SANKO MARKETING FOODS CO.,LTD. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥2.44B
• Operating Income: ¥-174M
• Net Income: ¥-145M
• EPS: ¥-5.26

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

SANKO MARKETING FOODS reported FY2026 Q1 consolidated results under JGAAP with revenue of ¥2.445bn, up 3.6% YoY, but remained loss-making at the operating and bottom lines. Gross profit was ¥784m, implying a gross margin of 32.1%, which is respectable for a restaurant/food-service operator, yet insufficient to absorb fixed costs given an operating loss of ¥174m (operating margin -7.1%). Ordinary loss was ¥183m and net loss ¥193m (net margin -7.9%), indicating continued pressure from non-operating items and possibly fixed costs in SG&A. The company’s DuPont-calculated ROE is -36.62%, driven primarily by a negative net margin and high financial leverage (financial leverage 5.09x), while asset turnover of 0.912x suggests decent utilization of the asset base. Equity is ¥527m against total assets of ¥2.68bn, implying an estimated equity ratio of about 19.7% (our calculation), which is modest and points to a leveraged balance sheet. Current assets of ¥1.365bn versus current liabilities of ¥1.19bn produce a current ratio of 114.7%, providing only a thin liquidity buffer; quick ratio is reported as the same due to unreported inventories, so true liquidity could be weaker. Interest expense is relatively low at ¥1m this quarter, but negative operating income leaves interest coverage formally negative. Revenue growth did not translate into profit improvement (operating loss flat YoY per disclosure), signaling limited operating leverage and/or elevated cost base (labor, utilities, food inputs, and rents). Tax expense of ¥4m despite a pretax loss likely reflects non-deductible items or minimum/local taxes; the reported effective tax rate metric is not economically meaningful in loss periods. Cash flow statements and depreciation are unreported (shown as zero), restricting our ability to assess cash earnings quality and capex intensity this quarter. Dividend remains suspended (DPS ¥0), which is consistent with losses and an imperative to preserve capital. Working capital is positive at ¥175m, but absent cash disclosure we cannot gauge immediate liquidity resiliency. Overall, the quarter shows modest top-line expansion but persistent operating losses and high leverage, leaving little margin for error. The key near-term focus should be on driving same-store sales, managing input costs, and rightsizing the fixed cost base to approach break-even. Given the thin equity cushion and sustained losses, capital structure risk remains a central consideration.

Profitability Analysis

ROE_decomposition: DuPont shows: Net profit margin -7.89%, Asset turnover 0.912x, Financial leverage 5.09x, producing a calculated ROE of -36.62%. The negative margin is the dominant drag, while leverage magnifies the loss on equity. Asset utilization is reasonable for the format. margin_quality: Gross margin of 32.1% suggests acceptable product-level economics, but SG&A and fixed occupancy/labor costs are too high, pushing operating margin to -7.1%. Ordinary margin is -7.5% and net margin -7.9%, indicating limited non-operating relief. Tax expense appears non-core/minimum given losses. operating_leverage: Revenue grew 3.6% YoY, yet operating loss was flat YoY, implying unfavorable operating leverage—either fixed costs remain elevated or incremental gross profit was offset by higher labor, utilities, or other overhead. Break-even remains some distance absent material cost actions or stronger sales mix/pricing.

Growth Assessment

revenue_sustainability: Top-line growth of 3.6% YoY is modest. For a casual dining/izakaya format, sustainability hinges on same-store traffic recovery, pricing power to offset food inflation, and network optimization. No segment mix was disclosed. profit_quality: With operating losses persisting and limited non-operating burden relief, profit quality is weak. The gap between gross margin and operating margin reveals an overweight fixed cost base. Lack of depreciation disclosure limits assessment of underlying cash earnings. outlook: Near-term outlook depends on demand normalization, cost pass-through, and store-level productivity. If same-store sales can outpace mid-single digits and cost controls take hold, losses could narrow. Absent such improvements, the high leverage amplifies downside risk.

Financial Health

liquidity: Current assets ¥1.365bn vs current liabilities ¥1.19bn yield a current ratio of 114.7% and working capital of ¥175m. Quick ratio is reported equal to current due to unreported inventories; true quick liquidity may be lower. Cash and equivalents are unreported, limiting visibility on immediate liquidity. solvency: Total liabilities ¥2.109bn vs equity ¥527m. Estimated equity ratio is ~19.7% (527/2,680), indicating a leveraged balance sheet. Debt-to-equity of 4.00x and financial leverage 5.09x highlight solvency sensitivity to continued losses. capital_structure: Interest expense is modest at ¥1m this quarter, but negative EBIT produces a formal interest coverage of -174x. With limited equity buffer, any refinancing, rent commitments, or covenant thresholds warrant monitoring. Specific debt composition and maturities are not disclosed.

Cash Flow Quality

earnings_quality: Operating CF is unreported this quarter, so we cannot reconcile earnings to cash. Given operating losses, cash earnings are likely weak absent significant non-cash add-backs, which are also unreported (depreciation shown as zero). FCF_analysis: Free cash flow is unreported. With negative operating income and unknown capex, FCF is uncertain but likely negative unless working capital released cash. working_capital: Working capital is positive at ¥175m. Composition details (inventories, receivables, payables days) are not disclosed, restricting analysis of cash conversion and potential seasonal swings.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is ¥0 and payout ratio 0.0%, appropriate given negative net income. Resumption would require a return to sustainable profitability. FCF_coverage: FCF coverage is unreported; with losses and unknown OCF/capex, there is no basis for distributions without eroding balance sheet strength. policy_outlook: Given high leverage (~20% equity ratio by our estimate) and ongoing losses, a conservative policy (no dividend) is likely to persist until consistent positive OCF and earnings are demonstrated.

Risk Assessment

Business Risks:

• Traffic volatility and consumer discretionary sensitivity in food-service/Izakaya format
• Input cost inflation (food, beverages) and utilities pressure on gross and operating margins
• Labor cost inflation and staffing constraints impacting service levels and wage ratios
• Occupancy cost rigidity (rents, common area maintenance) limiting flexibility
• Execution risk in store portfolio optimization and potential closures
• Brand relevance and competitive intensity in casual dining/night economy

Financial Risks:

• High leverage with estimated equity ratio ~19.7% and D/E ~4.0x
• Sustained operating losses eroding equity and constraining financing
• Limited visibility on liquidity due to unreported cash and cash flows
• Refinancing and covenant risks if lenders require profitability improvements
• Interest rate risk on any floating-rate debt (though current interest expense appears low)

Key Concerns:

• Operating margin at -7.1% despite 3.6% YoY revenue growth indicates weak operating leverage
• Negative ROE (-36.6%) amplified by high financial leverage
• Unreported cash flow and depreciation impede assessment of cash burn and asset intensity
• Thin liquidity buffer (current ratio 1.15x) with unknown immediate cash position

Investment Implications

Key Takeaways:

• Top-line growth (+3.6% YoY) did not translate into profit improvement; operating loss remains.
• Gross margin (32.1%) is adequate but overwhelmed by fixed SG&A and occupancy/labor costs.
• High leverage (financial leverage 5.09x; D/E 4.0x) magnifies losses and solvency risk.
• Liquidity cushion is thin (current ratio 114.7%); cash position undisclosed.
• Return metrics are depressed (ROE -36.6%), driven by negative margins.
• Dividend remains suspended; capital preservation takes precedence.

Metrics to Watch:

• Monthly same-store sales growth and average ticket/traffic trends
• Store-level EBITDA margin and corporate SG&A as % of sales
• Gross margin progression vs food and utility cost inflation
• Labor cost ratio and hours productivity
• Cash and cash equivalents, OCF, and capex to assess cash burn/FCF
• Equity ratio and net debt to EBITDA (once EBITDA reported)
• Interest coverage and any covenant headroom
• Progress on store closures/renegotiations and rent ratios

Relative Positioning: Compared to domestic small-cap food-service peers, SANKO exhibits weaker profitability (negative operating margin) and a lower equity buffer (estimated equity ratio ~20% vs peers often ~30–40%), leaving it more sensitive to demand shocks and cost inflation.

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