YOKOREI (2874) FY2026 Q2 Earnings Report

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Executive Summary

The first half of FY2026 produced a significant increase in profit, despite largely flat revenue, driven by improved profitability in the cold-storage warehousing business and an improvement in non-operating income and expenses. Revenue was ¥642.3B (+1.3% YoY), Operating Income was ¥41.1B (+35.0%), Ordinary Income was ¥43.0B (+65.3%), and interim Net Income attributable to owners of the parent was ¥28.5B (+70.5%). The primary factors behind the increase in profit were improved profitability in the food sales business and the improvement in non-operating income and expenses resulting from the shift from a foreign exchange loss in the same period of the previous year to a foreign exchange gain in the current period.

Factors Affecting Financial Performance

【Revenue】Revenue was ¥642.3B, representing a limited 1.3% YoY increase. The cold-storage warehousing business expanded, with external revenue of ¥203.6B (+10.3%), driving consolidated revenue growth. However, the food sales business recorded a decline in revenue, with external revenue of ¥438.5B (-2.5%), and the performance of the two segments offset each other.

【Profit and Loss】Operating Income was ¥41.1B (+35.0%), and the Operating Income margin improved to 6.4% from 4.8% in the same period of the previous year. The cold-storage warehousing business maintained high profitability, with segment profit of ¥47.9B (+10.0%) and a margin of 22.4%, making it the primary source of profit and accounting for 76.5% of total segment profit. Despite lower revenue, the food sales business significantly improved its segment profit to ¥14.5B (+107.4%), with its margin rising from 1.6% to 3.3%. The increase in Ordinary Income was supported by the shift from a foreign exchange loss of ¥3.5B in the same period of the previous year to a foreign exchange gain of ¥4.3B in the current period. A gain on the sale of investment securities of ¥1.6B was recorded as extraordinary income, representing a temporary factor. In conclusion, the company achieved both revenue growth—close to flat—and significant profit growth, with the quality of profit growth comprising both operating improvements and temporary non-operating and extraordinary factors.

Segment Analysis

Of total segment profit of ¥62.7B, the cold-storage warehousing business accounted for ¥47.9B, or 76.5%, and maintained high profitability with a margin of 22.4%. The food sales business showed a significant improvement in profitability, with segment profit of ¥14.5B (+107.4%) against revenue of ¥438.5B (-2.5%), and its margin increased to 3.3%. Corporate expenses (adjustments) were ¥21.6B, up +7.7% from ¥20.1B in the same period of the previous year. This increase exceeded the growth rate of consolidated revenue and was a factor that somewhat constrained operating leverage.

Key Financial Indicators

【Profitability】Operating Income margin was 6.4% (4.8% in the same period of the previous year), gross margin was 13.7% (12.1%), and Net Income margin was 4.4% (2.6%), representing improvements in all cases. Annualized ROE was 6.6%, and the Equity Ratio was 40.5%. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥97.2B, equivalent to 3.4 times Net Income attributable to owners of the parent of ¥28.5B, indicating strong cash backing for earnings. 【Investment Efficiency】Capital expenditures were ¥106.4B, reaching 2.4 times depreciation and amortization of ¥43.5B, indicating that the company is in an investment phase focused on expanding cold-storage warehousing capacity. The company has an asset-intensive structure, with fixed assets accounting for the majority of total assets at ¥1838.5B, or 84.7% of total assets. Improvement in capital efficiency therefore depends on progress in recovering investments. 【Financial Soundness】An Equity Ratio of 40.5% indicates a certain degree of stability. However, current liabilities of ¥399.1B exceeded current assets of ¥331.0B, resulting in a current ratio below 1x, and short-term liquidity requires attention. Interest-bearing debt consists mainly of long-term borrowings of ¥701.3B, while coverage of interest expense of ¥4.1B by Operating Income and non-operating income and expenses has been secured.

Cash Flow Analysis

Operating Cash Flow was ¥97.2B, a significant increase from ¥14.9B in the same period of the previous year. In addition to the increase in Net Income, improvements in working capital—including a ¥9.5B decrease in inventories and a ¥4.2B increase in accounts payable—contributed to the increase. Investing Cash Flow was negative ¥78.6B, primarily due to capital expenditures of ¥106.4B. The ¥100.7B YoY increase in construction in progress related to cold-storage warehousing also indicates that investment is in an expansion phase. Even including proceeds of ¥22.6B from the sale of investment securities, Investing Cash Flow remained a net outflow; however, Free Cash Flow, combining Operating Cash Flow and Investing Cash Flow, remained positive at ¥18.7B. Financing Cash Flow was negative ¥20.6B, as the net decrease in short-term borrowings and repayments of long-term borrowings exceeded new borrowings. Cash and cash equivalents decreased by ¥1.2B to ¥31.4B. Although operating cash generation was strong, the burden of investment and debt repayments somewhat constrained cash liquidity.

Earnings Quality

The increase in Operating Income was accompanied by an improvement in gross profit margin, indicating good earnings quality on the operating side. Non-operating income was ¥10.0B, equivalent to 1.6% of revenue, with a foreign exchange gain of ¥4.3B serving as the largest positive contributor. Non-operating income and expenses amounted to a net loss of ¥4.4B in the same period of the previous year, compared with a net gain of ¥2.0B in the current period. This improvement in non-operating income and expenses contributed approximately ¥6.4B to the increase in Ordinary Income. A gain on the sale of investment securities of ¥1.6B was recorded as extraordinary income; as a non-recurring item, it should be distinguished when assessing full-year earnings power. The gap between Profit Before Tax of ¥44.6B and Net Income of ¥28.5B—comprising ¥28.5B attributable to owners of the parent and consolidated Net Income of ¥29.0B, including ¥0.5B attributable to non-controlling interests—is primarily attributable to income taxes of ¥15.6B. Operating Cash Flow reached 3.4 times Net Income attributable to owners of the parent, indicating favorable cash conversion without undue reliance on accruals.

Earnings Forecasts and Guidance

Progress against the full-year plan was 51.4% for revenue, 58.7% for Operating Income, 67.3% for Ordinary Income, and 59.4% for Net Income attributable to owners of the parent. Progress on the profit lines all exceeded the standard 50% benchmark. However, the outperformance in Ordinary Income progress includes a foreign exchange gain of ¥4.3B, while the outperformance in Net Income progress includes a gain on the sale of investment securities of ¥1.6B; these should be distinguished from recurring earnings power. The full-year plan calls for revenue of ¥1250.0B (-0.4% YoY) and Operating Income of ¥70.0B (+65.2%). In the second half, continued profitability improvement in the food sales business and the maintenance of revenue growth in the cold-storage warehousing business will be key to achieving the plan. The company has revised its earnings forecast and dividend forecast.

Shareholder Returns

The dividend for the first half was ¥13.00 per share, resulting in a Payout Ratio of 27.0% against interim Net Income attributable to owners of the parent of ¥28.5B. No share repurchases were conducted; accordingly, this is a Payout Ratio based solely on dividends, not a Total Return Ratio. The full-year dividend forecast is ¥27.00 per share (¥13.00 interim and an assumed ¥14.00 year-end dividend), resulting in an estimated Payout Ratio of approximately 33.2% against the full-year plan for Net Income attributable to owners of the parent of ¥48.0B. Dividend coverage by first-half Free Cash Flow of ¥18.7B is sufficient, and the dividend burden is not excessive at this time.

Risk Factors

1. High leverage and short-term liquidity: Debt/EBITDA is at a high level, while the current ratio is also below 1x, leaving limited short-term funding flexibility. Sensitivity to rising interest rates and deterioration in refinancing conditions is relatively high.

2. Decline in food sales business revenue: Revenue in the food sales business decreased 2.5% YoY. Although profit increased through improved profitability in the first half, if sales volumes or product market conditions weaken, there will be limits to growth achieved solely through margin improvement.

3. Reliance on temporary factors: The increase in Ordinary Income includes a boost from a foreign exchange gain of ¥4.3B, while Net Income includes the temporary factor of a ¥1.6B gain on the sale of investment securities. Non-operating income in the second half may fluctuate due to a shift toward yen appreciation or changes in market conditions.

Industry Benchmark (For Reference; Company Research)

Key Points from the Financial Results

1. While the cold-storage warehousing business maintained revenue growth and high margins, the food sales business also demonstrated a significant improvement in profitability. As a result, Operating Income increased 35.0% even though revenue growth was limited to 1.3%. The quality of profit growth is characterized by its leadership by margin improvement.

2. First-half Operating Cash Flow was ¥97.2B, substantially exceeding Net Income, indicating favorable cash conversion. Meanwhile, capital expenditures reached 2.4 times depreciation and amortization, and construction in progress related to cold-storage warehousing increased substantially, confirming that the company is in an expansion investment phase.

3. Progress in Ordinary Income and Net Income exceeded progress in Operating Income. However, part of this outperformance depended on temporary factors such as foreign exchange gains and gains on the sale of investment securities. It will therefore be important to continue assessing underlying performance on an Operating Income basis from the second half onward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,257–¥1,330 at ±1% for the cost of equity, and ¥1,287–¥1,296 at ±0.1 for ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value will be below Book Value per Share.
• Net assets as of the quarter-end are used (there is a timing gap 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; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting a professional as necessary.

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