OOMITSU CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥37.87B
• Operating Income: ¥-39M
• Net Income: ¥92M
• EPS: ¥6.33

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 Integrated Analysis

Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)

Executive Summary

Verdict: FY2026 Q2 was weak, with an operating loss despite modest topline growth and a sharp contraction in profitability and ordinary income. Revenue grew 3.9% YoY to 378.7, but operating income swung to -0.39 (from 2.79 prior), and net income fell 81.6% YoY to 0.92. Gross profit was 71.0 with an 18.8% gross margin, but SG&A of 71.4 exceeded gross profit, driving the operating loss. Operating margin deteriorated by about 87 bps YoY (from ~0.77% to ~-0.10%), and net margin compressed by roughly 113 bps (from ~1.37% to ~0.24%). Ordinary income dropped 60.5% YoY to 1.16, cushioned by non-operating income of 2.69 offset by 1.12 in non-operating expenses. Effective tax burden was heavy (tax burden factor 0.48; effective rate ~51.5%), further depressing net earnings. ROE was a low 1.5%, generated by a very thin net margin (0.2%), moderate asset turnover (1.33x), and high financial leverage (4.53x). Cash flow quality was mixed: OCF of 1.52 covered net income 1.65x, but cash conversion versus EBITDA was weak at 0.57x. Capex of 5.25 (1.7x depreciation) yielded negative implied FCF of about -3.73, necessitating financing inflows (FinCF 3.89) to support investments and buybacks (-1.50). Balance sheet risk is elevated: D/E 3.53x, Debt/EBITDA 32.6x, current ratio just 1.01x, and cash/short-term debt only 0.18x, pointing to refinancing and liquidity pressures. Interest coverage on an EBIT basis was negative (-0.87x), highlighting vulnerability if operating trends do not improve. Working capital is thin (WC 1.86) with payables (81.3) exceeding receivables (74.7), and short-term borrowings are high (44.2; 51% of total debt). Forward-looking, the company must restore operating margin by tightening SG&A and improving gross spread, otherwise high leverage and a heavy short-term debt mix could constrain investment and dividends. Given industry’s low-margin nature, execution on cost pass-through and efficiency will be critical in 2H. Dividend sustainability looks strained with a payout ratio of 226.5% against negative FCF. Overall, caution is warranted until operating profitability normalizes and liquidity buffers improve.

From Earnings Presentation: In Q2 of the fiscal year ending May 2026, revenue reached 37,871 million yen (+3.9%), setting a new record high, but operating income fell into the red at -39 million yen due to higher personnel and transportation costs and a product damage incident in the Marine Products business (inventory write-off of 161 million yen). Ordinary income was maintained at 116 million yen by recording 174 million yen of compensation related to the product damage as non-operating income, but this represents a substantial decline of -60.5% from the prior year (296 million yen). Profit attributable to owners of parent was 92 million yen (-81.6%), also affected by the recoil from 394 million yen of compensation income recorded in the previous year. For the full year, guidance calls for record-high revenue of 78.6 billion yen (+5.0%), but operating income is planned to decrease to 660 million yen (-18.6%), mainly due to operating losses in the Marine Products business. Ordinary income of 820 million yen and net income of 550 million yen are expected to be roughly flat year on year. The External Sales business is set to post higher revenue and operating profit through new customer acquisition and deeper penetration of existing accounts; the Amica business opened two stores but will see lower profit due to opening expenses and higher personnel costs; and the Marine Products business will weigh on the full year with a sharp decline in revenue and profit stemming from the abrupt halt of scallop exports to China and the product damage incident. The dividend is planned at 15.0 yen annually (7.5 yen interim, 7.5 yen year-end), marking a fourth consecutive increase, with the policy of DOE 3% or higher maintained. Concerns highlighted in the XBRL analysis regarding cost overruns, leverage, and liquidity are corroborated by the materials, and management cites earnings improvement and rigorous inventory control as priority issues.

Financial Analysis

Profitability

ROE decomposition (DuPont): Net Profit Margin (NPM) ~0.24% × Asset Turnover (ATO) 1.33× × Financial Leverage (FL) 4.53× = ROE ~1.5%. The biggest adverse change YoY is the net profit margin, driven by an operating swing to loss as SG&A (71.41) modestly exceeded gross profit (71.02). Operating margin fell from ~0.77% to ~-0.10% on higher cost intensity and weak operating leverage, while non-operating income partially offset but could not fully compensate. Interest burden is severe (EBT/EBIT -4.87), indicating interest expense overwhelming a negative EBIT base; tax burden is also high (NI/EBT 0.48), amplifying the NPM squeeze. Asset turnover (1.33x) is acceptable for food wholesale but not enough to overcome margin compression; leverage (4.53x) magnifies small margins into low ROE, increasing downside risk. Business drivers: likely cost inflation and limited pricing power, with SG&A not flexing down quickly enough and non-operating items masking core weakness. Sustainability: the margin compression appears cyclical/operational rather than one-off; without cost actions or better gross spread, sustained improvement is uncertain. Concerning trends: margin deterioration, interest burden outpacing operating earnings, and capex above depreciation during weak profitability.

Growth

Revenue grew 3.9% YoY to 378.7, likely reflecting pricing and/or volume stabilization in food distribution. However, profit did not follow revenue: operating income fell by 3.2 points (to -0.39), and ordinary income declined 60.5% YoY. The growth was not accompanied by operating leverage; SG&A consumed the gross profit, implying poor cost absorption. Non-operating income provided a partial offset (2.69), but this is less reliable as a growth driver. With EBITDA at 2.67 (margin 0.7%), the company has little cushion against cost variability. Forward outlook depends on regaining a positive operating margin via better gross spread (supplier terms, mix) and SG&A control. Absent that, revenue growth alone will not translate into earnings growth. Capex at 1.7x depreciation suggests investments are ongoing; payback and returns will be key to restoring profit momentum.

Financial Health

Liquidity: Current ratio 1.01x and quick ratio 1.01x are only marginally above warning thresholds; caution on near-term liquidity. Maturity structure: short-term loans 44.16 (51% of total debt) vs cash 7.99 yields cash/STD of 0.18x—material refinancing risk and maturity mismatch. Solvency: D/E 3.53x and Debt/Capital 58.1% indicate aggressive leverage; Debt/EBITDA 32.6x is extreme given depressed EBITDA. Interest coverage: EBIT-based coverage is negative (-0.87x); EBITDA coverage is reported as 5.97x but is fragile given small EBITDA and high interest cost (0.45). Equity decreased to 62.80 (from 63.76), reflecting diminished retained earnings. No off-balance sheet commitments are disclosed in the data; absence of disclosure does not imply absence of risk.

Cash Flow

OCF/Net Income at 1.65x suggests acceptable earnings conversion this quarter, but OCF/EBITDA at 0.57x indicates weak cash conversion, likely from working capital outflows or timing. Implied FCF (OCF - Capex) is about -3.73, not covering capex and buybacks (-1.50), necessitating financing inflows (3.89). Accruals ratio is low (-0.2%), supportive of earnings quality despite low profitability. Signs of potential working capital strain include receivables (74.7) close to payables (81.3) and minimal cash relative to short-term debt. Sustaining capex at 1.7x depreciation with current earnings power will require continued reliance on external funding unless operating cash flow improves.

Dividend Sustainability

With a calculated payout ratio of 226.5% against net income of 0.92 and implied negative FCF (~-3.73), dividend coverage appears unsustainable from internal cash generation. Financing cash inflow (3.89) and concurrent buybacks (-1.50) suggest capital returns are being supported by leverage amid weak earnings. Unless operating profitability and OCF rebound in 2H, dividend policy likely faces pressure (potential reduction or reliance on balance sheet). Lack of disclosed DPS and total dividend paid limits precision; monitoring the full-year guidance and board policy will be critical.

Business Outlook

Full-year revenue is expected to reach a record-high 78.6 billion yen (+5.0%), while operating income is planned to decline to 660 million yen (-18.6%). The External Sales business is expected to continue revenue and profit growth through deeper penetration of existing clients, acquisition of new accounts, improvement in gross margin, and restraint of logistics costs. The Amica business, having opened two stores, is on a growth trajectory in revenue, but opening costs, personnel, transportation, and utility expenses are squeezing profitability, and an operating profit decline is planned. The Marine Products business is assumed to remain in operating loss for the full year due to the abrupt halt of scallop exports to China (import suspension notice in mid-November); recovery in export sales depends on developing channels to other countries and new product lines. The product damage incident was a one-off event in Q2 and has been covered by compensation, but rigorous inventory control is key to reducing losses. Ordinary income of 820 million yen and net income of 550 million yen are expected to be roughly flat year on year, supported by non-operating income (compensation, etc.) and tax effects. The dividend is planned at 15.0 yen for a fourth consecutive increase, maintaining DOE of 3% or higher and adhering to the shareholder return policy. Recognized business risks include: (1) ongoing frugality among consumers in the foodservice sector, (2) geopolitical risks to seafood exports (prolonged Chinese import ban), (3) inflationary pressures on personnel and logistics costs, and (4) operational risks such as product damage. Earnings improvement (gross margin enhancement and cost control) and stronger inventory and credit management underpin the full-year recovery scenario.

Management Guidance

Management explained that, although net sales reached a record high, operating income was significantly depressed by a product damage incident (inventory write-off of 161 million yen) and a sharp decline in export sales in the Marine Products business during Q2. While 174 million yen in compensation was recorded as non-operating income to secure positive ordinary income, restoring core earnings is recognized as urgent. For the full year, the External Sales business aims to continue revenue and profit growth through improvement in gross margin, restraint of logistics costs, and stronger new account acquisition; the Amica business will maintain growth via store openings while thoroughly managing costs; and the Marine Products business plans to improve profitability by expanding export sales (developing other countries and new product lines) and reducing losses through rigorous inventory control. Regarding dividends, management stated: “While taking into account the financial condition, earnings trends, and payout ratio, we will base our approach on progressive dividends and continue stable dividends with DOE of 3% or higher,” and plans a fourth consecutive increase to an annual 15.0 yen. While the shareholder return policy is maintained, sustaining dividends with negative FCF implies reliance on financing cash flows, making navigation under leverage and liquidity constraints a challenge.

Strategic Initiatives

• [External Sales business] Deepen transactions with existing key customers, strengthen proposal-based sales tailored to customer needs, intensify new development across multiple formats such as school meals, ready-made meals, and hospitals, improve gross margin, and curb expenses including logistics costs
• [Amica business] Continue new store openings (two stores already opened in FY26/5), expand SKUs for foodservice operators and strengthen sales activities, enhance sales to general consumers by expanding items for at-home consumption, strengthen promotions including use of SNS, and improve logistics efficiency
• [Marine Products business] Deepen transactions with existing key customers, expand export sales (develop sales channels and new products), strengthen new customer acquisition, enhance proposal capabilities for marine products in collaboration with the External Sales and Amica businesses, and reduce losses through rigorous inventory control
• Companywide measures include addressing higher personnel costs due to base wage increases, improving efficiency amid higher transportation costs driven by sales growth, strengthening differentiated products in private brands (オルマルシェ・プロの選択・ジェフダ), and continuing a strategy to develop markets across the three businesses

Risk Assessment

Business Risks:

• Margin pressure from cost inflation and limited pass-through in a low-margin wholesale model
• SG&A rigidity leading to operating losses when gross profit softens
• Customer concentration and competitive pricing pressure in foodservice/retail channels
• Execution risk on capex with near-term returns uncertain

Financial Risks:

• High leverage (D/E 3.53x; Debt/Capital 58%)
• Refinancing risk from high short-term debt mix (51%) and low cash/STD (0.18x)
• Weak interest coverage (-0.87x on EBIT basis)
• Negative implied FCF requiring external funding

Key Concerns:

• Operating margin deterioration to -0.10%
• Debt/EBITDA 32.6x amid depressed EBITDA
• Effective tax rate ~51.5% reducing net income
• Potential covenant pressure if EBITDA weakens further

Risk Factors from Presentation:

• Continuation of the challenging environment surrounding the foodservice industry (heightened consumer frugality due to rising prices)
• Volatility risk in export sales within the Marine Products business (geopolitical factors such as the Chinese government’s import suspension notice)
• Ongoing inflationary pressures on personnel, transportation, and utility costs
• Operational risks such as product damage incidents (a product damage incident occurred at an outsourced warehouse during Q2, with an inventory write-off of 161 million yen recorded)
• Expense increases associated with new store openings temporarily pressure profitability in the Amica business
• Inventory management challenges (inventory buildup and slower monetization underpin OCF/EBITDA of 0.57x)

Investment Implications

Key Takeaways:

• Topline grew 3.9% but operating swung to loss as SG&A exceeded gross profit
• ROE 1.5% is driven by thin margins and high leverage; quality of earnings mixed
• Liquidity and refinancing risks are elevated given low cash and high short-term debt
• Capex at 1.7x depreciation with negative FCF increases funding dependence
• Dividend sustainability is questionable with a 226.5% payout ratio and negative FCF

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio
• Gross margin progression and supplier pass-through
• OCF/EBITDA and working capital turns
• Net debt, Debt/EBITDA, and interest coverage
• Short-term debt rollover and cash balance trajectory
• Effective tax rate normalization

Relative Positioning: Versus domestic food wholesalers/distributors, profitability is currently below peers’ low single-digit operating margins, while leverage and short-term funding reliance are higher, implying a weaker risk-adjusted profile unless operating earnings recover.

Supplementary Insights (Key Highlights)

• Interim revenue reached a record high (+3.9%), but the 161 million yen write-off from the Marine Products business product damage incident was the primary driver of the operating loss
• Recorded 174 million yen in compensation related to the product damage incident as non-operating income, securing positive ordinary income (dependence on non-core income)
• External Sales business increased revenue via existing clients +1.9% and new accounts 974 million yen, with operating profit +11 million yen (+4.4%), showing resilience
• Amica business opened two stores (Matsumoto, Mizunami), revenue +1.3% but operating profit -161 million yen (-28.4%) due to new store opening costs and higher personnel expenses
• Marine Products business: Following the Chinese government's notice to suspend imports of Japanese seafood (mid-November), scallop exports of roughly 1.0 billion yen plunged; export sales -219 million yen and operating loss of -179 million yen (vs. +25 million yen a year ago)
• Full-year operating income plan of 660 million yen is mainly due to continued operating losses in Marine Products; full-year revenue outlook of 78.6 billion yen is a record high
• Interim dividend 7.5 yen; full-year 15.0 yen, planning a fourth consecutive increase; maintains DOE of 3%+ and progressive dividend policy
• Increase in SG&A (+378 million yen) was broad-based: personnel +126 million yen, transportation +209 million yen, other +42 million yen
• External Sales business is strengthening new development across multiple formats such as hospitals, ready-made meals, and elderly care; Amica business online shop +8.1% and strong
• Marine Products business clearly identifies rigorous inventory control to reduce losses and expansion of export sales (new customer development, new products) as key initiatives going forward

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
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