KUZE CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥36.14B
• Operating Income: ¥986M
• Net Income: ¥896M
• 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

Kuze Co., Ltd. (TSE: 2708) delivered resilient topline and solid operating profit growth in FY2026 Q2 on a consolidated JGAAP basis, while bottom-line contracted year over year. Revenue rose 8.1% YoY to ¥36.14bn, reflecting sound demand and/or price pass-through in its food distribution business. Gross profit reached ¥7.60bn, with a gross margin of 21.0%, indicating stable procurement/spread discipline despite ongoing cost pressures. Operating income increased 33.8% YoY to ¥986m, lifting the operating margin to roughly 2.7%, supported by operating leverage and cost controls. Ordinary income of ¥1,066m exceeded operating income, implying net positive non-operating balance (e.g., financial income or subsidies outweighing interest expense). Net income declined 20.7% YoY to ¥710m, suggesting heavier tax burden and/or special losses relative to the prior year. Using income tax expense of ¥363m and net income of ¥710m, implied pre-tax income is approximately ¥1,073m, putting the effective tax rate at about 33.8% this period. DuPont analysis shows ROE of 8.39%, driven by a thin but positive net margin of 1.96%, healthy asset turnover of 1.488x, and leverage of 2.87x. Liquidity is adequate with a current ratio of 118.3% and quick ratio of 95.1%, while solvency appears manageable given a debt-to-equity ratio of 1.78x and strong interest coverage of 44.8x. Working capital stands at ¥2.46bn, underpinned by inventories of ¥3.11bn and presumably sizable receivables typical for a distributor. Cash conversion was weak in the period: operating cash flow was only ¥56m versus net income of ¥710m (OCF/NI of 0.08), indicating a significant working capital drag. Financing cash outflows of ¥2.47bn suggest debt repayments and/or other financing uses rather than dividends (DPS and payout reported as zero), aligning with a conservative capital allocation tilt. EBITDA totaled ¥1.20bn (margin ~3.3%), evidencing modest capacity to absorb shocks in a low-margin sector. The equity ratio shown as 0.0% appears unreported in the dataset; based on balance sheet values, equity/asset ratio is approximately 34.8%, which is consistent with the stated leverage factor. While operating trends are improving, near-term free cash flow was constrained, and the decline in net income underscores sensitivity to non-operating items and taxes. Overall, Kuze shows improving core profitability and controlled leverage, but needs to convert earnings into cash more consistently to support balance sheet strength and any future shareholder returns.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.96%
• asset_turnover: 1.488
• financial_leverage: 2.87
• calculated_ROE: 8.39%
• commentary: ROE is predominantly supported by efficient asset turnover and moderate leverage; net margin remains thin, typical for food distribution. margin_quality:
• gross_margin: 21.0%
• operating_margin: 2.7%
• EBITDA_margin: 3.3%
• drivers: ['Stable gross spread management despite input cost volatility', 'Improved operating leverage and cost discipline lifting OP margin', 'Non-operating balance positive (ordinary income > operating income)'] operating_leverage: Revenue growth of 8.1% translated to a 33.8% increase in operating income, indicating favorable operating leverage and cost containment. Given the low base margin, small improvements in gross profit and SG&A efficiency materially impact operating profit.

Growth Assessment

revenue_sustainability: Topline growth of 8.1% YoY appears underpinned by demand resilience and/or pricing. Sustainability will depend on customer retention, contract pricing, and input cost trends. profit_quality: Operating income growth outpaced sales, highlighting better cost control; however, net income decreased 20.7% YoY, likely due to higher tax burden and/or special items. Ordinary income exceeded operating income, suggesting supportive non-operating factors. outlook: Near-term outlook is cautiously constructive for operating profit given leverage to volumes and cost control, but bottom-line visibility is tempered by tax and potential one-off items. Sustained margin gains and better cash conversion are critical to extend momentum.

Financial Health

liquidity:

• current_ratio: 118.3%
• quick_ratio: 95.1%
• working_capital: ¥2.46bn
• commentary: Liquidity is adequate, with near-par quick ratio reflecting reliance on receivables. Inventory of ¥3.11bn is meaningful for a distributor and needs active turnover management. solvency:
• debt_to_equity: 1.78x (total liabilities/equity)
• interest_coverage: 44.8x (operating income/interest expense)
• equity_ratio_estimate: ≈34.8% (equity/assets, based on provided BS values)
• commentary: Leverage is moderate and well-covered by earnings. Interest burden is light relative to operating income. capital_structure: Assets ¥24.28bn funded by liabilities ¥15.05bn and equity ¥8.46bn. Negative financing cash flow (¥2.47bn) points to deleveraging and/or other financing uses in the period.

Cash Flow Quality

earnings_quality: OCF/Net income of 0.08 indicates weak cash conversion in the half, implying working capital expansion overshadowed earnings. EBITDA of ¥1.20bn supports underlying cash generation potential if working capital normalizes. FCF_analysis: Free cash flow not disclosed (shown as 0). With OCF at ¥56m and no reported investing outflows in the dataset, true FCF is uncertain; the reported zero likely reflects incomplete disclosure rather than actual zero. working_capital: Inventory at ¥3.11bn and high receivables exposure (implied by quick ratio) likely drove OCF weakness. Monitoring DSO/DIO turns is key to restoring cash conversion.

Dividend Sustainability

payout_ratio_assessment: Reported DPS and payout ratio are zero for the period. Given net income of ¥710m, a payout was not indicated. FCF_coverage: With OCF at ¥56m and FCF unreported, coverage cannot be reliably assessed this quarter. Cash generation must improve to underpin any future distributions. policy_outlook: The large financing cash outflow suggests prioritization of balance sheet management (e.g., debt repayment) over shareholder returns in the near term. Any shift toward dividends likely requires sustained OCF strength and stable leverage.

Risk Assessment

Business Risks:

• Low-margin distribution model vulnerable to input cost inflation and price competition
• Customer concentration or contract repricing risk in foodservice channels
• Supply chain disruptions affecting fill rates and procurement costs
• Execution risk in working capital management (receivables and inventory turns)

Financial Risks:

• Weak cash conversion this period increases reliance on short-term funding
• Exposure to interest rate changes despite currently low interest burden
• Potential volatility in non-operating items affecting ordinary and net income
• Tax rate variability impacting bottom-line predictability

Key Concerns:

• OCF/Net income at 0.08 indicates near-term cash flow pressure
• Net income declined 20.7% YoY despite stronger operations
• Moderate leverage (1.78x liabilities/equity) requires continued discipline if growth investments rise

Investment Implications

Key Takeaways:

• Core operations improved: +8.1% sales and +33.8% operating income YoY
• Margins remain thin but expanding modestly (OPM ~2.7%, EBITDA margin ~3.3%)
• ROE at 8.39% is primarily driven by turnover and leverage, not high margins
• Cash conversion weak; working capital optimization is a priority
• Leverage manageable with robust interest coverage
• Financing outflow suggests deleveraging or other balance sheet actions over distributions

Metrics to Watch:

• OCF/Net income ratio and free cash flow
• Receivable days and inventory days (turnover metrics)
• Gross-to-operating margin spread (SG&A efficiency)
• Ordinary-to-operating income gap (non-operating volatility)
• Effective tax rate normalization
• Debt/EBITDA and net leverage (as disclosures allow)

Relative Positioning: Within Japan’s food distribution peers, Kuze exhibits typical low margins but solid operating leverage and acceptable balance sheet strength; sustained improvement in cash conversion would enhance its relative standing.

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