Kikkoman Corp. :KIKOY-US: Earnings Analysis: Q1, 2018 By the Numbers : August 17, 2017

Kikkoman Corp. reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Kikkoman Corp. – McCormick & Company, Incorporated, Kewpie Corporation Sponsored ADR and Grupo Herdez SAB de CV (MKC-US, KWPCY-US and HERDEZ-MX) that have also reported for this period.


  • Summary numbers: Revenues of USD 961.28 million, Net Earnings of USD 54.91 million.
  • Gross margins narrowed from 40.39% to 40.06% compared to the same period last year, operating (EBITDA) margins now 12.17% from 11.86%.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from 8.52% to 8.76%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 961.28 884.07 958.78 956.66 916.12
Revenue Growth (%YOY) 4.93 4.34 7.87 14.38 10.59
Earnings (mil) 54.91 12.5 58.22 48.27 102.61
Earnings Growth (%YOY) -46.48 -50.1 7.24 20.54 122.93
Net Margin (%) 5.71 1.41 6.07 5.05 11.2
EPS 0.85 0.19 0.9 0.75 1.59
Return on Equity (%) 2.49 0.58 2.74 2.25 4.97
Return on Assets (%) 6.77 1.58 7.32 5.77 12.33

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Market Share Versus Profits

Revenues History
Earnings History

KIKOY-US‘s change in revenue this period compared to the same period last year of 4.93% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that KIKOY-US is holding onto its market share. Also, for comparison purposes, revenues changed by 8.73% and earnings by 339.17% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year earnings decline was driven by the drop in gross margins from 40.39% to 40.06%. This drop in earnings would have been worse were in not for operational cost control activities, which helped the operating margins (EBITDA margins) improve from 11.86% to 12.17%. For comparison purposes, gross margins were 39.30% and EBITDA margins were 10.14% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

KIKOY-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 98.61 days, compared to last year’s level of 91.48 days.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich


The company’s earnings decline is largely a result of non-operational activity. As a matter of fact, the company showed increases in operating (EBIT) and pretax margins. EBIT margins improved from 8.57% to 9.08% and pretax margins widened from 8.52% to 8.76%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Kikkoman Corp. is a holding company which engages in the food manufacturing business. It operates through the following segments: Domestic Foods-Manufacturing and Sales, Domestic Others, Overseas Foods-Manufacturing and Sales, and Overseas Foods-Wholesale. The Domestic Foods-Manufacturing and Sales segment manufactures and sells soy sauce, beverages, and alcoholic beverages. The Domestic Others segment involves in the production and sale of clinical diagnostic reagents, hygiene inspection agents, processing enzymes and chemical products such as hyaluronic acid. It also operates in real estate property leasing, logistics, and back-office support for Kikkoman Group, and other businesses. The Overseas Foods-Manufacturing and Sales segment sells soy sauce, Del Monte products, and overseas health foods. The Overseas Food-Wholesale segment purchases and sells oriental food products in Japan and overseas. The company was founded on December 7, 1917 and is headquartered in Noda, Japan.

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