revenue of ¥3兆2,200B, Operating Income of ¥2,970B (+59.8% year on year), and Net Income of ¥1,956B (+59.6%). Neither the earnings forecast nor the dividend forecast has been revised. Q1 progress rates were 20.1% for revenue, 11.1% for Operating Income, and 11.2% for Net Income, below the standard quarterly progress rate of 25%. However, it is necessary to take into account the seasonality of the alcoholic beverages and soft drinks businesses, where demand is concentrated in summer, and the fact that the plan is weighted toward the second half. Achieving the substantial full-year profit growth plan will depend on earnings improvement in Japan and East Asia and the continuation of growth in Asia Pacific during the second half.

Shareholder Returns

The full-year dividend forecast is ¥57 per share, and the Payout Ratio based on the full-year EPS forecast of ¥129.71 is approximately 43.9%. Dividend payments in Q1 totaled ¥380.3B, while share repurchases were effectively zero (¥0.0B), meaning that shareholder returns are centered on dividends. Q1 Free Cash Flow of ¥182.1B was below dividend payments, but given the structure in which cash generation is concentrated in the second half due to the seasonality of the alcoholic beverages business, the company appears capable of securing dividend funding for the full year.

Risk Factors

1. Short-term liquidity risk: Current assets of ¥9,253.7B compared with current liabilities of ¥1兆7,078.8B indicate that the current ratio remains below 1x. Cash and cash equivalents have declined to ¥745.7B, making bond redemptions and trends in the refinancing of short-term borrowings key areas for attention in liquidity management.

2. Earnings pressure from rising financial expenses: Financial expenses increased +30.0% to ¥120.8B from ¥92.9B in the previous year, weighing on Profit Before Tax. Net financial income and expenses, after offsetting financial income of ¥94.3B, deteriorated to -¥26.4B from -¥19.6B in the previous year, and changes in the interest-rate environment may continue to affect earnings.

3. Declining profitability in Japan and East Asia: Operating Income in this segment declined -34.8% year on year to ¥157.4B, while its profit margin fell to 5.7%. Higher promotional and logistics costs are believed to be the primary causes. If improvement in the cost structure of the domestic business does not progress, recovery in the company-wide profit margin may be delayed.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (food_beverage)

Profitability and Returns

Growth and Capital Efficiency

Industry comparison data currently does not provide calculated median or Delta values; therefore, assessment of the relative positioning is deferred.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Growth in Asia Pacific profit (+29.5%) and the expansion of Europe’s profit surplus (+200.7%) indicate an increasing structural contribution from overseas businesses. Meanwhile, Operating Income in Japan and East Asia declined significantly by -34.8%, and the widening regional disparity in profitability represents a structural change evident from the earnings data.

2. OCF improved significantly from the previous year to ¥504.2B and exceeded Net Income, indicating stronger cash backing for earnings. However, the structure in which the current ratio remains below 1x continues, resulting in mixed assessments of cash flow quality and short-term financial soundness.

3. Even after taking seasonality into account, the full-year progress rate remains below the standard level of 25%. The extent to which SG&A expenses are controlled and profitability in Japan and East Asia improves during the second half will be key points for monitoring progress toward the full-year plan.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,902–¥2,012 at ±1% for the cost of equity, and ¥1,951–¥1,959 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest-rate reference month: 2026-07 / 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 forecast or guarantee the future share price.)

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

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