SATO FOODS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥20.48B
• Operating Income: ¥2.02B
• Net Income: ¥732M
• EPS: ¥379.64

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

Sato Foods Co., Ltd. (29230) delivered a solid topline and a sharp profit rebound in FY2026 Q2 on a consolidated JGAAP basis. Revenue grew 9.8% YoY to 204.8, reflecting resilient demand and likely price/mix benefits in core packaged rice and related products. Gross profit reached 50.64, implying a gross margin of 24.7%, which appears consistent with price pass-through and/or easing input cost pressures. Operating income surged 134.4% YoY to 20.21, lifting the operating margin to roughly 9.9%, a step-change versus the prior year’s depressed level. Ordinary income rose 105.9% YoY to 22.09, supported by 3.15 in non-operating income against 1.04 in non-operating expenses, with dividend income of 0.34 contributing. EBITDA was 34.73 (17.0% margin), underscoring improved operating leverage and cost discipline. ROE calculated via DuPont stands at 8.0%, built on a 9.3% net margin, 0.336x asset turnover, and 2.55x financial leverage; this aligns with the reported ROE. Liquidity looks comfortable with a current ratio of 196.7% and a quick ratio of 174.9%, and working capital of 117.46. The balance sheet shows total assets of 610.33 and equity of 239.73 (equity ratio approximately 39%), with interest-bearing loans of about 170.52 (36.00 short-term and 134.52 long-term), implying modest leverage. Interest coverage is very strong at 50.6x, reflecting limited interest burden. That said, operating cash flow was negative at -14.17 despite solid profitability, likely due to working capital investment and timing effects; estimated free cash flow (OCF – capex) was around -28.99, and financing inflows of 38.02 helped bridge funding needs. There are internal inconsistencies in the reported statement relationships: operating income (20.21) exceeds gross profit minus SG&A (50.64 – 42.02 = 8.62), implying other operating items or classification differences; additionally, profit before tax (10.74) is well below ordinary income (22.09), suggesting significant extraordinary losses, while net income (19.14) exceeds that PBT figure, implying unusual tax/extraordinary effects—these limit clean comparability. EPS (basic) was 379.64 yen and book value per share is estimated at 4,753 yen, supporting the 8.0% ROE outcome. Overall, the quarter shows healthy demand, improved margins, and strong coverage metrics, offset by negative OCF and higher reliance on financing. Data gaps (e.g., R&D, dividends paid, investing cash flows breakdown) and the noted statement anomalies warrant caution when interpreting run-rate cash generation and sustainability.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 9.3% (Net income 19.14 / Revenue 204.80)
• asset_turnover: 0.336x (Revenue 204.80 / Assets 610.33)
• financial_leverage: 2.55x (Assets 610.33 / Equity 239.73)
• calculated_ROE: 8.0% (matches reported 8.0%) margin_quality:
• gross_margin: 24.7% (50.64 / 204.80)
• operating_margin: ≈9.9% (20.21 / 204.80)
• EBITDA_margin: 17.0% (34.73 / 204.80)
• commentary: YoY operating profit growth (+134%) far outpaced revenue (+9.8%), indicating significant margin recovery from prior-year cost pressures and improved fixed-cost absorption. The spread between gross margin (24.7%) and operating margin (~9.9%) suggests SG&A intensity remains meaningful, but the EBITDA margin at 17.0% confirms underlying efficiency gains. operating_leverage: High in the period: modest top-line growth translated into a large increase in operating income, implying either normalization of input costs (e.g., rice, energy, packaging) and/or successful price increases. Continued leverage depends on sustaining volumes and avoiding cost inflation re-acceleration. notes_on_inconsistencies: Operating income (20.21) exceeds gross profit minus SG&A (50.64 – 42.02 = 8.62), implying other operating income or classification differences in JGAAP presentation. Ordinary income (22.09) reconciles roughly with operating income plus net non-operating items, but the sharp drop to profit before tax (10.74) indicates material extraordinary losses; net income (19.14) then exceeding PBT suggests unusual tax effects or line-item presentation that limits clean margin comparability.

Growth Assessment

revenue_sustainability: Revenue +9.8% YoY to 204.80 reflects solid demand and/or pricing in core categories. For a staple food producer, this growth rate suggests both market resilience and likely price pass-through. Sustainability will hinge on consumer elasticity to pricing and competitive responses. profit_quality_and_trend: Operating income +134.4% YoY to 20.21 signals strong recovery from prior pressures. EBITDA margin at 17.0% corroborates broad-based improvement. However, the mismatch between ordinary income (22.09) and profit before tax (10.74) points to non-recurring items affecting statutory profit in the period. outlook_drivers: Raw material (rice) procurement prices and availability, including harvest dynamics and inventory policies, Energy and packaging cost trajectory; further easing would support margins, while spikes would compress them, Effectiveness of price/mix strategies and product innovation in microwavable and ready-to-eat offerings, Channel mix (retail vs. food service) and promotion cadence heading into seasonally stronger periods, Potential FX effects on imported materials and packaging components

Financial Health

liquidity:

• current_ratio: 196.7% (238.89 / 121.42)
• quick_ratio: 174.9%
• working_capital: 117.46
• cash_and_deposits: 48.68
• commentary: Short-term liquidity is comfortable, with ample current assets and meaningful cash on hand. Accounts receivable are 101.10, indicating reliance on trade credit; accounts payable at 9.24 are comparatively low, implying limited supplier financing. solvency_and_capital_structure:
• total_assets: 610.33
• total_liabilities: 263.64
• equity: 239.73 (equity ratio ≈39.3%)
• interest_bearing_debt: ≈170.52 (36.00 short-term + 134.52 long-term)
• debt_to_equity_variants: ['Total liabilities / equity: 1.10x (as reported)', 'Gross interest-bearing debt / equity: ≈0.71x', 'Net debt (gross debt – cash): ≈121.84']
• interest_coverage: 50.58x (EBIT / interest expense), indicating very strong debt service capacity. maturity_profile_and_flexibility: Long-term loans (134.52) dominate, suggesting moderate refinancing risk and stable funding. Financing CF of +38.02 indicates active use of borrowings to fund capex and working capital in the period.

Cash Flow Quality

earnings_quality: Weak in the quarter: OCF/Net income at -0.74x indicates earnings did not translate into cash due to working capital build and/or timing effects. Extraordinary items and tax effects also complicate the linkage between accounting profit and cash. free_cash_flow_analysis:

• operating_CF: -14.17
• capital_expenditures: -14.82
• estimated_FCF: -28.99 (OCF – capex; Investing CF breakdown not disclosed)
• interpretation: Negative estimated FCF suggests cash consumption to support growth/capex and seasonal working capital; financing inflows covered the shortfall. working_capital_dynamics: Receivables (101.10) are large relative to payables (9.24), implying net investment in trade working capital and limited supplier credit. Inventories at 26.57 are modest, but inventory strategy (e.g., securing raw rice) may vary seasonally. data_limitations: Investing CF breakdown, dividends paid, and other cash detail are unreported, constraining full cash bridge analysis.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 18.6%, implying a conservative distribution relative to earnings. However, DPS and total dividends paid are unreported, so validation is limited. FCF_coverage: Not directly calculable from disclosures. On an estimated basis, FCF is negative this period, so dividends (if any) would be funded by balance sheet capacity rather than organic cash generation in H1. policy_outlook: Given stable balance sheet and modest leverage, capacity exists to maintain a conservative dividend. Actual policy assessment is constrained by missing DPS history and management guidance disclosure.

Risk Assessment

Business Risks:

• Raw material price volatility (domestic rice procurement costs) impacting gross margins
• Energy and packaging cost fluctuations affecting COGS
• Consumer price sensitivity and competitive pricing in staple food categories
• Channel concentration risk with major retailers and private label competition
• Operational risks in production capacity utilization and quality control

Financial Risks:

• Negative operating cash flow and reliance on financing CF in the period
• Refinancing risk related to 36.00 in short-term loans (albeit mitigated by cash balance and coverage)
• Potential earnings volatility from non-operating/extraordinary items affecting statutory profit
• Working capital intensity due to high receivables and low payables

Key Concerns:

• Statement anomalies: PBT far below ordinary income while net income exceeds PBT, indicating impactful non-recurring/tax items
• OCF/NI at -0.74x and estimated negative FCF despite strong profit rebound
• Sensitivity to cost inflation re-acceleration that could compress recently improved margins

Investment Implications

Key Takeaways:

• Top-line growth (+9.8% YoY) combined with strong operating leverage lifted operating margin to ~9.9%
• ROE at 8.0% is supported by improved net margin and moderate leverage
• Liquidity is solid (current ratio ~197%), and interest coverage is strong (50.6x)
• Cash conversion was weak in the period (OCF negative), driving reliance on financing inflows
• Extraordinary/tax effects distort statutory earnings comparability; underlying operating trend remains positive

Metrics to Watch:

• Gross and operating margin trajectory versus input cost trends
• OCF/NI and working capital turns (AR and AP days) to gauge cash conversion
• Capex levels versus capacity utilization and growth needs
• Debt trajectory (short- vs long-term) and net debt/EBITDA
• Any disclosure on DPS/payout policy and extraordinary items

Relative Positioning: Within Japan’s staple/packaged food peers, Sato’s margin recovery and high interest coverage are supportive, while cash conversion and extraordinary item noise are relative weak points in the period.

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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