J-OIL MILLS, INC. FY2027 Q1 Earnings Report

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Executive Summary

The quarter was characterized by increases in both revenue and earnings, with improved profitability primarily driven by greater efficiency in selling, general and administrative expenses. Revenue was ¥601.8B (+6.9% YoY), Operating Income was ¥15.7B (+56.7%), Ordinary Income was ¥17.5B (+47.0%), and Net Income was ¥13.6B (+54.0%). Although the gross margin declined slightly from the previous year to 14.9%, the decline in the SG&A ratio to 12.3% lifted the Operating Income margin to 2.6%. The core Oils and Fats Business led the increases in both revenue and earnings, while the Specialty Foods Business posted lower revenue but improved profitability.

Factors Affecting Earnings

【Revenue】Revenue was ¥601.8B, up +6.9% YoY. The Oils and Fats Business grew to ¥556.1B (+7.7%), accounting for 92.5% of total revenue and driving overall growth, supported by expansion in foodservice oils and meal products. Meanwhile, the Specialty Foods Business recorded ¥46.0B (-2.1%), a slight decline in revenue due to a decrease in food ingredients.

【Profit and Loss】Operating Income was ¥15.7B (+56.7%), Ordinary Income was ¥17.5B (+47.0%), and Net Income was ¥13.6B (+54.0%), representing double-digit earnings growth at each level. While the gross margin declined slightly to 14.9%, the reduction in the SG&A ratio to 12.3%—improving from approximately 13.5% in the previous year—resulted in operating leverage. By segment, Operating Income in the Oils and Fats Business was ¥12.2B (+55.3%), while the Specialty Foods Business posted ¥3.0B (+72.3%), with its margin improving to 6.5%, confirming a positive contribution from the business mix. The difference between Ordinary Income and Net Income was primarily attributable to income taxes and other taxes (¥5.1B, effective tax rate of 27.2%); the impact of extraordinary income and losses (income of ¥1.4B and loss of ¥0.2B) was limited. In conclusion, the Company achieved increases in both revenue and earnings.

Segment Analysis

The Oils and Fats Business led the Company in both revenue and earnings, with revenue of ¥556.1B (+7.7%), Operating Income of ¥12.2B (+55.3%), and an Operating Income margin of 2.2%. The Specialty Foods Business recorded lower revenue of ¥46.0B (-2.1%), but Operating Income increased to ¥3.0B (+72.3%), and its Operating Income margin improved to 6.5%, securing higher profitability than the Oils and Fats Business. In terms of revenue composition, the Oils and Fats Business accounts for 92.5%, highlighting the Company’s high business concentration. The higher-margin profile of the Specialty Foods Business suggests potential for improvement in the overall business mix.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 2.6% (1.8% in the previous year), while the Net Income margin improved to 2.3% (1.6% in the previous year). Although the gross margin declined slightly to 14.9% from the previous year, the reduction in the SG&A ratio to 12.3% was the primary driver of the improvement in profitability.【Cash Flow Quality】Cash and deposits increased to ¥70.1B from the previous year, while accounts payable and long-term borrowings also increased, indicating that financing progressed to support the expansion of inventories and procurement.【Investment Efficiency】ROE was 1.2%, and the Equity Ratio was 65.1%. Although capital efficiency remained low, financial soundness was at a high level. Total asset turnover was low, with accounts receivable of ¥373.4B and inventories of ¥197.3B; the accumulation of current assets constrained capital efficiency.【Financial Soundness】The Company maintained ample liquidity, with current assets of ¥1000.2B against current liabilities of ¥431.0B. The Equity Ratio of 65.1% declined slightly from 66.5% in the previous year but remained at a high level.

Cash Flow Analysis

Although an individual disclosure of the cash flow statement is not available, changes in the balance sheet indicate that cash and deposits increased from ¥33.0B in the previous year to ¥70.1B, while accounts payable expanded from ¥146.2B to ¥188.0B. This suggests that the Company secured funding to support raw-material procurement and inventory accumulation. Long-term borrowings increased from ¥56.5B to ¥71.5B, indicating the concurrent use of external financing. Meanwhile, accounts receivable and inventories remained at high levels, suggesting that funds may have become increasingly tied up relative to earnings growth. This point warrants attention when assessing the sustainability of cash generation during a period of earnings growth.

Earnings Quality

Extraordinary income of ¥1.4B this period (including gains on sales of fixed assets) and extraordinary losses of ¥0.2B (losses on disposal of fixed assets) were limited in scale, and their temporary impact on Net Income was small. Non-operating income of ¥2.3B (including dividend income of ¥0.7B) was only 0.4% of revenue, and even including equity-method investment income of ¥1.1B, the majority of earnings was attributable to improvements at the operating level. The difference between Ordinary Income of ¥17.5B and Net Income of ¥13.6B was primarily attributable to income taxes and other taxes of ¥5.1B (effective tax rate of 27.2%). Comprehensive Income was ¥9.8B, below Net Income, as valuation differences on available-for-sale securities of -¥3.2B and foreign currency translation adjustments of -¥1.4B reduced other comprehensive income and loss. Market fluctuation factors therefore contributed to the variability of Comprehensive Income.

Earnings Forecast and Guidance

Progress in Q1 against the full-year forecasts—Revenue of ¥2430.0B, Operating Income of ¥55.0B, and Ordinary Income of ¥62.0B—was 24.8% for Revenue, 28.6% for Operating Income, and 28.2% for Ordinary Income. Operating Income and Ordinary Income were slightly ahead of the standard quarterly progress rate of 25%. No revisions were made to either the earnings forecasts or the dividend forecast. Based on the current pace of progress, no significant downside risk to the full-year plan has been identified at this time.

Shareholder Returns

The annual dividend forecast is ¥80, representing an expected increase from the previous year’s ¥35 (interim or year-end actual dividend). The Payout Ratio against forecast EPS of ¥150.98 is approximately 53%. Given the financial base of cash and deposits of ¥70.1B and an Equity Ratio of 65.1%, there is little concern regarding dividend sustainability. No disclosure has been made regarding share repurchases, and shareholder returns are centered on dividends.

Risk Factors

1. Raw Material Price and Foreign Exchange Risk: The gross margin declined from the previous year to 14.9%, and market fluctuations in vegetable oils and oilseeds, as well as foreign exchange movements, may continue to affect margins.

2. Business Concentration Risk: The Company depends on the Oils and Fats Business for 92.5% of revenue, creating a structure in which market changes in that business could significantly affect overall Company performance.

3. Accumulation of Working Capital: Asset balances are substantial, with inventories of ¥197.3B and accounts receivable of ¥373.4B, while accounts payable and long-term borrowings have also increased. The balance between earnings growth and capital efficiency needs to be monitored.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (food_beverage)

Profitability and Returns

The Company’s profitability is below the industry median and ranks in the lower tier within the food and oils and fats sector.

Growth and Capital Efficiency

The Revenue growth rate exceeds the industry median, indicating a relatively favorable position in terms of top-line growth.

※Source: Compiled by the Company

Key Earnings Highlights

1. In addition to increases in both revenue and earnings, the improvement in the Operating Income margin from the previous year, primarily due to greater SG&A efficiency, is a key earnings highlight.

2. The Specialty Foods Business achieved an Operating Income margin of 6.5%, exceeding the 2.2% margin of the Oils and Fats Business, suggesting potential for an improvement in the overall Company margin through a better business mix.

3. Although the current ratio and Equity Ratio are at high levels and financial soundness is favorable, ROE remains low at 1.2%. Trends in asset efficiency, including accounts receivable and inventories, will be a key focus in evaluating future capital efficiency.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly available data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥2,811–¥2,970 at ±1% for the cost of equity, and ¥2,874–¥2,898 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not 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, after consulting with a professional as necessary.

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