ROCK FIELD CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Q1 of FY2027 saw increases in both revenue and profit, with the recovery in operating income from ¥0.1B in the previous year period to ¥1.8B being the most important point. Revenue was ¥126.8B (+1.6% YoY), operating income was ¥1.8B (+1700.0%), ordinary income was ¥2.1B (+383.5%), and net income was ¥1.0B (compared with a ¥0.1B loss in the previous year period). Positive operating leverage resulting from an improved gross margin and restrained growth in selling, general and administrative expenses was the primary driver of the profit recovery. However, OCF was negative ¥3.7B, indicating that current-period profit has not been converted into cash generation.

Factors Affecting Results

【Revenue】Revenue was ¥126.8B (+1.6% YoY), representing progress of 24.3% against the full-year plan of ¥521.6B (+2.1%), a start that was broadly in line with assumptions. The company operates a single segment, the Prepared Foods Business, and does not disclose a segment breakdown.

【Profit and Loss】The gross margin improved to 57.8% from 57.1% in the previous year period, while selling, general and administrative expenses increased to ¥71.5B (+0.6% YoY), below the rate of revenue growth. As a result, the SG&A ratio declined to 56.4%, and the operating margin expanded to 1.4% (0.1% in the previous year period). Ordinary income reached ¥2.1B, supported by non-operating income including ¥0.2B in insurance dividends; however, the effective tax rate of 49.7% restrained net income growth, leaving net income at ¥1.0B. Both revenue and profit increased.

Segment Analysis

The company operates a single segment, the Prepared Foods Business, and segment disclosures have been omitted.

Key Financial Indicators

【Profitability】The operating margin improved to 1.4% (0.1% in the previous year period), the net margin was 0.8%, and the gross margin improved to 57.8% (57.1% in the previous year period); however, the absolute levels remain low. Annualized ROE was 1.4%, and annualized ROIC was 2.2%, indicating room for improvement in capital efficiency.【Cash Flow Quality】OCF was negative ¥3.7B, and the OCF/net income ratio was negative 3.75x relative to net income of ¥1.0B, indicating that profit has not been converted into cash. The primary factors were a ¥4.6B increase in accounts receivable and a ¥4.7B decrease in the bonus provision.【Investment Efficiency】Capital expenditures of ¥2.2B amounted to only 49% of depreciation and amortization expense of ¥4.5B, indicating that replacement investment continues to remain below depreciation and amortization.【Financial Soundness】With an equity ratio of 83.0%, interest-bearing debt of ¥1.5B, and a current ratio of 354.0%, the financial foundation is extremely robust.

Cash Flow Analysis

OCF was negative ¥3.7B, deteriorating from negative ¥1.4B in the previous year period. A ¥4.6B increase in accounts receivable, a ¥4.7B decrease in the bonus provision, and a ¥1.1B increase in inventories were sources of cash outflow, which could not be fully offset by a ¥0.2B increase in accounts payable. Investing CF was negative ¥2.9B, including capital expenditures of ¥2.2B, which remained below depreciation and amortization expense of ¥4.5B. Free cash flow was negative ¥6.7B, and together with negative financing CF of ¥4.8B (¥3.8B in dividend payments and ¥1.1B in repayments of borrowings and lease liabilities), cash and cash equivalents decreased by ¥11.5B during the quarter. Nevertheless, cash and deposits of ¥120.2B and low interest-bearing debt provide substantial financial flexibility.

Earnings Quality

The improvement in operating income was attributable to recurring factors—an improved gross margin and restrained SG&A expenses—while the only temporary factor was the recognition of ¥0.1B in impairment losses as an extraordinary loss. Ordinary income exceeded operating income by ¥0.3B due to non-operating income such as ¥0.2B in insurance dividends and ¥0.1B in dividend income, which should be evaluated separately from the core business. The effective tax rate was high at 49.7%, and the tax burden restrained net income growth. From an accrual perspective, changes in working capital, primarily a ¥4.6B increase in accounts receivable and a ¥4.7B decrease in the bonus provision, prevented the improvement in accounting profit from being reflected in OCF, resulting in an OCF/net income ratio of negative 3.75x. In terms of earnings quality, the delay in cash conversion was a defining feature of the quarter.

Earnings Forecasts and Guidance

The full-year plan calls for revenue of ¥521.6B (+2.1% YoY), operating income of ¥5.3B (-32.0%), and ordinary income of ¥5.8B (-27.2%), with no revisions to the forecasts as of the current quarter. As of Q1, progress rates were 24.3% for revenue, 33.9% for operating income, 35.4% for ordinary income, and 31.6% for net income, all exceeding the standard progress rate of 25%. However, the full-year operating income plan represents a year-on-year decline, suggesting that cautious assumptions regarding cost burdens and profitability have been incorporated for the second half. Accordingly, the Q1 improvement in profit cannot simply be extrapolated as the full-year level.

Shareholder Returns

The full-year dividend forecast remains unchanged at ¥24.0 per share. Based on the full-year EPS forecast of ¥11.98, the payout ratio is approximately 200.3%, a level at which dividends cannot be covered by current-period profit alone. Dividend payments during the quarter were ¥3.8B, while OCF was negative ¥3.7B and free cash flow was negative ¥6.7B, indicating that dividends were not covered by internally generated cash flow during the quarter. Nevertheless, financial capacity in the form of cash and deposits of ¥120.2B and an equity ratio of 83.0% supports the company’s ability to pay dividends for the time being.

Risk Factors

1. Low profitability and limited ability to pass through external costs: The operating margin remains at 1.4%, and earnings are likely to fluctuate significantly if increases in raw materials, packaging materials, energy, labor, and logistics costs cannot be sufficiently passed on through pricing.

2. Weak cash conversion of profit: The OCF/net income ratio is negative 3.75x, driven by a ¥4.6B increase in accounts receivable, a ¥4.7B decrease in the bonus provision, and a ¥1.1B increase in inventories. If this condition persists, working capital requirements could affect cash management even during a period of revenue and profit growth.

3. Continued investment restraint: Capital expenditures remain at only 49% of depreciation and amortization expense. If this level continues, the renewal of manufacturing, store, and logistics facilities may be delayed, potentially affecting future supply capacity and cost competitiveness.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (food_beverage)

Profitability and Returns

Both the operating margin and net margin are below the industry median, indicating that profitability is relatively low within the industry.

Growth and Capital Efficiency

The revenue growth rate is also below the industry median, indicating that the momentum of top-line expansion is somewhat weaker than that of the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. While revenue increased only 1.6% YoY, the operating margin improved by approximately 134bp due to the improved gross margin and restrained SG&A expenses, marking a shift toward revenue and profit growth during the quarter.

2. OCF was negative ¥3.7B, and the OCF/net income ratio was negative 3.75x, indicating that the improvement in accounting profit has not translated into cash generation. The contributing factors were increases in accounts receivable and inventories and a decrease in the bonus provision; working capital trends going forward will therefore be a key area of focus.

3. The full-year operating income plan represents a 32.0% YoY decline, in contrast to the significant improvement in profit during Q1. The plan may incorporate cautious assumptions regarding profitability in the second half, making it important to monitor progress over the full year.

Theoretical Share Price (For Reference)

Sensitivity: ¥821–¥866 at ±1% for the cost of equity, and ¥836–¥848 at ±0.1 for ω.

Notes:

• Since 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 from the full-year forecast).

(Calculation model: Residual Income Model (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated solely from publicly available 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, after consulting a professional as necessary.

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