Chuo Gyorui Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥77.00B
• Operating Income: ¥1.84B
• Net Income: ¥1.51B
• EPS: ¥304.04

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

Chuo Gyorui Co., Ltd. (80300) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥76.996bn, up 5.5% YoY, demonstrating solid topline momentum in a generally low-margin wholesale/distribution business. Despite higher revenue, operating income declined 11.6% YoY to ¥1.837bn, indicating margin pressure and negative operating leverage. Gross profit was ¥7.524bn, implying a gross margin of 9.8%, which remains thin and susceptible to procurement price volatility and product mix. Operating margin compressed to approximately 2.4%, consistent with rising SG&A or tighter gross spreads. Ordinary income of ¥2.087bn exceeded operating income, suggesting meaningful non-operating contributions (e.g., investment income or equity-method gains) partly offsetting operating pressure. Net income declined 15.6% YoY to ¥1.214bn, reflecting both the operating shortfall and a relatively heavy tax burden. Based on ordinary income and reported income tax (¥866m), the implied effective tax rate is roughly 41–42%, a headwind to net profitability. DuPont decomposition indicates: net margin 1.58%, asset turnover 0.952x, and financial leverage 2.25x, yielding an ROE of 3.37%; profitability is modest and largely driven by asset efficiency and leverage rather than strong margins. The balance sheet appears sound: total assets ¥80.867bn and total equity ¥36.013bn imply an equity ratio near 44.6% (despite the 0.0% placeholder), and leverage (assets/equity) is about 2.25x. Liquidity is adequate with a current ratio of 138% and quick ratio of 84.7%; working capital stood at ¥8.141bn, supported by inventories of ¥11.425bn. Interest expense of ¥88m is well covered (≈20.9x by operating income), indicating low near-term refinancing risk. Cash flow statements were not disclosed (0 placeholders), so operating cash conversion and free cash flow cannot be assessed from this dataset. Dividend data show DPS and payout as 0.00, which should be treated as undisclosed rather than actual zero; thus dividend policy and sustainability cannot be evaluated here. Overall, the quarter shows resilient sales but weaker profitability, with ordinary income cushioning the operating shortfall and tax burden weighing on bottom-line. The company’s capital structure and liquidity appear healthy, providing flexibility to navigate cost pressures. Data gaps around cash flows and dividends limit the assessment of earnings quality and shareholder return capacity; monitoring subsequent disclosures is important.

Profitability Analysis

ROE is 3.37% per DuPont: net margin 1.58% × asset turnover 0.952 × financial leverage 2.25. Operating margin is ~2.4% (¥1.837bn/¥76.996bn), down YoY, indicating negative operating leverage despite revenue growth. Gross margin is 9.8% (¥7.524bn/¥76.996bn), typical for a seafood wholesaler but leaves limited room to absorb SG&A inflation or procurement shocks. Ordinary income margin is ~2.7% (¥2.087bn/¥76.996bn), implying non-operating income contributed roughly ¥250m above operating profit. Net margin at 1.58% reflects both thin industry margins and a high implied tax burden (~41–42%). Interest coverage is strong at ~20.9x (¥1.837bn/¥88m), suggesting limited drag from financing costs on profitability. The YoY decline in operating income (-11.6%) versus revenue growth (+5.5%) points to cost inflation, adverse mix, or increased logistics/personnel costs outweighing pricing benefits. Given the low gross margin, small adverse movements in input costs can disproportionately compress operating profit. Profitability quality is mixed: core operating metrics weakened, but ordinary income support mitigated the decline; reliance on non-operating items raises the importance of sustainability of such gains.

Growth Assessment

Revenue grew 5.5% YoY to ¥76.996bn, suggesting healthy demand/volume or some pricing pass-through in the seafood distribution channel. However, operating income fell 11.6% YoY to ¥1.837bn, indicating growth was not accretive to margins. Net income decreased 15.6% YoY to ¥1.214bn, magnified by a high implied tax rate. The gap between operating and ordinary income implies non-operating contributions (~¥250m) are meaningful to growth in comprehensive earnings; sustainability of this is uncertain. With gross margin at 9.8%, any rise in procurement costs, deterioration in product mix, or increased wastage can erode growth benefits. Absent volume/mix disclosure, the sustainability of the 5.5% revenue growth is uncertain; industry conditions, price elasticity, and supply stability will be key. Near-term outlook hinges on the company’s ability to tighten expense control and stabilize gross spreads while maintaining volumes. If cost pressures persist, operating leverage could remain negative despite topline growth.

Financial Health

Total assets were ¥80.867bn, liabilities ¥40.948bn, and equity ¥36.013bn, implying an equity ratio of roughly 44.6% (the reported 0.0% should be treated as undisclosed) and financial leverage (assets/equity) of ~2.25x. The current ratio stands at 138% and quick ratio at 84.7%, suggesting adequate short-term liquidity with reliance on inventory conversion. Working capital is ¥8.141bn, supported by inventories of ¥11.425bn; inventory management is therefore central to liquidity. Debt-to-equity is 1.14x (likely total liabilities/equity; interest-bearing debt not disclosed), indicating moderate leverage. Interest expense is modest at ¥88m with strong coverage (≈20.9x), pointing to manageable solvency risk. Cash and equivalents are undisclosed in this dataset, limiting precision on immediate liquidity buffers.

Cash Flow Quality

Operating cash flow, investing cash flow, and financing cash flow are not disclosed in this dataset (zeros indicate unreported), preventing a direct assessment of earnings-to-cash conversion. Consequently, OCF/Net income and free cash flow metrics shown as 0.00 should not be interpreted as actual values. Earnings quality assessment must rely on accrual-based indicators: inventories are material (¥11.425bn), implying potential working capital sensitivity to sales and procurement cycles. Without OCF, we cannot confirm whether the YoY profit decline was accompanied by working capital build or release. Capex and depreciation are also undisclosed (¥0 placeholders), so we cannot judge maintenance capex needs versus reported earnings. Overall, cash flow quality is indeterminable from available data; disclosure of OCF, capex, and changes in working capital will be crucial.

Dividend Sustainability

Dividend per share and payout ratio are shown as 0.00, which should be treated as undisclosed rather than actual zero. With net income at ¥1.214bn but no cash flow data, free cash flow coverage of dividends cannot be evaluated. The absence of capex and OCF disclosure precludes assessment of distributable capacity and policy adherence. Balance sheet strength (equity ratio ~44.6%, strong interest coverage) suggests capacity exists in principle, but confirmatory cash data are needed. Policy outlook cannot be inferred from this dataset; investors should reference company guidance and historical dividend track record when available.

Risk Assessment

Business Risks:

• Low structural margins (GPM ~9.8%, OPM ~2.4%) amplify sensitivity to input cost and pricing volatility
• Procurement risk in seafood supply chains (volume variability, seasonal catches, import conditions, FX)
• Negative operating leverage observed as revenue growth did not translate to profit growth
• Potential reliance on non-operating income to support ordinary profit
• High implied tax rate (~41–42%) compressing net margins
• Inventory management risk given sizable inventories (¥11.425bn)

Financial Risks:

• Cash flow information undisclosed, limiting visibility into cash conversion and FCF
• Debt structure details not disclosed; debt-to-equity of 1.14x may include non-interest-bearing liabilities
• Liquidity partly dependent on inventory turnover; quick ratio at 84.7% indicates reliance on working capital efficiency
• Potential exposure to interest rate changes, though current interest burden is low

Key Concerns:

• Operating income declined 11.6% YoY despite 5.5% revenue growth
• Net income declined 15.6% YoY; implied effective tax rate is elevated
• Cash flow (OCF/FCF) and capex data absent; cannot validate earnings quality
• Equity ratio reported as 0.0% in the dataset, requiring recalculation for accurate assessment

Investment Implications

Key Takeaways:

• Topline growth of 5.5% YoY did not translate into profit growth; margins compressed
• Ordinary income outpaced operating income, indicating non-operating support to earnings
• ROE of 3.37% is modest and constrained by low net margin
• Balance sheet appears solid with an estimated equity ratio around 44.6% and strong interest coverage
• Liquidity is adequate but dependent on inventory conversion

Metrics to Watch:

• Gross and operating margin trajectory and SG&A discipline
• Inventory turnover days and working capital trends
• Breakdown and sustainability of non-operating income components
• Disclosure of OCF and capex to assess FCF and dividend capacity
• Effective tax rate drivers and potential normalization
• Interest-bearing debt levels and refinancing profile

Relative Positioning: Within low-margin food/seafood distribution peers, the company exhibits typical thin margins, solid asset turnover, and moderate leverage; profitability underperformed in the quarter, but financial footing appears stable relative to sector norms.

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