House Foods Group Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥153.60B
• Operating Income: ¥5.87B
• Net Income: ¥6.44B
• EPS: ¥60.02

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

House Foods Group (2810) reported FY2026 Q2 consolidated results under JGAAP showing stable topline but pronounced operating margin compression. Revenue was ¥153.6bn, down 0.9% YoY, while operating income fell 36.6% YoY to ¥5.87bn, indicating negative operating leverage amid cost pressures and/or a less favorable mix. Ordinary income of ¥6.45bn exceeded operating income by ¥0.58bn, implying positive non-operating contributions offsetting part of the operating shortfall. Net income rose 1.6% YoY to ¥5.60bn, a notable divergence from operating income that suggests supportive below-OP items and possibly one-off factors; however, tax expense was sizeable at ¥3.07bn. Gross profit was ¥56.80bn, translating to a robust gross margin of 37.0%, but the operating margin declined to 3.8%, pointing to elevated SG&A and/or cost inflation not fully passed through. EBITDA was ¥12.19bn (7.9% margin), with depreciation/amortization of ¥6.32bn indicating a capital-intensive asset base relative to operating earnings. The DuPont breakdown yields a net margin of 3.65%, asset turnover of 0.362x, and financial leverage of 1.33x, resulting in an ROE of 1.76% for the period. Liquidity appears strong with a current ratio of 300.7% and modest leverage (liabilities/equity of 0.35x), supporting financial resilience. Operating cash flow was ¥7.68bn, exceeding net income (OCF/NI 1.37x), indicating solid earnings-to-cash conversion in the half. Financing cash flow was an outflow of ¥10.55bn, likely reflecting dividends, debt repayment, or buybacks, though dividends per share and share data were not disclosed in the provided set. Balance sheet strength is underpinned by ¥424.06bn in total assets against ¥318.36bn equity, and working capital of ¥126.68bn; inventories are modest at ¥19.60bn relative to current assets, suggesting manageable inventory risk. Interest expense was de minimis at ¥26m, with interest coverage at 225.7x, underscoring low financial risk. The reported equity ratio and several cash flow and dividend fields show as zero, which should be interpreted as undisclosed rather than actual zero. Given the revenue stability and healthy gross margin, the main near-term focus is recovering operating margin via price/mix and cost control. Overall, the company demonstrates strong balance sheet and cash conversion resilience but faces near-term profitability headwinds at the operating level. Data limitations (e.g., unreported investing CF, cash balance, equity ratio, DPS, and share counts) temper interpretation and require caution when assessing dividend sustainability and FCF.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 3.65%
• asset_turnover: 0.362x
• financial_leverage: 1.33x
• calculated_ROE: 1.76% (period basis, not annualized) margin_quality: Gross margin: 37.0% (¥56.80bn/¥153.60bn) indicates solid value-add and pricing power at the gross level., Operating margin: 3.8% (¥5.87bn/¥153.60bn), down sharply YoY in tandem with -36.6% YoY OP, signaling SG&A pressure and/or incomplete cost pass-through., EBITDA margin: 7.9% suggests adequate cash earnings buffer but compressed versus gross margin, highlighting high overhead and/or marketing spend., Ordinary margin: 4.2% (¥6.45bn/¥153.60bn) exceeding OP margin by 0.4ppt due to positive non-operating items. operating_leverage: Revenue down 0.9% YoY while OP down 36.6% YoY demonstrates negative operating leverage in the half., D&A at ¥6.32bn vs OP ¥5.87bn implies low EBIT coverage by operating cash cost structure; fixed cost absorption likely pressured profits., Interest burden negligible (¥26m), so margin compression is operational, not financial.

Growth Assessment

revenue_sustainability: Topline -0.9% YoY to ¥153.60bn suggests broadly stable demand with slight softness., Gross profit - magnitude of gross margin (37.0%) implies pricing/mix remains supportive despite volume or input cost variability. profit_quality: Net income +1.6% YoY to ¥5.60bn despite OP decline indicates reliance on non-operating contributions in the period., Tax expense of ¥3.07bn against ordinary income of ¥6.45bn implies an effective tax rate around 47–48%, limiting the translation of pre-tax profits to net. outlook: Key to re-accelerating earnings will be restoring operating margin via cost optimization and calibrated price/mix actions., Stable balance sheet allows continued brand and capacity investments; however, lack of disclosed investing CF limits visibility on growth capex., Watch for recovery in operating income run-rate relative to revenue stabilization as an indicator of improved operating leverage.

Financial Health

liquidity: Current ratio: 300.7%, Quick ratio: 269.6% — ample short-term liquidity., Working capital: ¥126.68bn; inventories ¥19.60bn are 10.3% of current assets, suggesting modest inventory risk. solvency: Total liabilities/Equity: 0.35x (¥112.20bn/¥318.36bn) — conservative leverage., Interest coverage: 225.7x, reflecting very low interest burden and high capacity to service debt. capital_structure: Assets: ¥424.06bn; Equity: ¥318.36bn; implied financial leverage (Assets/Equity) 1.33x., Equity ratio field is undisclosed in the dataset; based on provided totals, implied equity ratio approximates 75% (¥318.36bn/¥424.06bn), indicating a strong equity base.

Cash Flow Quality

earnings_quality: OCF ¥7.68bn vs Net income ¥5.60bn yields OCF/NI of 1.37x — solid cash conversion., EBITDA of ¥12.19bn supports cash generation despite EBIT compression. FCF_analysis: Investing CF is undisclosed (reported as zero), preventing precise FCF calculation., Indicatively, positive OCF provides capacity for capex and distributions; full-year FCF will depend on the capex profile and working capital seasonality. working_capital: Large positive working capital base (¥126.68bn) underpins OCF stability., Detailed movements by component are not available; inventories appear contained relative to current assets, reducing risk of cash tie-up.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio fields are undisclosed in the dataset (zeros indicate non-disclosure)., With EPS at ¥60.02 and positive OCF, capacity for distributions exists in principle; however, actual payout cannot be assessed from the provided data. FCF_coverage: FCF not computable due to undisclosed investing CF; FCF coverage metrics are therefore not assessable this period. policy_outlook: Financing CF outflow of ¥10.55bn suggests cash returned to stakeholders and/or debt reduction, but the split is unknown., Assess sustainability upon disclosure of full-year capex, investing CF, and dividend policy details.

Risk Assessment

Business Risks:

• Input cost inflation and FX pass-through risk compressing operating margins.
• Demand elasticity to price hikes potentially affecting volume/mix in core categories.
• Competitive intensity in packaged foods impacting promotional spend and SG&A.
• Potential supply chain and logistics cost volatility affecting gross-to-operating margin conversion.

Financial Risks:

• Operating margin sensitivity to small topline fluctuations (negative operating leverage observed).
• Limited visibility on investing cash flows and cash balance due to non-disclosure in this dataset.
• Tax rate volatility (estimated ~47–48% this period) affecting net earnings predictability.

Key Concerns:

• Sharp YoY decline in operating income (-36.6%) despite near-flat revenue.
• Reliance on non-operating items to bridge from operating to ordinary income.
• Inability to assess FCF and dividends without investing CF and DPS disclosure.

Investment Implications

Key Takeaways:

• Topline stable (-0.9% YoY) but significant operating margin compression to 3.8%.
• Net income resilience (+1.6% YoY) aided by non-operating items despite higher estimated tax burden.
• Balance sheet conservative with low leverage (0.35x liabilities/equity) and strong liquidity (current ratio ~3.0x).
• Cash conversion solid (OCF/NI 1.37x), though FCF visibility is limited.
• Restoration of operating leverage is central to the earnings recovery narrative.

Metrics to Watch:

• Operating margin trajectory vs. gross margin (cost pass-through effectiveness).
• SG&A ratio and marketing efficiency.
• Price/mix vs. volume trends driving revenue and asset turnover.
• Investing cash flow and capex intensity to gauge FCF and growth reinvestment.
• Tax rate normalization and impacts on net margin.
• Working capital turns (especially inventory days) and OCF consistency.

Relative Positioning: Within Japanese packaged foods, House Foods exhibits stronger-than-average balance sheet conservatism and liquidity, but near-term profitability lags on operating margin due to negative operating leverage; recovery depends on cost discipline and pricing execution.

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