Suntory Beverage & Food Limited FY2026 Q2 Earnings Report

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Executive Summary

The Company posted higher revenue and profit, securing double-digit revenue growth driven by price revisions, a recovery in volumes, and foreign exchange effects, although profit margins declined slightly due to higher raw material and logistics costs. Revenue was ¥8,998.8B (+11.6% year on year, +¥934.7B), while operating income was ¥739.6B (+3.0%, +¥21.3B). As the Company applies IFRS, ordinary income is not used; on a profit-before-tax basis, profit before tax was ¥733.2B (+4.5%), while net income attributable to owners of the parent was ¥420.8B (+2.3%). The primary drivers of revenue growth were price revisions and category strengthening in Japan, combined with volume recovery in Europe, Asia, and the Americas and significant expansion in Oceania. Profit growth resulted from SG&A efficiency improvements partially offsetting higher costs.

Factors Affecting Business Performance

【Revenue】By segment, Japan, the largest segment by composition, posted revenue of ¥3,600.9B (40.0% composition ratio, +4.6% year on year), achieving moderate revenue growth due to the effects of price revisions. Europe recorded ¥2,119.4B (23.6% composition ratio, +12.0%), Asia ¥1,696.0B (18.8%, +12.9%), and the Americas ¥982.3B (10.9%, +12.5%), with all three regions posting double-digit revenue growth due to volume recovery and foreign exchange effects. Oceania showed exceptional growth, recording ¥600.1B (6.7%, +69.7%), demonstrating the benefits of diversification in the business portfolio.

【Profit and Loss】The gross profit margin was 37.0%, down 1.1pt from 38.1% in the previous year, primarily due to higher raw material, packaging material, and logistics costs. The SG&A ratio improved by 0.4pt to 28.5% from 28.9%, as advertising and logistics efficiencies partially absorbed higher costs. Consequently, the operating margin was 8.2%, down 0.7pt from 8.9% in the previous year. Profit before tax was ¥733.2B (+4.5%), exceeding the growth rate of operating income, supported by an improvement in net financial income and expenses, with finance costs declining from ¥30.3B in the previous year to ¥18.2B. Net income attributable to owners of the parent was ¥420.8B (+2.3%); the slightly heavier income tax burden resulted in the difference from profit-before-tax growth. Both revenue and profit increased.

Segment Analysis

Profitability varied by region. Japan posted operating income of ¥213.2B (+16.8% year on year), the highest growth among all segments, although its operating margin remained the lowest within the Group at 5.9%. Europe’s operating income declined to ¥302.7B (-6.6%), but its operating margin remained at 14.3%, maintaining the highest profitability level in the Group. Asia recorded ¥199.3B (-0.8%), with an operating margin of 11.7%, remaining largely flat. The Americas posted ¥102.6B (+0.1%), with a stable operating margin of 10.4%. Oceania recorded significant profit growth of ¥52.4B (+156.2%), while its operating margin improved to 8.7%, clearly demonstrating its increasing earnings contribution as the business expands.

Key Financial Indicators

【Profitability】The operating margin was 8.2%, down 0.7pt from 8.9% in the previous year, while the gross profit margin was 37.0%, down 1.1pt from 38.1%. The primary factor was the impact of higher raw material and logistics costs. The consolidated net profit margin was 5.9% (based on consolidated net income). 【Cash Flow Quality】Operating cash flow (OCF) of ¥711.7B was 1.69 times net income attributable to owners of the parent of ¥420.8B, indicating a favorable level of cash conversion. 【Investment Efficiency】ROE was 3.6% (based on consolidated net income divided by average net assets), and total asset turnover was approximately 0.39 times, indicating room for improvement in capital efficiency. 【Financial Soundness】The equity ratio was 59.0%, nearly unchanged from 59.3% in the previous year. Cash and deposits were ¥1,598.2B, providing ample liquidity relative to bonds and borrowings (current and non-current combined: ¥160.1B).

Cash Flow Analysis

Operating cash flow was ¥711.7B, a significant increase of +69.6% year on year. After deducting the increase in inventories (-¥212.7B) and income tax payments (-¥174.9B) from the subtotal before changes in working capital of ¥892.0B, the resulting level represented a notable improvement from the previous year. Investing cash flow was -¥338.5B, of which capital expenditures of -¥349.1B accounted for the majority of investing activity. Financing cash flow was -¥279.5B, with dividend payments of -¥185.4B representing the primary cash outflow; no share repurchases were conducted. As a result, free cash flow (OCF + investing cash flow) was positive at ¥373.2B, indicating a structure in which cash generated from operating activities can fund dividend payments and capital expenditure requirements. Cash and cash equivalents stood at ¥1,598.2B at the end of the period, an increase of +¥107.5B from the previous year.

Earnings Quality

Non-operating income and expenses made a negative net contribution, with finance income of ¥11.8B versus finance costs of ¥18.2B, and other income of ¥18.7B versus other expenses of ¥42.1B. Accordingly, profit before tax of ¥733.2B was primarily generated by the Company’s core earnings power, represented by operating income of ¥739.6B. No significant temporary factors classified as extraordinary gains or losses were identified, and impairment losses were limited to ¥2.65B. Comprehensive income was ¥703.0B, including ¥568.3B attributable to owners of the parent, exceeding net income attributable to owners of the parent of ¥420.8B by ¥147.5B. This difference was largely attributable to an increase of +¥171.4B in foreign currency translation adjustments. The difference between net income and comprehensive income was primarily attributable to foreign exchange-related non-recurring items; therefore, the quality of net income and operating income as indicators of core profitability can be considered sound.

Earnings Forecast and Guidance

Progress for the first half of the fiscal year against the full-year forecast was 49.3% for revenue (¥8,998.8B/¥18,260.0B), 47.7% for operating income (¥739.6B/¥1,550.0B), and 47.3% for net income attributable to owners of the parent (¥420.8B/¥890.0B). Although each was slightly below the 50% benchmark for a half-year period, progress was generally at a standard level. No revisions were made to the earnings forecast or dividend forecast during the quarter, and the Company appears to expect to achieve its current plan. The full-year operating income forecast calls for growth of +4.2% year on year, while the consolidated net income forecast calls for growth of +0.3%, indicating a plan for somewhat slower profit growth in the second half.

Shareholder Returns

The interim dividend was ¥60 per share, and the full-year dividend forecast was ¥120, reflecting a plan to distribute dividends evenly between the first and second halves. The payout ratio, calculated by dividing total dividend payments of ¥185.4B by net income attributable to owners of the parent of ¥420.8B, was 44.1%. Compared with free cash flow of ¥373.2B, the cash coverage of dividends was sufficiently secured. No share repurchases were conducted, and shareholder returns consisted primarily of dividends.

Risk Factors

1. Pressure on profit margins from higher raw material and logistics costs: The gross profit margin declined by 1.1pt to 37.0% from 38.1% in the previous year. This decline was not fully offset by the 0.4pt improvement in SG&A efficiency, resulting in a 0.7pt decline in the operating margin to 8.2%.

2. Declining working capital efficiency due to higher inventories: Inventories increased +17.2% to ¥1,610.5B from ¥1,375.3B in the previous year. In the calculation of OCF, the increase in inventories was also a negative factor of -¥212.7B.

3. Impairment risk related to goodwill and intangible assets: Goodwill amounted to ¥3,013.0B (13.1% of total assets), while intangible fixed assets amounted to ¥5,687.7B (24.8% of total assets). The Company has a high dependence on intangible assets, creating relatively high sensitivity to the results of impairment testing when business conditions change.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Because median industry data has not been obtained, it is difficult to clearly determine the Company’s relative position. However, the Company’s operating margin of 8.2% and net profit margin of 5.9% are confirmed levels based on current-period results.

Growth and Capital Efficiency

Revenue growth of 11.6% represents double-digit growth and may indicate a high growth rate compared with general growth levels in the food and beverage sector.

※Source: Compiled by the Company

Key Points from the Results

1. Securing double-digit revenue growth while maintaining operating income growth of +3.0% despite a higher-cost environment through SG&A efficiency demonstrates the Company’s ability to respond through both pricing policy and cost management. However, the gross profit margin declined by 1.1pt, indicating that the pass-through of higher raw material and logistics costs remains in progress.

2. OCF increased significantly by +69.6% year on year, and OCF/net income attributable to owners of the parent was 1.69 times, indicating favorable cash conversion. Free cash flow of ¥373.2B exceeded the funding requirements for dividends and capital expenditures, providing a foundation for sustainable shareholder returns.

3. By region, Japan led growth with a profit increase of +16.8%, while Europe, previously the Group’s most profitable region, posted a profit decline of -6.6%. Oceania expanded significantly in both revenue and profit. Changes in the earnings structure among segments will be an important reference point when evaluating future trends in the Group-wide profit margin.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly available data using a residual income model (Ohlson-type model with an explicit five-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥3,983–¥4,214 at ±1% for the cost of equity, and ¥4,087–¥4,103 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; therefore, there is a timing difference relative to the full-year forecast.

(Calculation model: Residual income model / Interest rate reference month: 2026-07 / 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 summary 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 responsibility, after consulting professionals as necessary.

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