SHINOBU FOODS PRODUCTS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥31.23B
• Operating Income: ¥1.40B
• Net Income: ¥1.05B
• EPS: ¥90.19

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

Verdict: Solid Q2 performance with double-digit profit growth, modest margin expansion, and strong cash conversion. Revenue rose 9.3% YoY to 312.35, with operating income up 14.4% YoY to 13.97 and net income up 11.4% YoY to 10.45. Operating margin improved to 4.5% (approx.) versus ~4.3% a year ago, reflecting operating leverage. Gross profit reached 46.94, implying a 15.0% gross margin this quarter. Ordinary income increased 10.9% to 13.85, with minimal non-operating drag (net non-operating -0.12). Net profit margin printed 3.4%, up slightly YoY. EBITDA was 21.34, yielding a 6.8% margin, indicating stable depreciation intensity. Cash generation was strong: operating cash flow of 19.72 exceeded net income by 1.89x, signaling high earnings quality. The balance sheet remains sound: current ratio at 117.5% (above 1.0 but below the 1.5 comfort threshold), D/E at 0.95x, and interest coverage at 82x. ROE calculated at 6.9% (NPM 3.4% × AT 1.060 × leverage 1.95x), in line with the reported figure. ROIC at 8.3% sits at the high end of management benchmarks, suggesting efficient capital use. Core FCF (OCF − capex) was approximately +9.23, largely funding buybacks of 9.07; total financing CF was -15.86, implying additional outflows (e.g., dividends or debt changes) not fully visible. Despite many unreported line items (e.g., dividend cash amount, investing CF detail), the disclosed data show improved profitability and healthy liquidity. The modest margin gains appear driven by better cost control and operating leverage rather than one-off items. Forward-looking, continued revenue growth with cost pass-through discipline could support further incremental margin expansion, while the current leverage and cash generation provide capacity for ongoing shareholder returns and maintenance capex.

Profitability Analysis

DuPont decomposition: ROE 6.9% = Net profit margin 3.4% × Asset turnover 1.060 × Financial leverage 1.95x. The largest YoY contribution appears to be a slight improvement in operating and net margins: operating margin rose from ~4.27% to ~4.47% (≈+20 bps), and net margin from ~3.28% to ~3.35% (≈+7 bps). Business driver: revenue growth of 9.3% outpaced operating expense growth, lifting operating income by 14.4% and indicating positive operating leverage; non-operating items were near-neutral, and tax rate was a manageable 23.5%. Asset turnover (1.060) is steady for a fresh foods producer; no evidence suggests a material shift in asset intensity this quarter. Financial leverage at 1.95x remains moderate, with interest expense only 0.17 and coverage at 82x, so leverage did not materially drive ROE changes. Sustainability: the modest margin uplift is likely sustainable if raw material and energy costs remain stable and price/mix discipline continues; however, the extent of further expansion may be limited in a low-margin food category. Watchpoints: lack of SG&A granularity (unreported) limits verification, but operating income growth outpacing revenue implies SG&A discipline; no red flag of SG&A growth exceeding revenue is evident from available data.

Growth Assessment

Top-line growth of 9.3% YoY to 312.35 is healthy for a prepared foods company and appears volume/mix driven with some pricing. Operating income grew 14.4%, indicating operating leverage from cost controls and scale. Ordinary income (+10.9%) and net income (+11.4%) tracked OI with minimal non-operating noise. Gross margin at 15.0% is consistent with a chilled/fresh foods mix; margin expansion occurred primarily at the operating level. Profit quality is supported by OCF/NI of 1.89x and an 82x interest coverage, suggesting durable earnings. Outlook: assuming steady convenience-store demand and manageable inputs (rice, seafood, packaging, utilities), mid-single to high-single digit revenue growth with flat-to-slightly higher margins is plausible. ROIC at 8.3% indicates value-accretive growth, but ROE at 6.9% remains below typical 8–10% investor thresholds, implying room to optimize capital structure or margins.

Financial Health

Liquidity: Current ratio 117.5% and quick ratio 117.1% are adequate (above 1.0), though shy of the 1.5 comfort benchmark; no warning trigger. Cash (56.06) plus receivables (64.94) cover current liabilities (109.21), limiting near-term refinancing risk. Solvency: D/E 0.95x is conservative for the sector; long-term loans total 33.06. Interest burden is minimal (interest expense 0.17) with 82x coverage. Maturity mismatch: short-term loans not disclosed, but sizable accounts payable (47.28) are matched by liquid current assets; residual risk is modest. Off-balance sheet: none disclosed in the data provided.

Cash Flow Quality

OCF/Net income is 1.89x, indicating high-quality earnings with strong cash conversion. Core FCF approximates +9.23 (OCF 19.72 − capex 10.49), sufficient to fund maintenance and a portion of shareholder returns. Financing CF was -15.86, including share repurchases of 9.07 and likely dividends/debt flows (not disclosed), suggesting some draw on cash balances or debt to complete returns. Working capital signals show no manipulation flags from available point-in-time data; receivables are sizeable but supported by revenue scale, and inventories are low as typical for fresh daily production. Overall, cash generation appears robust and consistent with reported earnings.

Dividend Sustainability

The calculated payout ratio is 32.3%, well below the 60% caution threshold and suggestive of sustainability. While total dividends paid are unreported, OCF comfortably covers net income and approximated FCF covers capex; buybacks of 9.07 were nearly matched by core FCF of 9.23, implying capacity for a balanced return program. Absent investing CF detail, we assume capex is the primary outflow; under that assumption, dividend sustainability is supported by current cash generation and balance sheet capacity. Policy outlook: with ROIC at 8.3% and leverage modest, the company has room to maintain or modestly increase distributions if earnings growth persists.

Risk Assessment

Business Risks:

• Input cost volatility (rice, seafood, packaged ingredients, utilities) potentially pressuring low operating margins
• Channel concentration risk to convenience stores and major retailers
• Labor availability and wage inflation impacting SG&A in a labor-intensive operation
• Food safety and quality control risks inherent in fresh/chilled food manufacturing
• Demand sensitivity to weather/seasonality affecting ready-to-eat categories

Financial Risks:

• Liquidity cushion is moderate (current ratio 1.18x), leaving less room in a sudden demand shock
• Receivables concentration risk if large customers delay payments
• Potential cash flow pressure if shareholder returns exceed FCF in a weaker quarter
• Limited disclosure on short-term borrowings and investing CF introduces uncertainty

Key Concerns:

• Sustaining margin gains in a competitive, low-margin category
• Maintaining ROE above cost of equity; current 6.9% is adequate but not high
• Visibility on investing cash flows and dividend cash amount is limited in the dataset

Investment Implications

Key Takeaways:

• Profits grew double-digit with modest margin expansion and strong cash conversion
• ROIC at 8.3% suggests disciplined capital deployment; ROE at 6.9% leaves room for improvement
• Balance sheet is sound with D/E 0.95x and very strong interest coverage
• Core FCF roughly matched share buybacks; total returns appear near current FCF capacity
• Earnings quality is high (OCF/NI 1.89x), reducing downside risk from accruals

Metrics to Watch:

• Operating margin trend (target: maintain >4.5%; watch ±50 bps moves)
• OCF/NI ratio (maintain >1.0x) and FCF after capex
• Input cost indices (rice, seafood, energy) and price pass-through effectiveness
• Receivables days and customer concentration metrics
• Capex intensity vs growth (capex/revenue and ROIC maintenance ≥8%)

Relative Positioning: Within Japanese ready-to-eat/processed foods peers, Shinobu Foods exhibits solid top-line momentum, disciplined cost control, and superior cash conversion, with conservative leverage. Profitability is improving but remains in the mid-single-digit ROE range, suggesting a steady operator with scope for incremental efficiency rather than a high-margin outlier.

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