JFLA Holdings Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥32.07B
• Operating Income: ¥631M
• Net Income: ¥190M
• EPS: ¥3.77

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

Verdict: Mixed quarter with resilient operating profit but sharp decline in bottom line due to heavier non-operating costs and taxes. Revenue was 320.69, down 0.9% YoY, while operating income was 6.31, essentially flat at -0.6% YoY, indicating stable core operations. Gross profit was 85.11, translating to a gross margin of 26.5%, supporting modest operating margin resilience. SG&A was 78.79, keeping the operating margin near 2.0% despite a slight revenue dip. Ordinary income fell 27.5% YoY to 4.58, driven by net non-operating expenses (-1.73), particularly interest expense of 2.26. Net income dropped 69.0% YoY to 1.81, reflecting a steep effective tax rate of 58.3% and financing burden. Operating cash flow of 5.49 exceeded net income by 3.0x, signaling solid earnings quality this period. The current ratio is healthy at 230%, and quick ratio at 180% indicates ample near-term liquidity. However, leverage is elevated with D/E at 3.18x and long-term loans of 180.32, compressing financial flexibility. Asset turnover stands at 0.82x, and ROE is a modest 1.9% from DuPont (NPM 0.6% × AT 0.82 × leverage 4.18x). ROIC at 1.3% is well below the 5% warning threshold, indicating weak capital efficiency. Interest coverage is 2.8x, below the 5x comfort benchmark and sensitive to earnings volatility. The operating margin likely expanded only marginally (~+1 bp) as operating income held steady against slightly lower sales. Negative retained earnings (-65.38) highlight accumulated deficits and constrain shareholder return flexibility. Forward-looking, deleveraging (financing CF -6.05) and tighter cost control appear necessary to protect ordinary profit under a high interest burden. Key watch items include interest costs, tax rate normalization, and demand elasticity in core businesses to sustain margins.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 0.6% × Asset Turnover 0.820 × Financial Leverage 4.18x = ROE 1.9%. The biggest change driver versus the prior year appears to be net profit margin deterioration, evidenced by a 69% YoY decline in net income despite nearly flat operating profit. Business reason: non-operating headwinds (interest expense 2.26 and other non-operating expenses) and a high effective tax rate (58.3%) compressed NPM, while operating margin was resilient at ~2.0%. Asset turnover likely softened slightly with revenue -0.9% YoY and assets at 390.97, but this was a secondary effect. Financial leverage is high (4.18x assets/equity), supporting ROE mechanically but adding risk; leverage did not offset the NPM shock. Sustainability: operating margin stability looks more durable, but the current NPM is vulnerable to interest and tax effects; normalization of tax or reduction of financing costs would be needed to sustainably lift ROE. Concerning trends: ordinary income declined 27.5% YoY despite stable OI, highlighting operating-to-ordinary profit leakage via financing and other non-operating costs; also, with interest coverage at 2.8x, further cost inflation or sales softness could pressure margins and ROE.

Growth Assessment

Top-line declined modestly (-0.9% YoY), suggesting stable but not expanding demand. Operating profit resilience (-0.6% YoY) indicates decent cost containment and pricing discipline with gross margin at 26.5%. Profit quality is mixed: core operations stable, but ordinary and net profit contracted sharply due to non-operating factors and a high tax rate. With ROIC at 1.3%, returns are below cost of capital benchmarks, limiting growth reinvestment efficiency. Outlook: near-term growth likely hinges on maintaining gross margin and curbing financing costs; absent deleveraging or tax normalization, net profit growth will lag operating profit. External drivers such as input cost trends and consumer demand recovery will influence revenue trajectory; management focus should be on SG&A productivity and working capital efficiency to support margins.

Financial Health

Liquidity appears solid: current ratio 230.3% and quick ratio 179.6% are comfortably above benchmarks; no warning on current ratio. Working capital stands at 117.03. Cash and deposits 40.58 plus receivables 81.56 and inventories 45.58 cover current liabilities of 89.80 well, limiting maturity mismatch risk near term. Solvency is the weak point: D/E is high at 3.18x (warning >2.0), and long-term loans are sizable at 180.32 with total liabilities 297.52 vs equity 93.45. Interest coverage at 2.8x is below the 5x comfort level, suggesting sensitivity to earnings shocks. Retained earnings are negative (-65.38), indicating accumulated losses and potential covenant/credit perception risk. No off-balance sheet obligations were reported in the provided data; absence of disclosure means additional obligations cannot be ruled out.

Cash Flow Quality

OCF was 5.49 versus net income 1.81, yielding OCF/NI of 3.04x, which is strong and indicates high cash realization this period. While full investing CF is unreported, disclosed capital expenditures were 5.27; implied FCF is approximately +0.22 if we use OCF - capex, suggesting thin but positive coverage after capex. Financing CF was -6.05, consistent with net debt repayment or interest/dividend outflows, aiding gradual deleveraging. Working capital details by component change are not provided, limiting our ability to detect manipulation; however, the high OCF/NI ratio does not flag immediate quality concerns. Sustainability: with modest operating margins, maintaining OCF strength will require tight working capital management; elevated interest costs could siphon cash if operating profit softens.

Dividend Sustainability

Dividend data (DPS, total dividends) are unreported, and payout ratios are not calculable from disclosures. Given negative retained earnings (-65.38) and high leverage (D/E 3.18x), the balance sheet does not strongly support aggressive cash returns. Implied FCF is marginally positive this half, but interest coverage (2.8x) and deleveraging needs (financing CF -6.05) suggest prioritization of balance sheet strengthening over distributions. Policy outlook: absent explicit guidance, a conservative stance on dividends appears likely until ordinary income recovers and leverage is reduced.

Risk Assessment

Business Risks:

• Input cost inflation impacting gross margin in food-related businesses
• Demand volatility and discretionary consumption sensitivity affecting revenue (-0.9% YoY)
• Operational execution risk in SG&A containment with low operating margin (~2.0%)
• Potential impairment risk on goodwill (9.89) and intangibles (10.62) if profitability weakens

Financial Risks:

• High leverage: D/E 3.18x and long-term loans 180.32 increase refinancing and interest rate risk
• Interest coverage at 2.8x leaves limited buffer against earnings shocks
• Negative retained earnings (-65.38) constraining financial flexibility and shareholder returns
• Elevated effective tax rate (58.3%) depresses net profit; potential for volatility due to valuation allowances
• Ordinary income sensitivity to non-operating expenses (net -1.73 this period)

Key Concerns:

• ROIC at 1.3% well below 5% threshold, indicating value-dilutive capital deployment
• Sharp YoY decline in net income (-69%) despite stable operating income points to structural financing/tax drag
• Dependence on debt funding with limited margin of safety if macro weakens
• Data gaps on investing CF and dividend policy limit full assessment of capital allocation

Investment Implications

Key Takeaways:

• Core operating performance is resilient with operating margin ~2.0% despite slight revenue decline
• Bottom line compression is driven by non-operating costs and a high tax rate, not by core operations
• Liquidity is comfortable, but leverage is elevated and ROIC is weak
• Earnings quality is acceptable this period with OCF/NI at 3.0x, but FCF is thin after capex
• Deleveraging progress and tax rate normalization are critical to restore ordinary and net profit growth

Metrics to Watch:

• Interest expense trend and interest coverage (target >5x)
• Effective tax rate normalization toward historical/structural levels
• Gross margin resilience versus input cost movements
• Working capital turns and OCF conversion
• Debt balance trajectory (especially long-term loans 180.32) and D/E ratio
• ROIC improvement toward >5%

Relative Positioning: Within small-cap Japanese consumer/food holdings, the company combines stable operating margins with above-average leverage and below-average capital efficiency. Liquidity is stronger than peers with similar leverage, but the financing and tax drag leave net profitability weaker than operational peers.

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