KIBUN FOODS INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥48.86B
• Operating Income: ¥-413M
• Net Income: ¥-1.01B
• EPS: ¥-46.14

Income Statement

Balance Sheet

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

FY2026 Q2 was weak for Kibun Foods, with modest top-line growth but continued losses at all profit layers and balance sheet leverage remaining elevated. Revenue rose 2.3% YoY to 488.64, but gross profit of 95.10 could not cover SG&A of 99.23, resulting in an operating loss of 4.13. Ordinary loss widened relative to operating loss due to a negative non-operating balance (non-op income 1.15 vs non-op expenses 5.35), leading to an ordinary loss of 8.33. Net loss was 10.53, an improvement YoY in magnitude (net loss narrowing by 15.9% YoY), but still a negative print. Gross margin stood at 19.5%, operating margin at roughly -0.85%, ordinary margin at -1.70%, and net margin at -2.1%. Margin basis-point changes vs last year cannot be precisely quantified because prior-period margin data are not provided, but the YoY improvements in operating, ordinary, and net loss suggest a directional margin improvement from a deeper loss base. The cost structure remains the core issue: SG&A at 20.3% of sales exceeded gross profit, implying insufficient pricing, mix, or cost pass-through to absorb overheads. Financing burden is meaningful; interest expense of 3.61 drove the negative non-operating result and depressed ordinary profit. Liquidity is tight but positive with a current ratio of 106.3%; however, the quick ratio at 73.5% indicates reliance on inventories and indicates limited immediate liquidity buffers. Leverage is high with D/E at 2.81x and financial leverage of 3.81x, magnifying the impact of slim/negative margins on ROE (-5.4%). ROIC of -1.3% underscores subpar capital efficiency versus typical food peers’ mid-single-digit targets. Cash flow quality cannot be assessed because operating and free cash flow figures were not disclosed this quarter. Earnings quality risk is therefore elevated by default, as we cannot verify cash conversion against reported losses. Forward-looking, recovery hinges on gross margin expansion through pricing and procurement control, measured SG&A restraint, and reducing financing costs or leverage. Near-term priorities should include lowering interest-bearing debt, improving working capital turns (inventory and receivables), and sustaining price/mix initiatives to lift contribution margins. Without improved operating leverage and better non-operating balance, sustained profitability and dividend capacity will remain constrained.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-2.1%) × 0.659 × 3.81 ≈ -5.4%. The most problematic component is the net profit margin, which is negative due to operating losses and a negative non-operating balance. Business reason: SG&A (99.23) exceeded gross profit (95.10), reflecting insufficient gross margin (19.5%) to cover overheads, likely influenced by raw material/energy/logistics inflation and incomplete price pass-through; additionally, interest expense (3.61) pushed ordinary income further negative. Sustainability: The negative margin is not structurally permanent if pricing and mix improvements continue and input costs stabilize; however, until gross margin exceeds ~20% and/or SG&A ratio declines below gross margin, recurring profitability will be difficult. Asset turnover at 0.659 is moderate for a food manufacturer and appears less of a driver than margin; improving inventory and receivables turns would help but will not offset a negative margin alone. Financial leverage at 3.81x amplifies the impact of a negative margin on equity returns; deleveraging would reduce ROE volatility and interest burden. Concerning trends: SG&A exceeded gross profit (20.3% SG&A-to-sales vs 19.5% gross margin), implying negative operating leverage; we cannot confirm whether SG&A grew faster than revenue due to missing YoY SG&A data, but the current level is too high relative to gross margin.

Growth Assessment

Revenue grew 2.3% YoY to 488.64, indicating stable demand, but growth did not translate into profit as operating income remained negative at -4.13. Gross margin at 19.5% suggests the company has not fully recovered pricing power or cost efficiencies post input inflation. Ordinary and net income improved YoY in loss magnitude (+6.2% and +15.9% respectively), implying some progress, but the non-operating burden remains a drag. We lack segment or product mix data to judge sustainability of sales growth; processed seafood and seasonal products are typically sensitive to raw material prices and holiday-season demand, which could introduce H2 volatility. Outlook hinges on: (1) price/mix retention against easing inputs, (2) SG&A restraint, and (3) gradual deleveraging to lower interest expense. Absent clear evidence of gross margin expansion above 20% and SG&A discipline, a return to sustained profitability remains uncertain.

Financial Health

Liquidity: Current ratio is 106.3% (above 1.0 but below the 1.5x comfort threshold), and quick ratio is 73.5%, indicating reliance on inventories for liquidity. We do not trigger a sub-1.0 warning, but buffers are thin. Maturity/mismatch: Current assets (311.79) exceed current liabilities (293.21) by 18.58; cash (65.30) is just shy of short-term loans (66.88), but accounts receivable (103.75) and inventories (96.38) provide additional coverage. Solvency: D/E is high at 2.81x (warning > 2.0). Total liabilities are 546.70 against equity of 194.27, reflecting heavy leverage. Interest coverage is -1.14x due to operating losses, highlighting immediate debt service risk if losses persist. Long-term loans of 117.31 and noncurrent liabilities of 253.50 indicate a meaningful fixed obligation load; deleveraging or refinancing at lower rates would be beneficial. No off-balance sheet obligations were reported in the provided data; absence of disclosure does not confirm absence of such items.

Cash Flow Quality

Operating cash flow and free cash flow were not disclosed, so OCF/Net Income and FCF coverage cannot be calculated. Consequently, we cannot verify whether the reported net loss is overstated or understated relative to cash generation. Working capital snapshot: inventories (96.38) and receivables (103.75) are sizable versus payables (92.98); without OCF data, we cannot assess whether working capital releases or builds impacted cash. Potential manipulation signs (e.g., extended payables, inventory build) cannot be evaluated without cash flow statements; monitoring days inventory and days sales outstanding is recommended once disclosed. Sustainability: Absent OCF, we cannot assert that capex and dividends (if any) are covered by internal cash generation.

Dividend Sustainability

Dividend data were not disclosed for the period; total dividends paid and DPS are unreported. A calculated payout ratio of -43.4% is not interpretable in the context of a net loss and missing dividend data; we do not rely on it. With negative earnings, dividend sustainability depends entirely on cash generation and balance sheet capacity, both of which are unclear without OCF/FCF. Given the high leverage (D/E 2.81x) and negative interest coverage, capacity for dividend growth appears constrained until profitability and cash flow improve. Policy outlook cannot be assessed from the data provided; we would look for management guidance on payout policy and capital allocation priorities.

Risk Assessment

Business Risks:

• Raw material cost volatility (seafood/surimi, soy, packaging) pressuring gross margin
• Energy and logistics cost inflation impacting COGS and SG&A
• Price pass-through risk amid consumer sensitivity and private-label competition
• Seasonality (oden and seasonal items) creating H1/H2 earnings skew
• Product mix and channel shifts affecting margin structure

Financial Risks:

• High leverage (D/E 2.81x) and negative interest coverage (-1.14x)
• Tight liquidity (current ratio 1.06x; quick ratio 0.74x) increases refinancing/rollover risk
• Negative non-operating balance driven by interest expense
• Potential covenant pressure if losses persist (not disclosed but a possibility)

Key Concerns:

• SG&A exceeding gross profit (20.3% vs 19.5%) resulting in operating loss
• ROIC at -1.3% signals destruction of capital value
• Inadequate visibility on cash flows (OCF/FCF unreported)
• Dependence on inventory conversion to meet short-term obligations

Investment Implications

Key Takeaways:

• Revenue growth of 2.3% YoY did not translate to profit; operating margin -0.85%
• Non-operating drag (interest expense 3.61) widened the loss to ordinary/net levels
• Leverage is high (D/E 2.81x; financial leverage 3.81x), amplifying negative ROE (-5.4%)
• Gross margin (19.5%) below SG&A ratio (20.3%) is the core profitability gap
• Liquidity is thin but positive (current ratio 1.06x; quick ratio 0.74x)

Metrics to Watch:

• Gross margin vs SG&A ratio (aim for gross margin > SG&A to restore operating profit)
• Interest coverage improvement (target > 2x) via EBIT recovery and/or deleveraging
• Working capital turns (DSO, DIO, DPO) and OCF disclosure
• Debt trajectory (short-term loans vs cash and refinancing plans)
• ROIC trend toward >5% as a minimum threshold

Relative Positioning: Within the Japanese processed foods space, Kibun’s leverage and negative profitability place it weaker than peers with mid-single-digit operating margins and positive interest coverage; recovery requires margin rebuilding and balance sheet normalization.

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