Morningstar | Hoshizaki Postpones Its Earnings Report Again, Casting Serious Doubt on Its Corporate Governance
On Feb. 13, Hoshizaki announced that it will postpone the announcement of December quarter results, which will be a delay of reporting for two consecutive quarters. One of its 15 distribution subsidiaries, Hoshizaki Tokai, had exaggerated its revenue to meet the challenging internal target, and as a result, it took almost two months for Hoshizaki to investigate the misconduct, which caused a delay on its September quarter results reporting. The company is now unable to report December quarter results as it identified the same fraud again, which requires it to assess whether the past investigation was done properly. We view that Hoshizaki’s wide economic moat, which stems from its nationwide distribution channels and strong brand name, is intact and thus retain our fair value estimate of JPY 11,100. However, we understand that this casts a serious doubt on Hoshizaki’s corporate governance, and it will take time to restore the confidence of the market.Hoshizaki and its subsidiaries are mainly engaged in the research, development, manufacture, sale and maintenance of kitchen equipment for industrial use. Co.'s principal products are ice makers including fully-automatic and large-scale ice makers, cooking electrolyzers, meal service carts, high humidity refrigerators, frozen refrigerators, cold salt water system, washing electrolyzers, dish washers, ice dispensers, tea servers, cooking appliances including electromagnetic cookers, electronic frying equipment and microwaves, among others. Co. provides its products in Japan as well as North and South America, Europe, Asia and other regions.
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