YAMAE GROUP HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥508.80B
• Operating Income: ¥7.09B
• Net Income: ¥3.71B
• EPS: ¥118.99

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

Verdict: Solid top-line and operating profit growth with modest margin expansion, but bottom-line weakened by a high tax rate and non-recurring items, leaving leverage and liquidity as key pressure points. Revenue rose 6.1% YoY to 5,087.98, and operating income increased 18.0% YoY to 70.86, showing improved operating discipline. Gross profit was 621.96 with a gross margin of 12.2%, and SG&A was contained at 551.10 (10.8% of sales), underpinning operating margin improvement. Operating margin expanded to 1.39% from an estimated 1.25% a year ago, an improvement of roughly 14 bps. Ordinary income slipped 4.8% YoY to 72.07 despite higher OI, reflecting weaker non-operating balance and mix; profit before tax rose to 80.94, implying net extraordinary gains of about 8.9. Net income declined 21.4% YoY to 33.00 due to a very high effective tax rate (54.2%) and profit mix. Cash flow quality was strong: operating cash flow of 83.20 was 2.5x net income, indicating robust cash conversion. Approximate free cash flow (OCF minus capex) was positive at about 19.1, supporting near-term funding needs including dividends and capex. Leverage remains elevated with D/E at 3.28x and Debt/EBITDA at 9.4x, and liquidity is tight with a current ratio of 0.97 and quick ratio of 0.84. ROE is modest at 3.5% per DuPont (NPM 0.7%, asset turnover 1.256x, leverage 4.28x), and ROIC of 2.4% is below the 5% warning threshold. Goodwill and intangibles are sizeable (combined ~758), raising integration and impairment monitoring needs. Interest coverage remains comfortable at 11.0x, cushioning higher leverage. Dividend payout ratio is 58.9%; with FCF around 19.1, coverage appears just adequate but sensitive to working capital and tax normalization. Forward-looking, continued SG&A discipline and margin improvement are positive, but sustaining earnings growth likely hinges on tax normalization, consistent non-operating results, and deleveraging to ease liquidity risk.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 0.7% × 1.256 × 4.28 ≈ 3.5%. The weakest component is the net profit margin at 0.7%, which constrains ROE despite reasonable asset turnover and high leverage. Versus last year, operating leverage improved (OI +18% vs revenue +6.1%), suggesting operating margin expansion (about +14 bps) as SG&A grew below sales. However, ordinary income declined YoY and NI fell due to a high tax rate and profit mix, offsetting operating gains. Business drivers: wholesale distribution scale benefits and cost control supported OI, while elevated tax burden and non-operating balance capped NI. Sustainability: incremental operating margin gains from SG&A efficiency look repeatable if discipline continues; the unusually high tax rate likely normalizes, but non-operating swings and extraordinary items are inherently volatile. Watchpoints: SG&A at 10.8% of sales is acceptable, but any SG&A growth outpacing revenue would quickly compress the sub-2% EBITDA/operating margin structure; also, non-operating income ratio of 33.8% underscores sensitivity to below-the-line items.

Growth Assessment

Top-line growth of 6.1% indicates steady demand across the portfolio, with operating profit up 18.0% highlighting improved mix and cost discipline. Operating margin rose to ~1.39%, pointing to positive operating leverage; EBITDA was 111.52 (2.2% margin), still thin but improving. Ordinary income fell 4.8% YoY and net income declined 21.4% due to higher tax burden and profit mix effects; underlying operating growth appears healthier than reported NI. Revenue sustainability rests on maintaining distribution volumes and pricing pass-through amid cost inflation; low margins leave limited buffer for shocks. Profit quality is solid at the cash level (OCF/NI 2.52x), implying earnings are cash-backed. Outlook: incremental margin expansion via SG&A control and procurement efficiencies is plausible; normalization of the effective tax rate would aid NI recovery. Risks to growth include tighter consumer demand, competitive pricing in wholesale, and financing costs given high leverage.

Financial Health

Liquidity is tight: current ratio 0.97 and quick ratio 0.84 are below healthy thresholds; explicit warning triggered for current ratio <1.0. Working capital is negative at -62.70, typical for wholesale models but increases liquidity management demands, especially with short-term loans of 356.52 and accounts payable of 1,209.03. Solvency: D/E is 3.28x (warning >2.0) and Debt/EBITDA is 9.36x (high), although interest coverage is comfortable at 10.97x. Total liabilities are 3,103.64 against total equity of 947.13, reflecting substantial leverage; long-term loans are 686.80, indicating meaningful refinancing exposure. Maturity mismatch risk: current liabilities (2,171.36) exceed current assets (2,108.66); reliance on payables and short-term borrowings heightens rollover risk if credit tightens. Off-balance sheet obligations are not disclosed in the provided data; none identified.

Cash Flow Quality

OCF of 83.20 versus NI of 33.00 yields an OCF/NI of 2.52x, indicating high-quality earnings with strong cash conversion. Approximate free cash flow, calculated as OCF minus capex, was about +19.1, suggesting capacity to fund dividends and maintain investment, albeit with a slim cushion. Working capital: while detailed movements are not disclosed, the negative working capital model suggests cash benefits from payables; no explicit signs of manipulation are observable from the limited data. Sustainability: with EBITDA at 111.52 and interest expense 6.46, cash interest is well covered; however, elevated leverage and tight liquidity mean FCF could be pressured by inventory or receivables build, or by higher interest rates.

Dividend Sustainability

The payout ratio is 58.9%, within the generally sustainable range (<60%), though near the upper bound given cyclical and margin risks. With approximate FCF of ~19.1 and implied dividend outlay roughly consistent with the payout ratio on NI, near-term coverage appears adequate but thin. Balance sheet leverage (D/E 3.28x) reduces flexibility; sustaining the dividend assumes stable OCF and no step-up in capex. Policy outlook: if tax rate normalizes and operating margin continues to improve, coverage should strengthen; conversely, any downturn in working capital or rise in interest costs could challenge dividend headroom.

Risk Assessment

Business Risks:

• Low-margin wholesale model with limited buffer (operating margin ~1.4%, EBITDA margin ~2.2%).
• Execution risk on cost control and procurement needed to sustain margin gains.
• Potential demand softness or pricing pressure in key categories affecting volume and mix.
• Integration and impairment risk given sizeable goodwill (349.04) and intangibles (409.07).

Financial Risks:

• Tight liquidity: current ratio 0.97, quick ratio 0.84, negative working capital.
• High leverage: D/E 3.28x and Debt/EBITDA 9.36x increase refinancing and covenant risk.
• Tax rate volatility (effective tax 54.2%) driving NI swings.
• Interest rate exposure given significant floating-rate debt potential (short-term loans 356.52).

Key Concerns:

• Net income decline (-21.4% YoY) despite stronger operations, pointing to below-the-line volatility.
• Dependence on non-operating/extraordinary items (PBT exceeds ordinary income) for bottom-line support.
• ROIC at 2.4% below cost of capital, indicating value creation challenges until margins improve or assets are optimized.
• Liquidity management reliance on payables and short-term borrowings.

Investment Implications

Key Takeaways:

• Core operations improved: revenue +6.1% and operating income +18.0% with margin expansion (~+14 bps).
• Bottom-line underperformed due to a high effective tax rate and non-operating mix; NI -21.4% YoY.
• Cash conversion strong (OCF/NI 2.52x); approximate FCF positive (~19.1).
• Balance sheet risk elevated: D/E 3.28x, Debt/EBITDA 9.36x, current ratio 0.97.
• ROE modest at 3.5% and ROIC 2.4% underscore need for further margin and asset efficiency gains.

Metrics to Watch:

• Operating margin and SG&A ratio trajectory.
• Effective tax rate normalization vs. mid-30s benchmark.
• Working capital turns (AR days, inventory days, AP days) and OCF consistency.
• Net debt/EBITDA and interest coverage trends amid rate environment.
• Goodwill/intangible impairment signals and acquisition integration KPIs.

Relative Positioning: Within Japan’s food and daily goods wholesale peers, the company shows decent top-line growth and improving operating discipline but remains more leveraged with tighter liquidity and subpar ROIC. The cash conversion is a relative strength; however, balance sheet risk and NI volatility temper the quality of growth.

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
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