KIKKOMAN CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥358.61B
• Operating Income: ¥39.63B
• Net Income: ¥35.03B
• EPS: ¥33.34

Income Statement

Balance Sheet

Cash Flow Statement

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

Kikkoman (2801) reported FY2026 Q2 (cumulative) results with modest top-line growth but margin compression. Revenue rose 0.9% YoY to 3,586.1, while operating income declined 5.6% YoY to 396.33, indicating negative operating leverage as costs outpaced revenue. Gross profit was 1,224.89, implying a gross margin of 34.2%, broadly resilient despite cost pressures in raw materials and logistics. SG&A expenses rose to 798.68, a 22.3% ratio to sales, compressing operating margin to 11.0% from roughly 11.8% a year ago (based on back-calculation). Net income fell 9.9% YoY to 313.15, with an effective tax rate of 28.6%; profit before tax was 430.39. Total comprehensive income reached 403.26, exceeding net income by 90.11, suggesting favorable other comprehensive income items (likely FX translation or securities valuation). DuPont analysis shows ROE at 5.9%, with an 8.7% net margin, 0.513x asset turnover, and 1.32x financial leverage—indicating returns are primarily margin-driven with conservative leverage. The balance sheet is strong: total assets 6,994.81, equity 5,312.94, equity ratio 74.9%, and low financial debt (short-term 38.42, long-term 144.00). Accounts receivable of 825.84, inventories of 1,048.96, and accounts payable of 606.46 imply a working capital-intensive model but manageable cash conversion. Cash and equivalents are sizeable at 1,061.84, providing ample liquidity. Debt-to-equity ratio reported at 0.31x appears to reflect total liabilities/equity; interest-bearing debt to equity is only about 0.03x, underscoring low financial risk. EPS (basic) was 33.34 JPY on average shares of 939.3 million, consistent with reported net income. Book value per share is calculated at 568.70 JPY, underscoring a strong capital base. While dividends per share are unreported, the calculated payout ratio is 77.4%, which looks elevated relative to H1 earnings and warrants monitoring given seasonality. Data limitations are material: operating cash flow, capex, and dividend cash outflows are unreported, constraining cash flow quality and dividend coverage analysis. Overall, Kikkoman displays solid balance sheet strength and stable gross margin resilience, but H1 shows negative operating leverage and softer net profitability, likely reflecting cost normalization and mixed volume/mix dynamics.

Profitability Analysis

ROE_decomposition: ROE 5.9% = Net margin 8.7% x Asset turnover 0.513 x Financial leverage 1.32x. Returns are driven mainly by margins; asset turnover is moderate and leverage conservative. margin_quality: Gross margin 34.2% (1,224.89/3,586.10) remains healthy. SG&A ratio 22.3% (798.68/3,586.10) elevated versus prior year, compressing operating margin to 11.0% (396.33/3,586.10). Back-calculation implies prior OPM ~11.8%, indicating ~0.8pp YoY contraction. Effective tax rate 28.6% (123.17/430.39) is within a normal range for the group under IFRS. operating_leverage: Revenue +0.9% YoY vs operating income -5.6% YoY evidences negative operating leverage in H1. Cost absorption and SG&A growth outpaced sales, likely due to inflationary inputs, marketing/logistics normalization, and possibly FX effects.

Growth Assessment

revenue_sustainability: Top-line growth was modest at +0.9% YoY. With inventory levels at 1,048.96 and AR at 825.84, sell-through versus sell-in should be monitored for demand normalization. Pricing likely supported revenue; volume growth is unclear from available data. profit_quality: Operating margin declined to 11.0% despite stable gross margin, implying SG&A intensity or mix effects. Net income -9.9% YoY outpaced the operating income decline, indicating additional below-OP items (e.g., FX, equity method income of 1.98) and a normalized tax rate. outlook: Assuming raw material cost headwinds ease gradually and price/mix is maintained, margins could stabilize in H2. However, limited volume visibility and potential FX volatility introduce uncertainty. The strong balance sheet provides flexibility to invest for growth and absorb near-term cost pressures.

Financial Health

liquidity: Cash and equivalents are 1,061.84, sizable relative to short-term loans of 38.42. Current assets total 3,348.49, but current liabilities are unreported; thus, current and quick ratios cannot be calculated. Working capital reported equals current assets due to missing current liabilities. solvency: Equity ratio 74.9% indicates a conservatively financed balance sheet. Total liabilities/equity approximates 0.31x (1,633.64/5,312.94). Interest-bearing debt totals 182.42, implying interest-bearing debt/equity ~0.03x, very low. capital_structure: Low net debt position with ample cash supports resilience. Equity base is robust (retained earnings 4,152.15, capital surplus 138.60), enabling continued strategic investment and shareholder returns.

Cash Flow Quality

earnings_quality: Total comprehensive income (403.26) exceeds net income (313.15) by 90.11, suggesting positive OCI items (e.g., FX translation or valuation gains). Without OCF, we cannot reconcile earnings to cash. FCF_analysis: Operating CF and capex are unreported; Free Cash Flow cannot be assessed. Cash balance is strong at 1,061.84, providing a buffer even if FCF were temporarily weak. working_capital: Estimated cash conversion metrics using H1 balances: Inventory days ~82 (1,048.96/2,330.80182), Receivables days ~42 (825.84/3,586.10182), Payables days ~47 (606.46/2,330.80*182), implying a cash conversion cycle ~77 days. Net working capital tied up (AR + Inventory − AP) ~1,268.34, indicating meaningful but manageable investment. Note: Estimates use end-period balances and H1 duration assumptions.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 77.4% on reported earnings; DPS is unreported. For a semiannual period, this looks high and may reflect seasonality or policy targeting full-year payout stability. FCF_coverage: Not assessable due to missing OCF and capex. Cash reserves (1,061.84) and low net debt provide coverage flexibility in the near term. policy_outlook: With strong equity and cash, the company can likely maintain a stable dividend policy, but sustaining a ~77% payout hinges on H2 earnings and FCF normalization. Management’s long-term policy parameters are not disclosed here.

Risk Assessment

Business Risks:

• Raw material price volatility (soybeans, wheat, sugar) and logistics costs impacting gross margin
• Foreign exchange fluctuations given overseas revenue exposure (USD, EUR, Asia)
• Demand normalization post-pricing actions affecting volume elasticity
• Competitive intensity from private labels and regional brands
• Geopolitical and supply chain disruptions affecting procurement and distribution
• Regulatory and food safety compliance across multiple jurisdictions
• Brand equity risk if pricing outpaces perceived value

Financial Risks:

• Potential working capital build (inventory and receivables) in a soft demand environment
• OCI volatility (securities valuation/FX translation) impacting equity
• Interest rate risk is limited but present on floating-rate exposures
• FX transaction and translation risk affecting earnings and comprehensive income

Key Concerns:

• Negative operating leverage in H1 despite revenue growth
• Elevated payout ratio (77.4%) versus H1 earnings with unreported OCF/FCF
• Limited visibility on capex and cash generation due to data gaps

Investment Implications

Key Takeaways:

• Revenue +0.9% YoY with operating income -5.6% YoY indicates margin pressure and negative operating leverage.
• Operating margin 11.0% (down ~0.8pp YoY) despite a stable 34.2% gross margin suggests SG&A intensity and mix effects.
• ROE 5.9% is primarily margin-driven; leverage is conservative (1.32x).
• Balance sheet is strong: equity ratio 74.9%, interest-bearing debt/equity ~0.03x, cash 1,061.84.
• Total comprehensive income exceeds net income by 90.11, implying positive OCI contribution.
• Working capital cycle estimated at ~77 days; monitor inventory and receivables dynamics.
• Dividend payout ratio calculated at 77.4% looks high versus H1 earnings; FCF coverage unassessable.

Metrics to Watch:

• Price/mix versus volume growth by region and category
• Raw material and logistics cost trends and hedging outcomes
• SG&A trajectory and efficiency initiatives
• FX impacts on revenue and margins (USD/JPY, EUR/JPY)
• Operating cash flow, capex, and FCF once disclosed
• Inventory days, receivable days, and payables discipline
• H2 margin recovery versus H1 contraction

Relative Positioning: Within Japanese Food & Beverage peers, Kikkoman maintains above-average balance sheet strength (high equity ratio, low net debt) and solid brand-led margins, though near-term profitability momentum lags given H1 negative operating leverage.

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