RIKEN VITAMIN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥47.27B
• Operating Income: ¥4.09B
• Net Income: ¥3.36B
• EPS: ¥113.03

Income Statement

Balance Sheet

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

FY2026 Q2 was a mixed quarter for Riken Vitamin (4526): topline was flat while operating profit contracted, but net profit edged up on healthy non-operating gains and a moderate tax rate. Revenue rose 0.2% year over year to 472.65, indicating essentially flat demand. Gross profit was 153.68 with a gross margin of 32.5%, suggesting stable pricing/mix at the gross level. SG&A was 112.76, implying an SG&A-to-sales ratio of 23.9%, which, combined with flat sales, drove operating deleverage. Operating income fell 11.6% YoY to 40.91, compressing the operating margin to 8.7%. Non-operating income of 4.97 (mainly dividend income of 2.57 and interest income of 0.83) more than offset non-operating expenses of 2.20, lifting ordinary income to 43.68 (-8.7% YoY). Net income increased 3.3% to 33.61, with net margin at 7.1%, helped by non-operating gains and a 25.7% effective tax rate. Operating margin compressed by roughly 115 bps YoY (from about 9.8% to 8.7%), while net margin expanded by about 21 bps (from ~6.9% to 7.1%). Earnings quality cannot be fully assessed because operating cash flow was not disclosed for the period. The balance sheet remains very strong: current ratio is 314.6%, D/E (liabilities/equity) is 0.40x, and the company holds net cash (cash 173.19 versus total borrowings 86.62). Asset efficiency is soft with asset turnover of 0.419, contributing to a low ROE of 4.2%. ROIC is 4.2%, below the 5% warning threshold, flagging capital efficiency concerns despite ample liquidity. Dividend payout ratio is calculated at a high 85.9%, which looks elevated relative to typical sustainability benchmarks, but cash flow coverage is unknown due to unreported OCF/FCF. Forward-looking, maintaining margins amid input cost and FX fluctuations and improving asset turnover will be key to lifting ROE/ROIC. The company’s conservative financial structure offers resilience, but improving operating momentum is required to enhance capital efficiency. Overall, stable sales with operating margin pressure, offset at the bottom line by non-operating income, and supported by a fortress balance sheet.

Profitability Analysis

ROE (4.2%) = Net Profit Margin (7.1%) × Asset Turnover (0.419) × Financial Leverage (1.40x). The largest pressure point is asset turnover at 0.419, indicating slow balance sheet cycling relative to sales. Operating margin declined to 8.7% (40.91/472.65), down ~115 bps YoY, due to operating deleverage as SG&A grew faster than revenue (revenue +0.2% vs higher SG&A ratio of 23.9%). Net margin improved ~21 bps YoY (~6.9% to 7.1%), largely because non-operating income (net +2.77) cushioned the decline in operating profit and the effective tax rate was moderate (25.7%). Financial leverage at 1.40x is modest, reflecting a conservative balance sheet with high equity; leverage did not contribute meaningfully to ROE expansion. Business drivers of the operating margin compression likely include: limited pricing headroom in core food ingredients/seasonings, inflation in logistics/utilities, and wage pressures elevating SG&A. The net margin improvement appears partly non-recurring if driven by financial income (dividends/interest at 3.40), which can fluctuate with market conditions and portfolio performance. Sustainability: margin expansion at the net level is less durable if operating profit remains under pressure; improvement requires either SG&A discipline or gross margin gains. Concerning trends: operating income down 11.6% YoY on flat sales implies adverse operating leverage; SG&A intensity is elevated at 23.9% of sales.

Growth Assessment

Revenue grew 0.2% YoY to 472.65, signaling flat demand in the first half. Operating income declined 11.6% to 40.91, with ordinary income down 8.7% to 43.68, indicating underlying profit headwinds despite stable sales. Net income rose 3.3% to 33.61, aided by non-operating gains and a manageable tax rate. Gross margin at 32.5% suggests product mix/pricing remain resilient at the gross level, but SG&A absorption weighed on operating performance. Non-operating income totaled 4.97 (dividends 2.57; interest 0.83), proving a meaningful contributor this quarter. With operating margin now 8.7%, restoring double-digit operating margin will likely require cost containment and/or mix upgrades. Outlook hinges on input cost stability (e.g., seaweed, seasonings raw materials), FX trends affecting imported inputs, and demand recovery in foodservice and overseas channels. Without OCF and capex disclosures, we cannot validate whether growth is being supported by healthy cash generation. Near term, expect earnings to be sensitive to non-operating items; medium term, improving asset turnover and SG&A efficiency will be required for sustained profit growth.

Financial Health

Liquidity is robust: current ratio 314.6% and quick ratio 262.8% comfortably exceed benchmarks; no warnings (both > 1.0). Working capital stands at 434.67, providing a large liquidity buffer. Solvency is strong: liabilities/equity (proxy D/E provided) is 0.40x; calculated equity ratio is approximately 71.5% (806.71/1,128.06). Interest-bearing debt totals about 86.62 (short-term 34.30; long-term 52.32) versus cash of 173.19, implying a net cash position of roughly 86.6. Interest coverage is very strong at 68.18x (operating income/interest expense). Maturity mismatch risk is low given current assets (637.21) far exceed current liabilities (202.54). No off-balance sheet obligations were reported in the provided data. Overall, the balance sheet provides ample flexibility to navigate operating volatility.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow were not disclosed, so OCF/Net Income and FCF coverage cannot be assessed. Consequently, we cannot confirm earnings-to-cash conversion quality or the sustainability of capex and dividends from internal cash generation. Working capital components on the balance sheet (AR 210.73; inventories 104.92; AP 79.30) do not indicate clear manipulation, but absent cash flow detail, we cannot rule out timing effects. Interest expense is low and coverage is strong, suggesting minimal cash interest burden. Given the net cash position, short-term liquidity for operations appears adequate even if OCF is temporarily weak.

Dividend Sustainability

The calculated payout ratio is 85.9%, above the <60% benchmark for comfortable sustainability. However, DPS, total dividends paid, and FCF are unreported, leaving coverage analysis incomplete. With net cash on the balance sheet, near-term dividend payments are likely fundable, but medium-term sustainability should be judged against OCF and capex once disclosed. If operating margin pressure persists and non-operating gains normalize, maintaining an ~86% payout may constrain reinvestment unless asset efficiency improves. Policy outlook: expect management to balance stable dividends with ROIC improvement initiatives; visibility improves with forthcoming cash flow disclosures.

Risk Assessment

Business Risks:

• Raw material price volatility (e.g., seaweed, seasonings inputs) impacting gross margin
• FX fluctuations affecting import costs and overseas earnings translation
• Demand softness or channel mix shifts in retail vs. foodservice
• Competitive pricing pressure in condiments/seasonings and processed foods
• Operational cost inflation (logistics, utilities, labor) driving SG&A deleverage

Financial Risks:

• ROIC at 4.2% below the 5% threshold, indicating capital efficiency headwind
• High payout ratio (85.9%) may be difficult to sustain if OCF is weaker than earnings
• Asset turnover at 0.419 implies slower balance sheet cycling and potential inventory/receivable risks
• Earnings sensitivity to non-operating income (dividend/interest), which can fluctuate with markets

Key Concerns:

• Operating margin compressed ~115 bps YoY on flat revenue
• Net income growth driven by non-operating items while operating profit declined
• Limited visibility on cash conversion and FCF due to unreported cash flow statements
• Capital efficiency below target ranges (ROE 4.2%, ROIC 4.2%) despite strong balance sheet

Investment Implications

Key Takeaways:

• Stable revenue but operating deleverage pressured operating income
• Non-operating gains and a moderate tax rate supported net profit growth
• Balance sheet strength (net cash, high equity ratio) provides resilience
• Low ROE/ROIC reflect soft asset efficiency and limited leverage contribution
• Payout ratio appears high; sustainability contingent on OCF and capex needs

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio
• Gross margin resilience versus input cost and FX movements
• Asset turnover improvement (inventory and receivables turns)
• Non-operating income volatility (dividends/interest) and its share of earnings
• Disclosure of OCF/FCF and capex to validate dividend coverage
• ROIC progression toward 7–8% management benchmarks

Relative Positioning: Within Japan food ingredients/seasonings peers, Riken Vitamin exhibits superior balance sheet strength and liquidity but lags on capital efficiency (ROIC/ROE) due to low asset turnover and modest operating margins; near-term earnings are more reliant on non-operating contributions than higher-margin 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