KADOYA SESAME MILLS (2612) FY2026 Q3 Earnings Report

Quick View

Executive Summary

For the cumulative Q3 period of the fiscal year ending March 2026, the Company reported higher revenue and income, with profitability clearly improving as profit growth outpaced revenue growth. Revenue was ¥305.0B (+2.0% YoY), Operating Income was ¥35.5B (+26.2%), Ordinary Income was ¥37.2B (+21.9%), and Net Income was ¥25.4B (+22.6%). The main drivers of profit growth were softer raw sesame prices and higher sales volume of sesame oil for export, while the containment of SG&A expenses due to the timing adjustment of advertising expenses also contributed. Operating Income, Ordinary Income, and Net Income are all progressing at a pace that exceeds the full-year Company forecasts.

Factors Affecting Performance

【Revenue】Revenue increased 2.0% YoY to ¥305.0B. Although concerns existed regarding a backlash from front-loaded demand associated with U.S. tariff policies, sesame oil for export increased on the back of strong brand strength and sales initiatives, with both the Sesame Oil Business and Edible Sesame Seed Business exceeding the same period of the previous year.

【Profitability】Operating Income was ¥35.5B (+26.2%), and the Operating Income margin improved by approximately 2pt to 11.6% from approximately 9.6% in the same period of the previous year. The gross profit margin increased to 28.0% (equivalent to 26.1% in the previous year) due to softer raw sesame prices, while the SG&A expense ratio remained nearly flat at 16.4%. Ordinary Income of ¥37.2B reflects Operating Income plus non-operating income of ¥1.8B (dividend income of ¥0.5B and foreign exchange gains of ¥0.8B). Non-operating expenses were small at ¥0.1B, and the main reason for the gap between Ordinary Income and Net Income (¥25.4B) was income taxes and other taxes (¥11.7B, effective tax rate of 31.6%); no temporary factors were identified. The Company achieved higher revenue and income, with profit growth significantly outpacing revenue growth.

Segment Analysis

SesameOil (Sesame Oil Business) is the core business, generating revenue of ¥238.5B, Operating Income of ¥31.7B, and a profit margin of 13.3%, accounting for approximately 78% of total revenue. EdibleSesameSeed (Edible Sesame Seed Business) generated revenue of ¥66.3B, Operating Income of ¥3.7B, and a profit margin of only 5.5%. Overall profit growth was led by the core Sesame Oil Business, with increased sales volume of sesame oil for export and softer raw material prices reflected in the segment’s high profit margin. The difference in profit margins between the two businesses is substantial at 7.8pt, indicating a high degree of dependence on the Sesame Oil Business in the earnings structure.

Key Financial Indicators

Profitability: ROE 6.9%, Operating Income margin 11.6%
Cash flow quality: Operating Cash Flow/Net Income 1.46x (healthy at 1.0x or above), FCF ¥32.5B
Investment efficiency: Capital expenditures/Depreciation and amortization 0.36x (less than 1.0x indicates a period of restrained investment)
Financial soundness: Equity Ratio 82.6%, Current Ratio 586.0%

Cash Flow Analysis

Operating Cash Flow was ¥37.2B, reaching 1.46x Net Income, indicating strong cash support for earnings. Although OCF was negative ¥15.0B in the same period of the previous year, it improved substantially due to a decrease in inventories and inventory adjustments. Investing Cash Flow was negative ¥4.7B, primarily due to capital expenditures of ¥2.9B. Financing Cash Flow was negative ¥9.2B, with dividend payments of ¥9.2B accounting for nearly the entire amount. FCF was substantial at ¥32.5B, indicating strong cash-generation capacity. However, capital expenditures were below depreciation and amortization expense of ¥8.2B, requiring monitoring of the adequacy of medium- to long-term equipment renewal.

Quality of Earnings

The difference between Ordinary Income of ¥37.2B and Net Income of ¥25.4B was primarily attributable to income taxes and other taxes (¥11.7B, effective tax rate of 31.6%). No extraordinary gains or losses were recorded, and no temporary factors were identified. Non-operating income of ¥1.8B was approximately 0.6% of revenue and therefore small in scale; however, foreign exchange gains of ¥0.8B included in this amount depend on market fluctuations, requiring attention to their recurrence. Operating Cash Flow (¥37.2B) exceeded Net Income (¥25.4B), indicating good earnings quality from an accruals perspective.

Earnings Forecasts and Guidance

Progress rates against the full-year forecasts (Revenue ¥405.0B, Operating Income ¥35.0B, Ordinary Income ¥36.0B) were 75.3% for Revenue, 101.4% for Operating Income, and 103.3% for Ordinary Income. Profit progress exceeded the standard progress level (Q3=75%) by 26–28pt. The forecasts announced on November 5 remain unchanged, while Operating Income and Ordinary Income had already exceeded their full-year forecasts as of Q3. The Q4 outlook incorporates the implementation of advertising initiatives, and profit margins are expected to be maintained if the trend of softer raw material prices continues.

Shareholder Returns

The Company’s full-year dividend forecast is ¥135 per share, resulting in a Payout Ratio of approximately 50.7% against forecast Net Income of ¥24.5B. No share buybacks have been conducted, and the Total Return Ratio is therefore expected to be approximately the same as the Payout Ratio. Annual dividend coverage relative to FCF of ¥32.5B is approximately 2.6x, indicating strong dividend-paying capacity supported by cash-generation strength.

Catalysts

【Short Term】The implementation of advertising initiatives in Q4, trends in raw sesame prices, and sales trends for sesame oil for export will influence quarterly performance.
【Long Term】Progress in the upcycling business, which converts defatted sesame from feed use into food ingredients, and the creation of new businesses through the strengthening of the research and development structure will form the foundation for medium- to long-term growth.

Industry Benchmarks (For Reference; Compiled by the Company)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin are both substantially above the median for the food and beverage industry, placing its profitability among the higher levels within the industry.

Growth and Capital Efficiency

The Revenue growth rate is slightly below the industry median, with top-line growth remaining at approximately the middle level within the industry.

※Source: Compiled by the Company

Risk Factors

1. Raw Material and Energy Price Volatility Risk: The cost of sales ratio is 72.0%. Although raw sesame prices are currently trending lower, future market price fluctuations could directly affect the Operating Income margin of 11.6%.

2. Elevated Working Capital: The Company holds accounts receivable of ¥90.9B and inventories of ¥23.1B. Long inventory and collection periods tie up funds during periods of revenue expansion, constraining capital efficiency (ROE 6.9%).

3. Foreign Exchange and Export Demand Volatility: While sesame oil for export is driving performance, a backlash from front-loaded demand associated with U.S. tariff policies and foreign exchange fluctuations could affect export profitability, including the foreign exchange gains of ¥0.8B recorded during the current period.

Key Points from the Earnings Results

1. The Operating Income margin improved by approximately 2pt from the same period of the previous year to 11.6%, substantially exceeding the industry median of 5.0%. The softening of raw material prices and timing adjustments to SG&A expenses (advertising expenses) contributed, and the recurrence of these factors is a key structural consideration affecting future profit margin trends.

2. Progress rates for Operating Income, Ordinary Income, and Net Income against their full-year forecasts all exceeded 100%, while the earnings forecasts remained unchanged. Performance trends in Q4 will determine the degree to which the forecasts are achieved.

3. Capital expenditures remained at only 0.36x depreciation and amortization expense. Although this contributes to short-term cash generation, it is a structural point requiring monitoring from the perspective of the adequacy of investment to maintain and renew the production structure over the medium to long term.

---

This report is an automatically generated earnings analysis prepared by AI through an integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. It is not intended to recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.

---End of Report---

---

AI Financial Analysis

Executive Summary

FY2026 Q3 results were strong, with modest sales growth translating into materially faster operating and net-profit growth through gross-margin expansion and tight SG&A control. Revenue increased 2.0% YoY to ¥30.50bn. Operating income rose 26.2% to ¥3.55bn, while ordinary income grew 21.9% to ¥3.72bn. Net income increased 22.6% to ¥2.54bn, equivalent to EPS of ¥276.43. Gross profit expanded 9.5% YoY to ¥8.54bn despite revenue growth of only 2.0%. The gross margin improved to 28.0% from 26.1% a year earlier, an expansion of approximately 190bp. The operating margin increased to 11.6% from 9.4%, an approximately 223bp improvement. The net margin rose to 8.3% from 6.9%, improving by approximately 140bp. SG&A expenses were virtually unchanged at ¥4.99bn, resulting in operating leverage as sales and gross profit grew. Ordinary income exceeded operating income by ¥0.17bn, supported by ¥0.76bn of foreign-exchange gains and ¥0.53bn of dividend income within non-operating income. Operating cash flow was ¥3.72bn and exceeded net income by 1.46x, supporting the cash realization of reported earnings. Free cash flow was robust at ¥3.25bn after ¥0.29bn of capital expenditures. Cash and deposits increased 29.6% YoY to ¥10.21bn, while total equity increased to ¥37.06bn. Liquidity remains exceptionally strong, with a 586.0% current ratio and 543.8% quick ratio. The principal operational watchpoint is working-capital intensity, as the quality alerts identify DSO of 82 days, DIO of 153 days, and a 199-day cash conversion cycle. Capital expenditure of ¥0.29bn was only 0.36x depreciation and amortization, creating a potential medium-term reinvestment risk despite excellent current cash generation. Q3 cumulative operating income has already reached 101.4% of the company’s ¥3.50bn full-year forecast, while net income has reached 103.8% of the ¥2.45bn forecast, making the remaining-quarter earnings outcome and any revision to guidance central forward indicators.

Profitability Analysis

The reported annualized ROE is 9.2%, comprising an 8.3% net profit margin, 0.906x asset turnover, and 1.21x financial leverage. Returns are therefore driven principally by healthy profitability and asset utilization rather than balance-sheet leverage. Financial leverage is conservative and makes only a limited contribution to ROE, consistent with the ¥37.06bn equity base relative to ¥7.81bn of total liabilities. The largest positive change versus the prior year was margin expansion: gross margin improved approximately 190bp and operating margin approximately 223bp. Revenue increased by ¥0.61bn, while gross profit increased by ¥0.74bn, indicating improved input-cost recovery, pricing, product mix, or procurement conditions. SG&A was effectively flat at ¥4.99bn, versus ¥4.99bn in the prior-year period, and the SG&A-to-sales ratio declined by approximately 33bp to 16.4%. This created favorable operating leverage, with operating income growing 26.2%, substantially faster than sales. EBITDA was ¥4.37bn and the EBITDA margin was 14.3%, above the 11.6% EBIT margin after ¥0.82bn of depreciation and amortization. The 8.3% net margin is within the good 5-10% range, while the 11.6% operating margin is also in the good 8-15% range. The 31.6% effective tax rate produced a 0.684 tax burden, moderately below the 0.70 reference level but not indicative of an unusual disconnect between pre-tax and net profit. The 1.047 interest burden reflects non-operating income exceeding non-operating expenses, rather than debt-funded earnings. The profit improvement appears primarily operational because operating-income growth exceeded ordinary-income growth and was achieved before the contribution from non-operating items. Sustainability depends on maintaining gross-margin gains in an edible-oil business exposed to sesame and other agricultural-input procurement costs, foreign exchange, packaging, and energy expenses.

Growth Assessment

Top-line growth was modest at 2.0% YoY, but profit growth was substantially stronger: operating income rose 26.2%, ordinary income 21.9%, and net income 22.6%. Gross profit rose ¥0.74bn YoY, exceeding the ¥0.61bn increase in revenue, which demonstrates a materially improved gross-profit conversion. Flat SG&A further amplified the benefit of gross-margin expansion. The food-industry gross margin of 28.0% is within the 25-40% healthy benchmark range, indicating that the company retained an economically viable spread over cost of sales. Cost of sales declined 0.6% YoY to ¥21.96bn despite higher sales, a favorable development for near-term profit growth. Foreign-exchange gains of ¥0.76bn were lower than the ¥1.39bn recorded in the prior-year period, so the increase in ordinary income was not reliant on an expansion in FX gains. The full-year forecast calls for revenue of ¥40.50bn, operating income of ¥3.50bn, ordinary income of ¥3.60bn, and net income of ¥2.45bn. Cumulative Q3 progress is 75.3% for revenue, broadly in line with the standard 75% level. Operating-income progress is 101.4%, 26.4 percentage points above the standard Q3 progress rate. Ordinary-income progress is 103.3%, 28.3 percentage points above standard. Net-income progress is 103.8%, 28.8 percentage points above standard. These profit progress rates indicate that the current forecast embeds a material fourth-quarter earnings decline or a conservative planning assumption. Future growth durability should be assessed through sales-volume resilience, the retention of the 28.0% gross margin, and whether commodity and currency movements can be passed through without weakening demand.

Financial Health

Financial health is very strong. Total assets were ¥44.86bn, funded by ¥37.06bn of equity and ¥7.81bn of liabilities, producing an equity ratio of 82.6%. The current ratio of 586.0% and quick ratio of 543.8% are substantially above healthy reference levels and indicate ample near-term liquidity. Current assets of ¥32.12bn exceeded current liabilities of ¥5.48bn by ¥26.64bn, representing substantial positive working capital. Cash and deposits increased ¥2.33bn YoY to ¥10.21bn and represented 22.8% of total assets. Accounts receivable were ¥9.09bn, or 20.3% of total assets, making collection efficiency an important balance-sheet consideration. The reported debt-to-equity ratio was only 0.21x, well below the 1.0x conservative benchmark and far from the 2.0x warning threshold. Current liabilities were covered more than five times by cash alone, reducing refinancing and short-term liquidity risk. Noncurrent liabilities of ¥2.32bn included a ¥1.83bn net defined-benefit liability, which is the principal identified long-dated obligation. Property, plant and equipment were ¥9.72bn, or 21.7% of assets, supporting a tangible manufacturing asset base. Intangible assets declined to ¥0.43bn and represent only 0.1% of assets, so the balance sheet is not dependent on material intangible asset values. There is no warning from the current ratio or the D/E ratio, and the capital structure provides capacity to absorb normal operating volatility. The key financial-health issue is not solvency, but the amount of capital tied up in receivables and inventories relative to the operating cycle.

Notable B/S Changes

Cash & deposits: +¥2.33bn (+29.6%) to ¥10.21bn - supported by ¥3.72bn operating cash flow and reinforces already strong liquidity. Intangible assets: -¥0.03bn (-41.1%) to ¥0.43bn - immaterial at 0.1% of total assets and reduces reliance on intangible asset values. Total equity: +¥1.59bn (+5.1%) to ¥37.06bn - retained profitability and positive comprehensive income strengthened the 82.6% equity ratio. Current liabilities: -¥0.54bn (-8.9%) to ¥5.48bn - alongside higher current assets, this contributed to the exceptionally high 586.0% current ratio.

Cash Flow Quality

Cash-flow quality was strong in FY2026 Q3. Operating cash flow was ¥3.72bn, exceeding ¥2.54bn of net income by 1.46x, comfortably above the 1.0x high-quality benchmark. The negative 2.6% accruals ratio also supports cash-backed earnings rather than aggressive accrual recognition. Cash conversion, measured as OCF/EBITDA, was 0.85x, below the 0.9x excellent reference but still supportive of solid EBITDA-to-cash conversion. Free cash flow was ¥3.25bn after ¥0.29bn of capital expenditures, leaving substantial internal funding capacity. Operating cash flow improved sharply from a ¥1.50bn outflow in the prior-year period to a ¥3.72bn inflow. The change was aided by a ¥0.63bn inventory decrease in the current period, compared with a ¥2.69bn inventory increase in the prior-year period. Trade receivables increased by only ¥0.11bn, while trade payables increased by ¥0.01bn, so the cash outcome was not dependent on a large extension of supplier payments. Cash dividends paid were ¥0.92bn, and financing cash flow was a ¥0.92bn outflow, consistent with shareholder distributions being funded internally. Despite this favorable current-period cash generation, the quality alerts flag DSO of 82 days, above the 60-day threshold. The elevated DSO means a meaningful amount of sales remains tied up in customer balances, which can reduce cash conversion if receivable growth accelerates. DIO of 153 days is also above the 90-day warning threshold, increasing exposure to commodity-price movements, inventory valuation pressure, and slow-moving-stock risk in a food manufacturer. The 199-day cash conversion cycle is above the 120-day warning level, reflecting the combined drag from receivable and inventory days. This long cycle is not currently causing a liquidity problem because cash reserves and current-asset coverage are substantial, but it raises the capital intensity of growth and should be monitored for deterioration. CapEx was only ¥0.29bn against ¥0.82bn of depreciation and amortization, or 0.36x. This underinvestment alert is material because recurring spending below depreciation can eventually constrain plant renewal, automation, quality-control investments, capacity expansion, and productivity. The low CapEx level supports near-term free cash flow but should not automatically be regarded as sustainable cash available for distribution.

Dividend Sustainability

The full-year dividend forecast is ¥135 per share. Relative to forecast EPS of ¥266.19, the implied dividend payout ratio is approximately 50.7%, within the below-60% sustainable benchmark. Using 9.204 million average shares, the implied annual cash dividend is approximately ¥1.24bn. This is covered by FY2026 Q3 cumulative free cash flow of ¥3.25bn by roughly 2.6x, and by operating cash flow of ¥3.72bn by roughly 3.0x. Cash dividends paid in the nine-month period were ¥0.92bn, also well covered by operating cash flow. The absence of share repurchases in the period means the dividend payout ratio is the appropriate shareholder-return measure. The strong cash balance of ¥10.21bn, low 0.21x D/E ratio, and substantial ¥26.64bn working-capital surplus provide additional distribution resilience. Dividend capacity is nevertheless linked to the durability of gross-margin gains and to maintaining efficient working-capital management. The principal capital-allocation caution is that CapEx/depreciation is only 0.36x; if replacement or growth investment normalizes, free-cash-flow coverage could moderate from the current high level. On the currently disclosed earnings, balance-sheet, and cash-flow profile, the forecast dividend appears supportable.

Risk Assessment

Business risks include Commodity-cost and supply risk: the company’s manufacturing profile includes ¥8.47bn of raw materials, leaving margins exposed to sesame and other agricultural-input prices, freight, energy, packaging costs, and procurement availability., Foreign-exchange risk: FY2026 Q3 included ¥0.76bn of FX gains within non-operating income; future exchange-rate movements can affect procurement costs and non-operating earnings., Food safety, quality-control, labeling, and recall risk: a consumer food manufacturer faces potentially significant brand and financial consequences from product-quality incidents., Demand and channel risk: price pass-through needed to defend gross margins can affect consumer demand, retailer relationships, and private-brand competition..

Financial risks include Working-capital risk: DSO of 82 days, DIO of 153 days, and a 199-day cash conversion cycle exceed alert thresholds, increasing cash tied up in operations., Inventory valuation and obsolescence risk: elevated inventory days increase exposure to input-price reversals, slow-moving stock, and potential write-downs., Capital renewal risk: CapEx/depreciation of 0.36x is below the 0.7x underinvestment threshold and may defer necessary manufacturing investment., Earnings normalization risk: cumulative operating income already exceeds the full-year forecast, so fourth-quarter profitability and forecast revisions may create elevated expectation sensitivity..

Key concerns include The high receivable-days alert is concerning because customer collections are slower than the 60-day reference level. This is not currently a liquidity threat given the 586.0% current ratio, but a worsening trend would reduce operating cash conversion and increase credit exposure., The high inventory-days alert is concerning because 153 days is well above the 90-day warning level. In food manufacturing, this may be partly related to raw-material procurement and production planning, but it raises carrying-cost, valuation, and commodity-exposure risk., The 199-day cash conversion cycle is a material operating-capital concern. Strong cash reserves currently contain the impact, yet the cycle means revenue growth can require disproportionately more working-capital funding., The repeated CapEx underinvestment alerts stem from capital expenditures of ¥0.29bn versus ¥0.82bn of depreciation, or 0.36x. This boosts near-term free cash flow, but prolonged underinvestment could impair asset reliability, manufacturing efficiency, quality assurance, and future growth capacity..

Investment Implications

Key takeaways include Revenue grew 2.0% YoY, but operating income grew 26.2%, driven by approximately 190bp gross-margin expansion and flat SG&A., The 11.6% operating margin and 8.3% net margin indicate good current profitability, while the annualized 9.2% ROE is achieved with low financial leverage., Operating cash flow of ¥3.72bn exceeded net income by 1.46x and generated ¥3.25bn of free cash flow, supporting earnings quality., Liquidity and capitalization are exceptionally robust, with ¥10.21bn of cash, an 82.6% equity ratio, 586.0% current ratio, and 0.21x D/E., Profit progress materially exceeds full-year guidance: Q3 cumulative operating income is 101.4% and net income is 103.8% of forecast., Working-capital intensity and underinvestment are the principal counterweights to otherwise strong earnings and balance-sheet indicators..

Metrics to watch include Gross margin retention versus the FY2026 Q3 level of 28.0%, Operating margin retention versus 11.6%, Fourth-quarter operating income relative to the ¥3.50bn full-year forecast, DSO versus the 82-day alert level, DIO versus the 153-day alert level, Cash conversion cycle versus the 199-day alert level, Operating cash flow relative to net income, CapEx/depreciation relative to the current 0.36x, Raw-material cost, currency movements, and the contribution of FX gains to ordinary income.

Regarding relative positioning, The company combines good food-manufacturing profitability, strong cash-backed earnings, and an unusually conservative balance sheet. Its 28.0% gross margin sits within the sector’s healthy 25-40% range, while liquidity is far stronger than standard minimum thresholds. Relative performance is tempered by a long working-capital cycle and capital spending materially below depreciation, making sustainable asset renewal and cash conversion the central issues alongside commodity-cost management.