Maruichi Sangyo Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥145.87B
• Operating Income: ¥906M
• Net Income: ¥296M
• EPS: ¥39.63

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

Maruichi Sansho (TSE:82280) delivered solid top-line momentum in FY2026 Q2, with revenue up 15.0% year over year to ¥145.9bn, reflecting robust volume and/or pricing in a low-margin wholesale/trading model. Profitability inflected strongly: operating income rose 111.5% YoY to ¥0.91bn and net income climbed 167.6% YoY to ¥0.79bn, underscoring meaningful operating leverage despite structurally thin margins. Gross profit reached ¥10.12bn, implying a gross margin of 6.9%, while operating margin improved to 0.62% and net margin to 0.54%. Ordinary income of ¥1.16bn sits above operating income, indicating net non-operating gains and very low interest burden (¥11m), which supported a high stated interest coverage (82.4x). DuPont analysis indicates ROE of 3.08%, driven by very high asset turnover (1.805x) and elevated financial leverage (3.17x), but constrained by slim net margins. Cash generation is the key weak spot this quarter: operating cash flow was negative ¥6.28bn, far below net income (OCF/NI = −7.99x), likely due to working capital build in receivables and inventories typical for seasonal peaks in food distribution. The balance sheet shows total assets of ¥80.8bn and total liabilities of ¥54.5bn, with equity at ¥25.5bn, implying a debt-to-equity ratio of 2.14x and moderate-to-high leverage for a low-margin business. Liquidity ratios are adequate on paper (current ratio 123.9%, quick ratio 92.3%), but the negative OCF and reliance on financing cash inflows (+¥2.29bn) to bridge near-term funding needs temper comfort. Depreciation and amortization of ¥0.50bn suggest modest capital intensity, consistent with a distributor, and EBITDA of ¥1.40bn (0.96% margin) provides limited cushion against adverse shocks. Effective tax expense was ¥0.21bn; based on net income, the implied effective tax rate is roughly 20–21%, despite the 0.0% figure in the provided summary metrics (which appears to reflect data limitations). Dividend distribution is currently nil (DPS ¥0; payout 0%), which is prudent given negative operating cash flow and the need to stabilize working capital. The equity ratio metric is shown as 0.0% due to non-disclosure under the provided dataset; based on reported liabilities and equity, the implicit equity ratio would be approximately 31.5%, but this is not explicitly disclosed. Overall, the quarter demonstrates improving earnings quality at the P&L level through operating leverage, offset by weak cash conversion and higher working capital intensity. Sustainability hinges on normalizing working capital and maintaining pricing discipline to preserve margin in a competitive, commodity-linked environment. The company’s low interest burden provides some resilience, but leverage and cash flow volatility merit continued monitoring. Given several unreported items (cash balance, capex/FCF, shares, equity ratio), conclusions should be viewed with moderate data caveats.

Profitability Analysis

ROE decomposition (DuPont): net profit margin 0.54% × asset turnover 1.805 × financial leverage 3.17 = ROE 3.08% (matches reported). The ROE profile relies more on high asset turnover and leverage than on margins, consistent with a wholesale model. Gross margin stands at 6.9%, operating margin at 0.62%, ordinary margin at 0.79%, and net margin at 0.54%, indicating thin but improving profitability. Operating income grew 111.5% YoY on 15.0% revenue growth, evidencing strong operating leverage as fixed costs were spread over higher volumes. Ordinary income outpaced operating income due to net non-operating gains and minimal interest expense (¥11m), enhancing bottom-line flow-through. EBITDA of ¥1.40bn (0.96% margin) suggests limited buffer against input price volatility and cost shocks; ongoing cost control and mix optimization are key. The implied effective tax rate, approximated from net income and income tax (¥208m/¥994m), is about 20.9%, consistent with domestic norms and supportive of clean earnings. Profit quality appears better than last year given the step-up in operating profit, but the disconnect with cash flow (negative OCF) indicates that accrual profits have not yet converted to cash, reducing near-term quality. Overall, profitability is improving but remains constrained by structural margin limitations and working capital intensity.

Growth Assessment

Revenue growth of +15.0% YoY to ¥145.9bn points to healthy demand and/or pass-through of procurement cost inflation. Operating income growth of +111.5% YoY (to ¥0.91bn) shows positive operating leverage and likely improved expense discipline. Net income growth of +167.6% YoY (to ¥0.79bn) benefited from both operating improvements and low interest cost. Sustainability of growth depends on maintaining volume, managing procurement price volatility, and retaining pricing power with customers; wholesale margins remain vulnerable to input cost swings. Given EBITDA margin under 1%, incremental growth must be margin-accretive to be meaningful at the bottom line. The negative OCF suggests growth was partly supported by working capital expansion (e.g., higher inventories/receivables), which is not sustainable without normalization. Near-term outlook: if working capital reverses seasonally and pricing remains stable, earnings traction can persist; otherwise, cash strain could cap growth. Non-operating items were favorable this period; reliance on such items is not a durable growth driver. With depreciation at ¥0.50bn and capex undisclosed, capacity constraints are unclear, but capital intensity appears low; growth is more likely to come from sales execution and mix.

Financial Health

Liquidity: current ratio 123.9% and quick ratio 92.3% are acceptable for a distributor, but the large negative operating cash flow (−¥6.28bn) indicates tight underlying liquidity and reliance on short-term funding. Working capital stands at ¥9.37bn; inventories are ¥12.37bn (not excessive vs. scale, but notable given cash outflow). Solvency: total liabilities ¥54.47bn vs. equity ¥25.49bn imply debt-to-equity of 2.14x, reflecting moderate-to-high leverage for a low-margin model. Interest burden is light (¥11m), yielding strong interest coverage (82.4x), which mitigates short-term solvency risk. Equity ratio is shown as 0.0% in the dataset due to non-disclosure; based on liabilities and equity, an implied equity ratio around 31–32% suggests a reasonable capital base. Capital structure appears tilted to short-term liabilities (current liabilities ¥39.19bn), consistent with trade financing; this increases refinancing and rollover dependence, especially when OCF is negative. Overall financial health is adequate but sensitive to working capital cycles and requires sustained discipline in inventory and receivables management.

Cash Flow Quality

Earnings quality is currently weak from a cash perspective: OCF of −¥6.28bn versus net income of ¥0.79bn results in OCF/NI of −7.99x, evidencing significant working capital outflows. The likely drivers are increases in accounts receivable and inventory tied to revenue growth and seasonality; exact line-item movements are not disclosed. Depreciation (¥0.50bn) supports EBITDA, but does not bridge the cash gap. Free cash flow is shown as 0 due to unreported investing cash flows/capex; thus, true FCF cannot be reliably assessed from the provided data. Financing cash inflow of ¥2.29bn indicates reliance on external funding to partially offset operating cash needs. Cash and equivalents are undisclosed in the dataset (shown as 0), limiting visibility on immediate liquidity buffers. Until working capital normalizes and OCF turns positive, cash flow quality remains a concern despite improved accrual profitability.

Dividend Sustainability

Annual DPS is reported at ¥0 with a payout ratio of 0.0%, reflecting a conservative stance amid negative operating cash flow. With FCF not disclosed (shown as 0 due to missing investing/capex data), coverage metrics cannot be accurately computed; however, negative OCF would not support distributions in the near term. Given leverage (D/E 2.14x) and short-term funding dependence, preserving cash to stabilize working capital is prudent. The near-term dividend outlook likely prioritizes balance sheet resilience over payouts; any resumption would depend on sustained positive OCF and working capital normalization.

Risk Assessment

Business Risks:

• Thin structural margins (gross margin 6.9%, operating margin 0.62%) leave limited shock absorption
• Procurement price volatility for food/commodities impacting spread and inventory valuation
• Customer pricing pressure and competitive intensity in wholesale/distribution
• Seasonality and volume variability affecting working capital and cash conversion
• Logistics and fuel cost inflation impacting distribution expenses
• Food safety and quality control risks, including recalls and compliance
• Supply chain disruptions (weather, disease outbreaks in livestock/seafood, import constraints)
• FX volatility if imported products exposure is material

Financial Risks:

• Negative operating cash flow (−¥6.28bn) creating funding pressure
• High reliance on short-term liabilities (current liabilities ¥39.19bn) and refinancing risk
• Working capital build (inventories ¥12.37bn) increasing cash tied up
• Leverage at 2.14x D/E amplifies downside in low-margin environment
• Potential interest rate sensitivity on short-term borrowings despite currently low interest expense
• Limited buffer from EBITDA margin (<1%) against adverse swings

Key Concerns:

• Sustained cash burn from working capital could strain liquidity
• Ability to maintain pricing/margins amid input volatility
• Dependence on financing inflows to bridge OCF shortfalls
• Data gaps (cash, capex, equity ratio detail) obscure full risk profile

Investment Implications

Key Takeaways:

• Strong operating leverage: revenue +15.0% YoY translated to operating income +111.5% YoY
• Margins remain thin (operating margin 0.62%), requiring tight cost and pricing discipline
• ROE of 3.08% is leverage- and turnover-driven; margin expansion is needed for structural improvement
• Cash conversion is weak (OCF/NI −7.99x), pointing to working capital strain
• Liquidity ratios are acceptable, but negative OCF and reliance on financing inflows elevate near-term risk
• Interest burden is minimal (¥11m), providing some resilience despite leverage (D/E 2.14x)

Metrics to Watch:

• Operating cash flow and working capital changes (receivables, inventories, payables)
• Gross and operating margin trajectory versus input cost trends
• Ordinary income components (non-operating gains/losses) sustainability
• Short-term borrowings and interest rate exposure
• Capex and true free cash flow once disclosed
• Credit metrics: current ratio, quick ratio, and net debt when cash data are available

Relative Positioning: Within Japan’s food wholesale/distribution peer set, Maruichi Sansho shows better-than-peer recent operating leverage but remains constrained by sub-1% EBITDA margins and elevated working capital intensity; leverage is on the higher side, and cash conversion currently trails best-in-class operators.

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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