Coca-Cola Bottlers Japan Holdings Inc. FY2026 Q2 Earnings Report

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Executive Summary

For Q2 of the fiscal year ending March 2026, Operating Income and Net Income turned profitable and increased significantly, primarily due to the reversal of the large impairment loss recorded in the same period of the previous year. Revenue was ¥4231.9B, representing only a slight increase of +1.3% year on year, while Operating Income was ¥91.0B, an improvement of ¥1012.7B from ¥-921.7B in the same period of the previous year (YoY +109.9%). Profit Before Tax was ¥87.6B (previous year: ¥-922.6B), while Net Income attributable to owners of the parent was ¥47.8B (previous year: ¥-658.9B, YoY +107.3%). Most of the improvement in Operating Income—approximately ¥887B—resulted from the reduction in the impairment loss recorded in the previous year, from ¥889.4B to ¥2.4B in the current period. The remaining improvement of approximately ¥126B was attributable to business operations. The increase in Revenue was mainly driven by growth in OTC and FoodService. Core business profitability is recovering at an Operating Income margin of 2.1%, but remains in the process of normalization.

Factors Affecting Performance

【Revenue】Revenue was ¥4231.9B, up +1.3% year on year. By segment, OTC was the largest at ¥1992.0B, representing 47.1% of the total (YoY +2.6%), followed by Vending at ¥1864.3B, representing 44.1% (YoY -1.7%), and FoodService at ¥229.5B, representing 5.4% (YoY +15.7%). The increase in Revenue from OTC and FoodService, supported by progress in price revisions and product mix improvements, offset the decline in Vending, resulting in a moderate increase in overall Revenue.

【Profit and Loss】Operating Income was ¥91.0B, turning profitable from ¥-921.7B in the same period of the previous year. Of the ¥1012.7B improvement, the reduction in impairment losses—from ¥889.4B in the previous year to ¥2.4B in the current period, a decrease of ¥887.0B—accounted for the majority, with the remainder attributable to operational improvements. By segment, OTC led overall performance with Operating Income of ¥227.5B (YoY +8.3%, margin 11.4%), while Vending recovered substantially to ¥53.4B (YoY +484.7%, margin 2.9%). FoodService maintained high profitability at ¥31.4B (YoY +10.0%, margin 13.7%). Other segments recorded an Operating Loss of ¥230.9B, narrowing the loss by 10.3% from ¥257.4B in the previous year. Profit Before Tax was ¥87.6B, and income taxes were ¥39.4B, representing an effective tax rate of 44.9%. Net Income attributable to owners of the parent was ¥47.8B (YoY +107.3%). Both Revenue and profit exceeded the previous year, resulting in higher Revenue and higher profit.

Segment Analysis

OTC is the largest source of earnings, accounting for 47.1% of Revenue and generating Operating Income of ¥227.5B, with an Operating Income margin of 11.4%. Although Vending accounts for 44.1% of Revenue, its margin remains at 2.9%. While this represents a significant improvement from the low profitability of the previous year, its profitability remains lower than that of the other segments. FoodService is small in terms of Revenue, at ¥229.5B, but has the highest margin at 13.7%; its Revenue growth rate of +15.7% was also the highest among the four segments. Other segments, which appear to include company-wide common expenses and other items, recorded an Operating Loss of ¥230.9B. However, the loss narrowed from ¥257.4B in the previous year, contributing to company-wide profitability improvement.

Key Financial Indicators

【Profitability】The Operating Income margin was 2.1%, turning profitable from the substantial loss in the same period of the previous year, equivalent to an Operating Income margin of approximately -22.0%. However, Selling, General and Administrative expense ratio remained high at 43.0% compared with a gross margin of 44.8%, limiting the realization of operating leverage. The Net Income margin, based on income attributable to owners of the parent, remained at 1.1%. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥-19.1B, representing a negative conversion relative to Net Income attributable to owners of the parent of ¥47.8B. The increase in inventories was a factor behind the divergence between profit and cash flow. 【Investment Efficiency】ROE was 1.3%. The DuPont decomposition into a Net Income margin of 1.1%, total asset turnover of 0.59x, and financial leverage of approximately 2.0x indicates that both asset efficiency and profitability are constraining factors. 【Financial Soundness】The Equity Ratio was 50.6%, down from 54.4% in the same period of the previous year, but remained above 50%. Current assets of ¥3012.1B and current liabilities of approximately ¥2168B resulted in a current ratio of approximately 1.4x, maintaining a certain level of payment capacity.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥-19.1B, deteriorating from ¥-16.9B in the previous year. The primary factor was a ¥173.5B increase in inventories, which offset support from a ¥20.1B decrease in trade receivables and a ¥79.9B increase in trade payables. Investing Cash Flow was ¥-87.1B; proceeds from the sale of property, plant and equipment and other items partially offset capital expenditures of ¥179.1B. As a result, Free Cash Flow was ¥-106.2B, with cash generation from operating and investing activities combined remaining negative. Financing Cash Flow was +¥175.2B, with shareholder returns consisting of dividend payments of ¥53.0B and share repurchases of ¥148.7B funded through external financing, including borrowings. Cash and cash equivalents totaled ¥832.3B, securing the period-end balance. However, inventory normalization will be a key focus for the recovery of future cash-generation capacity.

Quality of Earnings

Operating Income of ¥91.0B included a net amount of +¥11.7B comprising other income of ¥53.4B and other expenses of ¥41.7B. This net amount may not be recurring in nature, and its repeatability is therefore considered limited. Items reconciling to Profit Before Tax of ¥87.6B included a net financial expense of ¥3.3B—comprising financial income of ¥1.7B and financial expenses of ¥5.0B—and equity-method income of ¥0.5B. The divergence from Operating Income was therefore modest. Profit Before Tax in the same period of the previous year was a substantial loss of ¥-922.6B, but the tax expense had a favorable effect through tax refunds, limiting the Net Loss to ¥-658.9B. In the current period, conversely, income taxes of ¥39.4B, representing an effective tax rate of 44.9%, restrained Net Income growth. Comprehensive income was ¥50.5B, including ¥50.0B attributable to owners of the parent. The difference of +¥2.2B from Net Income attributable to owners of the parent of ¥47.8B was small, indicating limited effects from valuation differences on other securities and foreign currency translation adjustments.

Earnings Forecast and Guidance

Progress against the full-year forecast was 46.9% for Revenue (forecast: ¥9027.0B), 25.3% for Operating Income (forecast: ¥360.0B), and 21.2% for Net Income (forecast: ¥225.0B, attributable to owners of the parent). All were below the standard first-half progress benchmark of 50%. Progress in Operating Income and Net Income was particularly delayed, making earnings improvement in the second half a prerequisite for achieving the full-year plan. As of the current quarter, no revisions had been made to the earnings forecast or dividend forecast.

Shareholder Returns

The interim dividend was ¥35 per share, compared with ¥28 per share in the same period of the previous year, while the full-year dividend forecast was ¥37. On a total basis, the interim dividend exceeded interim Net Income attributable to owners of the parent of ¥47.8B, resulting in a Payout Ratio above 100%. In addition, the Company conducted share repurchases of ¥148.7B, making total shareholder returns through dividends and share repurchases several times Net Income. Shareholder returns during the period were funded through Financing Cash Flow, indicating that they were not fully covered by internally generated cash.

Risk Factors

1. Delayed cash conversion: Operating Cash Flow (OCF) was ¥-19.1B, representing a substantial divergence from Net Income attributable to owners of the parent of ¥47.8B. The primary factor was a ¥173.5B increase in inventories. If inventory normalization does not progress, the recovery of cash-generation capacity may be delayed.

2. High effective tax rate: The effective tax rate was high at 44.9% (income taxes of ¥39.4B / Profit Before Tax of ¥87.6B), serving as a factor depressing the Net Income margin of 1.1%.

3. Dependence of shareholder returns on external financing: Dividends of ¥53.0B and share repurchases of ¥148.7B, combined, substantially exceeded Net Income attributable to owners of the parent of ¥47.8B and were funded through Financing Cash Flow of +¥175.2B. If negative Operating Cash Flow continues, funding for shareholder returns may become increasingly dependent on financing activities.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (food_beverage)

Profitability and Returns

Both the Company's Operating Income margin and Net Income margin are at low levels, suggesting that its profitability within the industry has room for improvement.

Growth and Capital Efficiency

Revenue growth remained moderate, suggesting that the Company's growth position within the industry is at an average level.

Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The return to positive Operating Income was primarily attributable to the reduction in the impairment loss of ¥889.4B recorded in the previous year, to ¥2.4B in the current period. Operational improvements accounted for only approximately ¥126B of the ¥1012.7B improvement. The Operating Income margin of 2.1% and ROE of 1.3% remain low, and profitability normalization remains in progress.

2. Operating Cash Flow (OCF) was ¥-19.1B, primarily due to a ¥173.5B increase in inventories, resulting in a divergence between profit and cash flow. Inventory trends will be a key point of focus in assessing future cash-generation capacity.

3. Full-year progress was 46.9% for Revenue, compared with 25.3% for Operating Income and 21.2% for Net Income, indicating that profit is lagging Revenue. The execution of profitability improvements in the second half will be the key to achieving the full-year plan.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type, explicit 5-year fade). It does not constitute a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥2,025–¥2,145 at ±1% for the Cost of Equity, and ¥2,078–¥2,087 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 were used; therefore, there is a timing difference relative to the full-year forecast.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not predict 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 benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional as necessary.

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