FRUTA FRUTA INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.06B
• Operating Income: ¥254M
• Net Income: ¥204M
• EPS: ¥2.52

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

Verdict: Strong top-line recovery with sharply higher profits, but cash flow quality is weak and several line-item inconsistencies warrant caution. Revenue rose to 20.58 (↑83.0% YoY), lifting operating income to 2.54 (↑174.6% YoY) and net income to 2.04 (↑177.3% YoY). Gross margin is 19.3%, operating margin is approximately 12.3%, ordinary margin is about 11.8%, and net margin is 9.9%. SG&A was 3.29, implying an SG&A-to-sales ratio of roughly 16.0%, indicating decent operating leverage given the 83% sales increase. Interest burden is negligible (interest expense 0.01), and interest coverage is a very strong 182.9x. Liquidity is robust with cash and deposits of 18.87 and a current ratio of 578.8%. Leverage is low with total liabilities of 5.92 and a D/E of 0.12x. Despite solid profitability optics, operating cash flow was -3.59, yielding an OCF/NI of -1.76x, which flags poor earnings-to-cash conversion. Financing cash flow of 7.94 suggests external funding (likely equity) was required to support operations and/or working capital. Book value per share is 56.7 JPY and reported ROE is 4.1%, aided by higher margins but capped by low asset turnover (0.377) and low leverage (1.11x). Retained earnings remain negative at -9.53, indicating accumulated past losses despite current profit. Several reported line items appear internally inconsistent (e.g., gross profit versus cost of sales; ordinary income versus profit before tax versus net income), so analysis relies on the key non-zero metrics provided (revenue, operating/ordinary/net income, cash flows, and balance sheet totals). Margin expansion/compression in basis points cannot be quantified due to lack of comparable prior-period margin disclosure. Forward-looking, the company needs to convert earnings into cash and manage working capital tightly to sustain gains without ongoing external financing. If revenue momentum persists and OCF normalizes, ROE can improve from the current 4.1%, but cash discipline is the key swing factor.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 9.9% × 0.377 × 1.11 ≈ 4.1%. The largest drag on ROE is asset turnover (0.377), despite a healthy net margin of 9.9% and modest financial leverage of 1.11x. The strong margin improvement (implied by profit growth outpacing revenue) likely stems from operating leverage and a better mix/pricing, with SG&A growing well below sales. Sustainability: margins could normalize if growth slows or input costs rise; maintaining a ~10% net margin in a beverage/food niche requires stable pricing and efficient procurement. Asset turnover suggests a heavy working-capital footprint (notably inventories of 6.76 and receivables of 3.55), which is corroborated by negative OCF; this constrains ROE. Financial leverage is low, so ROE upside will primarily come from sustaining margins and improving turnover rather than levering up. Concerning trends: OCF/NI at -1.76x signals earnings quality risk; also, if SG&A growth re-accelerates faster than sales, operating leverage will reverse. Given data limitations (missing YoY margin levels), we cannot quantify bps changes, but profit growth vastly exceeded revenue growth, implying margin expansion in the period.

Growth Assessment

Revenue expanded 83.0% YoY to 20.58, a strong rebound likely driven by volume recovery and/or pricing. Operating income rose 174.6% to 2.54 and ordinary income rose 165.7% to 2.42, indicating operating leverage and improved mix. Net income advanced 177.3% to 2.04, with net margin at 9.9%, an attractive level for a small food/beverage player. SG&A at 3.29 implies an SG&A ratio of ~16.0%, supportive of improved operating margin (~12.3%). EBITDA of 2.57 (margin ~12.5%) aligns with the operating margin, indicating limited non-cash charges (D&A 0.03). Sustainability: growth durability will depend on maintaining sell-through and avoiding inventory buildups, as negative OCF points to working capital strain. With retained losses still negative, consistent profitability is needed to rebuild equity and reduce reliance on external financing. Near-term outlook hinges on converting sales to cash, stabilizing gross margin around ~19%, and improving inventory turns. Without reported segment detail, we assume gains are core rather than one-time. Basis-point margin changes vs. prior year are not computable due to unreported prior margins.

Financial Health

Liquidity is very strong: current assets 34.05 vs current liabilities 5.88, current ratio 5.79x and quick ratio 4.64x; cash alone (18.87) exceeds current liabilities. Solvency is conservative with total liabilities 5.92 vs equity 49.37 (D/E 0.12x). No warning triggers: Current Ratio >> 1.0 and D/E well below 2.0. Maturity mismatch risk appears low given cash buffer versus accounts payable of 4.51. Interest-bearing debt levels are unreported, but negligible interest expense suggests minimal debt service burden. Noncurrent liabilities are only 0.04, implying limited long-term obligations. Off-balance sheet items are unreported; we have no visibility on leases or guarantees. Equity quality: retained earnings remain negative (-9.53), reflecting historical deficits, but current profitability helps repair capital. Cash runway is comfortable near term, but sustained negative OCF would erode this cushion absent continued financing.

Cash Flow Quality

OCF was -3.59 against net income of 2.04, yielding OCF/NI of -1.76x, which is a material quality concern. The shortfall is likely driven by working capital investment (inventory and/or receivables build relative to payables), consistent with rapid sales growth. Capex is minimal at 0.04, so FCF weakness is not capex-driven. Financing cash inflow of 7.94 likely reflects equity issuance or similar funding to offset negative OCF; reliance on external capital is a red flag if it persists. With EBITDA at 2.57 and D&A only 0.03, accruals are not the issue; it is the conversion of earnings to cash. No signs of aggressive working-capital release; rather, cash is tied up, which is common during rapid growth but must normalize. Dividend payments are unreported; given negative OCF, distributing cash would be imprudent until cash conversion improves. Free cash flow cannot be fully assessed due to incomplete investing CF disclosure, but operating cash deficit suggests weak FCF in the period.

Dividend Sustainability

Dividend data are unreported, so payout ratios and FCF coverage cannot be calculated. Given negative operating cash flow and a history of retained losses (-9.53), internal capacity to fund dividends appears limited in the near term. Any potential distributions would likely depend on external funding or rapid normalization of OCF, which is not yet evidenced. Policy outlook: management is likely to prioritize reinvestment and balance sheet repair over cash returns until sustained positive OCF is achieved.

Risk Assessment

Business Risks:

• Demand volatility for niche beverage/food products affecting volume and pricing.
• Input cost and procurement risk for key raw materials (e.g., imported fruit pulp) impacting gross margin.
• Supply chain and logistics constraints (import timing, freight costs) that can drive inventory swings.
• Customer concentration risk if sales rely on a few retail channels or partners (not disclosed).

Financial Risks:

• Weak cash conversion (OCF/NI -1.76x) requiring working capital funding.
• Potential dilution or dependence on external financing (financing CF +7.94).
• Retained earnings negative (-9.53) limits capital flexibility despite high cash balance.
• Small scale (Total assets 54.56) may amplify volatility in margins and cash flows.

Key Concerns:

• Earnings quality flagged by negative OCF despite strong NI.
• Inventory and receivables management; risk of obsolescence or slower collection.
• Data inconsistencies across some income statement lines complicate analysis and monitoring.
• Sensitivity to FX (imported inputs), which can impact COGS and margins.

Investment Implications

Key Takeaways:

• Revenue up 83% YoY with operating income up 175% indicates strong operating leverage.
• Net margin at ~10% but cash conversion negative; sustainability hinges on working capital normalization.
• Balance sheet liquidity is ample (cash 18.87; current ratio 5.79x) and leverage is low (D/E 0.12x).
• Retained losses remain; consistent profitability is needed to rebuild equity quality.
• Financing inflow suggests reliance on external capital this period; watch for dilution.

Metrics to Watch:

• OCF/Net Income ratio (target >1.0).
• Inventory days and receivable days; payables coverage.
• Gross margin stability around ~19% and SG&A ratio (~16%).
• Operating margin trend (~12%) and EBITDA margin (~12.5%).
• Equity issuance or other financing activity and cash balance trajectory.
• ROE progression from 4.1% via improvements in asset turnover.

Relative Positioning: Within small-cap Japanese food/beverage peers, the company shows stronger recent revenue growth and margins but weaker cash flow conversion; balance sheet liquidity is a relative strength, while scale and earnings quality remain constraints.

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