OUG Holdings Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥171.00B
• Operating Income: ¥2.30B
• Net Income: ¥1.85B
• EPS: ¥410.56

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

OUG Holdings (TSE:8041) reported FY2026 Q2 consolidated results under JGAAP with steady top-line growth and significantly improved profitability. Revenue rose 3.3% year over year to ¥171.0bn, while operating income increased 40.2% to ¥2.30bn, evidencing strong operating leverage. Gross profit of ¥14.47bn implies a gross margin of 8.5%, and operating margin expanded to 1.35%, reflecting improved cost discipline and/or a more favorable product mix. Ordinary income reached ¥2.60bn (margin 1.52%), and net income was ¥2.22bn (margin 1.30%), up 19.8% YoY. DuPont decomposition indicates ROE of 5.95%, built from a 1.30% net margin, 1.822x asset turnover, and 2.52x financial leverage. Balance sheet strength appears reasonable: total assets are ¥93.88bn, equity is ¥37.24bn (implied equity ratio ~39.7%), and liabilities total ¥54.71bn (debt-to-equity 1.47x). Liquidity is adequate with a current ratio of 147.9% and a quick ratio of 80.5%, though the quick ratio suggests some reliance on inventory conversion. Inventories are sizable at ¥31.23bn (about 45.6% of current assets), which is typical for a trading/distribution model but a key working capital swing factor. Operating cash flow was negative at -¥1.70bn despite ¥2.22bn of net profit, likely reflecting a temporary working capital build; financing inflows of ¥1.52bn helped bridge liquidity. Interest coverage is robust at 20.4x, providing a cushion against rate or spread volatility. Based on income tax of ¥0.78bn and net income of ¥2.22bn, the implied effective tax rate is roughly mid-20s percent when compared to a proxied pre-tax figure, though the reported effective tax rate metric shows 0.0% due to reporting limitations. Dividend data show DPS and payout ratio as 0.00, which likely indicates no disclosure rather than an explicit zero dividend at this stage of the fiscal year. Several items (equity ratio, cash and equivalents, investing cash flows, share counts, and per-share book value) are shown as zero due to non-disclosure in the dataset and should not be interpreted as actual zeros. Overall, the quarter demonstrates margin recovery and efficient asset use, but cash conversion lags due to working capital, a common seasonal feature in distribution businesses. The sustainability of the margin uplift and normalization of cash flow through the second half will be central to the outlook.

Profitability Analysis

ROE of 5.95% is driven by a 1.30% net profit margin, 1.822x asset turnover, and 2.52x financial leverage (Assets/Equity = ¥93.88bn/¥37.24bn). Operating margin of 1.35% improved meaningfully, with operating income up 40.2% versus revenue up 3.3%, indicating positive operating leverage. Gross margin stands at 8.5%, suggesting some pricing or mix improvement versus input cost trends; the pass-through of costs appears to have improved. Ordinary income margin at 1.52% benefits from limited financial burden; interest expense is ¥113m, yielding strong EBIT interest coverage of 20.4x. EBITDA is ¥2.78bn (EBITDA margin 1.6%), indicating modest non-cash charges; D&A of ¥478m is manageable. The spread between gross and operating margins implies SG&A intensity around 7.1% of sales, suggesting good cost control. Margin quality appears stable, with ordinary income exceeding operating income (likely aided by non-operating gains or equity method income), though details are not disclosed. Overall profitability remains thin in absolute terms, as is typical for wholesalers/trading businesses, but the trajectory is favorable.

Growth Assessment

Revenue growth of 3.3% YoY to ¥171.0bn indicates stable demand and/or successful price pass-through. Profit growth is stronger: operating income +40.2% and net income +19.8% YoY, pointing to better cost efficiency and operating leverage. The improvement in margins (operating margin 1.35% and ordinary margin 1.52%) suggests enhanced execution and potentially normalization of procurement costs. Asset turnover at 1.822x is healthy, indicating efficient use of the balance sheet to drive sales. Sustainability hinges on maintaining gross spread in a volatile procurement environment and managing SG&A discipline. With inventories at ¥31.23bn, revenue visibility is supported, but excess build could pressure future cash flows if demand softens. The outlook depends on seasonality and commodity/seafood price dynamics typical of the sector; maintaining current margin uplift into H2 is the key watchpoint. Given limited disclosure of segment details, growth appears primarily operational rather than acquisitive this quarter.

Financial Health

Total assets are ¥93.88bn funded by ¥54.71bn of liabilities and ¥37.24bn of equity, implying an equity ratio of approximately 39.7% (despite a reported 0.0% placeholder). Debt-to-equity is 1.47x (total liabilities/equity), acceptable for a distribution-oriented model. Liquidity is solid with current assets of ¥68.52bn versus current liabilities of ¥46.32bn, giving a current ratio of 147.9%. The quick ratio of 80.5% indicates reliance on inventory conversion to meet short-term obligations, a normal characteristic for the business model but still a liquidity consideration. Working capital stands at ¥22.20bn, providing an ample buffer. Interest coverage of 20.4x reflects low near-term refinancing risk and manageable interest burden. No detail on cash and equivalents or investing cash flows is available in this dataset (reported as zero due to non-disclosure), but financing inflows of ¥1.52bn suggest proactive liquidity management in light of negative OCF. Overall solvency and liquidity appear sound, contingent on inventory turnover and receivables collections.

Cash Flow Quality

Operating cash flow is -¥1.70bn versus net income of ¥2.22bn, yielding an OCF/Net Income ratio of -0.77, indicating weak cash conversion this period. The likely driver is working capital outflows (inventory build and/or receivables), consistent with the inventory-heavy balance sheet. EBITDA of ¥2.78bn offers non-cash add-backs, but they did not offset working capital needs in the quarter. Investing cash flow is shown as ¥0bn (unreported), so free cash flow cannot be reliably computed; the reported FCF of 0 should be treated as a placeholder rather than an actual figure. Financing inflows of ¥1.52bn helped cover the operating cash shortfall, implying additional borrowings or reduced repayments. The quality of earnings requires monitoring until working capital normalizes; absent clear evidence of structural issues, the cash shortfall appears timing-related. Key to watch are inventory days and receivable days in H2, which typically reverse seasonal outflows in distribution businesses.

Dividend Sustainability

Dividend per share and payout ratio are shown as 0.00, which likely reflects lack of disclosure in this interim dataset rather than a confirmed zero dividend. With net income of ¥2.22bn and implied equity ratio near 39.7%, there is room for distributions in principle, but sustainability must be evaluated against cash generation. Given operating cash flow was -¥1.70bn in the period and investing cash flow is undisclosed, free cash flow coverage cannot be assessed; the reported FCF coverage of 0.00x is a placeholder. Interest coverage (20.4x) and working capital headroom (¥22.20bn) support capacity, but prudent policy would hinge on normalization of OCF in H2. Without official guidance or a stated policy in the dataset, the outlook is neutral pending visibility on full-year cash flows and capital allocation priorities.

Risk Assessment

Business Risks:

• Margin volatility from procurement price fluctuations and pass-through timing.
• Inventory risk given ¥31.23bn stock; potential write-downs or slower turns if demand softens.
• Customer concentration or channel risk typical in wholesale/trading (not disclosed but characteristic of the sector).
• Seasonality leading to uneven quarterly cash flows.
• Exposure to seafood supply conditions, import regulation, and FX on sourcing (sectoral context).

Financial Risks:

• Negative operating cash flow this period, implying reliance on short-term funding until working capital normalizes.
• Quick ratio at 80.5% indicates dependence on inventory monetization for liquidity.
• Leverage of 1.47x liabilities-to-equity could rise if financing continues to bridge OCF gaps.
• Potential interest rate risk on floating-rate borrowings, though current coverage is strong.

Key Concerns:

• Cash conversion (-¥1.70bn OCF vs ¥2.22bn net income) and timing of working capital reversal.
• Sustainability of recent margin improvement amid input price variability.
• Visibility on capital expenditures and investing cash flows (undisclosed in this dataset).

Investment Implications

Key Takeaways:

• Top-line growth of 3.3% with outsized operating income growth of 40.2% signals improved operating efficiency.
• ROE at 5.95% is driven by solid asset turnover (1.822x) and moderate leverage (2.52x).
• Liquidity is adequate (current ratio 148%), but quick ratio of 80.5% highlights working capital dependence.
• OCF was negative (-¥1.70bn) despite ¥2.22bn net profit, suggesting temporary working capital headwinds.
• Interest coverage is strong at 20.4x, mitigating near-term financing risk.

Metrics to Watch:

• Inventory days and receivable days to confirm cash conversion in H2.
• Gross and operating margin progression to test durability of cost/mix gains.
• Ordinary income vs operating income gap (non-operating contributions).
• Net debt and short-term borrowings, given financing inflows of ¥1.52bn.
• Effective tax rate normalization versus implied mid-20s level.

Relative Positioning: Within Japanese food/seafood trading peers, OUG shows typical thin margins but demonstrates better-than-peer operating leverage this quarter, balanced by weaker cash conversion that needs to normalize to sustain the improvement.

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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