ASAHIMATSU FOODS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.63B
• Operating Income: ¥26M
• Net Income: ¥32M
• 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

Asahimatsu Foods (TSE: 29110) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥3.633bn, down 2.6% YoY, while operating income rose 41.1% to ¥26m, highlighting effective cost control against a soft top line. Gross profit was ¥1,034.9m, implying a gross margin of 28.5%, a solid level for a processed foods maker given input cost volatility. Operating margin remained thin at 0.7%, underscoring limited pricing power and high fixed-cost absorption, but the YoY operating gain suggests improving efficiency and mix. Ordinary income of ¥94m exceeded operating income by ¥68m, indicating meaningful non-operating tailwinds (e.g., financial income or subsidies), which buoyed overall profitability. Net income doubled YoY to ¥61m (NPM 1.68%), supported by those non-operating gains, though core operating earnings remain modest. EBITDA was ¥257.4m (7.1% margin), and depreciation of ¥231.4m is heavy relative to operating income, pointing to an asset-intensive model and subdued core returns. DuPont metrics show ROE at 0.73% (margin 1.68% × asset turnover 0.339 × leverage 1.28), reflecting thin margins and low turnover despite conservative leverage. Liquidity is strong with a current ratio of 383% and quick ratio of 266%, and solvency is robust with debt-to-equity at 0.23x and interest coverage of 13.8x. Total assets were ¥10.706bn and equity ¥8.393bn, implying an estimated equity ratio near 78%, even though the disclosed “equity ratio” line item shows 0.0% (not disclosed). Operating cash flow was slightly negative at ¥-7.0m versus positive net income, suggesting a working capital build or timing effects; inventories stood at ¥1.536bn, hinting at seasonal stocking or slower sell-through. Financing cash flow was positive at ¥109.8m, likely reflecting borrowings or lease inflows; investing cash flow was not disclosed in this period’s summary. Dividend information shows DPS and payout as 0.00 in the dataset, which should be treated as not disclosed for this period rather than an actual zero. Balance sheet strength provides ample buffer to navigate cost/input volatility and demand normalization. The key challenge is translating gross margin stability into durable operating margin expansion without relying on non-operating income. Data gaps (cash balance, equity ratio disclosure, investing cash flows, share count) limit full precision, but available figures indicate a conservatively financed, stable business with improving operating momentum. Near-term focus should be on sustaining gross margin, normalizing working capital to restore positive OCF, and strengthening core operating profitability.

Profitability Analysis

ROE is 0.73%, decomposed as net margin 1.68% × asset turnover 0.339 × financial leverage 1.28. Operating margin is 0.7% (¥26m/¥3,633m), ordinary margin is 2.6% (¥94m/¥3,633m), and net margin is 1.68% (¥61m/¥3,633m). The spread between ordinary and operating income (¥68m) signals reliance on non-operating gains to support earnings. Gross margin at 28.5% is healthy for the category, but SG&A and fixed costs compress operating margin, indicating limited operating leverage at current volumes. EBITDA margin of 7.1% versus operating margin of 0.7% highlights heavy depreciation (¥231.4m), consistent with an asset-intensive production base. Interest expense is minimal (¥1.88m), and interest coverage is strong at 13.8x, reinforcing that core profitability constraints stem from operations rather than financing costs. Effective tax rate is not disclosed in the summary; approximating from net income (¥61m) and income tax (¥24.1m) implies roughly 28–29% on an estimated pre-tax basis, broadly in line with Japan’s statutory range. Overall, margin quality is adequate at the gross level, but the business needs either volume growth or further cost efficiency to lift operating margins sustainably.

Growth Assessment

Revenue declined 2.6% YoY to ¥3.633bn, suggesting subdued demand or pricing pressure in core categories. Despite the top-line softness, operating income rose 41.1% YoY, pointing to cost containment, mix improvements, or procurement normalization (e.g., raw material/energy relief). Ordinary income strength versus operating income indicates non-operating support; absent this, underlying profit growth is modest. Net income rose 101.7% YoY to ¥61m, but the quality of growth depends on sustaining operating gains and reducing reliance on non-operating items. The gross margin at 28.5% provides a base for profitability if SG&A discipline continues. Asset turnover of 0.339 is low, suggesting limited scale efficiency; improving turnover through sales growth or inventory optimization would support ROE. Near-term outlook hinges on input cost trends (soy/beans, packaging, energy), pricing actions with retail partners, and channel mix. If working capital normalizes (inventory/receivables), OCF should improve, reinforcing earnings quality. Overall, revenue sustainability appears moderate with stable category fundamentals, while profit quality will improve if operating margin expands independently of non-operating gains.

Financial Health

Liquidity is strong: current assets ¥5,026.8m vs. current liabilities ¥1,311.5m yields a current ratio of 383% and a quick ratio of 266%. Working capital is ample at ¥3,715.3m, aided by sizeable inventories of ¥1,535.8m. Solvency is robust: total liabilities ¥1,968.6m against equity ¥8,393.0m implies low leverage (D/E 0.23x). Interest burden is minimal (¥1.88m) with coverage of 13.8x. Although the disclosed equity ratio shows 0.0% (not reported), a simple estimate from balance sheet totals suggests ~78% equity ratio (¥8.393bn/¥10.706bn). Financing CF was +¥109.8m, which modestly increased financial resources but does not materially alter the conservative capital structure. Overall, the company has substantial balance sheet flexibility and low solvency risk.

Cash Flow Quality

Operating CF was slightly negative at ¥-7.0m versus net income of ¥61.0m, resulting in an OCF/NI ratio of -0.11. This gap likely reflects working capital movements (e.g., inventory build or receivables timing), consistent with inventories of ¥1.536bn. Depreciation of ¥231.4m is significant relative to operating income, indicating non-cash charges are a large component of earnings and that cash conversion will depend on working capital control. Investing CF is shown as 0 in the dataset (treated as not disclosed here), so Free Cash Flow cannot be reliably derived; given negative OCF and ongoing maintenance capex implied by depreciation, underlying FCF likely trended weak in the period. Earnings quality would improve with normalization of inventory and receivables, restoring positive OCF. Monitoring cash conversion, inventory turnover, and capex commitments is key to assessing sustainability.

Dividend Sustainability

The dataset shows DPS and payout ratio as 0.00, which should be treated as not disclosed for this period. With net income of ¥61m and slightly negative OCF, near-term dividend capacity is primarily a function of balance sheet strength rather than period cash generation. The company’s conservative leverage (D/E 0.23x) and estimated high equity ratio (~78%) suggest capacity to sustain a modest dividend policy if one exists historically; however, FCF coverage cannot be assessed as investing cash flows and capex are not disclosed. Payout sustainability would hinge on restoring positive OCF and stabilizing operating margins above current levels. Policy outlook cannot be inferred for this quarter; clarity requires full-year guidance and historical dividend track record.

Risk Assessment

Business Risks:

• Input cost volatility (soy/beans, packaging materials, energy) affecting gross margins
• Pricing power constraints with retail and foodservice channels, including private label competition
• Domestic demand softness and demographic headwinds in Japan
• Product/category concentration in freeze-dried and tofu-related segments
• Execution risk in cost control and productivity to lift operating margin
• Supply chain and inventory management risks (obsolescence, seasonal build-ups)

Financial Risks:

• Working capital swings leading to weak operating cash flow despite positive earnings
• Dependence on non-operating income to support profit, creating earnings volatility
• Potential capex needs given high depreciation, pressuring FCF if OCF is weak
• Interest rate normalization raising borrowing costs (though current interest burden is low)
• Limited asset turnover constraining ROE absent margin expansion

Key Concerns:

• Thin operating margin (0.7%) and reliance on non-operating gains to reach ordinary income
• Negative OCF versus positive net income, pointing to cash conversion challenges
• Top-line contraction (-2.6% YoY) amid competitive and channel pressures

Investment Implications

Key Takeaways:

• Core operations improved YoY but remain low-margin; further SG&A and productivity gains are needed
• Non-operating income materially supported profits this quarter; sustainability is uncertain
• Balance sheet is strong, providing downside protection and flexibility
• Cash conversion lagged earnings due to working capital; normalization is a catalyst for FCF improvement
• Gross margin resilience (~28.5%) is a foundation for margin recovery if volume or pricing improves

Metrics to Watch:

• Operating margin and ordinary-operating income gap (quality of earnings)
• OCF/Net income and inventory turnover (cash conversion)
• Gross margin versus input cost indices (soy/packaging/energy)
• Asset turnover and sales growth (scale efficiency)
• Capex and investing cash flows (maintenance vs. growth spend)
• Interest expense trajectory and leverage (though currently conservative)

Relative Positioning: Within Japanese packaged foods peers, Asahimatsu exhibits conservative leverage and strong liquidity but lower operating margins and asset turnover, leaving ROE below peer averages; improving core operating efficiency and cash conversion are key to narrowing the 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
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