| Indicator | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2265.7B | ¥2307.8B | -1.8% |
| Operating Income / Operating Profit | ¥44.0B | ¥85.7B | -48.6% |
| Ordinary Income | ¥57.8B | ¥100.3B | -42.4% |
| Net Income / Net Profit | ¥46.2B | ¥69.9B | -33.9% |
| ROE | 4.2% | 6.6% | - |
For the fiscal year ended March 2026, Revenue was 2,265.7B (YoY -42.1B, -1.8%), Operating Income was 44.0B (YoY -41.7B, -48.6%), Ordinary Income was 57.8B (YoY -42.5B, -42.4%), and Net Income attributable to owners of the parent was 46.2B (YoY -23.7B, -33.9%), reflecting revenue and profit declines. Operating margins were compressed by spreads driven by volatile oil & fat raw material markets and higher SG&A, lowering the operating margin to 1.9% (down 1.8ppt from 3.7% prior year) and gross margin to 15.0% (down 1.5ppt from 16.5%), indicating deteriorated profitability. Non-operating income was supported by dividend income of 12.1B and equity-method gains of 2.0B, and Special Gains of 14.9B (mainly gain on sale of investment securities 13.8B) also contributed, but only partially offset the operating weakness. The Oils & Fats Business accounted for 91.7% of revenue but saw Operating Income plunge by -59.1%, while the Specialty Food Business recorded Revenue -7.9% but Operating Income +513.3% driven by product mix improvement.
[Revenue] Revenue was 2,265.7B (-1.8%). The core Oils & Fats Business was 2,077.9B (-1.3%), representing 91.7% of the total. Breakdown: Commercial-use oils 1,156.0B (prior year 1,106.7B, +4.5%), Meals 623.2B (prior 685.6B, -9.1%), Household-use oils 289.3B (prior 300.0B, -3.6%). Commercial-use increased due to renegotiated quantity/price terms with customers, while Meals declined due to falling grain markets and supply-demand adjustments. Specialty Food Business was 190.8B (-7.9%): dairy-based PBF 112.2B (prior 109.7B, +2.3%) remained solid, but food ingredients 77.7B (prior 96.0B, -19.1%) fell significantly due to temporary demand slowdown and product mix changes. Other businesses 7.3B (-25.6%) were affected by contraction in ancillary operations such as real estate leasing. Sales to major customer Ajinomoto were 467.4B (prior 487.8B, -4.2%); disclosure to ZEN-NOH not provided, but B2B dependency remains high.
[Profitability] Cost of sales was 1,924.9B (prior 1,927.5B, -0.1%), achieving compression exceeding the revenue decline, but gross margin worsened to 15.0% (prior 16.5%, -1.5ppt). SG&A was 296.8B (prior 294.6B, +0.7%), representing 13.1% of Revenue (prior 12.8%, +0.3ppt); fixed cost burden increased despite lack of revenue growth, reversing operating leverage. Consequently, Operating Income was 44.0B (-48.6%), operating margin 1.9% (prior 3.7%, -1.8ppt), and profitability deteriorated significantly. Non-operating income included dividend income 12.1B and equity-method investment gains 2.0B totaling 14.1B; non-operating expenses were 2.3B (interest expense 1.1B, fees 0.8B), giving net non-operating income of +13.8B. Ordinary Income settled at 57.8B (-42.4%). Extraordinary items netted +6.2B: Special Gains 14.9B (gain on sale of investment securities 13.8B, gain on sale of fixed assets 1.1B) less Special Losses 8.6B (loss on retirement of fixed assets 7.0B, disaster losses 1.5B, impairment loss 0.1B). Pre-tax income was 64.0B, less income taxes of 16.2B (effective tax rate 25.3%), and after non-controlling interests 0.3B, Net Income attributable to owners of the parent was 46.2B (-33.9%). In summary, revenue and profit declined, operating margin deteriorated substantially, and special gains provided partial support.
The Oils & Fats Business posted Revenue 2,077.9B (-1.3%) and Operating Income 33.8B (-59.1%), with an operating margin of 1.6% (down 2.3ppt from 3.9% prior year). Commercial-use oils increased on customer pricing negotiations, while Meals declined -9.1% due to falling grain markets and inventory adjustments. Gross margin deterioration is attributed mainly to lagged price pass-through against rising raw material costs and narrowing market spreads, and the drop in segment profitability against segment assets of 1,345.2B depressed company-wide profitability. The Specialty Food Business reported Revenue 190.8B (-7.9%) and Operating Income 8.3B (+513.3%), with an operating margin of 4.3% (improved 3.6ppt from 0.7%). Strong growth in dairy-based PBF and product mix improvement in food ingredients (phasing out low-margin items and focusing on high-value-added products) materially improved profitability despite revenue decline. Segment assets of 160.0B are small, but profit volatility exceeds the company average. Other businesses recorded Revenue 7.3B (-25.6%) and Operating Income 2.0B (+4.2%), with an operating margin of 27.3% (improved 7.8ppt from 19.5%), driven by fixed-cost efficiency from real estate leasing, etc. The Oils & Fats Business accounted for 76.7% of consolidated operating income, making recovery in that segment key to company profits.
[Profitability] Operating margin 1.9% (down 1.8ppt from 3.7%), Net Profit Margin 2.0% (down 1.0ppt from 3.0%), ROE 4.2% (down 2.5ppt from 6.7%) — profitability retreated across the board. Gross margin 15.0% (down 1.5ppt from 16.5%) driven by increases in raw material, energy and packaging costs and delayed price pass-through. SG&A ratio 13.1% (up 0.3ppt from 12.8%) indicates downward rigidity of fixed costs and reversal of operating leverage in a declining revenue environment. EBITDA margin 3.7% (EBITDA 84.9B ÷ Revenue) contracted 1.8ppt from 5.5%. [Cash Quality] Operating Cash Flow / Net Income = 0.63x (Operating CF 30.0B ÷ Net Income 47.5B), OCF / EBITDA = 0.35x (Operating CF 30.0B ÷ EBITDA 84.9B), indicating weak operating cash generation and concerns over cash backing of profits. Working capital absorbed cash: inventory increase -11.0B, accounts receivable increase -8.1B, accounts payable decrease -4.2B, pressuring OCF. Estimated working capital cycle (CCC) is about 122 days (inventory days + AR days - AP days). [Investment Efficiency] ROE 4.2% combines Equity Ratio 66.8%, Net Profit Margin 2.0%, and Total Asset Turnover 1.36x. Total Asset Turnover 1.36x (flat from prior year) shows maintained asset efficiency, but falling net margin depressed ROE. ROA (based on Ordinary Income) was 3.4% (down 2.4ppt from 5.8%). Capital expenditures were 52.6B, 1.29x depreciation 40.8B, indicating continued growth investment. [Financial Soundness] Equity Ratio 66.8% (up 4.6ppt from 62.2%), Current Ratio 332.6% (up 62.6ppt from 270.0%), Debt/Equity 6.5% (improved 5.2ppt from 11.7%) indicate high financial safety. Interest-bearing debt was 75.2B (short-term borrowings 8.5B + long-term borrowings 56.5B + corporate bonds 120.0B - cash 33.0B) versus EBITDA 84.9B, giving Debt/EBITDA 0.89x, low leverage. Interest coverage using Operating CF is 30.0B ÷ interest paid 1.1B = 27.3x, but given weak OCF, assumptions underlying solvency assessments warrant caution.
Operating CF was 30.0B (prior 183.0B, -83.6%). Starting from pre-tax profit before adjustments 64.0B (prior 101.4B, -36.9%), non-cash items such as depreciation 40.8B (prior 40.6B, flat) were added back and working capital changes adjusted. Inventory increase -11.0B, accounts receivable increase -8.1B, accounts payable decrease -4.2B compressed Operating CF by roughly 23B, and tax payments -19.9B were another heavy burden. Operating CF subtotal (before working capital movements) was 39.8B, reduced by working capital and tax to about 10B net reduction. Investing CF was -35.2B (prior -37.8B), driven by capital expenditures -52.6B (prior -37.8B), partially offset by proceeds from sale of fixed assets 3.1B and sale of securities 16.1B. Free Cash Flow was -5.2B (Operating CF 30.0B + Investing CF -35.2B), turning negative. Financing CF was -82.1B (prior -68.6B), including long-term borrowings repayment -63.9B, dividend payments -24.7B (including 0.4B to non-controlling interests), net increase in short-term borrowings 8.5B, proceeds from disposal of treasury shares 0.8B, etc. Cash decreased from opening balance 119.5B by -86.5B to ending cash 33.0B (-72.4%). The weight of working capital (lengthening inventory days and DSO) and weak OCF generation are highlighted, and FCF could not cover dividends, compressing liquidity.
Ordinary Income 57.8B comprises Operating Income 44.0B plus non-operating income 16.1B less non-operating expenses 2.3B. Major non-operating income items were dividend income 12.1B (prior 12.2B, flat) and equity-method investment gains 2.0B (prior 0.4B), totaling 14.1B, about 0.6% of Revenue — a moderate proportion. Non-operating expenses totaled 2.3B (interest paid 1.1B and fees 0.8B), about 0.1% of Revenue. Extraordinary items netted +6.2B; Special Gains 14.9B were mainly gain on sale of investment securities 13.8B (prior 9.7B), while Special Losses totaled 8.6B (loss on retirement of fixed assets 7.0B and disaster losses 1.5B), roughly in line with prior year. Gains on sale of investment securities lack recurrence and should be distinguished from recurring earnings. The gap between pre-tax income 64.0B and net income 46.2B is about 28%, explainable by effective tax rate 25.3% and non-controlling interests 0.3B. Accrual ratio ((Net Income - Operating CF) ÷ Net Income) = (46.2B - 30.0B) ÷ 46.2B = 35.0%, indicating Operating CF lags Net Income and raising concerns on quality of earnings. Comprehensive income was 72.8B; the difference of 26.6B from Net Income 46.2B includes actuarial adjustments for retirement benefits 14.8B, valuation differences on securities 3.8B, and OCI share of equity-method affiliates 3.4B, etc. Core recurring income comprises Operating Income and dividend income, but the company relied on special gains to cover operating weakness, raising sustainability concerns.
Company guidance for the Full Year: Revenue 2,430.0B (YoY +7.2%), Operating Income 55.0B (YoY +24.9%), Ordinary Income 62.0B (YoY +7.2%), Net Income attributable to owners of the parent 50.0B (approx. +5%), EPS ¥150.98, Dividend ¥40, expecting revenue and profit growth. Versus current actuals, Revenue needs an uplift of +164.3B and Operating Income +11.0B. Assumptions include stabilization of oil & fat raw material markets and effective price pass-through, continued focus of Specialty Food Business on high-margin products, and absorption of fixed costs through logistics and manufacturing efficiencies. Dividend was cut from ¥70 to ¥40 (Payout Ratio 26.5%) to prioritize Operating CF recovery and adopt a conservative capital allocation stance. Key to meeting the plan are the degree of improvement in operating margins in H2, maintenance of Specialty margins, and reduction in working capital.
Dividend for the period was ¥70 (interim ¥35, year-end ¥35); total dividends against Net Income attributable to owners of the parent 46.2B amounted to approximately 23.3B (Payout Ratio ~50.4%). The Payout Ratio rose from 33.1% prior year (Net Income 69.9B, dividend ¥70), maintaining dividend amount despite profit decline. However, against Operating CF 30.0B, dividend payments 24.7B (including 0.4B to non-controlling interests) give OCF coverage 1.2x, and FCF -5.2B means dividends were not covered by FCF. Liquidity was supplemented by proceeds from sale of investment securities 16.1B. Next year’s dividend guidance is ¥40 (Payout Ratio 26.5%), a cut prioritizing Operating CF recovery. No share buybacks were conducted (treasury stock acquisitions 0.02B were for fractional share handling), so shareholder returns remain dividend-centric. Sustainability of dividends depends on OCF improvement and working capital management; cash on hand 33.0B and investment securities 198.6B provide buffers, but monitoring working capital trends and FCF normalization is crucial.
Commodity Price Volatility Risk: Fluctuations in oil & fat raw materials (soybean oil, palm oil, etc.) and grain markets can cause large swings in gross margin. This period saw gross margin 15.0% (down 1.5ppt from 16.5%) and spread compression that pressured Operating Income. Procurement cost volatility and lagged price pass-through in B2B contracts squeeze margins, contributing to the Oils & Fats Business operating margin decline to 1.6% (from 3.9%). Futures hedging partially mitigates risk, but market volatility remains unavoidable and will continue to influence next period’s profitability.
Working Capital Management Risk: Inventory increase -11.0B, accounts receivable increase -8.1B, accounts payable decrease -4.2B cumulatively absorbed -23.3B cash and pressured Operating CF, with CCC about 122 days. Operating CF / Net Income 0.63x and OCF / EBITDA 0.35x are low, indicating weak cash conversion. Inventory days tend to lengthen amid raw material market adjustments, and DSO about 61 days indicates relatively long receivable terms. Delay in normalizing working capital risks persistent negative FCF and liquidity strain; inventory optimization and stronger credit management are required.
Segment Concentration Risk: The Oils & Fats Business accounts for 91.7% of Revenue and 76.7% of Operating Income; its margin decline to 1.6% pulled down consolidated margin to 1.9%. Dependence on major customers (e.g., Ajinomoto 467.4B) is high, and B2B price negotiation dynamics and demand shifts materially affect performance. The Specialty Food Business has a higher operating margin of 4.3% but only 8.4% of revenue; unless portfolio diversification advances, earnings volatility tied to oil & fat market conditions will persist.
Profitability & Returns
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 1.9% | 5.0% (3.3%–8.4%) | -3.1pt |
| Net Profit Margin | 2.0% | 3.2% (1.9%–6.6%) | -1.1pt |
Both Operating and Net Profit Margins are below industry median, indicating underperformance. Oil & fat commodity market volatility and spread contraction are the main drivers; the degree of improvement next period will determine relative positioning.
Growth & Capital Efficiency
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -1.8% | 5.4% (1.0%–8.6%) | -7.2pt |
Revenue growth lags the industry median of +5.4% at -1.8%, reflecting market adjustments and declines in key segments. Next period’s plan for +7.2% aims to return to industry average.
※ Source: Company compilation
Operating margin deteriorated to 1.9% (from 3.7%), with combined declines in gross margin and rising SG&A reversing operating leverage. Recovery of oil & fat market spreads and effectiveness of price pass-through are the single most important variables for next period performance. The Specialty Food Business’ improvement to a 4.3% operating margin (from 0.7%) due to product mix shift is notable; expanding its revenue share could structurally improve profitability.
Operating CF plunged to 30.0B (prior 183.0B, -83.6%), with Operating CF / Net Income 0.63x and OCF / EBITDA 0.35x indicating weak cash backing of earnings. Inventory and AR increases and AP decrease absorbed roughly 23B in cash, lengthening CCC to about 122 days. With FCF -5.2B, dividends of ¥70 were not covered by FCF and liquidity was supplemented by sale of investment securities. The dividend cut to ¥40 signals prioritization of OCF recovery; working capital management will be key to restoring shareholder return capacity.
Financial safety is very high with Equity Ratio 66.8%, Current Ratio 332.6%, and Debt/Equity 6.5% indicating low leverage. Short-term financing risk is limited, but persistent weakness in Operating CF could constrain the balance between maintaining dividends and funding growth. Recovery in Oils & Fats margins, growth in Specialty, and working capital reductions must align to restore sustainable cash generation and capital efficiency.
This report is an AI-generated financial analysis document produced by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.