KUZE CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥36.14B
• Operating Income: ¥986M
• Net Income: ¥710M
• EPS: ¥153.56

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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: Solid top-line and operating improvements in FY2026 Q2 with clear margin expansion and strong cash conversion, but bottom line declined YoY due to a higher tax burden and potential non-recurring effects last year. Revenue rose 8.1% YoY to 361.39, driven by steady demand and likely pass-through of cost inflation. Gross profit reached 84.45, delivering a gross margin of 23.4%. Operating income climbed 33.8% YoY to 9.86, lifting operating margin to 2.73%. Ordinary income rose 22.4% to 10.66 with modest non-operating gains (net +0.80), including dividend income of 0.16. Despite stronger operations, net income fell 20.7% YoY to 7.10, with an effective tax rate of 33.6% weighing on the bottom line. Operating margin expanded by roughly 53 bps YoY (from about 2.20% to 2.73%), indicating improving operating leverage and/or better SG&A discipline. EBITDA was 11.63, implying an EBITDA margin of 3.2%—thin but improving for a food wholesale model. Cash flow quality was strong: OCF of 10.66 was 1.50x net income, indicating good earnings convertibility. Liquidity is adequate but not abundant (current ratio 1.21, quick ratio 0.95), and leverage is on the higher side (D/E 1.87x) though interest coverage is very strong at 75.9x given light interest burden. Asset efficiency remains a key driver, with asset turnover at 1.49x supporting an ROE of 8.4% despite low net margins. Working capital remains the core funding engine; accounts payable of 107.16 are high but supported by cash plus receivables of 120.92. ROIC is reported at 12.8%, comfortably above typical cost of capital, suggesting value-accretive operations. Forward-looking, sustained gross margin discipline and SG&A control will be crucial to defend the improved operating margin. Tax normalization and any one-off effects last year are likely the main reasons for the net income decline; absent new non-recurring items, bottom-line trajectory should re-align with operating trends. Overall, the quarter shows improving operational execution and healthy cash generation, tempered by thin structural margins and moderate leverage.

Profitability Analysis

ROE decomposition (DuPont): ROE 8.4% = Net Profit Margin 2.0% × Asset Turnover 1.488 × Financial Leverage 2.87x. The component with the most notable change this quarter versus last year is the profitability leg at the operating level: operating margin improved from ~2.20% to 2.73% (+53 bps), indicating better gross spread management and/or SG&A discipline. Business drivers likely include pass-through pricing to offset input costs and early benefits from logistics and cost optimization; non-operating factors were modest (net +0.80) and do not dominate the story. Asset turnover at 1.49x remains a central strength for a low-margin distributor and appears stable, implying consistent use of working capital to drive sales. Financial leverage at 2.87x is elevated and supports ROE, but this is a structural, not cyclical, contributor; it increases sensitivity to shocks even if interest burden is currently small. The operating margin improvement seems partly sustainable if pricing discipline and procurement remain firm; however, competitive pressure and food inflation volatility could cap further expansion. No evidence that SG&A grew faster than revenue this quarter; the improved operating margin suggests SG&A/revenue likely improved, though detailed SG&A breakdown was not disclosed. Watch for any reversion if wage and logistics inflation re-accelerate.

Growth Assessment

Revenue growth of 8.1% YoY to 361.39 appears volume and price-mix supported, consistent with steady foodservice demand and pass-through pricing. Operating income growth of 33.8% outpaced sales, reflecting operating leverage and margin management. Ordinary income grew 22.4%, aided by small non-operating income; dependence on non-operating items remains low. Net income declined 20.7% YoY to 7.10 due to a higher effective tax rate (33.6%) and likely absence of prior-year non-recurring benefits. Growth quality is solid at the operating and cash levels, with OCF/NI at 1.50x and EBITDA improvement. Sustainability hinges on maintaining gross spread amid input cost fluctuations (commodities, FX) and managing SG&A amid wage/logistics inflation. Near-term outlook is cautiously positive for operating earnings if pricing discipline holds; bottom-line normalization requires stable tax rates and no new one-offs. Overall, the growth profile is improving in core operations with manageable external headwinds.

Financial Health

Liquidity is adequate but below best-practice thresholds: current ratio 1.21 (below 1.5 benchmark) and quick ratio 0.95 (below 1.0, mild caution). No explicit warning for current ratio <1.0 (it is >1.0), but the sub-1.0 quick ratio indicates reliance on inventory to meet short-term obligations. Solvency: D/E 1.87x is above the conservative benchmark (1.5x) but below the explicit risk trigger (2.0x); monitor leverage trends. Interest coverage is very strong at 75.85x given low interest expense (0.13). Maturity mismatch risk appears contained: current assets 168.48 vs current liabilities 139.40; cash plus receivables (120.92) cover 86.7% of current liabilities, with inventories (36.11) bridging the remainder. Long-term loans are modest at 10.00; short-term loans were unreported, so total interest-bearing debt may be understated. No off-balance sheet obligations were disclosed in the provided data. Equity stands at 84.58, providing a reasonable buffer.

Cash Flow Quality

OCF of 10.66 exceeds net income of 7.10 (OCF/NI = 1.50x), indicating healthy earnings quality with supportive working capital dynamics. Capex was modest at 0.99; implied FCF (analytical estimate) is approximately 9.67 (= OCF 10.66 minus capex 0.99), suggesting capacity to fund maintenance capex and dividends. Financing CF of -2.55 likely reflects dividend payments and/or debt reduction; exact breakdown not disclosed. No signs of aggressive working-capital management are evident from the headline figures; receivables (77.37) and payables (107.16) are sizable as typical for the model, but cash generation was strong, indicating collections were satisfactory this period. With thin margins, sustaining OCF will require continued discipline on inventory turns and credit terms. Overall cash conversion is robust this quarter.

Dividend Sustainability

The calculated payout ratio is 27.4%, comfortably below the 60% sustainability benchmark. DPS details were unreported, but cash coverage appears solid based on implied FCF (~9.67) relative to net income (7.10). Given modest capex (0.99) and strong OCF, the current dividend level appears serviceable under normal operating conditions. Key sensitivities are working-capital swings and margin pressure, which could tighten coverage in weaker quarters. Policy outlook likely remains stable if operating momentum continues and leverage does not increase.

Risk Assessment

Business Risks:

• Commodity and food input cost volatility impacting gross spread
• Logistics and wage inflation pressuring SG&A and operating margin
• Customer demand variability in foodservice channels
• Credit risk from concentrated or weaker restaurant customers (AR 77.37)
• Supplier terms risk given high payables (107.16) and reliance on trade credit

Financial Risks:

• Elevated leverage (D/E 1.87x) despite strong coverage
• Quick ratio below 1.0 indicating reliance on inventory for liquidity
• Potential unreported short-term borrowings increasing refinancing risk
• Interest rate sensitivity if floating-rate debt is used

Key Concerns:

• Net income declined 20.7% YoY despite stronger operations, driven by tax/one-off factors
• Structurally thin operating margin (2.73%) leaves limited buffer against shocks
• Dependence on working capital dynamics to sustain OCF
• Data gaps (investing CF details, DPS, SG&A breakdown) limit full transparency

Investment Implications

Key Takeaways:

• Healthy operational beat: revenue +8.1% YoY and operating income +33.8% with ~53 bps margin expansion
• Strong cash conversion (OCF/NI 1.50x) supports reinvestment and dividends
• ROE at 8.4% underpinned by high asset turnover and leverage; ROIC reported at 12.8%
• Liquidity adequate but tight on a quick basis (0.95) and leverage elevated (D/E 1.87x)
• Bottom-line decline due to higher tax burden/non-recurring effects rather than core weakness

Metrics to Watch:

• Operating margin and SG&A/revenue ratio
• Gross profit per unit and pass-through pricing effectiveness
• OCF/NI and working capital turns (AR days, inventory days, AP days)
• Effective tax rate normalization
• Leverage trend and any changes in interest-bearing debt
• Capex discipline versus growth initiatives

Relative Positioning: Within Japanese food wholesalers/distributors, the company exhibits improving operating efficiency and strong cash conversion, with ROE supported by asset turnover. However, it operates with thin margins and somewhat elevated leverage versus conservative benchmarks, placing it mid-pack on resilience but favorable on near-term operating momentum.

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