DELICA FOODS HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥30.81B
• Operating Income: ¥1.23B
• Net Income: ¥-66M
• EPS: ¥51.93

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

Delica Foods Holdings (33920) reported solid FY2026 Q2 consolidated results under JGAAP, with clear signs of operating leverage and improved profitability. Revenue grew 9.8% YoY to ¥30.81bn, reflecting steady demand and likely successful price pass-through in the fresh produce and processed vegetables value chain. Operating income surged 142.2% YoY to ¥1.228bn, indicating significant SG&A discipline and/or mix improvements beyond gross margin uplift alone. Net income rose 152.8% YoY to ¥842m, translating to a net margin of 2.73%, still thin as is typical for food distribution, but materially better than the prior-year run-rate. Gross profit reached ¥6.581bn with a gross margin of 21.4%, suggesting improved procurement and processing economics in a still cost-pressured environment. EBITDA was ¥1.805bn (5.9% margin), underpinned by depreciation of ¥577m, indicating a moderately asset-intensive model with ongoing facility and logistics investments. The company generated strong operating cash flow of ¥2.598bn, more than 3.0x net income, evidencing robust earnings quality and favorable working capital dynamics. Interest coverage was a healthy 33.7x, reflecting low financing burden (interest expense ¥36m) relative to the improved operating base. Total assets were ¥28.664bn and equity ¥9.741bn, implying an equity ratio around 34% on our calculation, although the disclosed equity ratio field shows 0.0% (treated as undisclosed rather than zero). Liquidity is solid with a current ratio of 126% and quick ratio of 122%; working capital stands at ¥2.203bn, consistent with short-cycle perishable inventories and rapid turnover. Leverage at the broad liability-to-equity level is 1.81x, which is manageable given the strong interest coverage and cash generation; net debt is not assessable due to undisclosed cash balances. ROE is 8.64% per DuPont, driven primarily by asset turnover of 1.075 and financial leverage of 2.94, given the structurally low net margin. The effective tax rate appears near 0% driven by a reported negative tax line (¥-17m), which is unlikely to persist and should normalize higher, a watchpoint for forward earnings. Dividend per share and share count are not disclosed in the dataset (zeros are placeholders), so dividend assessment relies on policy inference rather than reported payout. Investing cash flow is undisclosed, preventing a reliable free cash flow estimate despite strong OCF. Overall, the company demonstrates meaningful operating momentum, improved margin capture, and high cash conversion, with an outlook contingent on sustaining procurement efficiency and price pass-through amid input volatility.

Profitability Analysis

ROE decomposition: Reported ROE is 8.64%, consistent with DuPont: ROE = Net margin (2.73%) × Asset turnover (1.075) × Financial leverage (2.94). The key constraint is the low net margin typical of the sector, while asset turnover and moderate leverage do the heavy lifting. margin_quality: Gross margin of 21.4% supports improved unit economics; operating margin of 4.0% (¥1.228bn/¥30.81bn) reflects strong SG&A control vs. prior-year levels. Net margin at 2.73% benefits from limited interest burden and an unusually low tax charge this period; normalization of taxes would compress net margin modestly. operating_leverage: Revenue grew 9.8% YoY, but operating income rose 142.2% YoY, evidencing significant operating leverage as fixed costs were absorbed and pricing/mix improved. The EBITDA margin of 5.9% vs. operating margin of 4.0% indicates a reasonable fixed-cost base; further revenue growth should translate into outsized operating profit if gross spread holds.

Growth Assessment

revenue_sustainability: Top-line growth of 9.8% YoY suggests effective price pass-through and demand resilience in foodservice/retail channels; sustainability depends on maintaining procurement stability and customer retention in a price-sensitive market. profit_quality: Operating profit expansion far outpaced sales growth, implying better cost discipline and mix. Strong OCF/NI of 3.09x validates earnings quality, though a portion likely reflects favorable working capital timing that may not repeat each quarter. outlook: With asset turnover at 1.075 and improved margins, continued incremental revenue should support further profit growth. Risks include input cost volatility (produce, logistics, energy), wage pressures, and tax normalization from the current near-zero effective rate.

Financial Health

liquidity: Current ratio 126.3% and quick ratio 122.3% indicate comfortable short-term coverage. Working capital of ¥2.203bn and modest inventories (¥331m) are consistent with fast inventory turns in perishables. solvency: Total liabilities of ¥17.610bn vs. equity of ¥9.741bn imply a liabilities-to-equity of 1.81x; financial leverage (assets/equity) is 2.94x. Interest coverage is strong at 33.7x, mitigating solvency concerns. capital_structure: Balance sheet shows moderate leverage supporting ROE without straining coverage. Cash and equivalents are undisclosed, so net leverage cannot be determined; refinancing and interest rate risk are present but moderated by cash generation.

Cash Flow Quality

earnings_quality: Operating cash flow of ¥2.598bn vs. net income of ¥842m (OCF/NI 3.09x) signals high-quality earnings, aided by non-cash D&A of ¥577m and favorable working capital flows. FCF_analysis: Investing cash flow is undisclosed (reported as 0), so we cannot compute reliable free cash flow or capex intensity. Given sector norms, maintenance capex is meaningful due to processing/logistics assets; true FCF likely below OCF but directionally positive. working_capital: Low absolute inventories and strong OCF suggest rapid inventory turnover and potential collection improvements; sustainability of the working capital tailwind should be monitored as timing effects can reverse.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are undisclosed (reported zeros). With EPS at ¥51.93 and improved profitability, capacity for dividends appears supported by earnings, but actual policy cannot be inferred from the dataset. FCF_coverage: Undeterminable due to missing investing cash flow; while OCF is strong, sustainable dividends require visibility on capex/FCF. policy_outlook: Given improving profitability and conservative leverage, a stable or modestly progressive policy would be consistent with peers; however, absent disclosed DPS or guidance, no conclusion can be drawn.

Risk Assessment

Business Risks:

• Produce price volatility and weather-related supply shocks impacting gross margins
• Food safety and quality control risks in fresh-cut processing
• Customer concentration and contract repricing risk in foodservice/retail channels
• Pass-through lag for logistics, energy, and labor cost inflation
• Competition from other distributors and private-label processors
• Seasonality and demand variability affecting operating leverage

Financial Risks:

• Interest rate increases affecting borrowing costs despite current high coverage
• Working capital reversals reducing OCF conversion in subsequent periods
• Capex requirements for processing centers, cold chain, and automation potentially pressuring FCF
• Tax rate normalization from the unusually low effective rate reducing net income
• Limited visibility on cash balances and net leverage due to undisclosed cash data

Key Concerns:

• Sustainability of margin expansion after a sharp YoY improvement
• Dependence on favorable procurement conditions for fresh produce
• Undisclosed investing cash flows obscuring FCF and dividend capacity

Investment Implications

Key Takeaways:

• Strong operating leverage: +9.8% revenue translated to +142% operating income
• Healthy liquidity (current ratio 126%, quick ratio 122%) and robust interest coverage (33.7x)
• ROE at 8.64% driven by asset efficiency and moderate leverage despite thin net margins
• High cash conversion (OCF/NI 3.09x) supports balance sheet resilience
• Tax normalization is a potential headwind given a near-zero effective rate this period

Metrics to Watch:

• Gross margin and SG&A ratio to assess persistence of operating leverage
• OCF-to-NI and working capital days (DSO/DPO/DIO) for cash conversion sustainability
• Capex and investing cash flow to gauge true FCF and dividend capacity
• Leverage (liabilities/equity) and interest coverage under different rate environments
• Effective tax rate trajectory and any one-off items
• Revenue growth by channel/segment and price pass-through effectiveness

Relative Positioning: Within Japanese food distribution and fresh-cut processing peers, the company exhibits improving profitability, solid liquidity, and strong cash conversion, with margins still structurally low but trending better; leverage is moderate and coverage strong, positioning the firm favorably if procurement discipline and pass-through continue.

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