ASAHIMATSU FOODS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.63B
• Operating Income: ¥26M
• Net Income: ¥63M
• EPS: ¥33.43

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: A mixed FY2026 Q2 with resilient profit growth driven by non-operating gains and cost discipline despite a modest top-line decline. Revenue fell 2.6% YoY to 36.33, but operating income rose 41.1% YoY to 0.26, and ordinary income surged 77.8% YoY to 0.94. Net income doubled (+101.7% YoY) to 0.61, lifting the net margin to 1.7%. Gross profit was 10.13, implying a gross margin of 27.9%, with SG&A of 9.86 (27.1% of sales) leaving a very slim operating margin of 0.7%. Operating margin expanded by roughly 22 bps YoY (from about 0.49% to 0.72%) despite the revenue decline, reflecting better cost control and possibly mix/pricing. Ordinary margin improved more materially (about +117 bps YoY) as non-operating income (0.72) meaningfully exceeded operating income, with dividends (0.17) and interest income (0.07) contributing. Cash flow quality was strong: OCF was 3.58, 5.86x net income, aided by sizable depreciation (2.41) and likely working capital tailwinds. The balance sheet remains conservative with a current ratio of 360%, D/E of 0.28x, and cash/deposits of 22.78 against short-term loans of 2.49, implying low liquidity risk. However, capital efficiency is weak: ROIC was 0.3%, and DuPont-calculated ROE was only 0.7% as low asset turnover (0.339) and thin margins offset low leverage. Interest coverage is comfortable at 11.16x and debt/EBITDA is a modest 3.09x. While earnings momentum looks positive, it leans on non-operating items; core operating profitability remains fragile. Implied free cash flow appears positive when netting OCF against reported capex (-2.36), supporting reinvestment and potential dividends, though reported payout ratio of 107.7% suggests caution on sustainability if earnings remain low. Forward-looking, execution on cost pass-through, mix improvement, and SG&A containment are key to strengthening operating margins. FX and input cost movements (e.g., soy, energy) will be pivotal for margin stability. Overall, near-term outlook is stable with upside contingent on translating cost control into structurally higher operating margins while maintaining cash generation.

Profitability Analysis

ROE (DuPont) = Net Profit Margin × Asset Turnover × Financial Leverage = 1.7% × 0.339 × 1.28x ≈ 0.7% (aligns with reported). The largest driver of the YoY improvement is the net margin, which improved by about 87 bps (from ~0.81% to 1.68%), supported by both a ~22 bps operating margin expansion and a larger uplift from non-operating income (ordinary margin +~117 bps). Asset turnover at 0.339 remains structurally low, reflecting a sizeable asset base relative to H1 revenue and the capital intensity of manufacturing. Financial leverage is modest at 1.28x, limiting ROE amplification—appropriate for risk, but it also caps return potential. Business drivers: cost discipline (SG&A at 27.1% of sales) and likely incremental price/mix tailwinds helped protect gross profit against softer sales; non-operating income (dividends, interest) provided a disproportionate lift to ordinary profit. Sustainability: non-operating contributions can be volatile; without further operating leverage, margin gains may not persist. Watch for SG&A growth vs revenue; currently, SG&A intensity remains high and any deleveraging could quickly compress operating margins.

Growth Assessment

Top line contracted 2.6% YoY, indicating a soft demand environment or pricing/volume adjustments. Despite this, operating income grew 41.1% YoY to 0.26 and ordinary income +77.8% YoY to 0.94, highlighting improved cost control and strong non-operating tailwinds. Net income doubled to 0.61, lifting net margin to 1.7%. The quality of growth is mixed: operating profitability is improving but remains very thin, while non-operating gains (0.72) are a key driver of YoY upside. EBITDA was 2.67 (7.4% margin), supported by depreciation of 2.41, indicating tangible asset intensity and room for operating leverage if sales stabilize or grow. Outlook: near-term growth hinges on cost pass-through, product mix upgrades, and maintaining SG&A discipline; macro factors (input costs, FX) will influence gross margin. Without a rebound in sales or further cost efficiencies, sustaining current profit growth will be challenging.

Financial Health

Liquidity is strong: current ratio 359.8% and quick ratio 248.3% comfortably exceed benchmarks; no warning flags (CR >> 1.0). Solvency is conservative: D/E 0.28x; total liabilities 23.13 vs equity 83.93. Interest-bearing debt comprises short-term loans of 2.49 and long-term loans of 5.75; debt/EBITDA ~3.09x is moderate. Interest coverage at 11.16x signals ample headroom. Maturity mismatch risk appears low with cash/deposits at 22.78 exceeding short-term loans (2.49) and robust working capital of 37.52. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF of 3.58 is 5.86x net income, indicating high earnings quality, driven by non-cash charges (depreciation 2.41) and likely working capital release. Capex was -2.36; implied free cash flow (OCF - capex) is about +1.22, suggesting capacity to fund reinvestment from internal cash generation. With investing CF details unreported, full FCF reconciliation is limited, but the positive spread of OCF over capex supports sustainability. No clear signs of working capital manipulation from the limited dataset; inventories (16.10) vs payables (4.06) look typical for the business, and cash is ample.

Dividend Sustainability

Reported payout ratio is 107.7%, implying dividends in excess of current period earnings capacity; however, DPS and total dividends were not disclosed in the dataset. On cash terms, implied FCF of ~1.22 suggests dividends could be covered if the aggregate dividend is modest; coverage cannot be confirmed without actual dividend cash outflow. Balance sheet strength and cash reserves (22.78) provide flexibility, but sustained payout above earnings is not prudent if operating margins remain sub-1%. Policy outlook likely favors stability, but improving core profitability is necessary to align payout with earnings over time.

Risk Assessment

Business Risks:

• Input cost and energy price volatility pressuring gross margins (e.g., soy, packaging, utilities).
• Price competition and private label pressure in domestic food retail limiting pricing power.
• Demand softness evidenced by -2.6% YoY revenue; volume sensitivity could erode operating leverage.
• Concentration in a mature domestic market with demographic headwinds impacting growth.

Financial Risks:

• High reliance on non-operating income (0.72 > operating income 0.26) to support profits.
• Very low ROIC (0.3%) and ROE (0.7%) highlight capital inefficiency.
• Potential dividend strain if payout remains above earnings (reported 107.7% payout).
• Inventory valuation risk amid cost volatility impacting working capital and cash conversion.

Key Concerns:

• Sustainability of margin improvements without a rebound in sales.
• SG&A intensity at 27.1% of sales leaves minimal operating buffer.
• Asset turnover at 0.339 constrains returns; requires higher utilization or portfolio optimization.
• FX exposure on imported raw materials potentially impacting costs and non-operating income.

Investment Implications

Key Takeaways:

• Profit growth in Q2 was achieved despite a revenue decline, but heavily aided by non-operating income.
• Operating margin improved ~22 bps YoY to ~0.7%, yet remains thin; further operating leverage is needed.
• Cash generation is strong relative to earnings (OCF/NI 5.86x), supporting reinvestment and potential dividends.
• Balance sheet is robust (CR ~360%, D/E 0.28x), limiting financial risk.
• Capital efficiency is the main weakness (ROIC 0.3%); unlocking returns requires higher turnover and margin.

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio each quarter.
• Gross margin sensitivity to raw material and energy costs.
• Non-operating income volatility (dividends, interest) and its share of ordinary profit.
• OCF vs. net income and working capital movements (inventory and receivables).
• Capex intensity vs. EBITDA growth and ROIC trend.

Relative Positioning: Within Japanese packaged food peers, the company exhibits stronger liquidity and low leverage but weaker capital efficiency and thinner operating margins; near-term performance is more reliant on non-operating items than best-in-class peers that deliver higher ROIC through scale, mix, and cost advantages.

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