JFLA Holdings Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥32.07B
• Operating Income: ¥631M
• Net Income: ¥564M
• 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

For FY2026 Q2, JFLA Holdings reported revenue of ¥32.07bn, down 0.9% YoY, indicating largely flat top-line performance amid likely soft consumer demand and/or portfolio adjustments. Gross profit of ¥8.55bn translated to a gross margin of 26.7%, suggesting reasonable cost discipline at the product level despite input cost pressures typical in the food and restaurant value chains. Operating income was ¥631m, down 0.6% YoY, keeping the operating margin at roughly 2.0%, which highlights a high SG&A burden and limited operating leverage at current scale. Ordinary income of ¥458m reflects meaningful non-operating headwinds, including interest expense of ¥206m, which compressed the flow-through from operating to ordinary profit. Net income fell 69% YoY to ¥181m, with net margin at 0.56%, implying a heavier aggregate drag from financing and tax-related items this period. DuPont analysis shows ROE of 1.94%, driven by a thin net margin (0.56%), moderate asset turnover (0.82x), and relatively high financial leverage (4.18x). The earnings mix indicates that leverage is compensating for low profitability, which elevates risk if operating conditions soften. Cash flow quality weakened: operating cash flow (OCF) was negative at -¥1.06bn, resulting in an OCF/Net Income ratio of -5.88, pointing to material working capital outflows or timing effects overshadowing accounting profits. Liquidity appears ample on a current basis, with a current ratio of 221% and a quick ratio of 175%, supported by ¥11.42bn of working capital; however, negative OCF tempers comfort around short-term funding needs. The balance sheet shows total assets of ¥39.10bn, liabilities of ¥30.38bn, and equity of ¥9.35bn; while the reported equity ratio is listed as 0.0% (undisclosed), a simple calculation suggests approximately 23.9%, consistent with a leveraged but not overly stretched capital structure for the sector. Debt-to-equity of 3.25x and interest coverage around 3.1x indicate limited headroom if rates rise or operating profit weakens. Dividend policy remains conservative, with DPS at ¥0 and a payout ratio of 0%, which is appropriate given negative OCF and the need to preserve liquidity. Revenue resiliency appears modest, and operating efficiency improvements will be key to rebuild net margin and free cash flow. The YoY decline in net income, despite near-flat operating profit, underscores sensitivity to non-operating items and potential tax/one-off effects. Given several unreported data points (e.g., D&A, EBITDA, investing CF, cash balance, shares), conclusions focus on available non-zero items and derived ratios. Near term, priority should be on stabilizing working capital, improving store/unit economics, and reducing financing drag to enhance cash flow conversion. Overall, the company remains operationally profitable but financially constrained, with earnings quality and cash conversion as the main watch items.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 0.56% (Net income ¥181m on revenue ¥32.07bn)
• asset_turnover: 0.82x (Revenue ¥32.07bn / Assets ¥39.10bn)
• financial_leverage: 4.18x (Assets ¥39.10bn / Equity ¥9.35bn)
• calculated_ROE: 1.94% (consistent with reported ROE 1.94%)
• commentary: ROE is primarily constrained by a very low net margin; leverage is the main amplifier. Improving margin quality is the most impactful lever for ROE. margin_quality:
• gross_margin: 26.7% (¥8.55bn / ¥32.07bn) – reasonable given sector input cost pressures
• operating_margin: 2.0% (¥631m / ¥32.07bn) – indicates heavy SG&A intensity
• ordinary_margin: 1.43% (¥458m / ¥32.07bn) – financing and other non-operating costs dilute operating performance
• net_margin: 0.56% – significant compression at the bottom line versus operating level
• drivers: Interest expense (¥206m) and tax/non-operating items meaningfully reduce profitability; pricing and mix likely supported gross margin but SG&A absorption remains challenging. operating_leverage: With revenue -0.9% YoY and operating income -0.6% YoY, operating leverage appears modest and relatively balanced; however, the low absolute margin implies high sensitivity to sales swings. Incremental margin improvements will require tighter SG&A control and better utilization.

Growth Assessment

revenue_sustainability: Revenue was essentially flat (-0.9% YoY), indicating stable but unspectacular demand. For a diversified food/restaurant-related group, this suggests limited volume growth and/or cautious pricing actions. profit_quality: Operating profit stability contrasts with a sharp -69% YoY decline in net income, implying deterioration below the operating line (financing, taxes, and/or other items). This lowers the quality of earnings from an equity perspective. outlook: Near-term growth likely depends on pricing discipline, procurement optimization, and store/portfolio reshaping. Executing cost pass-through, rationalizing underperforming units, and leveraging scale in sourcing could stabilize margins. Macro factors (consumer spending, wage and input inflation, FX-driven import costs) will be key external variables.

Financial Health

liquidity: Current ratio 221% and quick ratio 175% indicate solid short-term liquidity buffers; working capital of ¥11.42bn is supportive, though negative OCF raises caution on cash conversion. solvency: Total liabilities ¥30.38bn vs equity ¥9.35bn yields debt-to-equity 3.25x and implied equity ratio ~23.9% (reported as 0.0% due to disclosure). Leverage is meaningful but manageable provided operating profits hold and capex remains disciplined. capital_structure: Financial leverage of 4.18x (assets/equity) underscores dependence on liabilities. Interest coverage of ~3.1x (operating income/interest expense) provides limited cushion against rate increases or earnings volatility.

Cash Flow Quality

earnings_quality: OCF of -¥1.06bn versus net income of ¥181m yields OCF/NI of -5.88, indicating weak cash conversion this period, likely driven by working capital outflows or timing effects. FCF_analysis: Investing cash flow is unreported (0). As such, free cash flow cannot be reliably derived from the provided figures this quarter; the headline FCF figure is not meaningful without investing data. working_capital: Inventory stands at ¥4.30bn; with negative OCF, changes in receivables/payables/inventories likely consumed cash. Tightening receivable collections and inventory turns are priorities to restore positive OCF.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0.00 with a payout ratio of 0%. Given low net margin and negative OCF, retaining earnings is prudent to support balance sheet resilience. FCF_coverage: FCF coverage is listed as 0.00x; however, investing CF is undisclosed, so true FCF coverage cannot be assessed this quarter. policy_outlook: Continuation of a conservative dividend stance appears likely until cash generation improves sustainably and leverage moderates. Any future distribution would depend on consistent positive OCF and improved interest coverage.

Risk Assessment

Business Risks:

• Input cost inflation (meat, dairy, grains, oils) and FX-driven import cost volatility
• Consumer demand softness and downtrading impacting same-store sales and mix
• Labor cost inflation and staffing constraints, including minimum wage increases
• Competitive intensity in restaurant/food retail channels pressuring pricing power
• Execution risk in portfolio optimization and store rationalization
• Supply chain disruptions affecting procurement and logistics

Financial Risks:

• Negative operating cash flow despite positive earnings, indicating cash conversion risk
• Elevated leverage (debt-to-equity 3.25x) and moderate interest coverage (~3.1x)
• Refinancing and interest rate risk if funding costs rise
• Potential impairment risk on underperforming assets if profitability weakens
• Working capital volatility (inventory and receivables) affecting liquidity

Key Concerns:

• Sustained negative OCF could erode liquidity despite healthy current ratios
• Thin net margin (0.56%) leaves little buffer against shocks
• Dependence on leverage to achieve ROE (4.18x financial leverage) increases downside sensitivity

Investment Implications

Key Takeaways:

• Top line essentially flat (-0.9% YoY); growth remains subdued
• Gross margin resilient at 26.7%, but SG&A intensity caps operating margin at ~2.0%
• Net income down sharply (-69% YoY) due to non-operating and tax effects
• ROE low at 1.94%, constrained by margin; leverage is the main ROE driver
• Operating cash flow negative (-¥1.06bn), signaling weak cash conversion
• Liquidity strong on paper (current ratio 221%), but must be validated by cash trends
• Leverage meaningful (D/E 3.25x) with limited interest coverage (~3.1x)
• Dividend suspended (DPS ¥0) appropriately conserves cash

Metrics to Watch:

• Same-store sales and pricing/mix to gauge demand and pricing power
• Food cost ratio and labor cost ratio to track margin recovery
• Operating cash flow and changes in working capital (DSO, DIO, DPO)
• Interest coverage and net debt/operating income (proxy for leverage given EBITDA not disclosed)
• Equity ratio (calculated) and debt maturity profile
• Store opening/closure pace and capex discipline
• Inventory turnover and shrink/spoilage metrics

Relative Positioning: Operationally profitable but low-margin and leverage-dependent, with weaker cash conversion than desirable; requires margin uplift and working capital normalization to improve resilience versus 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
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