Nittetsu Mining Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥93.07B
• Operating Income: ¥8.59B
• Net Income: ¥7.34B
• EPS: ¥84.19

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

FY2026 Q2 was a solid earnings beat on profitability despite a slight top-line decline. Revenue fell 2.3% YoY to 930.7, but operating income surged 60.9% YoY to 85.9, lifting net income 15.6% YoY to 66.2. Gross profit was 207.5 with a gross margin of 22.3%, while SG&A held at 121.7, enabling strong operating leverage. Operating margin improved to 9.2% from an estimated 5.6% a year ago, a roughly 363 bps expansion. Ordinary income rose 45.5% YoY to 95.7, supported by non-operating income of 19.0 (notably 7.8 in dividend income and 1.1 in interest income) offset by 9.2 in non-operating expenses. Profit before tax reached 102.4 with an effective tax rate of 28.3%, leading to net margin of 7.1%. EBITDA was 121.4, and interest coverage is very strong at 32.8x, reflecting conservative leverage and healthy earnings power. Cash generation quality is adequate with OCF/NI at 1.07x, indicating earnings broadly backed by cash. Liquidity is robust (current ratio 210%, quick ratio 187%) and the balance sheet is conservative (D/E 0.62x) with cash (411.4) exceeding total borrowings (approx. 375.0), implying a small net cash position. ROE is modest at 4.2%, constrained by low asset turnover (0.364x), and ROIC at 4.0% is below a 5% hurdle, signaling capital efficiency remains a structural challenge. Non-operating income is meaningful at 28.7% of operating income, highlighting some reliance on financial income/dividends. Capex was sizable at 133.4, and against OCF of 71.1 implies negative implied FCF in the period, which raises questions on self-funding of growth and dividends. Reported payout ratio (calculated) of 282.4% suggests distributions exceeded earnings, but dividend details are unreported and should be verified. Overall, the quarter demonstrates effective cost/mix management and expense discipline, but sustainability hinges on commodity price/mix stability and capital discipline. Near-term outlook is cautiously positive on margins, while medium-term value creation requires improving ROIC and asset turns.

Profitability Analysis

ROE decomposition: Net Profit Margin (7.1%) × Asset Turnover (0.364x) × Financial Leverage (1.62x) = ROE 4.2%. The most influential constraint on ROE is the low asset turnover, given a sizable asset base (total assets 2,558.1) versus revenue (930.7). Operating margin improved materially: operating income +60.9% YoY on -2.3% revenue implies operating margin rising from ~5.6% to 9.2% (≈+363 bps), driven by better gross-to-SG&A spread (gross profit 207.5 less SG&A 121.7). Business drivers likely include price/mix tailwinds in key products, cost containment, and lower input cost pressure versus prior year, while non-operating dividend income also supported ordinary income. Sustainability: part of the margin gain appears operational (gross margin at 22.3% and SG&A control), which is more sustainable than purely financial gains; however, the reliance on non-operating income (19.0) adds a non-recurring element risk depending on market conditions and investee distributions. Watch for SG&A growth vs revenue; in this period, expense discipline supported margin expansion, but no detailed SG&A breakdown is disclosed to assess mix or recurring savings. Overall, ROE uplift potential depends more on improving asset turnover (project ramp-ups, portfolio pruning) than on further leverage, given already conservative gearing.

Growth Assessment

Top line softened (-2.3% YoY) to 930.7, but profit growth was strong due to margin expansion (operating income +60.9% YoY, ordinary income +45.5%, net income +15.6%). The revenue decline suggests cyclical or price normalization headwinds in mining/materials, but operational efficiencies and pricing discipline offset. Non-operating income (dividends 7.8, interest 1.1) provided an incremental lift; this component is inherently more variable. EBITDA of 121.4 provides a buffer for reinvestment, but capex intensity (133.4 in the period) is high relative to OCF, limiting organic cash growth near term. Outlook: absent a rebound in volumes/prices, sustaining a 9%+ operating margin may be challenging; however, cost base improvements and selective portfolio management can preserve mid-to-high single-digit margins. Revenue sustainability depends on commodity price trends, construction materials demand in Japan, and export pricing. The effective tax rate (28.3%) is within normal range; no obvious one-off tax effects were flagged. Net income growth lagging operating income growth reflects higher below-OP volatility and tax/extraordinary items. Medium term, improving asset turnover and ROIC will be key to durable EPS growth.

Financial Health

Liquidity is strong: current ratio 209.6% and quick ratio 187.1%, with cash and deposits at 411.4 versus short-term loans of 120.5. No warning on current ratio (<1.0) or leverage (D/E 0.62x) thresholds; both are comfortably healthy. Total liabilities are 983.3 against total equity of 1,574.8, reflecting a conservative capital structure. Maturity profile appears manageable: short-term debt (120.5) is well covered by cash (411.4) and receivables (310.7), reducing rollover risk. Long-term loans are 254.5, and interest coverage is robust at 32.8x, indicating ample ability to service debt. Investment securities (466.3) are sizable, providing additional financial flexibility but also market valuation risk. No off-balance sheet obligations are disclosed in the provided data; absence of disclosure does not rule them out. Overall solvency and liquidity positions are strong, with a modest net cash posture.

Cash Flow Quality

OCF/Net Income is 1.07x, which is acceptable and indicates earnings are largely cash-backed. With capex at 133.4 and OCF at 71.1, the analyst-implied FCF is approximately -62.3 for the period, suggesting external funding or cash reserves were required to cover investments and distributions. Financing CF of 120.8 indicates reliance on financing inflows this period, consistent with capex-heavy phases. Working capital indicators are not detailed, but the strong cash balance versus payables and inventories suggests no obvious aggressive working capital release; no signs of manipulation are evident from the limited data. Sustainability: if capex remains elevated, internally funded FCF may stay constrained unless OCF improves via higher margins/volumes. Monitoring the cadence and duration of the current capex cycle is critical.

Dividend Sustainability

The reported calculated payout ratio is 282.4%, implying dividends well above earnings if accurate; however, dividend amounts (DPS, total dividends paid) are unreported, so this figure should be treated cautiously. With implied negative FCF in the period (OCF 71.1 vs capex 133.4), dividend coverage from free cash flow appears weak for this half-year unless supported by balance sheet cash or asset monetizations. Balance sheet strength (net cash and low D/E) provides temporary support capacity, but sustained payouts above earnings are not structurally sustainable. Policy outlook: without disclosed guidance, we assume a stable-to-cautious stance pending clearer visibility on cash generation and capex profile. Key watch items: actual DPS announcements, payout framework (target payout/DOE), and FCF trajectory in H2.

Risk Assessment

Business Risks:

• Commodity price volatility affecting mining and materials selling prices and margins
• Demand cyclicality in construction materials and domestic infrastructure markets
• Operational risks in mining/processing (equipment downtime, grade variability, energy costs)
• Reliance on non-operating income (dividends/financial income) to support ordinary profit

Financial Risks:

• Capex-heavy period driving negative implied FCF, increasing reliance on financing inflows
• Market value and income volatility from large investment securities portfolio (466.3)
• Potential payout-policy pressure if dividends exceed internally generated cash
• Interest rate risk on refinancing of loans (short-term 120.5; long-term 254.5)

Key Concerns:

• ROIC at 4.0% is below a 5% warning threshold, indicating capital efficiency challenges
• Low asset turnover (0.364x) constrains ROE (4.2%) despite margin improvements
• Non-operating income accounts for 28.7% of operating income, adding earnings variability
• Data gaps (investing CF, DPS details, SG&A breakdown) limit full quality assessment

Investment Implications

Key Takeaways:

• Strong margin-driven earnings beat with operating margin expansion of ~363 bps YoY
• High-quality cash conversion this quarter (OCF/NI 1.07x), but negative implied FCF due to heavy capex
• Balance sheet is conservative with robust liquidity and near net cash status
• Capital efficiency remains a key overhang: ROIC 4.0% and ROE 4.2% limited by low asset turns
• Profit mix includes notable non-operating income (dividends), introducing variability

Metrics to Watch:

• Operating margin trajectory and gross-to-SG&A spread in H2
• OCF and capex cadence to gauge true FCF and dividend coverage
• Commodity price indices relevant to core products (e.g., aggregates, limestone, metals)
• Investment securities income and valuation swings (dividends, market gains/losses)
• ROIC progression and asset turnover improvement initiatives

Relative Positioning: Within Japanese materials/mining peers, the company demonstrates superior balance sheet strength and improved operating margins this quarter, but lags on capital efficiency (ROIC, asset turnover). Earnings stability may be more sensitive to commodity and financial income swings than vertically integrated peers with higher recurring operating profit.

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