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

Fuji Oil Co., Ltd. (26070) delivered a strong top-line and operating recovery in FY2026 Q2 under IFRS, with revenue at 3,756.96 and up 18.9% YoY, supported by improved pricing and/or volume in its food ingredients portfolio. Gross profit reached 402.77 for a gross margin of 10.7%, indicating meaningful recovery from cost pressures but still a relatively thin structural margin typical of the category. SG&A was 350.67, highlighting continued spending discipline relative to the higher gross profit, enabling operating income of 138.86 (+132.5% YoY) and an operating margin of approximately 3.7%. EBITDA was 235.99 (margin 6.3%), and D&A of 97.13 confirms that the EBIT uplift is not merely due to lower depreciation. Net income improved markedly to 85.39 (+325.0% YoY), with an effective tax rate of 8.1%, which is low and likely influenced by geographic mix, one-offs, or deferred tax effects. DuPont metrics show a net margin of 2.3%, asset turnover of 0.578, and financial leverage of 2.91x, yielding an ROE of 3.8%—a recovery but still modest versus typical food ingredient peers. Despite better earnings, operating cash flow was negative at -257.94, leading to free cash flow of -347.24 after capex, signaling working capital absorption and/or timing effects. Financing cash flow was 428.99, likely reflecting higher borrowings to fund working capital and investments; short-term loans of 643.73 and long-term loans of 434.96 underscore reliance on debt funding in the period. The balance sheet shows total assets of 6,504.37 and total equity of 2,231.87, with an equity ratio of 33.7% and a reported debt-to-equity of 1.10x, indicating moderate leverage for the sector. Inventory stands at 1,093.49, consistent with elevated working capital needs amid price inflation and supply chain normalization. The company reported total comprehensive income of 145.29, exceeding net income, which supports equity but may reflect FX translation gains and fair value movements. Dividend data is partially unreported; the calculated payout ratio is 53.3% while cash dividends paid were 22.37, implying cash payout of roughly 26% against this interim NI—coverage by FCF is currently negative given OCF weakness. Liquidity ratios are not directly calculable from disclosed items, and several subline items (cash, receivables, current liabilities) are unreported, limiting precision. Nevertheless, the trajectory of profitability is favorable, while cash conversion lags due to working capital. Key watchpoints include normalization of OCF, inventory turnover, and sustainability of price-cost spread given commodity volatility. Overall, the quarter demonstrates operational improvement and margin repair, but the quality of earnings will be tested by the pace of working capital unwinding and the need for ongoing financing.

Profitability Analysis

ROE decomposition (DuPont) indicates: net profit margin 2.3% × asset turnover 0.578 × financial leverage 2.91x = ROE 3.8%. Operating margin is about 3.7% (138.86/3,756.96), a sharp YoY improvement that reflects both better gross margin (10.7%) and SG&A cost control. EBITDA margin of 6.3% confirms operating leverage is improving as revenue scales across a fixed cost base. The gross margin level still suggests sensitivity to raw material prices (e.g., cocoa, palm, specialty oils/fats) and energy costs; the uplift likely owes to pricing actions and mix. The tax burden was unusually light (effective tax rate 8.1%), which aided net margins and ROE; sustainability is uncertain. Financial leverage at 2.91x assets/equity helps ROE, but with modest net margin and turnover, the overall ROE remains sub-ideal versus domestic staples peers. Asset turnover of 0.578 is moderate and may be depressed by inventory build; further normalization could enhance ROE without incremental leverage. Operating leverage was evident as operating income growth (+132.5% YoY) well outpaced revenue growth (+18.9% YoY), indicating improved price-cost spread and fixed-cost dilution. Comprehensive income exceeded net income, implying positive OCI items that also supported equity this period.

Growth Assessment

Revenue growth of +18.9% YoY to 3,756.96 suggests strong demand and/or effective pricing in the company’s specialty oils and fats and food ingredients segments. The breadth of growth sustainability depends on the persistence of pricing power amid volatile cocoa and vegetable oil markets and customer pass-through dynamics. Operating income growth (+132.5% YoY) signals substantial recovery from prior cost pressure, implying a structural improvement in procurement, mix, and/or pricing. Net income growth (+325.0% YoY) is more pronounced, aided by a low effective tax rate; forward comparability should assume a normalized tax rate, which could temper bottom-line growth. EBITDA of 235.99 supports the notion of improving operating efficiency, with potential for further margin expansion if input costs stabilize and high-cost inventory rolls off. Profit quality is mixed: accounting earnings improved, but OCF was negative due to working capital absorption, suggesting timing effects or inventory accumulation. Medium-term outlook depends on inventory normalization, supply chain stability, and capex translating into capacity/productivity gains; capex at 89.11 indicates continued investment to support growth. Equity-method income (8.80) contributed modestly to profits; its persistence adds a small, diversified income stream. Overall, growth momentum is positive but should be balanced against cash conversion and commodity risk.

Financial Health

Total assets are 6,504.37 and total equity 2,231.87 (equity ratio 33.7%), indicating a moderate capital buffer for a staple ingredients business. Reported debt-to-equity is 1.10x, with short-term loans of 643.73 and long-term loans of 434.96; financing CF of 428.99 suggests incremental borrowing to support working capital and investments. Liquidity metrics (current and quick ratios) are not calculable due to unreported current liabilities and cash; thus, short-term liquidity must be inferred from borrowing activity and OCF trends. Inventories are sizable at 1,093.49, which can constrain liquidity if turnover slows; inventory management is a key determinant of cash generation. The effective tax rate (8.1%) and lack of reported interest expense limit assessment of after-tax coverage and interest serviceability; however, EBITDA of 235.99 provides a buffer against typical interest burdens in this sector. Subtotals for assets and liabilities provided do not sum to totals, indicating partial disclosure of line items rather than inconsistency in the statements. Overall solvency appears sound given the equity base and leverage profile, but near-term liquidity is tighter due to negative OCF.

Cash Flow Quality

Earnings quality is mixed: accounting profits rose sharply, yet operating cash flow was -257.94, yielding an OCF/NI ratio of -3.02x, which indicates material working capital outflow and/or timing factors. Free cash flow was -347.24 after capex of 89.11, implying external funding was necessary to bridge cash needs. Investing CF of -89.30 closely aligns with capex, suggesting limited M&A or financial investment outflows in the period. The negative OCF likely reflects inventory build (inventories at 1,093.49) and potential receivables growth, though receivables are unreported; payables dynamics cannot be assessed due to missing data. The persistence of negative OCF would be a concern; conversely, a reversal as inventories normalize would validate earnings quality. Depreciation of 97.13 vs EBITDA of 235.99 supports that EBIT improvements are not primarily driven by accounting changes. Working capital data is incomplete, but the magnitude of financing CF indicates reliance on debt to fund the cash gap this period.

Dividend Sustainability

Dividend-related disclosures are limited: annual DPS is unreported, and only dividends paid of -22.37 are provided. The calculated payout ratio is 53.3%, while the cash payout implied by dividends paid versus NI (~26%) suggests either seasonality or a differing basis (e.g., interim payments vs full-year payout). Free cash flow coverage of dividends is -7.63x, reflecting negative FCF this period and indicating that dividends were effectively debt-funded in the quarter/half. In the near term, sustainability depends on OCF normalization as working capital unwinds; absent that, payouts rely on balance sheet capacity. With an equity ratio of 33.7% and moderate leverage, the company has flexibility, but sustained negative FCF would pressure dividend policy. Given the sector’s typical emphasis on stable dividends, management likely aims to maintain payouts, but future coverage hinges on cash conversion and commodity pass-through.

Risk Assessment

Business Risks:

• Commodity price volatility (cocoa, palm, specialty oils/fats) impacting gross margin
• Input cost inflation (energy, logistics) and pass-through timing risk
• FX fluctuations (notably USD/JPY) affecting procurement costs and translation
• Customer demand elasticity to pricing actions and potential downtrading
• Supply chain disruptions affecting inventory and service levels
• Quality/food safety compliance risk inherent in ingredients manufacturing
• Execution risk on capex and productivity improvements

Financial Risks:

• Negative operating cash flow and reliance on short-term borrowing to fund working capital
• Refinancing and interest rate risk given increased borrowings
• Working capital concentration in inventories leading to liquidity strain if turnover slows
• Potential normalization of low effective tax rate reducing net income
• Limited visibility on interest coverage due to unreported interest expense

Key Concerns:

• OCF/NI at -3.02x and FCF at -347.24 signal weak cash conversion this period
• Inventory at 1,093.49 implies significant cash tied up; turnover trends are critical
• ROE at 3.8% remains below likely cost of equity despite operational recovery

Investment Implications

Key Takeaways:

• Strong revenue growth (+18.9% YoY) and sharp operating recovery (OP +132.5% YoY) with operating margin ~3.7%
• EBITDA margin at 6.3% and improved gross margin (10.7%) indicate better price-cost balance
• Net income surged (+325% YoY) aided by low tax rate (8.1%); sustainability of tax rate is uncertain
• Cash conversion weak: OCF -257.94 and FCF -347.24, necessitating financing CF of 428.99
• Leverage moderate (D/E 1.10x; equity ratio 33.7%), but short-term funding dependence increased
• Dividend coverage by FCF is negative; payout sustainability hinges on OCF normalization
• Comprehensive income (145.29) exceeded NI, supporting equity via OCI items

Metrics to Watch:

• Operating cash flow recovery and OCF/NI ratio back toward >1.0x
• Inventory days and overall working capital turnover
• EBITDA margin trajectory and operating margin sustainability
• Net debt/EBITDA and interest coverage once interest expense is available
• Commodity price trends (cocoa, vegetable oils) and pricing pass-through cadence
• FX (USD/JPY, EUR/JPY) impacts on input costs and translation
• Capex execution versus returns (ROIC) and impact on capacity/mix
• Effective tax rate normalization

Relative Positioning: Relative to domestic food ingredient and packaged food peers, the company shows stronger near-term operating momentum but remains below-average on ROE (3.8%) with thin margins and weaker cash conversion; leverage is moderate, providing some flexibility, but sustained improvement depends on working capital normalization and continued price-cost management.

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
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