TAKARA HOLDINGS INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥186.56B
• Operating Income: ¥7.79B
• Net Income: ¥9.70B
• EPS: ¥29.40

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Takara Holdings (TSE:2531) delivered FY2026 Q2 consolidated results marked by resilient top-line growth but pronounced profit compression. Revenue rose 5.7% year over year to ¥186.6bn, reflecting steady demand across core businesses, while cost pressures and higher operating expenses weighed on earnings. Gross profit reached ¥58.7bn, implying a gross margin of 31.5%, a reasonable level for the group’s product mix, but the operating margin contracted to 4.2% as operating income declined 26.1% to ¥7.8bn. Ordinary income of ¥7.4bn was slightly below operating income, indicating a modest net non-operating loss despite low interest expense (¥0.31bn). Net income fell 37.3% to ¥5.7bn, bringing EPS to ¥29.40, underscoring margin compression and possibly higher tax and/or minority interest impacts in the period. The DuPont-derived ROE is 1.98% on the provided metrics, restrained by a 3.05% net margin and moderate asset turnover of 0.391 despite modest financial leverage of 1.66x. Liquidity remains strong: current assets of ¥245.4bn versus current liabilities of ¥73.4bn imply a current ratio of 334% and a quick ratio of 235%, providing ample near-term flexibility. The balance sheet is solid with total equity of ¥287.5bn against total assets of ¥476.6bn (equity-to-asset ratio roughly 60% based on reported balances), and a liabilities-to-equity ratio of 0.61x. Operating cash flow was positive at ¥6.2bn and exceeded net income (OCF/NI = 1.09), indicating broadly healthy earnings quality for the half-year. EBITDA of ¥12.8bn (margin 6.9%) and an interest coverage of about 25x signal comfortable debt service capacity despite weaker operating profit. Working capital is sizable at ¥172.0bn, with inventories of ¥72.8bn (about 30% of current assets), which should be monitored for turnover efficiency. Reported effective tax rate in the calculated metrics shows 0.0%, but this conflicts with disclosed income tax expense; therefore, the 0.0% should be treated as an unreported/placeholder figure. Dividend data (DPS, payout, FCF coverage) and certain cash flow items (investing cash flows, cash balance) were not disclosed in the dataset, limiting assessment of shareholder return policy and free cash flow after capex. Overall, the quarter shows good revenue momentum but negative operating leverage, with a strong balance sheet and adequate cash generation partially mitigating earnings weakness. The outlook hinges on cost normalization, price/mix execution, and inventory discipline in the second half. Given data gaps, conclusions are based on available non-zero values and may differ from full disclosures.

Profitability Analysis

ROE_decomposition: ROE 1.98% = Net margin 3.05% × Asset turnover 0.391 × Financial leverage 1.66. Net margin is the primary drag, with asset turnover moderate and leverage modest. margin_quality: Gross margin at 31.5% suggests reasonable value-add, but the operating margin compressed to 4.2% (operating income ¥7.8bn on revenue ¥186.6bn). Ordinary income (¥7.4bn) fell below operating income, indicating slight net non-operating losses despite low interest. Net margin at 3.05% reflects the combined impact of weaker operations and heavier below-OP items/taxes. operating_leverage: Revenue grew 5.7% YoY while operating income fell 26.1%, evidencing negative operating leverage. Implied SG&A and other operating costs expanded faster than gross profit: SG&A proxy ≈ ¥51.0bn (gross profit ¥58.7bn minus operating income ¥7.8bn), or about 27% of sales, indicating cost inflation and/or higher marketing/logistics burden. additional_metrics: EBITDA ¥12.8bn (6.9% margin); interest expense ¥0.31bn; interest coverage ≈ 25x, showing ample cushion despite weaker EBIT.

Growth Assessment

revenue_sustainability: Top-line growth of 5.7% YoY indicates resilient demand and/or pricing/mix execution across segments. Sustainability will depend on further price pass-through, product mix in beverages/seasonings/bio, and export momentum. profit_quality: Profitability lagged revenue due to cost pressures and higher operating expenses. Ordinary income below operating income points to minor non-operating headwinds. The net decline (-37.3% YoY) likely reflects a tougher cost/tax environment rather than demand softness. outlook: Key swing factors for 2H include raw material and packaging cost trends, additional price adjustments, FX impacts on overseas earnings, and cost discipline in SG&A. Recovery potential exists if cost inflation eases and price/mix holds, but near-term margin pressure remains a risk. Inventory normalization and stable demand in core categories will be important to support margins.

Financial Health

liquidity: Current assets ¥245.4bn vs current liabilities ¥73.4bn; current ratio 334% and quick ratio 235% indicate strong short-term liquidity. Working capital stands at ¥172.0bn. solvency: Total liabilities ¥176.7bn vs total equity ¥287.5bn (liabilities/equity ≈ 0.61x). Balance sheet leverage is moderate, and interest burden is light (¥0.31bn). capital_structure: Assets ¥476.6bn funded ~60% by equity (based on balances) and ~40% by liabilities, implying conservative capitalization. Financial leverage of 1.66x is modest, supporting resilience despite earnings volatility.

Cash Flow Quality

earnings_quality: OCF ¥6.2bn exceeded net income ¥5.7bn (OCF/NI 1.09), suggesting reasonable cash conversion for the half-year. Depreciation and amortization (¥5.0bn) provide non-cash support to EBITDA. FCF_analysis: Investing cash flow and capex were not disclosed (reported as 0), so free cash flow after capex cannot be assessed. The provided FCF figure of 0 should be treated as unreported rather than actual zero. working_capital: Inventories ¥72.8bn comprise roughly 29.7% of current assets; inventory management and turnover will be important to protect cash conversion. Receivables/payables details are not provided, limiting deeper analysis of working-capital dynamics.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio were not disclosed; reported zeros should be treated as unreported values. With EPS at ¥29.40, potential payout capacity exists, but actual policy execution cannot be inferred from the dataset. FCF_coverage: Free cash flow after capex is not available due to missing investing cash flows; therefore, dividend coverage by FCF cannot be evaluated. policy_outlook: Given the solid balance sheet and low interest burden, the company has capacity to maintain shareholder returns in principle, but near-term profit compression argues for cautious stance until margin recovery is clearer. Formal guidance and historical policy (not provided here) would be necessary to assess trajectory.

Risk Assessment

Business Risks:

• Raw material and packaging cost inflation pressuring gross margins
• Negative operating leverage if SG&A growth outpaces sales
• FX volatility affecting overseas revenues and input costs
• Category competition and pricing power constraints in beverages/seasonings
• Inventory buildup risk impacting cash conversion and potential obsolescence
• Regulatory/tax changes affecting alcohol and food segments

Financial Risks:

• Earnings sensitivity to cost spikes despite modest leverage
• Potential increase in working capital needs impacting OCF
• Non-operating losses (albeit small) diluting operating earnings
• Limited visibility on capex and investing cash flows constraining FCF assessment

Key Concerns:

• Sharp YoY decline in operating and net income despite revenue growth
• Compression of operating margin to 4.2%
• Data gaps on investing CF, cash balance, dividends, and effective tax rate

Investment Implications

Key Takeaways:

• Top-line growth (+5.7% YoY) contrasted by significant profit decline (OP -26%, NI -37%) indicates margin pressure and negative operating leverage
• Balance sheet remains strong with low leverage (liabilities/equity ~0.61x) and robust liquidity (current ratio 334%)
• Cash conversion is acceptable (OCF/NI 1.09), but FCF cannot be confirmed due to missing capex data
• Interest coverage (~25x) provides ample cushion against rate or earnings volatility
• Inventory levels are high in absolute terms; turnover discipline is a key watchpoint
• ROE at 1.98% is subdued, constrained mainly by low net margin

Metrics to Watch:

• Gross and operating margin trajectory and SG&A-to-sales ratio
• Price realization versus input cost trends (raw materials/packaging)
• Inventories and working-capital turnover; OCF/NI ratio
• Capex intensity and full cash flow statement to derive FCF
• FX impacts on revenue and costs; non-operating income/expense run-rate
• ROE and ROIC progression into 2H

Relative Positioning: Within Japanese beverages/seasonings/bio-related peers, the company exhibits a strong balance sheet and liquidity with moderate leverage, but currently trails on profitability momentum due to margin compression; recovery depends on cost normalization and execution on price/mix and cost control.

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
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