KENKO Mayonnaise Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥45.94B
• Operating Income: ¥1.94B
• Net Income: ¥2.25B
• EPS: ¥83.45

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Kenko Mayonnaise Co., Ltd. (TSE: 29150) reported FY2026 Q2 consolidated results marked by a notable contraction in profitability amid relatively flat top-line performance. Revenue was ¥45.9 billion, down 1.1% YoY, indicating broadly stable demand but some softness in volume or pricing. Gross profit was ¥10.85 billion with a gross margin of 23.6%, suggesting cost pressures or adverse mix effects compared with the prior year (prior gross margin not disclosed). Operating income fell 39.1% YoY to ¥1.94 billion, compressing the operating margin to approximately 4.2%, versus an estimated ~6.9% in the prior-year period, evidencing significant negative operating leverage. Ordinary income of ¥2.00 billion exceeded operating income, implying net non-operating gains of roughly ¥0.06 billion; net income came in at ¥1.25 billion, down 44.6% YoY. The provided DuPont metrics indicate a net profit margin of 2.71%, asset turnover of 0.712x, and financial leverage of 1.58x, producing a calculated ROE of 3.05%. Liquidity remains solid, with a current ratio of 186.6% and quick ratio of 172.8%, supported by working capital of ¥15.9 billion. The balance sheet appears conservative with total assets of ¥64.6 billion and total equity of ¥40.9 billion, implying modest leverage (assets/equity 1.58x; debt-to-equity 0.59x). Cash flow from operations was ¥1.53 billion, 1.23x net income, signaling adequate earnings-to-cash conversion this period. Interest coverage is strong at 88.4x based on operating income and reported interest expense of ¥22 million, indicating low near-term refinancing risk. Reported investing cash flow is zero (likely an undisclosed figure), resulting in a mechanically computed free cash flow of zero; this should be treated as a disclosure limitation rather than economic reality. Dividend data (DPS, payout, and FCF coverage) are shown as zero and should be considered unreported, not actual. Several fields (equity ratio, cash and equivalents, share counts) are also unreported, which constrains precision on per-share and capital policy analysis. Overall, the quarter shows resilient liquidity and solvency but a meaningful deterioration in margins and ROE, with cost structure and pricing the key swing factors for the second half. Near-term focus should remain on gross margin recovery, passing through input cost changes, and maintaining operating discipline to stabilize profitability.

Profitability Analysis

ROE_decomposition: DuPont indicates ROE of 3.05% = Net margin 2.71% × Asset turnover 0.712 × Financial leverage 1.58. The modest net margin, rather than leverage or turnover, is the primary constraint on ROE. Operating margin is ~4.23% (¥1,944m/¥45,941m), while ordinary income margin is ~4.36% and net margin 2.71%, reflecting meaningful below-OP items and taxes. margin_quality: Gross margin at 23.6% and EBITDA margin at 6.7% point to a relatively thin spread after overheads. The YoY operating income decline of 39.1% against a 1.1% revenue dip implies cost inflation and/or unfavorable mix outpaced pricing actions. Ordinary income exceeded operating income by ~¥60m, implying minor net non-operating gains; however, tax expense and potential extraordinary items reduced net profitability more than typical. operating_leverage: With revenue down 1.1% and operating income down 39.1%, implied operating leverage was sharply negative. Prior-year operating margin is estimated at ~6.9% versus ~4.2% currently, highlighting fixed-cost absorption pressure and/or increased SG&A intensity.

Growth Assessment

revenue_sustainability: Revenue was ¥45.9bn (-1.1% YoY), signaling broadly stable demand but limited growth momentum. Without segment or geographic detail, sustainability hinges on pricing retention and volume stabilization amid competitive conditions in processed foods/condiments. profit_quality: Net income of ¥1.25bn decreased 44.6% YoY, disproportionately to sales, indicating deterioration in profit quality due to margin compression. The OCF/Net Income ratio of 1.23x is a positive indicator that earnings were backed by cash, though one period is insufficient to infer trend. outlook: Key swing factors for 2H include raw material and logistics costs, price pass-through, and product mix improvement. If input cost pressures ease and pricing holds, margins can recover; absent that, ROE will likely remain in the low single digits.

Financial Health

liquidity: Current ratio 186.6% and quick ratio 172.8% indicate ample short-term liquidity. Working capital stands at ¥15.9bn. Cash and equivalents are unreported (shown as zero), so precise cash runway cannot be assessed, but overall current assets of ¥34.3bn vs current liabilities of ¥18.4bn suggest comfortable coverage. solvency: Total assets ¥64.6bn and equity ¥40.9bn imply assets/equity of 1.58x; the stated debt-to-equity ratio is 0.59x, indicating moderate leverage. Interest expense is minimal at ¥22m, and interest coverage of 88.4x suggests low financial risk. capital_structure: The equity ratio is shown as 0.0% but is clearly unreported; using provided balances, equity/asset is approximately 63.3%. Leverage is conservative for the sector, providing flexibility for investment and price volatility.

Cash Flow Quality

earnings_quality: OCF of ¥1.53bn vs net income of ¥1.25bn yields OCF/NI of 1.23x, indicating reasonable cash realization of earnings this period. Depreciation and amortization of ¥1.16bn supports EBITDA of ¥3.10bn, consistent with reported operating profit. FCF_analysis: Investing cash flow is unreported (displayed as zero), so free cash flow cannot be reliably calculated. Given D&A of ¥1.16bn, underlying maintenance and growth capex likely consumed some cash, but the magnitude is unknown. Financing CF was -¥0.83bn, implying net outflows to debt service, lease, or shareholder returns. working_capital: Inventories of ¥2.53bn appear modest relative to revenue scale, but without prior-period inventory data, changes cannot be assessed. Working capital of ¥15.9bn underpins liquidity; changes in receivables/payables are not disclosed, limiting deeper analysis.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.0%, which should be treated as undisclosed rather than actual. EPS is ¥83.45 for the period; without a disclosed dividend, payout cannot be assessed. FCF_coverage: FCF is shown as zero due to undisclosed investing CF; therefore, FCF coverage of dividends cannot be evaluated. The company’s strong liquidity and low interest burden suggest capacity, but policy and actual FCF are unknown. policy_outlook: No dividend policy details are available in the data provided. Given the margin compression and focus on stabilizing profitability, the near-term stance may prioritize reinvestment and balance sheet resilience, but this is an assumption in the absence of disclosures.

Risk Assessment

Business Risks:

• Input cost volatility for edible oils, eggs, and other raw materials affecting gross margin
• Pricing power constraints in retail and foodservice channels
• Product mix shifts toward lower-margin SKUs
• Competition from private labels and domestic peers
• Demand sensitivity to consumer sentiment and foodservice traffic

Financial Risks:

• Margin compression translating into lower ROE and cash generation
• Potential working capital swings given receivables and inventory needs
• Capex requirements (undisclosed) that could pressure FCF in a soft margin environment
• Currency exposure on imported raw materials if applicable (not disclosed)

Key Concerns:

• Operating income down 39.1% YoY on a 1.1% sales decline indicates adverse operating leverage
• Gross margin at 23.6% and EBITDA margin at 6.7% leave limited buffer for further cost inflation
• ROE at 3.05% is below typical cost of equity benchmarks, requiring margin repair to improve returns

Investment Implications

Key Takeaways:

• Top line broadly stable (-1.1% YoY), but profitability deteriorated materially
• Operating margin compressed from an estimated ~6.9% to ~4.2%
• ROE at 3.05% constrained primarily by low net margin
• Liquidity strong (current ratio 186.6%, quick ratio 172.8%) and leverage moderate (D/E 0.59x)
• Earnings-to-cash conversion acceptable this period (OCF/NI 1.23x), but capex/FCF undisclosed
• Interest coverage very strong (88.4x), suggesting low near-term financial strain

Metrics to Watch:

• Gross margin trajectory and input cost pass-through
• Operating margin recovery and SG&A efficiency
• OCF sustainability and actual capex to derive true FCF
• Inventory and receivable turns to monitor working capital discipline
• Pricing and mix effects in core mayonnaise and prepared foods categories

Relative Positioning: Within Japanese packaged food/condiment peers, Kenko Mayonnaise currently exhibits weaker profitability momentum (sharp YoY OP decline) but maintains a comparatively conservative balance sheet and strong liquidity, positioning it defensively should cost pressures persist.

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
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