Ajinomoto Co.,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥738.88B
• Operating Income: ¥80.87B
• Net Income: ¥56.73B
• EPS: ¥52.18

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

Ajinomoto Co., Inc. (TSE: 2802) reported FY2026 Q2 consolidated IFRS results showing resilient profitability amid slightly softer top-line trends. Revenue was ¥738.9 billion (-0.7% YoY), but net income improved 2.0% YoY to ¥51.2 billion, indicating margin support and cost discipline. Gross profit reached ¥271.4 billion with a gross margin of 36.7%, underscoring strong pricing/mix and product differentiation in key categories. Operating income was ¥80.9 billion, implying an operating margin of roughly 10.9% despite the revenue decline. EBITDA was ¥123.5 billion (16.7% margin), providing a healthy buffer for reinvestment and shareholder returns. DuPont analysis yields an ROE of 6.5%, driven by a 6.9% net margin, 0.424x asset turnover, and 2.23x financial leverage. The effective tax rate was 27.9%, consistent with Japan-based multinational norms. Cash generation was robust: operating cash flow of ¥81.8 billion equated to 1.60x net income, and free cash flow totaled ¥43.2 billion in the period. The balance sheet remains sound with total assets of ¥1.744 trillion and total equity of ¥783.9 billion (reported equity ratio 41.0%). Interest-bearing debt detail is incomplete, but disclosed loans total ¥217.7 billion long-term and ¥5.9 billion short-term, suggesting moderate leverage. Liquidity looks adequate with ¥164.8 billion in cash and equivalents, though full current liability detail is not disclosed. Capital allocation was active: dividends paid were ¥18.97 billion and share repurchases ¥50.01 billion in the period. The calculated payout ratio is 157% and FCF coverage 0.54x, signaling that recent shareholder returns exceed internally generated free cash flow this half. While earnings quality appears strong (OCF > NI), limited disclosure on SG&A, interest expense, and current liabilities constrains deeper line-item analysis. Overall, Ajinomoto demonstrates solid margin resilience, disciplined cash conversion, and a balanced yet active capital structure, but the elevated total cash returns versus FCF warrant monitoring if replicated over the full fiscal year. All conclusions are based solely on the available non-zero data; several zero/blank items reflect non-disclosure rather than true zeros.

Profitability Analysis

ROE is 6.5% via DuPont: Net Profit Margin 6.9% × Asset Turnover 0.424 × Financial Leverage 2.23x. The net margin is healthy for a food/ingredients company and improved YoY relative to revenue contraction, implying pricing/mix and cost control effectiveness. Gross margin stands at 36.7%, indicating strong value-add and favorable product mix in higher-margin segments. Implied operating margin is approximately 10.9% (Operating Income ¥808.70 / Revenue ¥7,388.81), suggesting robust operating efficiency; however, SG&A detail is unreported, limiting insight into cost drivers. EBITDA margin of 16.7% corroborates ample operating earnings before non-cash charges. Effective tax rate of 27.9% is broadly in line with expectations; no unusual tax items are visible from disclosed data. Equity method income of ¥4.01 billion (¥40.06 in 100M JPY) modestly supports the bottom line. Operating leverage appears favorable: with revenue down 0.7% and net income up 2.0%, fixed-cost absorption did not erode profitability, implying successful price discipline and/or mix. Without YoY operating income data, the precise degree of leverage sensitivity cannot be quantified. Overall margin quality appears solid, backed by high gross margin, decent operating margin, and strong cash conversion.

Growth Assessment

Top-line contracted slightly (-0.7% YoY) to ¥738.9 billion, indicating a mixed demand or FX/pricing environment. Despite this, net profit grew 2.0% YoY, implying improved margin capture. Gross profit of ¥271.4 billion with a 36.7% margin suggests sustained premium positioning and/or input cost normalization. The absence of SG&A detail prevents attribution of profit growth between overhead efficiency and commercial effectiveness. R&D expense disclosure is absent; innovation pipeline momentum cannot be assessed from this data set. Revenue sustainability hinges on retaining pricing, mix, and volume in core food products and amino science segments; current results imply resilience. EBITDA at ¥123.5 billion supports reinvestment capacity for growth initiatives. With asset turnover at 0.424x, capital intensity is moderate, typical for branded food and specialty ingredients; incremental growth will likely rely on mix and productivity rather than sheer asset expansion. Outlook qualitatively skews stable to cautiously positive on margins given current cost discipline, but top-line reacceleration remains a watch item. FX, raw material costs, and geographic mix are likely swing factors, though not separately disclosed here. Overall, profit quality appears better than revenue momentum in this half, which is constructive if sustained.

Financial Health

Total assets are ¥1,744.6 billion, equity ¥783.9 billion, and reported equity ratio 41.0%, reflecting a solid capital base. Total liabilities are ¥907.9 billion, implying a liabilities-to-equity ratio of ~1.16x (consistent with the reported Debt-to-Equity). Interest-bearing debt is not fully disclosed; known loans are ¥5.9 billion short-term and ¥211.8 billion long-term, suggesting modest financial leverage relative to scale. Cash and equivalents are ¥164.8 billion, providing ample liquidity for near-term needs and supporting ongoing operations and shareholder returns. Current assets total ¥701.3 billion; current liabilities are unreported, so current and quick ratios cannot be determined. Inventories of ¥286.95 billion appear significant; without AR/AP disclosure, we cannot assess the cash conversion cycle. The effective tax rate (27.9%) and lack of disclosed interest expense preclude interest coverage analysis. Overall solvency looks healthy with substantial equity and manageable disclosed debt. The capital structure appears balanced, though more detail on lease liabilities and other interest-bearing items would refine the assessment.

Cash Flow Quality

Operating cash flow was ¥81.78 billion, equal to 1.60x net income, indicating strong earnings quality and good non-cash add-backs/working-capital management. Free cash flow is ¥43.19 billion, positive after investing activities, supporting organic funding of dividends and a portion of buybacks. Investing cash flow was -¥38.59 billion; without capex disclosure, we cannot isolate maintenance vs. growth investments or the role of financial asset movements. Working capital specifics are limited: we have inventories but not receivables/payables; nonetheless, OCF strength suggests no acute working-capital drain this half. Depreciation and amortization totaled ¥42.63 billion, implying underlying cash EBITDA of ~¥166.98 billion (EBITDA plus/minus working capital and other OCF items not disclosed). With interest expense unreported, cash interest burden cannot be assessed. The positive OCF-to-NI ratio and positive FCF indicate solid cash conversion, though repeatability depends on sustaining operating margins and stable working capital.

Dividend Sustainability

Reportedly, the calculated payout ratio is 157.0% for the period, while FCF coverage is 0.54x, indicating that dividends (and total shareholder returns) exceeded internally generated free cash flow in this half. Dividends paid were ¥18.97 billion, and share repurchases were ¥50.01 billion; combined cash returns of ~¥69.98 billion compare to FCF of ¥43.19 billion. Absent annual DPS guidance and given the half-year context, the 157% payout metric may reflect period-specific timing or policy factors; nevertheless, on disclosed figures, coverage is tight. Balance sheet flexibility (¥164.8 billion cash and moderate disclosed debt) allows continued distributions near term, but sustained payout above earnings/FCF would pressure cash balances or require higher leverage. Policy framework (e.g., payout ratio or DOE) is not disclosed in this dataset; thus, dividend trajectory cannot be inferred with confidence. Monitoring full-year earnings, FCF, and any stated payout/DOE targets will be key to evaluating sustainability.

Risk Assessment

Business Risks:

• Top-line softness (-0.7% YoY) potentially reflecting volume pressure, FX, or price elasticity
• Input cost volatility affecting gross margin sustainability
• Product mix shifts between food and amino science impacting margin profile
• Competitive pricing in core categories
• Innovation/R&D pipeline visibility is limited (R&D unreported)

Financial Risks:

• Dividend and buyback outflows exceeding FCF in the half (FCF coverage 0.54x)
• Partial disclosure of interest-bearing debt and interest expense limits leverage and coverage assessment
• Inventory balance sizable without offsetting AR/AP detail, raising uncertainty on working-capital dynamics
• Potential FX translation effects on earnings and equity not quantified

Key Concerns:

• Sustainability of shareholder returns if FCF does not ramp in H2
• Dependence on pricing/mix to offset revenue softness
• Lack of SG&A detail obscures underlying efficiency trends

Investment Implications

Key Takeaways:

• Margins are resilient: gross margin 36.7%, implied operating margin ~10.9%, EBITDA margin 16.7%
• ROE at 6.5% is supported by solid net margin and moderate leverage despite low asset turnover
• Cash generation strong (OCF/NI 1.60x), translating into positive FCF of ¥43.2 billion
• Equity ratio at 41% underpins balance sheet strength
• Shareholder returns were high relative to FCF in the half (dividends + buybacks ~¥70.0 billion vs. FCF ¥43.2 billion)

Metrics to Watch:

• Revenue trajectory and price/mix sustainability after the slight YoY decline
• Operating margin trend and SG&A efficiency once disclosed
• Working-capital movements (AR/AP/inventory) and their impact on OCF
• Capex levels versus growth initiatives (capex currently unreported)
• Dividend payout and buyback pace relative to full-year FCF
• Interest-bearing debt detail and interest coverage once available

Relative Positioning: Within Japanese food and ingredients peers, Ajinomoto’s implied operating and EBITDA margins are on the higher side, supported by a premium mix and efficiency, while leverage appears moderate and equity ratio solid; revenue momentum is softer near term but profit quality and cash conversion compare favorably.

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