AMIYAKI TEI (2753) FY2027 Q2 Earnings Report

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Executive Summary

This interim-period result shows higher revenue but lower profit, due to a decline in gross margin and the recognition of extraordinary losses, with a substantial drop in net income. Revenue was ¥19.96B (+10.1% YoY), while Operating Income was ¥0.85B (△14.0% YoY). Net income attributable to owners of the parent was ¥0.36B (△33.0% YoY). Gross margin declined from 59.8% in the prior-year period to 58.5%, and the increase in SG&A expenses exceeded the increase in gross profit. In addition, extraordinary losses of ¥0.23B, including an impairment loss of ¥0.18B, weighed on net income.

Factors Behind Earnings Changes

【Revenue】Revenue was ¥19.96B, an increase of ¥1.82B from the prior-year period, representing growth of +10.1%. Segment-level disclosure is not available, so the breakdown of the increase cannot be determined.

【Profit and Loss】Gross profit was ¥11.67B, up +¥0.83B (+7.7%) YoY. SG&A expenses were ¥10.82B, up +¥0.97B (+9.8%), with the increase exceeding gross profit growth. The operating margin declined from 5.4% in the prior-year period to 4.2%. Ordinary Income was ¥0.9B (△12.9% YoY), and non-operating income and expenses were modest at +¥0.06B. Extraordinary losses were ¥0.23B (¥0.1B in the prior-year period), mainly comprising an impairment loss of ¥0.18B and a loss on disposal of property, plant and equipment of ¥0.04B; these one-off factors weighed on net income. Profit before income taxes was ¥0.67B (△28.1% YoY), and income taxes were ¥0.31B, bringing the tax burden as a percentage of profit before income taxes up to 46.1% from 42.1% in the prior-year period. Overall, this was a result of higher revenue but lower profit.

Key Financial Indicators

【Profitability】The operating margin was 4.2% (5.4% in the prior-year period), and the net profit margin was 1.8% (approximately 3.0% in the prior-year period). Annualized ROE was 3.2%, below approximately 4.8% in the prior-year period. The primary reason for the decline was the deterioration in the net profit margin, while total asset turnover improved due to increased sales and a reduction in total assets. 【Cash Quality】No cash flow statement was disclosed, but the ¥0.18B impairment loss is a non-cash expense, so cash-generating capacity may be higher than net income suggests. Cash and deposits were ¥8.45B, down △¥0.39B (△4.4%) from the end of the prior-year interim period. 【Investment Efficiency】EPS was ¥17.64 (¥26.32 in the prior-year period, △33.0%). Goodwill was ¥2.43B, down ¥0.13B from ¥2.56B at the end of the prior-year interim period. 【Financial Soundness】The Equity Ratio was 77.1% (75.9% in the prior-year period), and the current ratio was 234.7%. Interest-bearing debt was approximately ¥0.79B, substantially below cash and deposits. Asset retirement obligations were ¥0.55B, accounting for 8.2% of total liabilities.

Cash Flow Analysis

Cash and deposits were ¥8.45B, down ¥0.39B from the end of the prior-year interim period, but remained well above current liabilities of ¥4.86B. Accounts payable were ¥1.4B, down △¥0.27B from the end of the prior-year interim period; all else being equal, this would tend to absorb working capital. Accounts receivable were ¥0.04B, up +¥0.02B, but represented just 0.2% of total assets, so the impact was small. Inventories were ¥0.13B, down △¥0.01B from the end of the prior-year interim period, indicating no inventory build-up. The ¥0.18B impairment loss included in extraordinary losses is non-cash, so cash-generating capacity may not have declined as much as net income. However, changes in cash balances also include movements in funds unrelated to operating activities and should not be equated with Operating Cash Flow (OCF) or FCF.

Earnings Quality

The decline in profit for the current period has two components: deterioration at the operating level due to lower gross margin, and one-off extraordinary losses such as impairment. Non-operating income was modest at ¥0.07B, with a limited contribution to Ordinary Income even including ¥0.02B of interest income; most profit was generated by core operations. Of the ¥0.23B in extraordinary losses, impairment losses and losses on disposal of property, plant and equipment totaled ¥0.225B, equivalent to approximately 62% of net income of ¥0.36B on a pre-tax basis. This amount materially affected the level of net income, making Ordinary Income of ¥0.9B a closer indicator of underlying recurring earnings power than net income. Comprehensive income was ¥0.36B, matching net income, with no divergence due to valuation differences or other factors. The 46.1% tax burden also reduced net income and suggests that some extraordinary losses may not be readily deductible for tax purposes.

Earnings Forecast and Guidance

The full-year forecast is Revenue of ¥41.06B (+8.9% YoY), Operating Income of ¥2B (△9.5% YoY), Ordinary Income of ¥2.07B (△11.7% YoY), and net income attributable to owners of the parent of ¥1.07B (△15.8% YoY), with forecast EPS of ¥52.08. First-half progress against the forecast was 48.6% for Revenue, 42.4% for Operating Income, 43.5% for Ordinary Income, and 33.8% for net income, with net income showing the lowest progress. To meet the forecast, the second half would require Operating Income of ¥1.15B (an operating margin of approximately 5.5%, versus 4.2% in the first half) and net income of ¥0.71B. The net income forecast assumes that the extraordinary losses recorded in the first half will not recur in the second half. The earnings forecast was revised during the current quarter, but the dividend forecast was not revised.

Shareholder Returns

The interim dividend was ¥17 (¥17 in the prior-year period), and the full-year dividend forecast is ¥34. Based on the average number of shares outstanding during the interim period, total interim dividends were approximately ¥0.35B, resulting in a Payout Ratio of approximately 96.5% relative to interim net income of ¥0.36B. For the full year, the forecast dividend payout of approximately ¥0.7B implies a forecast Payout Ratio of approximately 65.3%, based on forecast net income of ¥1.07B. In view of cash and deposits of ¥8.45B and an Equity Ratio of 77.1%, the capacity to fund dividends is strong. On the other hand, the level of the Payout Ratio will depend on whether earnings recover in the second half.

Risk Factors

1. Risk of rising costs: Gross margin was 58.5%, down approximately 1.3pt from the prior-year period. If the cost ratio continues to rise, it could further pressure the 4.2% operating margin, particularly as SG&A expenses are up +9.8%.

2. Risk of further impairment: The company recorded an impairment loss of ¥0.18B in the first half and holds ¥11.18B in property, plant and equipment and ¥2.43B in goodwill. If store profitability deteriorates, additional extraordinary losses could affect achievement of the full-year net income forecast of ¥1.07B.

3. Risk related to dividend funding and store closures: The Payout Ratio relative to interim net income is high at approximately 96.5%. In addition, asset retirement obligations of ¥0.55B account for 8.2% of total liabilities and may result in cash outflows upon store closures or renovations. However, cash and deposits of ¥8.45B provide a buffer.

Industry Benchmarks (Reference; Compiled by the Company)

Profitability and Returns

The operating margin is above the industry median, while the net profit margin is slightly below the median, reflecting the impact of extraordinary losses and the tax burden.

Growth and Capital Efficiency

Revenue growth is 4.9pt above the industry median and is close to the upper end of the IQR (10.9%).

※Source: Company compilation

Key Points in the Results

1. The main feature is that higher revenue has not translated into higher profit. The increase in SG&A expenses (+¥0.97B) exceeded the increase in gross profit (+¥0.83B), and the operating margin declined from 5.4% to 4.2%. Trends in the cost ratio and SG&A expenses will determine the trajectory of profitability.

2. One-off factors, including impairment losses, contributed substantially to the decline in net income. The difference between Ordinary Income (¥0.9B) and net income (¥0.36B) is attributable to extraordinary losses and the tax burden; the full-year forecast requires net income of ¥0.71B in the second half.

3. The financial base is strong, with an Equity Ratio of 77.1% and a current ratio of 234.7%, demonstrating resilience during periods of declining profitability. However, asset retirement obligations of ¥0.55B and the recoverability of goodwill of ¥2.43B should continue to be monitored.

Theoretical Share Price (Reference Value)

Sensitivity: ¥923–¥974 for a ±1% change in the cost of equity; ¥943–¥951 for a ±0.1 change in ω.

Notes:

• Net income is substantially compressed relative to operating income due to the tax burden, acquisition-related expenses, minority interests, and other factors (net income ÷ operating income 54%). This value reflects that compression at face value; if the factors are temporary, underlying earnings power may be higher.
• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets at the end of the quarter are used (there is a timing mismatch with the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be somewhat overstated.

(Valuation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-09 / Mechanically calculated using only publicly disclosed data; this is not a forecast of market prices or a recommendation of any specific investment action, and does not predict or guarantee future share prices)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the company based on publicly available earnings data. Investment decisions should be made at your own responsibility and, where necessary, after consulting a professional.

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