FUJI OIL CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥375.70B
• Operating Income: ¥13.89B
• Net Income: ¥8.65B
• EPS: ¥99.32

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 topline and margin rebound in FY2026 Q2 with significant operating leverage, but cash flow quality and leverage remain key overhangs. Revenue rose 18.9% YoY to 3756.96, with operating income up 132.5% to 138.86 and net income up 325.0% to 85.39. Gross profit reached 523.10, implying a gross margin of 13.9%. SG&A was 381.56, yielding an SG&A-to-sales ratio of about 10.2%. Operating margin improved to 3.7%, expanding roughly 180 bps YoY (from ~1.9% last year based on implied prior period figures). Net margin improved to 2.3% from roughly 0.6% last year, a widening of about 160 bps, supported by better operating performance and a moderate effective tax rate of 22.6%. EBITDA totaled 240.30, translating to a 6.4% EBITDA margin, indicating improved operating efficiency versus last year’s implied levels. Equity-method income was modest at 5.96, accounting for about 5% of profit contributions, suggesting earnings were primarily driven by core operations rather than affiliates. Despite the profit rebound, operating cash flow was -95.15 versus net income of 85.39 (OCF/NI -1.11x), signaling a notable earnings quality concern likely tied to working capital (inventory build) and timing effects. Free cash flow was deeply negative at -426.38 due to negative OCF and 134.82 in capex, necessitating 173.74 of financing inflows to bridge the gap. Balance sheet leverage is elevated with short-term loans of 1977.79 and long-term loans of 808.74; the equity ratio is 33.7% and D/E is 1.91x, while Debt/EBITDA is a high 11.6x. ROE is still subdued at 3.8% as the business remains margin- and asset-turn constrained, and ROIC sits at a weak 2.1%, well below a 5% warning threshold. Inventory of 1838.13 is large relative to current assets (3835.85), underlining working-capital intensity and commodity exposure. Dividend payout ratio is 53.3% on an earnings basis, but FCF coverage is negative (-9.36x) this half, raising near-term sustainability questions if cash generation does not normalize. Forward-looking, sustained pricing discipline, cost pass-through amid volatile cocoa/palm inputs, and inventory normalization will be crucial to converting improved P&L into cash and lifting ROIC. Absent better OCF, leverage could constrain flexibility in a higher-rate or tighter credit environment; however, the step-up in operating margin provides a foundation if execution on cash and ROIC follows.

Profitability Analysis

ROE decomposition: ROE 3.8% = Net Profit Margin 2.3% × Asset Turnover 0.578 × Financial Leverage 2.91x. The largest YoY change is in Net Profit Margin, which improved by roughly 160 bps (from ~0.6% to 2.3%), versus a more modest change expected in asset turnover and a largely unchanged leverage profile. The margin lift reflects strong operating leverage (OP up 132.5% vs sales +18.9%), suggesting effective price revisions, mix improvement, and/or cost pass-through against higher input costs, partially offset by still-elevated SG&A (10.2% of sales). Asset turnover at 0.578 remains subdued for a food ingredients business, reflecting inventory-heavy operations and possibly slower collection cycles amid price inflation, which limits ROE uplift. Financial leverage at 2.91x is doing much of the work in the DuPont bridge, indicating ROE is being aided by balance sheet risk rather than pure operating excellence. Sustainability: margin gains are partially sustainable if pricing discipline and mix hold, but commodity price volatility (notably cocoa) could compress gross margin and require further pass-through; asset turnover improvement will hinge on inventory normalization. Watch for SG&A growth outpacing revenue—this quarter, OP growth outstripped SG&A, but maintaining SG&A discipline is essential to avoid margin leakage.

Growth Assessment

Revenue growth of +18.9% YoY to 3756.96 demonstrates robust demand and/or successful price pass-through in key product lines. Operating profit growth of +132.5% to 138.86 indicates strong operating leverage from improved gross spread and SG&A efficiency. Net income rose +325% to 85.39, aided by better operations and controlled taxes (22.6% rate). The quality of growth is mixed: the P&L improvement is clear, but OCF was negative (-95.15), pointing to working capital absorption—likely inventory and receivables expansion amid price inflation and volume growth. EBITDA margin at 6.4% suggests further headroom versus historical targets if commodity conditions stabilize and mix shifts continue. Equity-method income was small (5.96), so growth is primarily organic/operational rather than affiliate-driven. Outlook: near-term growth should hinge on continued cost pass-through in chocolate and edible oils, as well as normalization of inventory cycles; however, commodity volatility and FX could re-introduce margin pressure. ROIC at 2.1% indicates value creation is currently below cost of capital; sustainably raising ROIC will require better asset turns and structurally higher operating margins.

Financial Health

Liquidity: Current ratio is not calculable due to unreported current liabilities; however, current assets are 3835.85 with inventories of 1838.13, implying a moderate share of lower-liquidity assets. Solvency: D/E is 1.91x (elevated but below the 2.0x warning threshold); equity ratio stands at 33.7%. Interest-bearing debt proxies: short-term loans 1977.79 and long-term loans 808.74 suggest total loans around 2786.53; Debt/EBITDA is high at 11.6x, indicating leverage risk. Maturity mismatch: short-term loans (1977.79) are sizable relative to current assets (3835.85); coverage appears adequate in aggregate, but liquidity quality depends on converting inventories/receivables, so rollover risk must be monitored. No off-balance sheet obligations were disclosed in the provided data. No explicit red flag for Current Ratio <1.0 or D/E >2.0 can be asserted given missing current liabilities and D/E at 1.91x.

Cash Flow Quality

OCF/Net Income is -1.11x (<0.8), signaling weak earnings quality this half, likely driven by working capital build (inventory and possibly receivables) and timing of payables. Free cash flow was -426.38, reflecting negative OCF and capex of 134.82. Financing inflows of 173.74 were used to cover part of the deficit, implying reliance on debt to sustain operations/investment this period. With inventories at 1838.13, working capital intensity is high; watch for inventory days and receivable turns to confirm normalization. No clear signs of deliberate working capital manipulation are evident from the limited disclosures, but the magnitude of OCF shortfall vs NI warrants caution. Sustaining dividends and capex will require a rebound in OCF in H2 or continued external funding.

Dividend Sustainability

The payout ratio is 53.3%, within a typical comfort zone on an earnings basis. However, FCF coverage is -9.36x this half due to negative OCF and ongoing capex (134.82), indicating that dividends were effectively debt-funded in the period (dividends paid -22.37 while financing CF +173.74). Near-term sustainability depends on OCF normalization and working capital release in H2; otherwise, continued payouts could constrain balance sheet flexibility. Policy outlook likely aims to maintain stability, but execution risk is tied to cash conversion given high leverage.

Risk Assessment

Business Risks:

• Commodity price volatility (cocoa, palm, shea) impacting gross margins and inventory valuation.
• Demand elasticity risk from price increases in chocolate and oils/fats segments.
• Supply chain and sourcing risks in origin countries (weather, geopolitical constraints).
• Operational execution risk in passing through costs and managing product mix.

Financial Risks:

• High leverage with Debt/EBITDA ~11.6x and D/E 1.91x, increasing refinancing sensitivity.
• Negative OCF vs NI (-1.11x) indicating weak cash conversion and potential liquidity strain.
• Large short-term loan balance (1977.79) requiring rollover amid uncertain credit conditions.
• Goodwill/intangible asset levels (339.89/327.92) create potential impairment risk if earnings weaken.
• FX risk (JPY vs USD/EUR) affecting imported raw materials and overseas revenues.

Key Concerns:

• ROIC at 2.1% is below a 5% warning threshold, implying limited value creation.
• Inventory-heavy working capital (inventories 1838.13) could delay OCF normalization.
• Earnings reliance on margin recovery while cash conversion lags, raising near-term funding dependence.

Investment Implications

Key Takeaways:

• Solid P&L recovery: sales +18.9% YoY, OP +132.5%, NI +325%, with OPM up ~180 bps to 3.7%.
• Cash flow lagging: OCF -95.15 vs NI 85.39; FCF -426.38 necessitated financing inflows.
• Leverage elevated: D/E 1.91x and Debt/EBITDA ~11.6x; equity ratio 33.7%.
• ROE 3.8% remains low; improvement driven more by margin recovery and leverage than asset efficiency.
• ROIC 2.1% highlights the need for better asset turns and sustained margin expansion.

Metrics to Watch:

• OCF/Net Income ratio and working capital trends (inventory and receivable days).
• Operating margin progression and gross margin resilience versus commodity inputs.
• Net debt/EBITDA and short-term debt rollover profile.
• ROIC and asset turnover improvement.
• FX impact and pace of price pass-through in key geographies.

Relative Positioning: Within Japan’s food ingredient peers, the quarter’s operating recovery is encouraging, but leverage and cash conversion are weaker than best-in-class, leaving the company more exposed to commodity and financing conditions until OCF normalizes.

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
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