| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥930.7B | ¥777.8B | +19.6% |
| Operating Income / Operating Profit | ¥10.8B | ¥4.9B | +121.3% |
| Ordinary Income | ¥13.2B | ¥6.4B | +107.2% |
| Net Income / Net Profit | ¥6.5B | ¥-0.1B | +5123.1% |
| ROE | 2.0% | -0.0% | - |
For the fiscal year ended March 2026, Key Coffee achieved significant revenue and profit growth: Revenue ¥930.7B (YoY +¥152.9B +19.6%), Operating Income ¥10.8B (YoY +¥5.9B +121.3%), Ordinary Income ¥13.2B (YoY +¥6.8B +107.2%), and Net Income attributable to owners of parent ¥6.5B (YoY +¥6.6B -). Revenue growth was driven by the core coffee-related business (+19.4%) and the foodservice-related business (+34.1%), supported by recovery in external conditions and proactive business expansion. Operating margin improved to 1.2% (up +0.6pt from 0.6% prior year), and SG&A ratio improved to 16.7% (down -1.4pt from 18.1%), reflecting leverage from scale expansion. Gross margin declined to 17.9% (down -0.8pt from 18.7%) indicating incomplete pass-through of higher raw material and logistics costs. Non-operating items included equity-method investment income of ¥2.0B which boosted Ordinary Income, and special items were minor (special loss ¥0.1B), resulting in a large turnaround from prior-year net loss (¥-0.1B).
Revenue: The core Coffee-related Business accounted for 88.1% of sales and expanded substantially to ¥842.96B (YoY +19.4%). Demand recovery in both consumer and commercial channels, price revisions taking effect, and increased sales volumes were drivers. The Foodservice Business recorded high growth at ¥56.52B (YoY +34.1%), supported by recovery at existing Italian Tomato stores and the expanded consolidation scope from the acquisition of Inoda Coffee. Other Businesses (transportation/logistics, mail-order, etc.) continued stable growth at ¥57.78B (YoY +3.9%). Overall, normalization of dining-out demand, strong coffee demand, and expansion via M&A supported revenue growth.
Profitability: Gross profit was ¥166.2B (gross margin 17.9%), with absolute gross profit increasing by ¥18.9B YoY due to revenue growth, but gross margin fell by -0.8pt. Rising raw material prices and higher logistics/packaging costs (¥22.3B, 2.4% of sales) pressured margins; timing and magnitude of price revisions lagged cost increases. SG&A was ¥155.4B (SG&A ratio 16.7%), up ¥15.0B in absolute terms, but improved by -1.4pt as a percentage of sales due to scale. Major items included freight and packing ¥22.3B, rents ¥8.6B, and R&D ¥2.1B; workforce and administrative efficiencies and economies of scale contributed to margin improvement. Operating Income rose to ¥10.8B (operating margin 1.2%), up ¥5.9B YoY, led by SG&A efficiency. Ordinary Income was ¥13.2B, with non-operating income ¥4.2B (equity-method investment income ¥2.0B, dividend income ¥0.4B, etc.) and non-operating expenses ¥1.7B (interest expense ¥1.5B, etc.), which boosted operating income by ¥2.4B. Special items included impairment losses of ¥0.1B negligible in impact, resulting in Profit Before Tax ¥13.1B. Income taxes were ¥3.0B (effective tax rate 22.9%), and after non-controlling interest deductions, Net Income attributable to owners of parent was ¥6.5B, a substantial improvement YoY. In conclusion, revenue and profit increased, with SG&A ratio improvement driving profit growth, though the decline in gross margin highlights the ongoing challenge of price policy and cost management.
Coffee-related Business: Revenue ¥842.96B (YoY +19.4%), Operating Income ¥15.7B (YoY +78.3%), operating margin 1.9% (up +1.0pt from 0.9%), showing substantial improvement in profitability. SG&A ratio improvement and higher sales volumes produced economies of scale. Foodservice Business: Revenue ¥56.52B (YoY +34.1%), Operating Income ¥0.6B (YoY +126.9%), operating margin 1.0% (up +0.7pt from 0.3%), widening profit and turning positive. The Inoda Coffee acquisition and strengthened Italian Tomato store operations drove both revenue and profit, aided by recovery in dining-out demand. Other Businesses (transportation/logistics, mail-order, insurance agency, etc.): Revenue ¥57.78B (YoY +3.9%), Operating Income ¥2.6B (YoY -1.2%), operating margin 4.4% (down -0.3pt from 4.7%), maintaining stable profitability with slight decline. Corporate expenses increased to ¥8.7B (prior ¥6.7B), impacted by M&A-related acquisition costs and strengthening of management functions. Overall, the Coffee-related Business accounts for 88% of revenue and is the main source of operating profit, while Foodservice is rapidly growing driven by M&A.
Profitability: Operating margin 1.2% (up +0.6pt from 0.6%), gross margin 17.9% (down -0.8pt), SG&A ratio 16.7% (improved -1.4pt); SG&A efficiency drove margin improvements while gross margin decline indicates challenges in addressing rising raw material and logistics costs. ROE improved to 2.0% (prior 0.7%) but remains well below industry average, indicating low capital efficiency. ROA (based on Ordinary Income) improved to 1.9% (prior 1.1%). Cash Quality: Operating Cash Flow (OCF) was -¥33.8B, below Net Income ¥6.5B, resulting in a cash conversion ratio of -519%, indicating quality issues. Accounts receivable increased by ¥65.2B and inventories by ¥55.1B, with working capital buildup from revenue growth pressuring OCF. Investment Efficiency: Total asset turnover decreased to 1.19x (prior 1.34x), as total assets increased by ¥202.9B YoY (+34.8%) from business expansion. Fixed asset turnover remains high at 3.54x, but expected to decline with increased capital expenditure. Financial Soundness: Equity Ratio (shareholders’ equity ratio) declined to 41.1% (down -11.5pt from 52.6%), increasing financial leverage. Current ratio was 125.8% and Quick ratio 113.9%, indicating short-term liquidity coverage, but short-term borrowings rose sharply to ¥173.2B (prior ¥82.2B, +¥91.0B), increasing dependence on short-term debt versus cash and deposits ¥52.8B. Net D/E ratio rose to 0.40x (prior 0.10x), indicating higher leverage. Payout Ratio is 1.2% (noted as extremely low), reflecting a priority on retained earnings.
Operating Cash Flow was -¥33.8B (prior -¥13.5B), deteriorating and significantly below Net Income ¥6.5B. The primary causes were increases in accounts receivable ¥65.2B and inventories ¥55.1B, with working capital accumulation not fully offset by an increase in trade payables ¥65.2B. Operating cash flow subtotal (Profit Before Tax + non-cash items) was -¥30.4B; even after adding depreciation of ¥11.2B, working capital increases drove negative OCF. Investing Cash Flow was -¥52.6B (prior -¥10.7B), driven mainly by capital expenditures ¥16.6B and outflows ¥35.5B for acquisition of subsidiary shares, reflecting significant allocation to M&A and capacity expansion. Subsidy receipts ¥2.2B provided some offset, but overall investing outflow was large. Free Cash Flow was -¥86.4B, heavily negative, as working capital buildup and aggressive investments strained liquidity. Financing Cash Flow was +¥88.3B (prior +¥28.3B), mainly from net increase in short-term borrowings ¥89.9B, indicating reliance on short-term debt to cover OCF and investing shortfalls. As a result, cash and deposits at year-end were ¥52.8B (up ¥2.0B from ¥50.8B at the beginning), but higher short-term liability dependence is a concern.
Most earnings are recurring from core coffee and foodservice operations: contract-derived revenue was ¥930.0B (99.9% of sales), with other revenue ¥0.6B immaterial. Non-operating income was ¥4.2B (0.5% of sales), primarily equity-method investment income ¥2.0B and dividend income ¥0.4B, indicating investment-related income tied to core business and limited one-off items. Special items were minor: special gain ¥0.03B (gain on sale of investment securities) and special loss ¥0.1B (impairment loss). Ordinary Income ¥13.2B and Profit Before Tax ¥13.1B were close, indicating profits are grounded in recurring operations. From an accrual perspective, OCF substantially lagged Net Income (OCF/Net Income = -519%), with notable increases in receivables and inventories suggesting risk of profit recognition without cash collection. Comprehensive income was ¥13.7B; consolidated Net Income ¥10.1B differed by ¥3.6B due to other comprehensive income such as ¥3.9B unrealized gains on securities, which lifted comprehensive income. Overall, recurring ordinary income dominates and one-off distortions are limited, but low cash conversion raises concerns about earnings quality.
Full-year guidance: Revenue ¥950.0B (YoY +2.1%), Operating Income ¥9.0B (YoY -16.4%), Ordinary Income ¥10.0B (YoY -24.2%), and Net Income attributable to owners of parent ¥7.5B, projecting lower revenue and profit versus the current year. Versus actuals, Revenue achieved ¥930.7B (achievement 98.0%), Operating Income ¥10.8B (achievement 120.0%), Ordinary Income ¥13.2B (achievement 132.0%); revenues slightly missed while profits substantially exceeded guidance. The outperformance in profit was driven by greater-than-expected SG&A ratio improvement and expanded non-operating income (equity-method investment income, etc.), aided by favorable external conditions and internal efficiency. However, next-year guidance assumes lower profits, likely reflecting conservative assumptions about sustained high raw material and energy costs, continuing M&A integration costs, and potential SG&A increases. For achieving guidance, ongoing price policy, stringent cost control, and improvement in working capital efficiency are key.
Annual dividend per share is ¥12.0 (interim ¥6.0, year-end ¥6.0), unchanged from prior year. Total dividends attributable to owners of parent were ¥2.6B against Net Income attributable to owners of parent ¥6.5B, implying a payout ratio of approximately 40.0% (= Total dividends ¥2.6B ÷ Net Income attributable to owners of parent ¥6.5B ×100). The document also references a Payout Ratio of 1.2%, which refers to DividendOnEquityRatio (dividend yield on BPS), and differs from the conventional payout ratio. The company maintained dividends despite OCF of -¥33.8B, implying short-term funding through borrowings. No share buybacks were disclosed; shareholder returns are composed only of dividends. For sustainability, normalizing OCF and improving working capital efficiency to fund dividends from internal cash is a key challenge.
Working capital expansion and cash flow deterioration risk: Accounts receivable increased ¥65.2B YoY and inventories increased ¥55.1B, leading to OCF of -¥33.8B. Days Sales Outstanding (DSO) are 89 days and Days Inventory Outstanding (DIO) are 108 days, which are prolonged; in the event of raw material price volatility or demand slowdown, inventory write-downs or bad debt risk may materialize. Short-term borrowings rose to ¥173.2B (YoY +¥91.0B); delayed OCF improvement could tighten liquidity.
Short-term liability concentration and interest rate risk: Of current liabilities ¥415.2B, short-term borrowings ¥173.2B and trade payables ¥192.9B represent a high short-term liability concentration with a short-term liability ratio of 97%. The multiple of short-term borrowings to cash and deposits is 3.3x, indicating significant refinancing risk. In a rising interest rate environment, higher interest expense could pressure profits, necessitating urgent financial strategies such as refinancing into long-term debt or securing committed lines.
Raw material price and FX volatility risk: With the Coffee-related Business accounting for 88.1% of revenue, the portfolio is highly concentrated and vulnerable to price fluctuations in coffee beans, sugar, fats/oils, etc. Gross margin declined -0.8pt YoY, showing a continued mismatch between price revisions and cost increases. Foreign exchange (mainly dollar-denominated procurement) can also affect gross margin; further yen depreciation or commodity price hikes could further compress profitability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 1.2% | 5.0% (3.3%–8.4%) | -3.8pt |
| Net Margin | 0.7% | 3.2% (1.9%–6.6%) | -2.5pt |
| Profitability is well below the industry median; while efficiency from scale expansion is progressing, low gross margin and cost structure remain challenges. |
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 19.6% | 5.4% (1.0%–8.6%) | +14.2pt |
| Revenue growth materially exceeds the industry median, driven by M&A and expansion of existing businesses. |
※ Source: Company compilation
An earnings growth trend driven by improved profitability in the core Coffee-related Business and SG&A efficiency was confirmed; however, the decline in gross margin (-0.8pt) indicates insufficient pass-through of rising raw material and logistics costs, so the effectiveness of future price policy and procurement strategy is key to sustaining profits. Operating margin 1.2% is well below the industry average 5.0%, indicating room for substantial profitability improvement.
OCF of -¥33.8B is far below Net Income, with buildup of receivables and inventories pressuring cash conversion. Short-term borrowings rose to ¥173.2B (YoY +¥91.0B) and short-term liability ratio is 97%, reducing flexibility in funding. Attention will focus on compressing working capital (shortening DSO and DIO), normalizing OCF, and refinancing into long-term borrowings.
M&A (including the Inoda Coffee acquisition) and capital expenditures expanded the business base and achieved high revenue growth of +19.6%, but increases in goodwill ¥4.8B and large increases in tangible fixed assets (land +¥43.0B, etc.) raise future impairment risk and fixed-cost burdens. Early realization of integration effects and synergy is a precondition for investment recovery and improved capital efficiency.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement disclosures. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly available financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed before making any investment decisions.