YOKOREI (2874) FY2026 Q1 Earnings Report

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Executive Summary

Although Revenue declined, Operating Income and below posted substantial increases due to improved profitability in the Cold Storage Business and normalization of non-operating gains and losses. The results represented a decline in Revenue but an increase in profit, rather than an increase in Revenue accompanied by a decline in profit. Revenue was ¥333.3B (-1.3% YoY), Operating Income was ¥21.9B (+21.1%), Ordinary Income was ¥20.9B (+145.4%), and Net Income was ¥12.4B (+731.5%). The sharp increases in Ordinary Income and Net Income were driven by the reversal from a foreign exchange loss in the same period of the previous year to a foreign exchange gain in the current period, as well as a ¥1.6B gain on the sale of investment securities. Accordingly, caution is warranted before viewing the profit growth rates above Operating Income as sustainable.

Factors Affecting Results

【Revenue】Revenue was ¥333.3B, a 1.3% YoY decline. By segment, the Cold Storage Business continued to grow, with Revenue of ¥110.5B (+7.9%), but the core Food Sales Business declined 5.0% YoY to ¥227.9B, weighing on company-wide performance.

【Profit and Loss】Operating Income was ¥21.9B (+21.1%), and the Operating Margin improved to 6.6% from 5.4% in the previous year. Gross Profit expanded to ¥46.8B (gross margin 14.1%, compared with 12.4% in the previous year), exceeding the 4.4% increase in SG&A expenses. Ordinary Income surged 145.4% YoY to ¥20.9B, primarily because non-operating expenses declined from ¥12.7B to ¥5.3B, particularly as the foreign exchange loss of ¥6.8B in the previous year turned into a foreign exchange gain of ¥0.6B in the current period. Net Income was ¥12.4B (+731.5% YoY), and Profit Before Tax included a ¥1.6B gain on the sale of investment securities. The effective tax rate was high at 44.7%, suppressing the conversion into Net Income. Overall, the results represented a decline in Revenue and an increase in profit, with the quality of earnings growth comprising both structural improvement at the Operating Income level and temporary factors at the Ordinary Income level.

Segment Analysis

The Cold Storage Business is the core business, with segment profit of ¥27.1B, accounting for 79.5% of total segment profit. It maintained high profitability, with Revenue of ¥110.5B (+7.9% YoY) and a profit margin of 24.5% (24.4% in the previous year), achieving increases in both Revenue and profit. The Food Sales Business recorded a 5.0% decline in Revenue to ¥227.9B, but segment profit more than doubled to ¥6.8B (+111.8% YoY), and its profit margin improved from 1.3% to 3.0%. Improvement in profitability despite declining Revenue is a feature of the Food Sales Business, but its sustainability depends on trends in costs and logistics expenses. Company-wide expenses (adjustments) were ¥12.1B, up from ¥10.4B in the previous year, partially offsetting the increase in total segment profit.

Key Financial Indicators

【Profitability】The Operating Margin improved to 6.6% (5.4% in the previous year), the Net Profit Margin to 3.7% (0.4% in the previous year), and ROE (annualized) to 5.9%, all representing improvements from the previous year. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥37.7B, approximately 3.0 times Net Income of ¥12.4B, representing a significant reversal from negative OCF of ¥46.8B in the same period of the previous year and indicating strong cash support for earnings. 【Investment Efficiency】Capital expenditures were ¥22.7B compared with depreciation and amortization of ¥21.6B, indicating continued investment in cold storage facilities. 【Financial Soundness】The Equity Ratio was 39.1% (38.6% in the previous year). The Current Ratio was 81.2%, calculated as current assets of ¥363.6B divided by current liabilities of ¥447.9B, below 1x, indicating a level at which short-term liquidity requires monitoring. Interest-bearing debt, including long-term borrowings of ¥678.7B and bonds of ¥100.0B, reflects the asset-intensive business structure.

Cash Flow Analysis

OCF improved substantially to ¥37.7B from negative ¥46.8B in the same period of the previous year. Trade receivables increased by ¥22.4B, placing a burden on working capital, but this was offset by a ¥3.6B decrease in inventories and an ¥8.6B increase in trade payables. Investing Cash Flow was positive at ¥3.2B, including ¥22.6B in proceeds from the sale of investment securities; however, cash-generating capacity on an operating basis, excluding ¥22.7B in capital expenditures, was approximately ¥14.9B. Financing Cash Flow was negative ¥36.5B, primarily reflecting decreases in short-term borrowings, repayments of long-term borrowings, and ¥7.1B in dividend payments. Free Cash Flow (OCF + Investing Cash Flow) was ¥40.9B, but approximately ¥14.9B of operating cash-generating capacity should be emphasized as the recurring cash-generation capability not dependent on the sale of securities.

Quality of Earnings

Profit Before Tax was ¥22.4B compared with Operating Income of ¥21.9B, a difference of only ¥0.5B. However, the extraordinary gain of ¥1.6B was a gain on the sale of investment securities and should be distinguished from recurring business earnings as a temporary factor. Of ¥4.2B in non-operating income, the ¥0.6B foreign exchange gain represented a reversal from the ¥6.8B foreign exchange loss in the previous year and was also strongly temporary in nature. OCF reached approximately 3.0 times Net Income, indicating strong cash support for current-period earnings. Meanwhile, corporate income taxes and other taxes amounted to ¥10.0B against Profit Before Tax, resulting in a high effective tax rate of approximately 44.7% and suppressing the conversion into Net Income. Overall, while the improvement in profitability at the Operating Income level includes structural elements, the sharp increases in Ordinary Income and Net Income were substantially driven by temporary factors, namely the reversal in foreign exchange gains and losses and the gain on sale of securities.

Earnings Forecast and Guidance

Q1 progress toward the full-year company forecasts was 28.2% for Revenue (¥333.3B/¥1,180.0B), 45.7% for Operating Income (¥21.9B/¥48.0B), 45.3% for Ordinary Income (¥20.9B/¥46.0B), and 40.3% for Net Income (¥12.4B/¥30.0B). Revenue progress was only slightly above the standard 25%, while all profit measures got off to a start substantially ahead of the standard pace. However, because the high progress rates for Ordinary Income and Net Income include the foreign exchange reversal and gain on the sale of investment securities, it is appropriate to regard progress in Operating Income as the more fundamental measure of achievement.

Shareholder Returns

The full-year company dividend forecast is ¥24.00 per share, and the forecast Payout Ratio, based on forecast Net Income of ¥30.0B and the average number of shares outstanding during the period, is approximately 47.2%. Q1 dividend payments amounted to ¥7.1B, within the approximately ¥14.9B in operating cash-generating capacity after deducting capital expenditures from OCF. No share buyback was confirmed. As this is an indicator based solely on dividends, no Total Return Ratio is presented.

Risk Factors

1. High leverage: Debt/EBITDA is calculated based on interest-bearing debt of ¥798.5B and EBITDA of approximately ¥43.5B (Operating Income of ¥21.9B + depreciation and amortization of ¥21.6B), placing it substantially above 4.0x. The company’s asset-intensive cold storage facility structure is financed with long-term liabilities, which may constrain financial flexibility during earnings volatility.

2. Short-term liquidity: The Current Ratio is 81.2%, calculated as current assets of ¥363.6B divided by current liabilities of ¥447.9B, below 1x, resulting in negative working capital. Cash and deposits of ¥38.9B provide only limited coverage of current liabilities, making the smooth turnover and refinancing of funds important.

3. Decline in Food Sales Business Revenue: External Revenue in the Food Sales Business was ¥227.9B, down 5.0% YoY, representing a declining trend for two consecutive periods. Although this was offset in Q1 by improved profitability (1.3%→3.0%), continued declines in sales volume would raise concerns regarding the sustainability of profitability improvements in this low-margin business.

Industry Benchmark (For Reference; Company Analysis)

Profitability and Returns

The Net Profit Margin is below the industry median and ranks toward the lower end of the industry.

Growth and Capital Efficiency

The Revenue Growth Rate is below the industry median, lagging the growth in industry top-line performance.

※Source: Company analysis

Key Points from the Results

1. Despite declining Revenue, the Operating Margin improved by 122bp, making profitability improvement centered on the Cold Storage Business the primary achievement in Q1.

2. The sharp increases in Ordinary Income and Net Income were driven by the reversal in foreign exchange gains and losses and a ¥1.6B gain on the sale of investment securities. Careful analysis is required before regarding the profit growth rate exceeding that of Operating Income as sustainable earnings power.

3. OCF reached approximately 3 times Net Income, indicating strong cash support for earnings, but the 81.2% Current Ratio and high Debt/EBITDA are key financial points requiring management alongside earnings improvement.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,151–¥1,216 at ±1% for the cost of equity, and ¥1,176–¥1,187 at ±0.1 for ω.

Notes:

• Because Net Income progress toward the full-year forecast (40%) exceeds the standard pace (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of schedule tend to exceed their forecasts; adjustments may be excessive for businesses with strong seasonality).
• Because forecast ROE is below the cost of equity, the theoretical value is below Book Value per Share.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price 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. The industry benchmarks are reference information compiled by the company based on publicly available earnings data. Investment decisions should be made at your own responsibility, with consultation with a professional as necessary.

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