ITO EN,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥262.48B
• Operating Income: ¥13.93B
• Net Income: ¥9.40B
• EPS: ¥81.24

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

Ito En (25930) reported FY2026 Q2 consolidated results under JGAAP with steady top-line growth but modest pressure at the operating level. Revenue rose 4.0% year over year to ¥262.5bn, supported by resilient demand but likely offset by cost headwinds. Gross profit of ¥94.8bn implies a gross margin of 36.1%, which is solid for a beverage/consumer staples profile. Operating income declined 3.2% YoY to ¥13.9bn, compressing the operating margin to 5.3%, indicating negative operating leverage in the period. Ordinary income (¥14.9bn) exceeded operating income, suggesting a positive non-operating contribution despite interest expense of ¥0.25bn. Net income increased 3.8% YoY to ¥9.54bn, lifting net margin to 3.64%, aided by the non-operating line and despite weaker operating profitability. The DuPont framework indicates a calculated ROE of 5.16%, driven by a 3.64% net margin, 0.725x asset turnover, and 1.96x financial leverage—an overall modest return on equity for a staples franchise. Liquidity is robust with a current ratio of 214.6% and quick ratio of 171.8%, backed by large current assets (¥232.0bn) versus current liabilities (¥108.1bn). Leverage appears moderate with total liabilities of ¥168.6bn against equity of ¥184.9bn, translating to 0.91x debt-to-equity (as provided) and financial leverage of 1.96x. Cash conversion was weaker than earnings, with operating cash flow of ¥7.51bn at 0.79x of net income, implying a working capital build or timing effects. Free cash flow cannot be assessed because investing cash flow was undisclosed (displayed as zero), and the reported FCF of zero reflects data limitations rather than actual cash generation. Interest coverage is very strong at 54.9x, highlighting ample debt service capacity. The reported effective tax rate metric (0.0%) is clearly an artifact of missing pre-tax figures in the provided metrics; using net income and tax expense implies an approximate effective tax rate near the low-to-mid 30s. Dividend data were not disclosed (DPS and payout shown as zero reflect non-disclosure), limiting conclusions on shareholder returns this period. Overall, Ito En delivered resilient revenue and net income growth but experienced operating margin compression and softer cash conversion, offset by strong liquidity and coverage. Data gaps (notably investing cash flows, cash balances, and dividend details) temper the precision of our assessment, but the available non-zero data indicate stable fundamentals with near-term margin pressures.

Profitability Analysis

ROE decomposition (DuPont): Net margin 3.64% × asset turnover 0.725 × financial leverage 1.96 yields ROE of 5.16% (matches reported). Gross margin is 36.1% (¥94.8bn/¥262.5bn), while operating margin is 5.3% (¥13.9bn/¥262.5bn), indicating a sizable SG&A/logistics/other operating cost load between gross and operating line. Ordinary margin is 5.7% (¥14.95bn/¥262.5bn), implying non-operating gains offset interest expense. EBITDA of ¥18.18bn implies an EBITDA margin of 6.9%, only modestly above operating margin—suggesting limited D&A burden and constrained operating leverage. Negative operating leverage is evident: revenue +4.0% YoY while operating income -3.2% YoY, pointing to cost inflation (raw materials, packaging, logistics) or higher promotion spend. Interest expense is low (¥0.25bn), with coverage of 54.9x, indicating financing costs do not constrain profitability. The margin structure reflects a stable gross margin but tighter operating margin, typical of a period with elevated cost pressures and/or pricing lag. Overall profitability is adequate but not high; the ROE of 5.16% is modest for the sector and primarily held back by thin operating margins and moderate asset turnover.

Growth Assessment

Revenue grew 4.0% YoY to ¥262.5bn, a steady pace consistent with stable underlying demand. Operating income declined 3.2% YoY, indicating that growth was not fully profitable due to cost pressures or increased operating investments. Net income rose 3.8% YoY, suggesting supportive non-operating items and possibly improved equity-method or other financial contributions. The quality of growth is mixed: top-line expansion is healthy, but the deterioration in operating margin hints at delayed cost pass-through or mix effects. With EBITDA margin at 6.9% and operating margin at 5.3%, incremental profitability on new sales appears limited in the period. Asset turnover at 0.725x signals efficient but not high asset utilization for a beverage company; near-term growth is more volume/price led than capital intensity-driven. Outlook depends on cost normalization, pricing/promotion discipline, and inventory management; sustained revenue growth with margin stabilization would improve earnings trajectory. Given data limitations (e.g., no segment detail), revenue sustainability cannot be assessed by product geography, but aggregate indicators suggest a resilient core business with near-term margin headwinds.

Financial Health

Liquidity is strong: current ratio 214.6% and quick ratio 171.8% reflect a substantial liquidity buffer (current assets ¥232.0bn vs current liabilities ¥108.1bn). Working capital stands at ¥123.9bn, supporting operating flexibility and seasonality. Solvency appears solid: total liabilities ¥168.6bn vs equity ¥184.9bn, implying moderate leverage; financial leverage (assets/equity) of 1.96x is consistent with conservative balance sheets in staples. Debt-to-equity is reported at 0.91x; while the debt mix is not disclosed, interest expense is low, suggesting manageable debt levels. Interest coverage at 54.9x indicates ample capacity to service obligations. The reported equity ratio of 0% is a non-disclosure artifact; the balance sheet values imply an equity ratio near 51% (¥184.9bn/¥362.1bn) though we refrain from asserting an exact figure without the company’s definition. Cash and equivalents are undisclosed (displayed as zero), but liquidity ratios suggest adequate cash and near-cash holdings.

Cash Flow Quality

Operating cash flow of ¥7.51bn equals 0.79x net income (¥9.54bn), pointing to weaker cash conversion this period, likely due to working capital investment (e.g., inventories at ¥46.26bn) or timing of receivables/payables. Depreciation and amortization of ¥4.25bn is modest, aligning with a light capital-intensity profile. Investing cash flow is undisclosed (shown as zero), preventing a reliable free cash flow calculation; the stated FCF of zero reflects missing data, not actual performance. Financing cash flow was an outflow of ¥8.65bn, consistent with debt repayment and/or shareholder returns, though dividend data are not disclosed. Earnings quality appears reasonable given strong interest coverage and ordinary income above operating income, but the gap between OCF and NI merits monitoring until working capital trends normalize. Without cash balance detail, we cannot assess net cash/debt or liquidity runway, but current and quick ratios indicate adequate coverage of short-term needs.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed (zeros indicate non-reporting). Consequently, we cannot calculate payout ratios versus reported earnings or cash flows for FY2026 Q2. With OCF below net income and investing cash flows undisclosed, free cash flow coverage of dividends cannot be assessed. Financing cash outflow of ¥8.65bn could reflect distributions or debt service, but the split is unknown. The balance sheet suggests scope for continued shareholder returns given moderate leverage and strong liquidity, contingent on maintaining OCF and capex discipline. Policy outlook cannot be inferred from the provided data; we would look for management guidance or historical policy disclosures in future filings.

Risk Assessment

Business Risks:

• Input cost inflation (tea leaves, packaging, energy, logistics) pressuring gross-to-operating margins
• Pricing power and timing of price pass-through versus cost spikes
• Demand elasticity and mix shifts affecting volume growth and margins
• Channel dynamics and promotional intensity impacting operating leverage
• Supply chain and inventory management risks, including seasonality

Financial Risks:

• Weaker cash conversion (OCF/NI 0.79) indicating working capital drag
• Data gaps on cash and investing flows hindering visibility into FCF and capex
• Exposure to interest rate changes, albeit mitigated by very high coverage
• Potential FX impacts on sourcing or overseas operations (not disclosed here)

Key Concerns:

• Negative operating leverage despite topline growth
• Limited EBITDA margin headroom (6.9%) to absorb further cost shocks
• Insufficient disclosure on cash, capex, and dividends constraining assessment of capital allocation

Investment Implications

Key Takeaways:

• Resilient revenue growth (+4.0% YoY) but operating income declined (-3.2% YoY), indicating margin pressure
• Net income growth (+3.8% YoY) supported by non-operating items; interest burden is minimal
• ROE at 5.16% is modest, constrained by thin operating margins and moderate asset turnover
• Strong liquidity (current ratio 214.6%, quick ratio 171.8%) and excellent interest coverage (54.9x)
• OCF/NI at 0.79 signals working capital drag; FCF cannot be evaluated due to undisclosed investing CF
• Leverage moderate (financial leverage 1.96x; liabilities ¥168.6bn vs equity ¥184.9bn)

Metrics to Watch:

• Operating margin trajectory and gross-to-operating spread
• OCF/Net income and working capital trends (inventory, receivables, payables)
• Pricing actions versus input cost trends (packaging, logistics, raw materials)
• Capex and investing cash flows (to assess true FCF and reinvestment needs)
• Dividend announcements and payout guidance
• Asset turnover and ROE progression

Relative Positioning: Within the Japan beverages/consumer staples cohort, Ito En exhibits steady topline growth and strong liquidity with conservative leverage, but currently delivers modest ROE and compressed operating margins; improvement hinges on cost pass-through and working capital normalization.

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