ORION BREWERIES,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥15.78B
• Operating Income: ¥2.72B
• Net Income: ¥2.54B
• EPS: ¥62.35

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

Orion Beer Co., Ltd. (consolidated, JGAAP) delivered solid topline and operating performance in FY2026 Q2, with revenue of ¥15.784bn (+4.3% YoY) and operating income of ¥2.718bn (+13.4% YoY). Gross profit of ¥8.503bn implies a robust gross margin of 53.9%, indicating effective pricing/mix and/or input cost control. EBITDA was ¥3.494bn, translating to a 22.1% EBITDA margin, underscoring good operating leverage. Despite stronger operations, net income declined 54.7% YoY to ¥2.544bn, suggesting prior-year non-recurring gains and/or higher non-operating/tax items this year; ordinary income was ¥2.615bn, slightly below operating income due to net financial and other non-operating effects. Using reported figures, DuPont ROE is 14.26%, driven by a 16.12% net margin, 0.359x asset turnover, and 2.46x financial leverage. Interest coverage remains strong at 20.7x (operating income/interest expense), reflecting manageable debt service at current profitability. Liquidity appears sound with a current ratio of 152.2% and quick ratio of 142.1%, supported by working capital of ¥6.228bn. The balance sheet shows total assets of ¥43.908bn and total equity of ¥17.839bn, implying a debt-to-equity ratio of 1.79x; leverage is moderate for the sector. Operating cash flow was negative at -¥2.618bn, resulting in an OCF/Net Income ratio of -1.03, flagging a timing or working capital-driven cash shortfall despite accounting profits. Investing and cash & equivalents line items are shown as zero, which likely indicates non-disclosure rather than actual zeros; hence free cash flow cannot be reliably derived from the cash flow statement. The reported effective tax rate of 0.0% appears to be a placeholder; based on net income and income tax disclosed (¥1.07bn), an implied ETR near 29–30% is more realistic. Dividend data (DPS, payout, FCF coverage) are also shown as zero and likely reflect non-disclosure; dividend capacity should therefore be assessed via earnings and balance sheet strength rather than the reported zeros. Overall, the company demonstrates improving core profitability and adequate solvency, offset by weaker cash conversion in the period. The YoY decline in net income likely reflects factors outside core operations, which warrants monitoring of extraordinary/non-operating items and tax normalization. Data limitations (several items reported as 0 due to non-disclosure) constrain precision on capex, cash, and dividends, but the available non-zero data indicate healthy operations with temporarily weak cash flow.

Profitability Analysis

ROE of 14.26% is explained by a 16.12% net margin, 0.359x asset turnover, and 2.46x financial leverage, indicating returns are primarily margin-driven rather than asset intensity. Gross margin of 53.9% is high for beer/beverage peers and supports the uptick in operating income (+13.4% YoY vs revenue +4.3% YoY), evidencing positive operating leverage. EBITDA margin at 22.1% versus operating margin at 17.2% (2,718/15,784) suggests moderate D&A intensity (D&A ¥776m) and a reasonably efficient asset base. Ordinary income (¥2,615m) trails operating income slightly, reflecting net interest and other non-operating items; interest expense is modest at ¥131m. The strong interest coverage of 20.7x underlines resilience to moderate rate increases. The YoY decline in net income (-54.7%) contrasts with operating growth, implying prior-year extraordinary gains, higher tax burden, or other below-OP impacts this year; core profitability appears intact. With asset turnover of 0.359x (based on period-end assets), efficiency looks typical for a branded beverage producer; using average assets could modestly lift or lower this figure. Margin quality appears supported by pricing/mix and cost discipline; sustained levels will depend on input cost stability (malt, aluminum, energy) and channel/product mix.

Growth Assessment

Revenue grew 4.3% YoY to ¥15.784bn, indicating steady demand and/or pricing actions. Operating income rose 13.4% YoY to ¥2.718bn, outpacing sales growth and pointing to operating leverage and margin enhancement. Ordinary income (¥2.615bn) is close to operating income, suggesting limited non-operating drag. The sharp YoY decline in net income (-54.7% to ¥2.544bn) is inconsistent with operating momentum and likely tied to non-recurring factors or tax timing; monitoring extraordinary gains/losses and tax normalization is crucial. Gross profit growth and the 53.9% gross margin highlight improved unit economics. EBITDA of ¥3.494bn (22.1% margin) supports the view of healthy underlying performance. Given the negative OCF in the period, growth quality must be validated via cash conversion in subsequent quarters as receivables/inventory normalize. Sustainability of revenue growth will depend on consumer demand, channel performance (on-premise vs off-premise), and competitive pricing by larger national brewers. Product mix upgrades and tourism exposure could support medium-term growth, but macro softness or weather effects can add volatility. With limited disclosure on capex (investing CF shown as 0), capacity expansion and maintenance investment needs are unclear; outlook should be framed cautiously until capex data are available.

Financial Health

Total assets are ¥43.908bn and total equity is ¥17.839bn, yielding a leverage ratio (liabilities/equity) of 1.79x; balance sheet leverage is moderate. The current ratio is 152.2% and quick ratio 142.1%, indicating satisfactory near-term liquidity. Working capital stands at ¥6.228bn (CA ¥18.166bn – CL ¥11.938bn), providing a buffer against seasonal cash swings. Interest expense is modest at ¥131m, with interest coverage of 20.7x, implying strong capacity to service debt from operating earnings. The reported equity ratio of 0.0% is a non-disclosure placeholder; based on disclosed totals, an implied equity ratio (equity/assets) is approximately 40.6%. Absence of disclosed cash & equivalents (shown as 0) limits fine-grained liquidity assessment, but overall current metrics are supportive. No maturities profile or covenant details are provided; refinancing risk cannot be assessed from the data.

Cash Flow Quality

Operating cash flow was -¥2.618bn versus net income of ¥2.544bn, resulting in an OCF/NI ratio of -1.03, indicating weak cash conversion in the period. The gap likely reflects working capital outflows (e.g., receivables build, seasonal inventory, and/or tax payments), though line-item details are not disclosed. EBITDA of ¥3.494bn and D&A of ¥776m show solid non-cash earnings support, but cash realization lagged. Investing cash flow is shown as ¥0, likely a non-disclosure; capex levels are therefore unknown, preventing a reliable free cash flow derivation. The pre-tax income implied by net income and income tax (~¥3.614bn) suggests a normalized tax cash outflow that could also weigh on OCF timing. Given these constraints, FCF quality cannot be conclusively assessed; monitoring working capital swings and capex disclosures in subsequent quarters is essential. Until OCF rebounds, reliance on balance sheet liquidity and credit lines may be necessary to fund operations and investments.

Dividend Sustainability

Dividend disclosures show DPS, payout ratio, and FCF coverage as 0.00, which likely indicates non-disclosure rather than actual zeros. Using earnings capacity alone, current-period net income of ¥2.544bn could support dividends, but negative OCF (-¥2.618bn) implies weak near-term cash coverage. Without investing cash flow/capex data, we cannot compute sustainable FCF coverage or maintenance capex requirements. Leverage at 1.79x liabilities/equity and strong interest coverage (20.7x) suggest room for distributions in a normalized cash scenario, but prudence is warranted until cash conversion improves. Policy outlook is therefore uncertain; we assume a conservative stance until OCF normalizes and capex visibility increases.

Risk Assessment

Business Risks:

• Input cost volatility (malt, hops, aluminum cans, energy) affecting margins
• Intense competition with national brewers impacting pricing and share
• Demand sensitivity to macro conditions, weather, and on-premise traffic
• Geographic/tourism exposure potentially amplifying volatility in Okinawa and inbound-driven channels
• Regulatory/tax changes on alcoholic beverages
• Channel concentration risk with key retailers and wholesalers
• Product mix and innovation cycle risk in RTD/beer categories

Financial Risks:

• Negative operating cash flow in the period (OCF/NI -1.03) indicating weak cash conversion
• Moderate leverage (liabilities/equity 1.79x) and potential interest rate exposure
• Limited disclosure on cash balances and capex (investing CF shown as 0), constraining visibility
• Refinancing/covenant risks not assessable due to lack of debt maturity detail
• Potential volatility in effective tax rate and extraordinary items influencing net income

Key Concerns:

• Sustained negative OCF would pressure liquidity if working capital does not normalize
• Net income down 54.7% YoY despite stronger operations, pointing to non-operating/tax/one-offs
• Unclear capex trajectory and FCF due to non-disclosure of investing cash flows
• Dependence on maintaining premium pricing/mix to defend margins amid cost inflation

Investment Implications

Key Takeaways:

• Topline growth of 4.3% YoY with operating income up 13.4% indicates healthy core momentum
• High gross margin (53.9%) and EBITDA margin (22.1%) reflect strong margin discipline
• ROE at 14.26% is margin-led, with moderate leverage (2.46x assets/equity) supporting returns
• Interest coverage of 20.7x signals solid debt service capacity
• Net income fell 54.7% YoY, likely due to non-operating/tax effects rather than core weakness
• Operating cash flow negative (-¥2.618bn), requiring close watch on working capital and cash conversion
• Liquidity appears adequate (current ratio 152.2%, quick ratio 142.1%), but cash balance undisclosed
• Disclosure gaps (cash, investing CF, dividends) limit precision of FCF and payout analysis

Metrics to Watch:

• Operating cash flow recovery and OCF/NI ratio normalization
• Working capital metrics (receivables and inventory turns, payable days)
• Capex and investing cash flow disclosures to gauge FCF
• Extraordinary/non-operating items and effective tax rate normalization
• Gross and EBITDA margin trajectory amid input cost movements
• Leverage metrics (net debt/EBITDA when cash is disclosed) and interest coverage
• Revenue mix (on-premise vs off-premise, premiumization) and volume trends

Relative Positioning: Compared to large domestic brewers, Orion appears to have competitive margins and adequate liquidity but operates at smaller scale with moderate leverage; it may be more exposed to regional/tourism demand fluctuations and input cost swings, while lacking the procurement and distribution advantages of national 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
• 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