Japan Foods Holding Ltd’s Latest Earnings: What Investors Should Know

Japan Foods Holding Ltd (SGX: 5OI) reported its second-quarter earnings report for the financial year ending 31 March 2016 (FY2016) last Friday. The reporting period was for 1 July 2015 to 30 September 2015.

As a purveyor of Japanese cuisine, Japan Foods serves up affordable Japanese fare such as ramen, through its Ajisen and Menya Musashi outlets, and gyoza, through its Osaka Ohsho outlets. All told, Japan Foods has a portfolio of 13 food & beverage brands.

You can read more about the company here and here . You can also catch the previous quarter’s earnings here .

Financial highlights

Here’s a rundown on the financial figures for Japan Foods:

  1. Japan Foods’ revenue for the second quarter was up 2.5% year on year. The firm recorded quarterly sales of $15.9 million.
  2. Despite the lackluster revenue, net profit for the period rose by a strong 36.8% to $1.3 million. Profit for this quarter was helped by lower cost of sales.
  3. As a result, earnings per share (EPS) rose 35.1% from 0.57 cents per share in the second quarter of FY2015 to 0.77 cents in the reporting quarter.   
  4. For the reporting quarter, cashflow from operations came in at $2.8 million while capital expenditure was only $267,000. This gives Japan Foods a positive free cash flow of $2.6 million for the reporting quarter.
  5. As of 30 September 2015, the company had almost $16 million in cash and equivalents and no debt.

In all, the reporting quarter for Japan Foods was not unlike the prior quarter. Revenue growth was minimal, but net profit rose sharply for the quarter. The food Japanese purveyor also demonstrated strong free cash flow and it has a clean balance sheet.

This cash war chest may be important for the company to reinvigorate top-line growth.

Japan Food’s board of directors proposed an interim dividend of 0.75 cents per share, up from the last year’s interim dividend of 0.73 cents per share.

Operational Highlights

The underlying food brands showed uneven growth during the quarter. Majority of the revenue growth came from its Kazokutei, Japanese Gourmet Town and Osaka Ohsho outlets. This was offset by weaker sales at Ajisen Ramen, Menya Musashi and Fruit Paradise .

Takahashi Kenichi, Executive Chairman and Chief Executive Officer of Japan Foods, added the following comment:

With the Singapore economy experiencing a slowdown and the global economy facing uncertain times, I am heartened that our earnings performance has continued on the uptrend and we were able to maintain our gross profit margin. I attribute this to the portfolio of compelling brands we have, our attractive price points and our conveniently located restaurants that continue to draw in diners.

We have also maintained our culture of tight cost control, which has tide us through many economic cycles.

Foolish summary

At its closing price yesterday of $0.45, Japan Foods traded at around 14.7 times trailing earnings and a trailing dividend yield of 4.5%.

For more investing analyses and to keep up to date on the latest financial and stock market news, sign up now for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead.

Also, like us on Facebook to follow our latest hot articles.

The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.