Ifuji Sangyo Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥16.04B
• Operating Income: ¥1.48B
• Net Income: ¥1.03B
• EPS: ¥127.35

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

Ifuji Sangyo (TSE: 29240) delivered strong top-line momentum in FY2026 Q2 with revenue of ¥16.04bn, up 44.6% YoY, but profitability lagged as operating income declined 2.8% YoY to ¥1.48bn. Gross profit of ¥2.97bn implies an 18.5% gross margin, indicating that cost of goods sold rose materially with volume and/or pricing mix, compressing conversion to operating profit. Operating margin settled at approximately 9.2%, below what the revenue surge would normally suggest, pointing to negative operating leverage in the period. Ordinary income of ¥1.50bn slightly exceeded operating income, implying small net non-operating gains, while net income was ¥1.04bn, essentially flat YoY (+0.1%), highlighting margin pressure despite revenue expansion. The DuPont breakdown shows ROE of 8.70% driven by a 6.46% net margin, 0.892x asset turnover, and modest leverage of 1.51x; ROE remains acceptable but not high for a food processor with limited financial leverage. Liquidity is strong: current ratio of 219% and quick ratio of 191% reflect a conservative working capital stance and ample headroom to meet obligations. The balance sheet is robust with total liabilities of ¥5.59bn against equity of ¥11.91bn (debt-to-equity 0.47x), limiting financial risk and interest burden; interest expense was only ¥8m with coverage of 185x. Operating cash flow was solid at ¥1.79bn, 1.73x net income, suggesting good earnings quality and likely working capital inflows or disciplined receivables collection; however, the lack of disclosed investing cash flows precludes a reliable free cash flow calculation. EBITDA of ¥1.70bn and a 10.6% EBITDA margin indicate healthy cash earnings, but the EBITDA-to-OP gap (D&A ¥224m) is moderate, pointing to manageable capital intensity. The effective tax rate implied by income tax expense (¥479m) versus pre-tax profit is roughly 32%, consistent with standard statutory rates; the reported 0.0% ETR in the summary metrics appears to be a placeholder. Dividend information (DPS, payout, FCF coverage) and cash balances were not disclosed in the dataset and should not be interpreted as literal zeros. Similarly, the equity ratio shown as 0.0% and share data (outstanding/treasury shares, BPS) are undisclosed rather than zero, limiting certain per-share and capital efficiency analyses. Overall, the period reflects a volume and/or price-led sales expansion with margin compression, robust operating cash generation, and a conservative capital structure. Key dynamics to monitor are input cost normalization, pricing pass-through to customers, and any normalization of the egg market that could influence gross margins. Despite data gaps, the available figures depict a financially resilient company with mid-to-high single-digit ROE and strong liquidity. Near-term outlook hinges on sustaining revenue gains while stabilizing unit margins and operating leverage. The company appears well positioned to fund operations internally given strong OCF and low interest burden, even though capex and dividend visibility are limited by disclosure gaps.

Profitability Analysis

ROE_decomposition: ROE 8.70% = Net Profit Margin 6.46% × Asset Turnover 0.892 × Financial Leverage 1.51. The modest leverage and reasonable turnover underpin an adequate, but not elevated, ROE for the sector. margin_quality: Gross margin 18.5% (GP ¥2,968m on revenue ¥16,036m) and operating margin ~9.2% (OP ¥1,480m) indicate material cost absorption and/or pricing mix that limited flow-through despite strong sales. Net margin at 6.46% is compressed by normal tax expense (~32% implied) and minor non-operating items. EBITDA margin at 10.6% suggests cash earnings resilience, but the OP-to-GP conversion near 49.9% points to operating cost inflation (labor, energy, logistics) and possibly promotional or contract pricing pressure. operating_leverage: Revenue rose 44.6% YoY while operating income fell 2.8% YoY, evidencing negative operating leverage in this period. This implies that incremental gross profit was offset by higher operating expenses and/or gross margin dilution, a pattern consistent with rapid price normalization in inputs, lagged pass-through, or an adverse sales mix (e.g., lower-margin products or channels gaining share).

Growth Assessment

revenue_sustainability: The 44.6% YoY revenue expansion is robust and likely reflects a combination of volume recovery and price effects; sustainability will depend on stability of raw egg prices, contract pass-through mechanisms, and customer demand in foodservice and manufacturing channels. profit_quality: Operating income declined despite the revenue surge, signaling that current growth is not fully profit-accretive. Net income growth was flat (+0.1% YoY), indicating that cost dynamics and pricing discipline are the key swing factors. Interest burden is negligible, so profitability is predominantly operationally driven. outlook: Absent visibility on capex and product mix, near-term profit trajectory hinges on restoring gross margin and cost control to regain positive operating leverage. With low financial leverage and strong OCF, the company has capacity to invest in efficiency (automation, procurement) to support margins if needed.

Financial Health

liquidity: Current assets ¥9,967m vs. current liabilities ¥4,549m yield a current ratio of 219% and a quick ratio of 191% (inventory ¥1,288m). Working capital stands at ¥5,418m, providing a substantial liquidity buffer. solvency: Total liabilities ¥5,588m vs. equity ¥11,906m imply debt-to-equity of 0.47x and financial leverage of 1.51x. Interest expense is minimal (¥8m) with 185x coverage, indicating very low solvency risk under current conditions. capital_structure: The balance sheet is equity-heavy with conservative leverage, affording flexibility. The reported equity ratio of 0.0% is an undisclosed placeholder; based on totals, the equity ratio would be approximately 66% (¥11,906m/¥17,975m) if computed from the provided balances.

Cash Flow Quality

earnings_quality: OCF of ¥1,789m equals 1.73× net income (¥1,036m), signaling strong cash conversion and suggesting favorable working capital movements and/or non-cash charges (D&A ¥224m) supporting cash earnings. FCF_analysis: Investing cash flows were undisclosed (shown as 0), so free cash flow cannot be reliably calculated. Using OCF alone suggests internal funding capacity is solid, but the absence of capex data prevents assessment of maintenance vs. growth investment needs. working_capital: Spot balances show inventories at ¥1,288m, but period-to-period changes are not provided. Given high OCF/NI, working capital likely released cash this period (e.g., receivables collection or payables management), though specific drivers cannot be confirmed without movement details.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are undisclosed (placeholders read as 0). With EPS at ¥127.35 and low interest burden, earnings capacity to support distributions appears reasonable, but an evidence-based payout ratio cannot be computed without actual DPS. FCF_coverage: FCF coverage cannot be assessed due to undisclosed investing cash flows (capex). OCF is robust, but sustainability of distributions should be tied to true FCF after maintenance capex, which is not available. policy_outlook: Dividend policy cannot be inferred from the dataset. Historical or management guidance would be required. Given the conservative balance sheet, there is theoretical capacity for returns, but disclosure gaps preclude conclusions.

Risk Assessment

Business Risks:

• Raw material price volatility (egg price fluctuations) impacting gross margin
• Epidemiological shocks (e.g., avian influenza) affecting supply and input costs
• Pass-through timing and contract structure risk with key customers
• Customer concentration in food manufacturers/foodservice channels
• Energy, logistics, and packaging cost inflation
• Product mix shifts toward lower-margin SKUs or channels
• Food safety and quality control risks in processing operations

Financial Risks:

• Working capital swings tied to input costs and selling prices
• Capex requirements for automation, capacity, and compliance potentially elevating cash needs
• Limited disclosure on cash balances and investing cash flows, obscuring FCF visibility
• Small absolute interest expense but potential rate sensitivity on new borrowing
• Asset impairment risk if demand normalizes below recent peaks

Key Concerns:

• Negative operating leverage despite strong revenue growth
• Gross margin pressure and conversion to operating profit
• Insufficient disclosure on investing cash flows and dividends, restricting FCF and payout analysis

Investment Implications

Key Takeaways:

• Revenue up 44.6% YoY to ¥16.04bn, but operating income down 2.8% YoY to ¥1.48bn
• Gross margin 18.5% and operating margin ~9.2% indicate margin compression
• ROE 8.70% driven by 6.46% net margin, 0.892x asset turnover, and low leverage (1.51x)
• OCF ¥1.79bn equals 1.73× net income, highlighting strong cash conversion
• Balance sheet conservative: debt-to-equity 0.47x; interest coverage 185x; liquidity ample
• Dividend and investing cash flow data not disclosed; FCF and payout capacity cannot be confirmed

Metrics to Watch:

• Gross margin and operating margin trajectory (evidence of positive operating leverage returning)
• OCF/Net income ratio and working capital days (AR, inventory, AP) for cash conversion durability
• Capex and investing cash flows to gauge maintenance vs. growth investment and true FCF
• Input cost indices (egg prices, energy, packaging) and timing of pass-through to customers
• ROE relative to cost of equity; target >10% would require higher margin or turnover
• Ordinary income vs. operating income spread to monitor non-operating gains/losses

Relative Positioning: Within Japanese food processors, Ifuji Sangyo exhibits stronger-than-average liquidity and low financial leverage, with mid-level profitability (ROE ~9%, OPM ~9%) that currently trails revenue growth due to margin compression; restoring positive operating leverage is key to improving its relative standing.

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