Maruha Nichiro Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥536.70B
• Operating Income: ¥18.74B
• Net Income: ¥15.98B
• EPS: ¥247.23

Income Statement

Balance Sheet

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

Maruha Nichiro’s FY2026 Q2 delivered solid operational improvement but weaker bottom-line due to below-the-line drag. Revenue grew 0.9% year over year to 5,366.97, while operating income rose 16.6% to 187.40, demonstrating good cost control and pricing discipline. Ordinary income increased 16.8% to 183.32, but net income declined 9.8% to 124.55 as non-operating losses and a normalized tax burden weighed on the bottom line. Operating margin expanded to 3.49%, up about 47 bps from an estimated 3.02% a year ago. Ordinary margin improved to 3.41%, up roughly 46 bps. Net margin compressed to 2.32%, down about 28 bps from an estimated 2.60% last year due to net non-operating loss (non-op income 30.84 vs non-op expenses 34.92, including interest expense 20.60). Gross margin is 14.5%, but prior-year gross margin was not disclosed, limiting a full spread analysis. Earnings quality assessment is constrained as cash flow statements are unreported; OCF/NI is not calculable, so conversion of earnings to cash cannot be verified. Balance sheet liquidity is adequate on a current basis (current ratio 167.9%), but the quick ratio is sub-1.0 (79.7%), reflecting heavy inventory intensity typical of seafood/processed foods. Leverage is moderate-to-high at 1.60x D/E, with sizable short-term loans (1,359.04) creating some maturity concentration risk. Interest coverage is healthy at 9.10x, mitigating near-term servicing risk. Capital efficiency remains a key weakness: ROE is 4.5% and ROIC is 3.0% (below the 5% warning threshold), highlighting a need for improved asset turns or margin enhancement. Dividend payout ratio is 44.7% (calculated), which looks reasonable in isolation, but FCF coverage cannot be confirmed given missing cash flow data. Forward-looking, sustaining operating margin gains while reducing financial costs and managing inventory more tightly will be crucial to lifting ROE/ROIC. FX and raw material volatility remain material swing factors for H2.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (2.3%) × Asset Turnover (0.751) × Financial Leverage (2.60x) = ROE (4.5%). The largest YoY driver appears to be the margin path: operating margin expanded ~47 bps (to 3.49%), but net margin compressed ~28 bps (to 2.32%) due to a net non-operating loss and higher tax burden. Business reason: improved operating performance (pricing, mix, cost control) raised operating income by 16.6% on modest revenue growth, but interest expense (20.60) and other non-operating costs offset these gains at the bottom line. Sustainability: operating gains look more durable than non-operating volatility; however, margin durability depends on raw material prices (seafood procurement), FX (import costs), and energy/logistics costs. Asset turnover (0.751) remains modest, reflecting an inventory-heavy model; scope exists to lift turns via inventory optimization. Financial leverage (2.60x) is steady-to-high and not the driver of improvement; relying on leverage to raise ROE would be risky given quick ratio <1. Concerning trends: SG&A detail is unreported; nevertheless, operating income up 16.6% against revenue +0.9% implies positive operating leverage this period—no red flag on SG&A growth outpacing revenue based on aggregate figures.

Growth Assessment

Revenue growth was modest at +0.9%, suggesting volume/mix/pricing gains were limited amid a challenging demand and cost environment. Profit growth was quality-positive at the operating level (+16.6%), evidencing improved gross-to-operating spread notwithstanding lack of SG&A breakdown transparency. Ordinary income growth (+16.8%) confirms operating lift, but net income fell 9.8% due to non-operating losses and normalized taxation. With ROIC at 3.0%, returns remain below target thresholds, implying growth has not yet translated into adequate capital efficiency. Outlook hinges on sustaining price discipline and cost pass-through in processed foods, stabilizing raw material costs (wild catch and aquaculture inputs), and potential easing in logistics/energy costs. FX (yen) remains a key variable for imported materials; a weaker yen would pressure margins absent additional price actions. Absent cash flow data, we cannot confirm whether working capital needs are growing with inventory, which could dampen growth quality in H2.

Financial Health

Liquidity is mixed: current ratio 167.9% (healthy) but quick ratio 79.7% (below 100%), highlighting reliance on inventories (2,293.90) to cover current liabilities (2,602.20). Leverage: D/E is 1.60x—above the conservative 1.5x benchmark but below the 2.0x warning threshold; monitor leverage drift. No explicit red flag thresholds breached (Current Ratio is not <1.0; D/E is not >2.0). Maturity mismatch risk: short-term loans total 1,359.04 versus cash 506.48 and receivables 1,417.44; while quick assets roughly match ST debt plus payables, the sub-1 quick ratio indicates potential refinancing/rollover dependency and sensitivity to inventory conversion. Long-term loans are 927.49, suggesting a balanced but meaningful debt stack. Off-balance sheet obligations are not disclosed; no data provided on lease liabilities or guarantees.

Cash Flow Quality

OCF, FCF, and working capital flows are unreported, so OCF/Net Income quality cannot be assessed (not calculable). Without OCF and capex data, we cannot verify FCF coverage of dividends or growth investments. Inventory intensity (quick ratio 79.7%) and sizable receivables (1,417.44) indicate that working capital management is a key determinant of cash conversion; however, without YoY or CF data, signs of working capital pull-forward or stretch are not identifiable. Interest coverage at 9.10x suggests earnings capacity to service debt, but cash interest coverage is unknown.

Dividend Sustainability

The calculated payout ratio is 44.7%, within the <60% benchmark for sustainability. However, with OCF and FCF unreported, we cannot confirm cash coverage. Balance sheet leverage at 1.60x D/E and a quick ratio below 1.0 imply limited room for materially higher distributions without improved cash conversion or reduced debt. Policy outlook: stable-to-cautious, contingent on H2 earnings delivery and working capital discipline.

Risk Assessment

Business Risks:

• Raw material price volatility (wild catch, aquaculture inputs) affecting gross margin
• FX volatility (yen) impacting import costs and price pass-through timing
• Energy and logistics cost fluctuations influencing cost base and margins
• Inventory valuation and obsolescence risk given high inventory levels
• Demand elasticity in processed foods limiting pricing power

Financial Risks:

• Quick ratio below 1.0 indicates reliance on inventory conversion and refinancing
• Debt-to-equity 1.60x with sizable short-term loans (1,359.04) creates rollover risk
• Non-operating losses (net -4.08) including interest expense 20.60 depress net margin
• ROIC at 3.0% below 5% warning threshold implies weak capital efficiency

Key Concerns:

• Net income decline (-9.8% YoY) despite strong operating gains
• Capital efficiency shortfall (ROE 4.5%, ROIC 3.0%) vs cost of capital
• Limited disclosure on SG&A and cash flows constrains earnings quality assessment
• Sensitivity to FX and commodity swings in H2

Investment Implications

Key Takeaways:

• Operating margin expanded ~47 bps to 3.49% on modest revenue growth (+0.9%)
• Net margin compressed ~28 bps to 2.32% due to non-operating drag and taxes
• Interest coverage is solid at 9.10x, but D/E at 1.60x warrants monitoring
• Quick ratio of 79.7% highlights working capital intensity and cash conversion importance
• ROIC at 3.0% signals the need for further margin and asset-turn improvements

Metrics to Watch:

• OCF/Net income and FCF (when disclosed) for dividend and debt service coverage
• Inventory days and receivables collection to improve quick ratio
• Non-operating items trend (interest expense, other) impacting net margin
• FX rates (JPY) and raw material indices (seafood) affecting cost of sales
• ROIC trajectory and capex discipline

Relative Positioning: Within Japan’s seafood and processed food peers, Maruha Nichiro shows improving operating execution but lags on capital efficiency (ROIC 3.0%, ROE 4.5%). Balance sheet leverage is somewhat higher than conservative benchmarks, and liquidity depends on inventory conversion. Sustained margin discipline and better working capital turns would be needed to close the gap versus best-in-class peers.

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
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis