Iceco Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥30.78B
• Operating Income: ¥704M
• Net Income: ¥448M
• EPS: ¥114.80

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

Verdict: A solid Q2 with clear margin expansion and strong cash generation, tempered by tight liquidity and elevated leverage. Revenue grew 5.7% YoY to 307.76, while operating income rose 27.7% YoY to 7.04, and net income increased 17.2% YoY to 4.48. Gross profit was 50.77, implying a gross margin of 16.5%. Operating margin improved to roughly 2.29% (7.04/307.76). Using the provided YoY rates, prior-period revenue and operating income imply operating margin expanded by approximately 40 bps (from ~1.89% to ~2.29%). Net margin increased to about 1.46%, up roughly 15 bps YoY. Ordinary income rose 20.6% YoY to 7.08, aided by a small net non-operating gain (0.55 income vs 0.19 expense). Earnings quality appears high this quarter with operating cash flow at 14.72, about 3.3x net income. Implied free cash flow was robust at approximately 10.5 (OCF 14.72 minus capex 4.20). However, the current ratio is 0.94 and working capital is negative (-6.63), highlighting short-term liquidity pressure. Leverage is elevated with D/E at 3.18x and financial leverage of 4.77x driving ROE of 10.5%. Interest coverage remains very strong at 67.5x, mitigating near-term servicing risk despite leverage. ROIC is reported at 9.4%, above the typical 7–8% target range, indicating good capital efficiency. The effective tax rate stands at 34.9%, a headwind to bottom-line conversion. Forward-looking, sustaining cost discipline and improving the balance sheet (liquidity and leverage) are key, while demand growth and operating leverage could support continued earnings expansion. Data gaps (e.g., inventories, dividend details, short-term loans) limit full granularity, but available metrics indicate improving profitability with balance sheet constraints that warrant attention.

Profitability Analysis

ROE decomposition (DuPont): ROE 10.5% = Net profit margin ~1.5% × Asset turnover 1.516 × Financial leverage 4.77x. The largest positive change driver appears to be margin improvement, as operating income grew 27.7% against revenue growth of 5.7%, implying operating margin expansion of ~40 bps YoY; net margin also improved ~15 bps. Business driver: better operating leverage likely from SG&A efficiency relative to gross profit growth (SG&A is 45.26 vs gross profit 50.77), and modest non-operating tailwinds (net +0.36). Asset turnover remained healthy at 1.516, indicating efficient use of the asset base for a distributor/logistics-heavy model. Financial leverage (4.77x) materially amplifies ROE, but this is a structural factor rather than an improvement driver this quarter. Sustainability: margin gains appear partly structural (cost discipline and scale benefits), though sensitivity to input costs and logistics expenses remains. Leverage-driven ROE is not a sustainable lever if liquidity stays tight; deleveraging could modestly reduce ROE but improve risk profile. Watchpoints: verify that SG&A growth does not outpace revenue over coming quarters and ensure operating margin improvements are not one-off. No evidence of SG&A growth exceeding revenue is available this quarter, but lack of YoY SG&A disclosure is a limitation.

Growth Assessment

Top-line growth of 5.7% YoY indicates steady demand. Profit growth outpaced sales (OI +27.7%, NI +17.2%), showing operating leverage. Operating margin rose from ~1.89% to ~2.29% and net margin from ~1.31% to ~1.46%, suggesting improved cost absorption and/or pricing/mix benefits. Non-operating impact was small and positive, so core operations drove the upside. EBITDA of 8.77 implies an EBITDA margin of ~2.85%, consistent with a low-margin distribution model but improving. Effective tax rate at 34.9% constrained net profit conversion, so further bottom-line upside could come from tax rate normalization, if any. Outlook: if revenue growth continues in the mid-single digits and cost control holds, operating income growth can remain above sales growth; however, energy, fuel, and labor inflation could compress margins. Balance sheet constraints (low current ratio, high D/E) may limit aggressive growth investments until liquidity improves. ROIC at 9.4% suggests current investments are yielding above cost-of-capital-like levels, supporting continued selective capex.

Financial Health

Liquidity is tight: current ratio 0.94 (<1.0 warning) and working capital is negative (-6.63). Quick ratio equals current ratio at 0.94 due to unreported inventories; actual quick ratio could be lower if inventories are material. Cash and deposits are 14.71 versus current liabilities of 103.32; accounts receivable are 50.16, and accounts payable are high at 81.50, indicating reliance on trade payables. Maturity mismatch risk exists given current liabilities exceed current assets; monitoring short-term refinancing and payables turnover is important. Solvency: D/E is 3.18x (>2.0 warning), reflecting high leverage; total liabilities 135.18 against equity 42.54. Long-term loans are 20.82; short-term borrowings are unreported, which limits clarity on near-term refinancing needs. Interest coverage is strong at 67.5x, mitigating near-term interest burden risk. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

Earnings quality is strong this quarter: OCF/Net income is 3.29x (>1.0 threshold). Implied free cash flow is approximately 10.52 (14.72 OCF minus 4.20 capex), sufficient to support ongoing investments and potential dividends. With financing CF near zero (0.04), cash generation was internally funded. Working capital detail is limited (inventories not disclosed), but the high OCF relative to net income reduces concerns about aggressive revenue recognition. No overt signs of working capital manipulation are evident from available data; however, the large accounts payable relative to receivables and cash warrants monitoring for payment timing effects.

Dividend Sustainability

Payout ratio (calculated) is 25.4%, comfortably below the 60% benchmark. DPS and total dividends are unreported, but with implied FCF of ~10.5, coverage for typical payout levels appears strong this period. Given liquidity constraints (current ratio <1.0) and elevated leverage (D/E 3.18x), management may prioritize balance sheet reinforcement over aggressive dividend increases. Policy outlook: maintaining a conservative payout aligned with earnings and cash flow seems prudent until liquidity metrics improve. Data gaps on DPS and total dividends limit precision in coverage analysis.

Risk Assessment

Business Risks:

• Low-margin distribution model vulnerable to fuel, energy, and labor cost inflation compressing margins
• Customer concentration risk typical in convenience store/food wholesale channels (not disclosed but industry-common)
• Supply chain and cold-chain logistics disruptions impacting service levels and cost
• Pricing power limitations amid competitive market dynamics

Financial Risks:

• Liquidity risk: current ratio 0.94 and negative working capital (-6.63)
• High leverage: D/E 3.18x and financial leverage 4.77x increase refinancing and covenant risks
• Potential short-term refinancing needs (short-term debt unreported; payables heavy vs cash/receivables)
• Interest rate risk on floating-rate borrowings (debt composition details not disclosed)

Key Concerns:

• Maturity mismatch with current liabilities exceeding current assets
• Dependence on trade payables (81.50) for funding operations
• Tax rate at 34.9% dampening net income conversion
• Data limitations on inventories, short-term loans, and dividend details which could alter liquidity and coverage assessments

Investment Implications

Key Takeaways:

• Clear margin expansion: operating margin up ~40 bps and net margin up ~15 bps YoY
• High-quality earnings: OCF is 3.3x net income; implied FCF ~10.5
• ROE of 10.5% supported by both operating improvement and high leverage; ROIC at 9.4% is healthy
• Balance sheet constraints: current ratio <1.0 and D/E 3.18x require attention
• Interest coverage very strong (67.5x), reducing near-term servicing risk despite leverage

Metrics to Watch:

• Operating margin and gross margin trajectory versus energy and labor cost trends
• Current ratio, quick ratio, and working capital movements (including inventories once disclosed)
• Debt-to-equity and net debt/EBITDA (when net cash disclosed) to track deleveraging
• OCF/NI and FCF sustainability relative to capex and dividends
• Accounts payable and receivable turnover to assess funding reliance and cash conversion

Relative Positioning: Within Japan’s food distribution/logistics peers, profitability trends are improving and ROIC is solid, but liquidity and leverage are weaker than conservative peers; strong cash generation partially offsets balance sheet risk.

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