| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥555.3B | ¥570.8B | -2.7% |
| Operating Income / Operating Profit | ¥14.7B | ¥11.3B | +29.7% |
| Ordinary Income | ¥19.0B | ¥15.5B | +22.2% |
| Net Income / Net Profit | ¥14.2B | ¥9.8B | +45.0% |
| ROE | 2.0% | 1.4% | - |
The FY2026 results recorded Revenue of ¥555.3B (¥-15.5B YoY -2.7%), a decline, but due to SG&A reductions Operating Income reached ¥14.7B (¥+3.4B +29.7%), Ordinary Income ¥19.0B (¥+3.5B +22.2%), and Net Income attributable to owners of the parent ¥14.2B (¥+4.4B +45.0%), delivering a significant increase in profit. Operating margin improved to 2.6% (up +0.6pt from 2.0% prior year), and ROE improved to 2.0% (up +0.6pt from 1.4%). Although the company achieved higher profits on lower sales, Operating Cash Flow was significantly reduced to ¥16.5B (¥-28.4B YoY -63.2%) due to inventory build, turning Free Cash Flow negative at ¥-21.6B. Comprehensive income was ¥23.2B (¥+14.4B +163.6%), supported by an expansion in valuation differences on available-for-sale securities.
[Revenue] Revenue was ¥555.3B (¥-15.5B YoY -2.7%), a decrease. In the single segment of Processed Foods Business, changes in market conditions or product mix are inferred to have impacted results. Cost of sales was ¥397.5B (¥-10.9B -2.7%), declining in line with sales, but gross margin declined to 28.4% from 28.9% a year earlier (-0.5pt). Increases in raw material and packaging costs or adverse mix effects appear to have pressured gross margin. SG&A was ¥143.2B (¥-11.4B -7.4%), achieving reductions exceeding the sales decline, and SG&A ratio improved to 25.8% from 26.9% a year earlier (-1.1pt).
[Profitability] Operating Income was ¥14.7B (¥+3.4B +29.7%), a substantial increase. Despite the decline in gross margin, large SG&A cuts improved Operating margin to 2.6% (up +0.6pt from 2.0%). Non-operating income totaled ¥5.2B, mainly dividend income of ¥2.8B. Non-operating expenses were ¥0.9B (including ¥0.3B foreign exchange loss), minimal. Ordinary Income was ¥19.0B (¥+3.5B +22.2%), maintaining an increasing trend. Extraordinary items resulted in a net loss of ¥2.0B (extraordinary gains ¥1.4B, extraordinary losses ¥3.4B), but impairment losses decreased from ¥5.6B prior year to ¥0.7B, driving Pre-tax Income to ¥17.0B (¥+4.4B +35.3% from prior ¥12.6B). After deducting income taxes of ¥2.7B (effective tax rate 16.0%), Net Income attributable to owners of the parent was ¥14.2B (¥+4.4B +45.0%), a substantial increase. Conclusion: higher profits on lower sales.
[Profitability] Operating margin 2.6% (up +0.6pt from 2.0%), Net margin 2.6% (up +0.9pt from 1.7%). Gross margin declined to 28.4% (down -0.5pt from 28.9%), but SG&A ratio reduction to 25.8% (down -1.1pt from 26.9%) contributed to Operating margin improvement. ROE was 2.0% (prior year 1.4%), improved versus the company's historical performance but remains low. ROA was 1.8% (prior year 1.2%). [Investment Efficiency] Total asset turnover was 0.69x (prior year 0.72x), deteriorating due to inventory increases. [Cash Quality] Operating Cash Flow was ¥16.5B, 1.16x of Net Income ¥14.2B, indicating some conversion power but a significant decline of -63.2% from ¥44.9B prior year. Operating CF/EBITDA was 0.33x (EBITDA ¥49.8B), low, with inventory buildup compressing cash generation. Free Cash Flow was negative ¥-21.6B (Operating CF ¥16.5B - Investing CF ¥38.1B). [Financial Soundness] Equity Ratio was 87.0% (prior year 86.4%), D/E ratio 0.15x, and Current Ratio 415.2%, extremely robust. Cash and deposits were ¥102.5B, and investment securities ¥51.6B (¥+12.2B +30.9% from prior ¥39.4B), indicating no short-term liquidity concerns. Retirement benefit liabilities were ¥5.0B, down ¥-5.6B -52.8% from ¥10.6B prior year, reducing pension burden.
Operating CF was ¥16.5B (¥44.9B prior year, ¥-28.4B -63.2%), a significant decline. Subtotal (profit before depreciation) was ¥18.8B, and adding depreciation expense of ¥35.1B yields EBITDA-equivalent of approximately ¥49.8B, but working capital increases absorbed cash heavily. The main driver was an increase in inventories of ¥-24.2B (raw material inventory rose from ¥110.3B to ¥135.1B, +22.5%), with increases in trade receivables of ¥-2.3B and a decrease in retirement benefit liabilities of ¥-5.3B also weighing on cash. Corporate taxes paid were ¥-5.3B. Operating CF/EBITDA ratio was 0.33x, reflecting deteriorated cash efficiency due to inventory buildup. Investing CF was ¥-38.1B (prior year ¥-28.2B), affected by capital expenditures of ¥-27.1B, acquisition of subsidiary shares ¥-8.7B, and intangible asset purchases ¥-1.0B. Free Cash Flow turned negative to ¥-21.6B, significantly worse from ¥16.7B prior year. Financing CF was ¥-2.8B, driven mainly by dividend payments of ¥-13.1B, partially offset by new borrowings of +¥10.0B and capital injection from non-controlling interests +¥0.3B. Cash and equivalents at period-end were ¥92.5B (¥116.9B at beginning, ¥-24.4B), so liquidity remains ample, but improving cash conversion through inventory correction is an urgent issue.
Of Ordinary Income ¥19.0B, Operating Income ¥14.7B (77.4%) is from core operations, with Non-operating income ¥5.2B (dividends received ¥2.8B, interest received ¥0.2B, etc.) complementing 22.6%. Non-operating income to revenue ratio is 0.9%, below 5%, indicating the bulk of recurring income depends on core business. Extraordinary items were a net loss of ¥2.0B (extraordinary gains ¥1.4B, extraordinary losses ¥3.4B), temporary factors, but the reduction of impairment losses from ¥5.6B to ¥0.7B contributed to the large Net Income increase. Accrual ratio is -0.3% (Operating CF ¥16.5B - Net Income ¥14.2B = ¥2.3B, over Total Assets ¥800.9B), low, indicating limited accrual buildup in accounting profits. Meanwhile, Operating CF remained only 0.33x of EBITDA ¥49.8B, and inventory increase ¥-24.2B substantially pressured cash generation, warranting attention to cash-based earnings quality. Comprehensive income ¥23.2B is 1.63x Net Income ¥14.2B, with Other Comprehensive Income ¥8.9B (valuation difference on available-for-sale securities ¥8.5B, retirement benefit adjustments ¥0.4B) boosting equity, indicating increased impact of market valuation fluctuations on the financial statements.
Full Year guidance: Revenue ¥570.0B (YoY +2.6%), Operating Income ¥15.0B (YoY +2.3%), Ordinary Income ¥18.0B (YoY -5.3%), Net Income attributable to owners of the parent ¥12.4B, EPS ¥43.55, Dividend ¥23.00. Versus guidance, actuals were: Revenue ¥555.3B at 97.4% of forecast (short), Operating Income ¥14.7B at 97.7% (slightly short), Ordinary Income ¥19.0B at 105.6% (exceeded), Net Income ¥14.2B at 114.5% (exceeded). The upside in profits was driven by SG&A reductions and support from non-operating income (dividends received, etc.). The revenue shortfall suggests differences in assumed market conditions or product mix. EPS was actual ¥50.18, 15.2% above forecast ¥43.55, materially exceeding planned earnings per share. However, weakness in cash generation due to inventory increases may not have been fully reflected in guidance, and inventory correction progress will be key to achieving next period's profit plan.
Annual dividend is ¥46.00 (interim ¥23.00, year-end ¥23.00), unchanged from prior year. Dividend payout ratio based on Net Income is 91.7% (total dividends ¥13.1B ÷ Net Income ¥14.2B), high. With Free Cash Flow of ¥-21.6B versus dividends of ¥13.1B, FCF coverage is -0.61x, indicating dividends this period relied on cash balances. However, strong balance sheet—cash and deposits ¥102.5B, investment securities ¥51.6B, Equity Ratio 87.0%—supports short-term sustainability. If next period EPS of ¥43.55 under company forecast is achieved, a dividend of ¥23.00 implies a payout ratio of 52.8%, normalizing distribution and potentially improving the balance between retained earnings accumulation and shareholder returns. Mid-term sustainability will require Free Cash Flow improvement via inventory correction and strengthened realization of returns on capital expenditures.
Inventory buildup / asset efficiency risk: Inventories increased by ¥15.4B (of which raw materials ¥13.5B) and rose ¥24.2B year-on-year, with inventory turnover days extended to approximately 142 days (rough estimate: raw materials ¥135.1B ÷ Cost of Sales ¥397.5B × 365 days × 0.34). Working capital accumulation is estimated to produce a CCC of 172 days, and the low Operating CF of ¥16.5B versus EBITDA ¥49.8B (0.33x) is primarily driven by this. Failure to normalize inventory would risk weakening cash generation, constraining investment capacity and shareholder returns.
Gross margin pressure risk: Gross margin decreased to 28.4% from 28.9% (-0.5pt). Rising raw material and packaging costs or worsening product mix are likely causes. If gross margin continues to decline amid a -2.7% sales decrease, SG&A cuts alone may be insufficient to sustain Operating margin, raising concerns over the sustainability of the profit structure. Delays in passing on costs or intensifying competition could further compress gross margin.
Investment securities valuation volatility risk: Investment securities amounted to ¥51.6B (6.4% of total assets), up +30.9% from ¥39.4B prior year. Valuation differences on available-for-sale securities totaled ¥24.5B, representing 3.5% of equity ¥696.9B, increasing the sensitivity of equity and ROE to market price fluctuations. Of Comprehensive Income ¥23.2B, ¥8.5B was valuation difference on securities; in a market correction scenario, equity could decline and ROE may be pressured.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.6% | 5.0% (3.3%–8.4%) | -2.4pt |
| Net Margin | 2.6% | 3.2% (1.9%–6.6%) | -0.6pt |
Operating margin is 2.4pt below the industry median of 5.0%, indicating low profitability within the food sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -2.7% | 5.4% (1.0%–8.6%) | -8.1pt |
Revenue growth of -2.7% is 8.1pt below the industry median of 5.4%, showing weaker growth.
※ Source: Company compilation
The company achieved higher profits on lower sales through SG&A reductions, but gross margin fell 0.5pt and inventories increased by ¥24.2B, substantially deteriorating asset efficiency and cash conversion. With Operating CF/EBITDA at 0.33x and Free Cash Flow ¥-21.6B, earnings quality is unbalanced. Next period structural improvements should focus on inventory correction and gross margin recovery via price and mix improvements to shorten CCC.
Financial soundness is very high with Equity Ratio 87.0%, D/E ratio 0.15x, and Current Ratio 415.2%, providing strong short-term resilience. However, the expansion of investment securities ¥51.6B (+30.9%) and valuation differences ¥24.5B that have boosted equity also raise sensitivity to market volatility. Fundamental improvement in asset efficiency is essential to escape the low ROE of 2.0%. The payout ratio of 91.7% is high, but ample cash balances support short-term sustainability.
This report was automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on publicly available financial statements. Investment decisions are your own responsibility; consult a professional advisor if necessary.