AHJIKAN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥24.94B
• Operating Income: ¥152M
• Net Income: ¥922M
• EPS: ¥23.63

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

Ajikan (29070) reported FY2026 Q2 consolidated results under JGAAP showing resilient top-line but severe margin compression. Revenue was 24,943 million yen, down 0.6% YoY, essentially flat. Gross profit was 6,891 million yen, implying a gross margin of 27.6%, but operating income fell sharply to 152 million yen (-88.3% YoY), yielding an operating margin of just 0.6%. Ordinary income of 260 million yen exceeded operating income, indicating support from non-operating items (e.g., financial income or other gains), while net income was 179 million yen (-80.5% YoY) with a net margin of 0.72%. DuPont metrics point to a low ROE of 1.03%, driven mainly by thin profitability rather than asset efficiency or leverage, as asset turnover was 0.926 and financial leverage modest at 1.56x. SG&A intensity is high: SG&A expense (calculated as gross profit minus operating income) was approximately 6,739 million yen, equivalent to about 27.0% of revenue, nearly exhausting the gross profit and leaving little operating profit. Cash generation was strong relative to earnings: operating cash flow (OCF) of 2,349 million yen implies an OCF/Net Income ratio of 13.12x, suggesting significant working capital inflows or timing benefits. Liquidity is sound, with a current ratio of 166% and a quick ratio of 124%, supported by working capital of 5,481 million yen. The balance sheet is conservative: total liabilities of 9,508 million yen against equity of 17,302 million yen produce a debt-to-equity ratio of 0.55x. Interest expense is low at 17 million yen, and interest coverage is comfortable at 8.9x (operating income basis). EBITDA was 726 million yen (2.9% margin), illustrating that even before depreciation the earnings base is thin. The effective tax rate metric shown as 0% is not meaningful given the reported income tax of 435 million yen; tax line timing or classification is likely affecting the interim view. Dividend data are not disclosed in the feed (DPS and payout shown as zero reflect non-disclosure, not actual zero), so dividend conclusions must be tentative. Several fields (Investing CF, Cash and equivalents, Equity ratio, shares, BVPS) appear unreported in the dataset and should not be interpreted as zeros. Overall, the quarter underscores pressure on operating margins amid near-flat sales, counterbalanced by healthy cash conversion and a solid balance sheet. Key to recovery will be gross margin stabilization and SG&A control, as well as sustaining working capital discipline that supported cash flow this period.

Profitability Analysis

ROE decomposition (DuPont): Net margin 0.72% × Asset turnover 0.926 × Financial leverage 1.56 ≈ ROE 1.03%, fully consistent with the reported 1.03%. Profitability is the principal drag: operating margin of 0.6% (152/24,943) is far below typical food processing benchmarks and down sharply YoY. Gross margin of 27.6% is reasonable for value-added food manufacturing but is largely consumed by SG&A (≈6,739 million yen, 27.0% of revenue), indicating limited operating leverage and potentially elevated selling/logistics/personnel costs. Ordinary income margin of 1.04% (260/24,943) above operating margin suggests non-operating gains offsetting weak core profitability; reliance on such items is not a sustainable driver. EBITDA margin of 2.9% highlights a thin earnings buffer before depreciation and interest. Interest burden is negligible (17 million yen), and interest coverage of 8.9x indicates financial costs are not the issue; the issue lies in operating cost structure. Operating leverage appears unfavorable this period: a 0.6% revenue decline translated into an 88% contraction in operating income, implying significant fixed-cost absorption or cost inflation not fully passed through. Margin quality is weak given the dependence on non-operating income to lift ordinary profit above operating profit. The sizable tax charge reported relative to net income complicates interim margin interpretation and may include period-specific items.

Growth Assessment

Revenue declined slightly (-0.6% YoY) to 24,943 million yen, suggesting stable demand but no growth catalyst evident this half. The sharp deterioration in operating income (-88.3% YoY) indicates that cost inflation or mix effects outweighed any pricing actions or efficiency gains. Given ordinary income surpassed operating income, near-term profit growth likely depends on factors outside core operations unless pricing power improves. EBITDA of 726 million yen provides limited capacity for reinvestment without improved margins. Sustainability of revenue appears intact in the near term (flat YoY), but profit quality is weak as non-operating support masks core weakness. Outlook hinges on management’s ability to restore gross margin (procurement, pricing) and curb SG&A (logistics, labor, promotions). If revenue remains flat, even modest gross margin recovery could materially lift operating income given the thin base; conversely, any further cost pressure could push operating profit towards breakeven. The high OCF this period suggests favorable working capital moves that may not recur at the same scale, so profit-led cash generation needs to improve for sustainable growth.

Financial Health

Liquidity is solid: current ratio 166.2% (13,763/8,282) and quick ratio 123.5% indicate a comfortable short-term buffer. Working capital stands at 5,481 million yen, with inventories at 3,535 million yen. Solvency is strong on a relative basis: total liabilities of 9,508 million yen versus equity of 17,302 million yen results in a debt-to-equity ratio of 0.55x. Interest expense is low (17 million yen), and coverage of 8.9x supports debt service capacity even with depressed operating profit. Total assets are 26,948 million yen, and asset turnover of 0.926 suggests moderate efficiency for a food manufacturer. The reported equity ratio of 0.0% appears undisclosed in the feed rather than truly zero; based on liabilities and equity reported, the implied equity ratio would be approximately 64% (17,302/26,948), underscoring balance sheet strength. Overall, the company maintains conservative leverage and ample liquidity, providing resilience while it works to repair margins.

Cash Flow Quality

Operating cash flow (OCF) of 2,349 million yen is robust relative to net income of 179 million yen, yielding an OCF/Net Income ratio of 13.12x. This indicates strong cash conversion driven likely by working capital inflows (e.g., inventory reduction or receivables collection) and non-cash charges (depreciation of 574 million yen). EBITDA of 726 million yen is well below OCF, reinforcing the view that working capital changes were a major positive swing this period. Investing cash flow is shown as zero in the dataset (likely undisclosed rather than actually zero), so Free Cash Flow (FCF) cannot be reliably computed; the displayed FCF value of zero should be treated as missing. Without capex data, earnings quality cannot be fully assessed through FCF coverage; however, OCF strength provides flexibility in the interim. Working capital management appears effective this half, but the sustainability of such inflows is uncertain; reversal risk exists if inventories or receivables rebuild in subsequent periods. Cash and equivalents are shown as zero in the feed and should be considered undisclosed.

Dividend Sustainability

Dividend per share (DPS) and payout ratio are shown as zero due to non-disclosure, so no definitive conclusion on current dividend policy can be drawn from this dataset. On fundamentals, depressed net income (179 million yen) and thin operating margin would constrain dividend capacity unless management prioritizes stability over earnings linkage. OCF was strong this period, but with investing CF undisclosed, FCF coverage cannot be assessed. If capex requirements are modest and the balance sheet remains conservative (D/E 0.55x), maintaining a modest dividend could be feasible; however, visibility is limited without DPS and capex data. Policy outlook will depend on margin recovery and the company’s capital allocation priorities between stability of shareholder returns and reinvestment to restore earnings.

Risk Assessment

Business Risks:

• Raw material cost volatility (e.g., agricultural/egg inputs) compressing gross margins
• Energy and logistics cost inflation impacting COGS and SG&A
• Limited pricing power with retail and foodservice customers, delaying cost pass-through
• Product mix shifts toward lower-margin items
• Operational fixed-cost absorption risk amid flat or declining volumes
• Supply chain disruptions affecting procurement and delivery timelines
• Food safety and quality control risks inherent to food manufacturing
• Foreign exchange volatility impacting imported ingredients and packaging costs

Financial Risks:

• Earnings sensitivity to small revenue changes due to thin operating margin
• Potential reversal of working capital inflows that boosted OCF
• Tax charge volatility in interim periods affecting net income
• Concentration risk if borrowing is short-term (data on maturity profile not disclosed)
• Information risk from several undisclosed items (Investing CF, cash balance, equity ratio, dividend)

Key Concerns:

• Severe decline in operating income (-88.3% YoY) despite near-flat sales
• SG&A ratio (~27% of revenue) nearly exhausting gross profit, leaving minimal operating profit
• Dependence on non-operating items to lift ordinary income above operating income
• Inability to assess capex/FCF due to missing investing cash flow disclosure
• Interim tax expense and net income relationship appears unusual, complicating earnings interpretation

Investment Implications

Key Takeaways:

• Flat revenue with pronounced margin compression led to ROE falling to ~1%
• Core profitability is weak; ordinary income benefited from non-operating items
• Balance sheet and liquidity are strong, providing cushion during margin repair
• Cash generation was robust on working capital inflows, which may not be recurring
• Visibility on FCF and dividend capacity is limited due to undisclosed investing CF and DPS

Metrics to Watch:

• Gross margin trajectory and procurement cost trends
• SG&A ratio and operating margin recovery
• Price pass-through progress with key customers
• Working capital metrics (inventory days, receivable days) and OCF sustainability
• Capex and investing cash flows to assess FCF and capital intensity
• Ordinary vs operating income mix (share of non-operating items)
• Tax rate normalization and its effect on net income

Relative Positioning: Within Japanese small-cap food manufacturers, Ajikan currently exhibits conservative leverage and strong liquidity but lags peers on operating margin and profit stability; successful cost pass-through and SG&A discipline are needed to close the profitability gap.

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