KANMONKAI Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.89B
• Operating Income: ¥-259M
• Net Income: ¥-172M
• EPS: ¥-12.54

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

Verdict: Weak quarter with widening cash burn and sustained operating losses despite modest revenue growth. Revenue reached 18.91 (100M JPY), up 5.0% YoY, but operating income remained negative at -2.59, and net income deteriorated to -1.71. Gross profit was 12.39 with a high gross margin of 65.5%, yet SG&A of 14.99 outpaced gross profit, yielding an operating margin of -13.7%. Ordinary income was -2.67 (-23.3% YoY), and profit before tax was -2.74, with a tax benefit of -1.02 driving net income to -1.71 (-52.4% YoY). EBITDA was -2.13 and the EBITDA margin was -11.3%, signaling weak core earnings power. Cash flow quality was poor: operating cash flow was -4.42, substantially worse than net loss, indicating cash burn exceeding accrual losses. The OCF/NI ratio printed at 2.59x due to both being negative; economically, cash realization is weak. Liquidity is adequate but tight: current ratio 122.7% is above 1.0, but quick ratio of 71.1% signals reliance on inventories for short-term coverage. Leverage is elevated with D/E at 1.61x; interest coverage is deeply negative (-27.26x), underscoring debt service risk if losses persist. Asset turnover of 0.654 and financial leverage of 2.61x paired with a -9.0% net margin delivered ROE of -15.4%. ROIC of -10.6% is well below the 5% warning threshold, indicating value destruction. Non-operating items were small (income 0.08 vs expenses 0.16) and did not change the narrative. Margin changes in basis points versus prior year cannot be reliably computed due to lack of historical margin data, though YoY declines in operating and ordinary income indicate no improvement in operating leverage. Working capital intensity appears high with inventories at 7.43 against half-year sales of 18.91, contributing to OCF weakness. Forward-looking, the company must reduce SG&A and improve store-level efficiency and traffic to return to breakeven; debt rollover risk rises if operating trends do not stabilize.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-9.0%) × 0.654 × 2.61 ≈ -15.4%. Component assessment: The dominant drag is the negative net profit margin; asset turnover is moderate for foodservice, and leverage amplifies losses. Change attribution: Prior-period DuPont components are not disclosed, so we cannot quantify which component changed most; however, YoY declines in operating and ordinary income suggest margin deterioration rather than balance sheet-driven effects. Business drivers: SG&A at 14.99 exceeded gross profit (12.39), implying insufficient sales density and/or cost inflation (food inputs, utilities, labor) that were not offset by pricing or traffic recovery. Sustainability: The current margin pressure appears structural unless the company can cut fixed costs, improve same-store sales, and optimize labor and procurement; leverage will continue to magnify outcomes. Concerning trends: SG&A growth versus revenue is not disclosed, but the level of SG&A relative to gross profit indicates negative operating leverage; EBITDA and OPM both in double-digit negatives corroborate weak profitability quality.

Growth Assessment

Top-line growth was +5.0% YoY to 18.91, reflecting some demand recovery or pricing, but not enough to cover cost structure. Profitability contracted: operating income -2.59 (-19.1% YoY), ordinary income -2.67 (-23.3% YoY), and net income -1.71 (-52.4% YoY), pointing to worsening operating leverage. Non-operating income and expenses were minor and did not drive the result. Without segment data, sustainability of revenue growth is unclear; however, high inventory levels suggest expectation of demand normalization or seasonal sales. Near-term outlook hinges on cost control (rent, labor scheduling, procurement) and restoring traffic; absent this, incremental revenue growth is unlikely to translate into profit.

Financial Health

Liquidity: Current ratio 1.23 is modestly above the 1.0 warning threshold; quick ratio 0.71 indicates tight liquidity if inventories cannot be rapidly monetized. Solvency: D/E 1.61x is above a conservative range (<1.5x) but below the 2.0x explicit red-flag threshold; nevertheless, interest coverage is deeply negative (-27.26x), highlighting elevated financial risk. Maturity profile: Short-term loans of 8.00 exceed cash of 6.95; current assets (17.67) do exceed current liabilities (14.39), but refinancing risk exists if banks tighten terms given persistent losses. Long-term loans are 3.20, bringing total loans to 11.20 versus equity of 11.07. No off-balance sheet obligations were reported in the data provided.

Cash Flow Quality

OCF was -4.42 versus net income of -1.71, indicating weaker cash generation than accrual results and pressure from working capital or continued operating losses. The reported OCF/NI of 2.59x is not economically meaningful due to both being negative; normalized, this signals poor cash conversion. Capex was -0.88; using capex as a proxy for investing cash outflows (total investing CF not disclosed), proxy FCF ≈ -5.30, implying that internal cash generation does not cover maintenance or growth investments. Working capital: Inventories at 7.43 relative to half-year sales of 18.91 suggest high stock levels, which likely contributed to OCF weakness; detailed AR/AP movements were not reported, limiting diagnosis of potential working capital management or timing effects. No signs of aggressive working capital optimization can be confirmed from available data.

Dividend Sustainability

Dividend data were not disclosed. With net losses (-1.71), negative EBITDA (-2.13), and proxy FCF around -5.30, capacity to pay dividends in the near term appears constrained. Payout and FCF coverage ratios are not calculable, but prudence would dictate retention of cash to support operations and debt service. Absent a disclosed dividend policy update, we assume a conservative stance is likely until profitability and OCF recover.

Risk Assessment

Business Risks:

• Persistent negative operating margin (-13.7%) and EBITDA margin (-11.3%) indicating structural profitability issues
• Cost inflation for food ingredients, utilities, and labor not offset by pricing or mix
• Demand risk if traffic recovery stalls; high inventories (7.43) could lead to margin pressure or waste
• Execution risk in SG&A and fixed-cost reduction given gross profit < SG&A

Financial Risks:

• Interest coverage deeply negative (-27.26x), increasing debt service vulnerability
• Refinancing risk with 8.00 in short-term loans vs 6.95 cash amid continued losses
• Leverage elevated (D/E 1.61x); ROIC -10.6% indicates value destruction
• Liquidity tightness signaled by quick ratio 0.71

Key Concerns:

• OCF of -4.42 worse than net loss, implying sustained cash burn
• Tax benefit (-1.02) supporting net income may not be repeatable
• Limited non-operating income (0.08) offers little cushion against operating losses
• Data gaps (no detailed SG&A or investing CF) obscure root-cause analysis

Investment Implications

Key Takeaways:

• Revenue growth of +5.0% failed to translate into profit; OPM at -13.7%
• Cash burn accelerated: OCF -4.42 and proxy FCF around -5.30
• Leverage and short-term debt reliance heighten refinancing risk with negative coverage
• ROE -15.4% and ROIC -10.6% point to ongoing value destruction
• Inventory-heavy working capital likely weighing on cash conversion

Metrics to Watch:

• Same-store sales growth and traffic vs ticket size (pricing power)
• SG&A as a percentage of sales and fixed-cost reduction progress
• Inventory turnover and days inventory on hand
• OCF trajectory and free cash flow after maintenance capex
• Interest coverage and short-term debt rollover status
• EBITDA margin progression toward breakeven

Relative Positioning: Versus domestic small-cap casual dining peers, the company exhibits weaker operating margins, inferior cash conversion, and tighter liquidity, with leverage toward the high end of the peer range; a sustained turnaround would require visible improvement in store-level economics and working capital discipline.

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