Yakiniku Sakai Holdings Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥11.65B
• Operating Income: ¥-6M
• Net Income: ¥6M
• EPS: ¥0.02

Income Statement

Balance Sheet

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: FY2026 Q2 was a breakeven quarter at the operating level with profitability saved by non-operating gains, resulting in a razor-thin net profit. Revenue grew 2.4% YoY to 116.47, while gross profit was 78.34 and SG&A was 78.40, yielding operating income of -0.06 (operating margin roughly -5 bps). Ordinary income was 0.76 (down 37.7% YoY), supported by 1.37 in non-operating income versus 0.54 in non-operating expenses, but interest expense of 0.39 drove very weak coverage. Profit before tax was 0.73, and net income fell sharply to 0.05 (-95.3% YoY) as the effective tax rate surged to 92.1%, leaving EPS at just 0.02 JPY. Gross margin printed at a high 67.3%, but this was fully offset by SG&A intensity (SG&A was 67.3% of sales), indicating minimal operating leverage. ROE was ~0.1% on DuPont (net margin ~0.04%, asset turnover 0.677x, leverage 2.58x), highlighting that leverage is propping up an otherwise negligible return profile. Interest coverage of -0.15x (based on operating income) is a red flag, even though cash on hand (47.03) nearly matches total interest-bearing loans (short-term 3.00, long-term 49.89). Liquidity is adequate with a current ratio of 142% and working capital of 18.03, but below the comfort threshold of 150%. Cash flow data were not disclosed, preventing validation of earnings quality (OCF/NI) and free cash flow coverage for any dividends or capex. Margin comparison in basis points versus prior periods cannot be quantified due to limited historical disclosure, but current operating margin hovers at approximately -5 bps and net margin at ~4 bps. The quarter shows rising revenue but heavy reliance on non-operating income and a punitive tax rate, which is not a stable earnings foundation. Balance sheet shows moderate leverage with D/E at 1.58x and net debt around 5.86 (interest-bearing debt minus cash), manageable but sensitive to interest costs. The very low net income suggests any dividend would not be sustainably covered by earnings in the near term. Forward-looking, key levers are SG&A discipline, rebuilding operating margin, normalizing the effective tax rate, and reducing interest burden to restore coverage. Absent operating margin recovery, ROIC remains sub-par (reported around 0%), implying limited value creation. Overall, stability hinges on improving core restaurant economics rather than financial or non-operating supports.

Profitability Analysis

ROE decomposition (DuPont): ROE ≈ Net Profit Margin × Asset Turnover × Financial Leverage = ~0.04% × 0.677 × 2.58 ≈ 0.1%. The component most constraining ROE is the net profit margin, which is near zero due to operating loss and an unusually high effective tax rate (92.1%). Business driver: high SG&A (78.40) effectively consumed all gross profit (78.34), leaving an operating deficit, with ordinary profit salvaged by non-operating income (1.37); interest expense (0.39) further eroded profitability. This mix implies dependence on non-operating items rather than core operations. Sustainability: non-operating gains are typically volatile; without SG&A control and operating margin expansion, current ROE is not sustainable. Warning signs: SG&A growth versus revenue growth cannot be directly compared due to lack of SG&A YoY disclosure, but the absolute SG&A-to-sales ratio (~67.3%) is elevated. Operating leverage is negative at present; gross margin is high for the business model, indicating the bottleneck is overhead efficiency rather than cost of sales.

Growth Assessment

Revenue grew 2.4% YoY to 116.47, indicating modest top-line momentum. However, operating income declined 15.2% YoY and ordinary income fell 37.7% YoY, evidencing deteriorating profit conversion. Net income collapsed by 95.3% YoY to 0.05, primarily due to weak operating results and a 92.1% effective tax rate. Profit quality is low as ordinary profit was driven by 1.37 of non-operating income while core operations were loss-making. With operating margin at approximately -0.05% and net margin ~0.04%, incremental sales are not currently translating into earnings. Outlook hinges on SG&A rationalization, rent and labor efficiency, and interest cost management; normalization of the tax rate would materially lift net profit, but should not be relied upon without operating recovery. Given missing disclosure on segment/store metrics and capex, sustainability of revenue growth and turnaround timing remain uncertain.

Financial Health

Liquidity: Current ratio 142% (above 1.0 but slightly below the 150% comfort benchmark); quick ratio 141% supported by cash of 47.03 and low inventories (0.29). No warning for Current Ratio < 1.0. Solvency: D/E 1.58x (slightly above conservative benchmark of 1.5x but below the 2.0x warning threshold). Interest-bearing loans total ~52.89 (ST 3.00, LT 49.89), largely offset by cash; estimated net debt ~5.86. Interest coverage is weak on an operating basis (-0.15x), indicating sensitivity to rate increases or profit dips. Maturity mismatch risk: Short-term loans (3.00) are well covered by cash and current assets (60.97) versus current liabilities (42.94), suggesting low near-term refinancing pressure. Off-balance sheet obligations: Not disclosed; typical restaurant lease liabilities (if any under JGAAP operating leases) are not visible, posing potential hidden leverage.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed, so OCF/Net Income and FCF cannot be assessed. Given ordinary profit dependence on non-operating gains and operating loss, there is a risk that accounting profit may not convert to cash without working capital relief. With cash of 47.03 and low inventory and receivables balances, working capital swings could materially affect OCF. No evidence of working capital manipulation can be concluded due to missing cash flow details; monitoring payables, accrued expenses, and any one-off gains in non-operating items is advisable.

Dividend Sustainability

Dividend data were not disclosed; the reported payout ratio figure (2398.7%) appears mechanically elevated due to negligible net income and should be treated cautiously absent confirmed DPS. With net income at 0.05 and no FCF disclosure, coverage by earnings or free cash flow cannot be verified. Given current operating loss and weak interest coverage, a sustained cash dividend would likely depend on cash reserves rather than recurring earnings, which is not prudent over time. Policy outlook cannot be inferred without management guidance; near-term priority should be operating margin restoration and interest burden reduction.

Risk Assessment

Business Risks:

• Persistent operating losses due to elevated SG&A relative to sales
• Cost inflation in food and labor compressing margins
• Traffic and same-store sales volatility affecting operating leverage
• Execution risk in store portfolio optimization and format strategy

Financial Risks:

• Weak interest coverage (-0.15x) raising sensitivity to rate increases
• Moderate leverage (D/E 1.58x) with reliance on non-operating income
• Potential tax volatility (92.1% effective rate) depressing net income
• Refinancing and covenant risk if profitability does not recover

Key Concerns:

• Dependence on non-operating income (1.37) to achieve ordinary profit
• Net income collapse (-95.3% YoY) despite revenue growth
• Lack of cash flow disclosure limiting assessment of earnings quality
• Possible off-balance lease commitments not captured under JGAAP

Investment Implications

Key Takeaways:

• Core operations are at breakeven with operating margin around -5 bps; profit relies on non-operating items
• ROE is effectively flat (~0.1%) with leverage masking weak margins
• Interest coverage is inadequate, highlighting the need for margin recovery or debt cost reduction
• Liquidity is acceptable but below optimal, with current ratio at 142% and net debt modest (~5.86)

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio trajectory
• Interest coverage (EBIT/interest) and average funding cost
• Effective tax rate normalization
• OCF and FCF once disclosed (OCF/NI target >1.0)
• Store productivity (same-store sales, labor cost ratio) and any restructuring charges

Relative Positioning: Within Japan’s casual dining/restaurants peer set, the company exhibits weaker operating profitability and interest coverage despite reasonable liquidity; recovery depends on SG&A discipline and operating margin improvement rather than top-line growth alone.

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
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis