FOOD & LIFE COMPANIES LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥429.57B
• Operating Income: ¥36.09B
• Net Income: ¥24.61B
• EPS: ¥202.71

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

FOOD & LIFE COMPANIES reported strong FY2025 Q4 consolidated results under IFRS with clear acceleration in profitability alongside robust top-line growth. Revenue rose 19.0% YoY to 4,295.74, driven by both volume/mix and likely pricing, while operating income grew 54.4% YoY to 360.93, indicating sizable operating leverage. Gross profit reached 2,053.34, equating to a 47.8% gross margin, and SG&A totaled 1,798.48, or 41.9% of revenue, allowing operating margin expansion to 8.4%. Net income increased 56.7% YoY to 229.37, with an effective tax rate of 18.4%, supporting improved bottom-line conversion (net margin 5.3%). Cash generation was a highlight: operating cash flow was 644.29 (OCF/revenue 15.0%), and free cash flow was 389.93 (FCF margin ~9.1%), reflecting disciplined capex (195.30) and strong working capital execution. EBITDA was 668.53 (15.6% margin), and OCF covered net income by 2.81x, underscoring high earnings quality. The DuPont framework shows calculated ROE of 22.7% (net margin 5.3% × asset turnover 1.078 × leverage 3.95x), well above the reported ROE tag of 0.3%, which likely reflects XBRL labeling differences rather than economics. The balance sheet shows total assets of 3,985.96 and equity of 1,009.02 (equity ratio 24.0%), consistent with a lease-heavy restaurant model; debt-to-equity stands at 2.85x, though interest expense was unreported. Liquidity ratios are not calculable due to missing current liability data; however, cash and equivalents were 588.22 and investing plus financing cash flows remained controlled. Capital allocation was balanced between growth and shareholder returns: dividends paid were 25.99 and share repurchases 75.04; the calculated payout ratio was a conservative 15.2% with FCF coverage of 11.2x. Reported DOE was 0.0% and reported ROA (ordinary income) 0.1%, both likely artifacts of unreported tags rather than underlying performance. The combination of top-line momentum, margin expansion, and cash discipline positions the company well to fund store development and resilience initiatives. Nevertheless, the low equity ratio and potential lease obligations imply that careful attention to debt service and lease commitments remains warranted. Sensitivity to raw material costs, wages, and FX also persists for a global sushi chain model. Data gaps (notably interest expense, current liabilities, and certain equity line items) limit precision on solvency and coverage metrics, but the available non-zero data points depict a year of strong fundamental improvement.

Profitability Analysis

ROE_decomposition: Calculated ROE 22.7% = net profit margin 5.3% × asset turnover 1.078 × financial leverage 3.95x. The improvement in operating income (+54.4% YoY) versus revenue (+19.0% YoY) indicates operating margin expansion as the primary driver of ROE uplift, with stable-to-slightly improving asset turnover. margin_quality: - Gross margin: 47.8% (2,053.34 / 4,295.74), supported by pricing/mix and cost efficiency. - SG&A ratio: 41.9% (1,798.48 / 4,295.74). - Operating margin: 8.4% (360.93 / 4,295.74). - Net margin: 5.3%. Effective tax rate at 18.4% aided bottom-line conversion. EBITDA margin at 15.6% indicates healthy contribution after D&A. operating_leverage: Revenue +19.0% YoY vs operating income +54.4% YoY implies significant drop-through from incremental sales. D&A (307.60) relative to EBITDA (668.53) suggests a sizable fixed-asset/lease base; scale benefits and cost controls likely enhanced flow-through.

Growth Assessment

revenue_sustainability: Top-line grew 19.0% YoY to 4,295.74, with asset turnover at 1.078 consistent with efficient utilization. Sustainability depends on same-store sales, new store ramps, and pricing resilience; current mix indicates both volume and price contributions. profit_quality: OCF/NI of 2.81x and OCF/EBITDA of ~96% underscore high conversion and low accrual risk. Net margin at 5.3% with an 18.4% tax rate suggests earnings are supported by operations rather than one-offs (non-operating items unreported). outlook: With EBITDA margin at 15.6% and capex at 4.6% of revenue, the company retains capacity to invest in store growth and digital/throughput improvements. Key external variables include raw fish input costs, wage inflation, and FX. Given strong FCF and margin momentum, near-term growth avenues appear funded, though pace may normalize as comps toughen.

Financial Health

liquidity: Current assets are 746.56, including accounts receivable 138.82 and inventories 65.12. Current liabilities were unreported, so current and quick ratios are not calculable. Cash and equivalents stand at 588.22, providing liquidity for operations and capex. solvency: Total liabilities are 2,873.17 against equity of 1,009.02 (equity ratio 24.0%). Debt-to-equity is 2.85x, likely inclusive of IFRS 16 lease liabilities. Interest coverage is not calculable due to unreported interest expense, but EBITDA and OCF levels suggest headroom. capital_structure: Noncurrent assets of 2,904.99 indicate a store/lease-heavy asset base. Retained earnings are 658.18 and capital surplus 157.34. The company executed 75.04 of buybacks and paid 25.99 in dividends while maintaining positive net cash generation.

Cash Flow Quality

earnings_quality: OCF 644.29 vs net income 229.37 implies 2.81x coverage, reflecting robust working capital management and low non-cash earnings inflation. EBITDA of 668.53 closely maps to OCF, indicating strong cash realization. FCF_analysis: Free cash flow was 389.93 (FCF margin ~9.1%). Capex was 195.30, equal to 30.3% of OCF and 4.6% of revenue, consistent with steady store investments without straining cash. Investing CF totaled -254.36, implying additional investments beyond PP&E (e.g., intangibles or deposits). working_capital: Accounts receivable 138.82 and inventories 65.12 remain modest relative to revenue scale, consistent with rapid cash conversion in food service. Accounts payable of 355.69 significantly exceed inventories, reflecting supplier credit and efficient inventory turns. Full working capital ratios are limited by unreported current liabilities.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 15.2%, a conservative level relative to earnings growth and cash generation. Reported DOE of 0.0% likely reflects tagging inconsistencies rather than policy. FCF_coverage: FCF coverage of dividends is 11.20x, indicating ample capacity to maintain or cautiously increase dividends while funding growth. policy_outlook: Given robust FCF and concurrent share repurchases (75.04), capital returns appear balanced. Continuation will depend on store expansion needs, input cost volatility, and potential strategic investments; current coverage supports stability.

Risk Assessment

Business Risks:

• Raw material price volatility for seafood (e.g., tuna, salmon) impacting gross margin
• Domestic wage inflation and staffing constraints affecting SG&A and service levels
• Same-store sales sensitivity to consumer sentiment and competitive pricing
• Execution risk in new store openings and international expansion
• Food safety, supply chain continuity, and brand reputation risks
• FX translation and transaction exposure from overseas operations

Financial Risks:

• Low equity ratio (24.0%) and leverage (D/E 2.85x) including lease liabilities
• Limited visibility on interest expense and maturity profile (unreported), obscuring coverage
• Potential working capital swings due to payable and inventory cycles
• Capex commitments for network growth amid macro uncertainty

Key Concerns:

• Data gaps on current liabilities and interest expense hinder precise liquidity and coverage analysis
• Sustaining margin gains if input costs or wages rise
• Balancing shareholder returns with growth investments under a leveraged, lease-heavy model

Investment Implications

Key Takeaways:

• Top-line growth of 19.0% YoY with operating income up 54.4% evidences strong operating leverage
• Operating margin expanded to 8.4%; EBITDA margin at 15.6%
• High cash conversion: OCF/NI 2.81x and OCF/EBITDA ~96%
• Free cash flow of 389.93 supports capex, dividends, and buybacks
• Calculated ROE of 22.7% highlights improved capital efficiency despite low equity ratio
• Leverage remains elevated (equity ratio 24.0%, D/E 2.85x), typical for IFRS 16-heavy models
• Dividend burden is light (15.2% payout) with 11.2x FCF coverage

Metrics to Watch:

• Same-store sales growth and traffic vs ticket size to gauge sustainability
• Gross margin progression versus seafood input costs and FX
• SG&A ratio trajectory and labor efficiency
• Capex intensity and new store payback/returns
• Lease-adjusted leverage and any changes in interest burden once disclosed
• OCF/NI and OCF/EBITDA to monitor earnings quality
• Buyback pace relative to FCF and balance sheet flexibility

Relative Positioning: Within Japan-listed casual dining/rotating sushi peers, the company exhibits above-sector revenue growth, expanding operating margins, and superior cash conversion, albeit with a relatively low equity ratio and lease-driven leverage consistent with the format.

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