Yakiniku Sakai Holdings Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥11.65B
• Operating Income: ¥-6M
• Net Income: ¥118M
• 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

Yakiniku Sakai Holdings (TSE: 26940) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥11.65bn, up 2.4% YoY, indicating modest top-line recovery. Gross profit reached ¥7.63bn, implying a high gross margin of 65.5%, consistent with restaurant models where a large portion of costs resides in SG&A rather than cost of sales. Operating income was slightly negative at ¥-6m (down 15.2% YoY), highlighting fragile operating leverage and limited ability to absorb fixed costs. Ordinary income turned positive at ¥76m, suggesting meaningful non-operating gains offsetting operating weakness, despite interest expenses of ¥26.08m. Net income was a slim ¥5m (down 95.3% YoY), indicating exceptional items and/or tax effects materially influenced the bottom line under JGAAP. The provided effective tax rate metric shows 0.0%, yet income tax expense is ¥81.88m; this points to classification/timing effects under JGAAP and limits comparability to statutory rates. DuPont shows a very thin net margin of 0.04%, asset turnover of 0.677x, and leverage of 2.58x, yielding a reported and calculated ROE of 0.08%—demonstrably subpar and dependent on leverage rather than profitability. Liquidity is adequate with a current ratio of 146% and working capital of ¥2.03bn, supported by low reported inventories of ¥30.12m. Solvency appears pressured: the debt-to-equity ratio is 1.48x and interest coverage is negative at -0.2x, reflecting insufficient operating earnings to cover interest expense. Total assets stand at ¥17.20bn against total equity of ¥6.66bn; while the reported equity ratio is 0.0% (unreported), the implied equity ratio is roughly 38.7% based on available balances. Cash flow data (OCF/FCF) are unreported (shown as zeros), limiting assessment of earnings quality and dividend capacity through cash metrics. Dividend per share is reported as zero with a payout ratio of 0%, consistent with earnings fragility and a likely cautious capital allocation stance. With operating income at breakeven and ordinary income reliant on non-operating items, the quality of earnings is mixed and sensitive to exogenous factors. Overall, the company demonstrates modest revenue growth but very thin profitability, leverage-driven ROE, and constrained interest coverage, warranting careful monitoring of cost controls, pricing power, and non-operating income sustainability. Data gaps in D&A, cash flows, share counts, and equity ratio reporting limit precision; analysis focuses on disclosed, non-zero items and reasonable inferences from the balance sheet.

Profitability Analysis

ROE_decomposition: DuPont indicates ROE of 0.08% = Net margin (0.04%) × Asset turnover (0.677x) × Financial leverage (2.58x). The principal constraint is the extremely low net margin; leverage is amplifying a weak earnings base rather than enhancing returns through operational efficiency. margin_quality: Gross margin is high at 65.5% (GP ¥7.63bn on revenue ¥11.65bn), typical for restaurant operators where labor, rent, utilities, and advertising are in SG&A. Operating margin is effectively 0% (¥-6m OI), evidencing that SG&A/fixed costs largely consume gross profit. Ordinary margin (~0.7%) reflects non-operating contributions (e.g., subsidies, investment/other income) offset by ¥26.08m interest expense. Net margin is only 0.04%, and the presence of ¥81.88m income tax with small net profit implies JGAAP-specific items/extraordinary factors or timing differences. operating_leverage: Incremental revenue growth of 2.4% did not translate into operating profit due to fixed cost absorption challenges; small deterioration in OI (-15.2% YoY) suggests negative operating leverage at current volume and cost structure. Interest coverage at -0.2x underscores that current operating run-rate is insufficient to service debt costs without non-operating income.

Growth Assessment

revenue_sustainability: Top-line grew 2.4% YoY to ¥11.65bn, indicating modest recovery. For a restaurant chain, sustainability hinges on same-store sales, guest traffic, average check, and store openings/closures—data not disclosed here. The low inventory level (¥30.12m) is consistent with a service business model and does not constrain growth. profit_quality: Ordinary income exceeding operating income suggests reliance on non-operating items to deliver positive pre-tax earnings. With net income at ¥5m, the quality of profits is low; earnings are vulnerable to the withdrawal of subsidies, the normalization of other income, or increases in interest costs. outlook: To improve earnings trajectory, the company needs SG&A optimization, better labor scheduling, selective price adjustments, and procurement efficiencies to convert gross profits into operating profits. While modest revenue growth is a positive, sustaining and scaling it without cost inflation eroding margins is the key challenge.

Financial Health

liquidity: Current assets ¥6.43bn vs current liabilities ¥4.41bn yields a current ratio of 146% and quick ratio of 145.3%, indicating adequate short-term liquidity. Working capital is positive at ¥2.03bn. solvency: Total liabilities ¥9.86bn vs total equity ¥6.66bn implies leverage is material. Debt-to-equity is 1.48x, and financial leverage per DuPont is 2.58x. Interest coverage is -0.2x due to negative operating income, highlighting thin solvency headroom dependent on non-operating income. The reported equity ratio is 0.0% (unreported), but the implied equity ratio based on assets/equity is approximately 38.7%. capital_structure: The balance sheet shows a moderate equity base relative to assets, but cash balances and debt maturity profiles are not disclosed. Interest expense of ¥26.08m suggests meaningful borrowings; given near-zero operating profits, refinancing and interest rate risks warrant attention.

Cash Flow Quality

earnings_quality: Operating CF, investing CF, and financing CF are unreported (shown as zero). Therefore, OCF/NI and FCF cannot be evaluated from the provided data. Given operating income near breakeven and reliance on non-operating gains, earnings quality should be treated cautiously until cash conversion is evidenced. FCF_analysis: Free cash flow is unreported. Without D&A and capex information, we cannot infer maintenance capex needs; typical restaurant models require ongoing capex for refurbishments and new store fit-outs. working_capital: Working capital is positive at ¥2.03bn. Inventories are low at ¥30.12m, which is operationally typical. However, receivables/payables composition is not provided, limiting assessment of cash conversion cycles.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is reported as ¥0.00 with a payout ratio of 0%, consistent with a conservative stance given minimal net income (¥5m) and negative operating income. FCF_coverage: FCF coverage is reported as 0.00x due to unreported cash flows; thus, dividend capacity cannot be assessed from FCF. With earnings thin and interest coverage negative, distributing dividends would likely be constrained. policy_outlook: Given current profitability and leverage, a cautious or suspended dividend policy appears consistent with balance sheet protection until sustained positive operating income and cash generation are demonstrated.

Risk Assessment

Business Risks:

• Cost inflation in food inputs, utilities, and labor compressing margins
• Weak operating leverage leading to breakeven or losses at modest sales levels
• Customer traffic volatility and sensitivity to macro conditions
• Competitive intensity in yakiniku/casual dining pressuring pricing
• Dependence on non-operating income to achieve positive ordinary income
• Potential extraordinary items/tax effects under JGAAP causing earnings volatility
• Supply chain disruptions impacting availability or cost of meat
• Brand/reputation and food safety risks inherent to restaurant operations

Financial Risks:

• Negative interest coverage (-0.2x) indicating reliance on non-operating income for debt service
• Leverage (D/E 1.48x) increasing sensitivity to earnings shortfalls
• Interest rate and refinancing risk given ongoing interest expense
• Limited visibility on cash flows and capex due to unreported OCF/FCF
• Potential covenant pressure if profitability remains weak

Key Concerns:

• Sustainability of non-operating gains underpinning ordinary income
• Ability to convert high gross margin into consistent operating profit
• Impact of wage and energy cost inflation on SG&A
• Tax/extraordinary item volatility affecting net income
• Liquidity preservation in the absence of strong cash generation

Investment Implications

Key Takeaways:

• Revenue growth of 2.4% YoY but operating income at ¥-6m signals fragile core profitability
• Ordinary income of ¥76m relies on non-operating items; earnings quality is mixed
• Net income of ¥5m (down 95.3% YoY) highlights bottom-line volatility
• Adequate liquidity (current ratio 146%) but negative interest coverage (-0.2x) raises solvency concerns
• Leverage is meaningful (D/E 1.48x; implied equity ratio ~38.7%)
• Cash flow data not disclosed; dividend suspended (DPS ¥0.00) aligns with preservation of financial flexibility

Metrics to Watch:

• Same-store sales growth, traffic, and average ticket
• SG&A ratio, labor cost ratio, and energy/utilities as a percent of sales
• Operating income margin and interest coverage
• Non-operating income components and sustainability
• Operating cash flow and capex once disclosed
• Debt levels, average interest rate, and maturity profile
• Store network changes (openings/closures, refurbishments) and unit economics

Relative Positioning: Relative to domestic casual dining peers, the company shows weaker operating profitability and interest coverage but adequate short-term liquidity; high gross margin is offset by heavy SG&A burden, resulting in leverage-driven, low-quality ROE.

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