NIPPN CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥207.90B
• Operating Income: ¥10.86B
• Net Income: ¥14.26B
• EPS: ¥112.20

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

Nippn (20010) reported FY2026 Q2 consolidated results showing modest top-line growth but a sharp decline in bottom-line profit year on year. Revenue rose 1.5% YoY to ¥207.9bn, while operating income increased 3.1% to ¥10.9bn, indicating slight operating margin expansion to roughly 5.2%. Gross profit of ¥49.3bn implies a gross margin of 23.7%, signaling continued improvement in mix and/or pricing pass-through relative to input costs. Ordinary income reached ¥12.1bn, suggesting positive non-operating contributions of about ¥1.3bn versus operating income. Despite this, net income declined 34.0% YoY to ¥9.27bn, implying material non-recurring items and/or higher tax burden versus the prior year. Using net income plus reported income tax, the implied pre-tax income is about ¥15.5bn, yielding an estimated effective tax rate of roughly 40.3% for the half-year. The DuPont profile shows a calculated ROE of 3.40% with a net margin of 4.46%, asset turnover of 0.493x, and financial leverage of 1.55x; this underscores that profitability rather than leverage is the binding constraint on ROE. Liquidity remains sound with a current ratio of 152% and quick ratio of 127%, and solvency is conservative with liabilities-to-equity at 0.56x and an estimated equity ratio (equity/assets) of about 64.6%. Interest coverage is very comfortable at about 90.5x, reflecting low financial risk. Operating cash flow was ¥6.59bn, equating to 0.71x net income, which is adequate but indicates some working capital or tax headwinds in the period. EBITDA of ¥16.1bn places EBITDA margin at 7.7%, consistent with modest operating leverage in a stable staples portfolio. Inventory of ¥26.6bn looks manageable relative to the scale of the business, though working capital dynamics likely absorbed cash in H1. Several disclosed items (e.g., cash and equivalents, investing cash flows, dividends, share counts) show as zero, which we treat as undisclosed rather than actual zeros; therefore, per-share and free cash flow coverage analyses are constrained. The mix of slight operating improvement and weaker net profit points to non-operational or tax/extraordinary headwinds as the primary drag YoY. Overall, the financial position is solid, cash generation is decent but below net income, and the path to higher ROE likely depends on sustained margin discipline, pricing power, and working capital optimization.

Profitability Analysis

ROE_decomposition: DuPont breakdown: Net profit margin 4.46% × Asset turnover 0.493 × Financial leverage 1.55 = ROE 3.40%. The primary constraint is modest net margin, as leverage is conservative and asset turnover is typical for a diversified food manufacturer. margin_quality: Gross margin 23.7% and operating margin ~5.2% indicate improved cost pass-through and mix resilience. The spread between operating and net margin signals tax/extraordinary impacts rather than core margin deterioration. EBITDA margin at 7.7% supports stable underlying profitability. operating_leverage: Operating income growth (+3.1% YoY) exceeded revenue growth (+1.5% YoY), implying mild positive operating leverage. This suggests incremental scale benefits and/or pricing offsets against input inflation.

Growth Assessment

revenue_sustainability: Revenue grew 1.5% YoY to ¥207.9bn, consistent with stable demand in core staples and gradual pricing actions. Given the half-year nature, growth appears sustainable but modest. profit_quality: Operating income growth outpaced sales, indicating underlying margin resilience. However, the 34% YoY decline in net income implies lower profit quality at the bottom line due to elevated taxes and/or extraordinary losses versus the prior year. outlook: Near-term growth hinges on continued cost pass-through, product mix upgrades (e.g., higher-margin processed foods), and management of wheat and other commodity inputs. FX and import cost dynamics, along with government wheat selling prices, remain key to sustaining margins.

Financial Health

liquidity: Current ratio 152.3% and quick ratio 126.8% indicate ample short-term liquidity. Working capital is approximately ¥54.6bn, providing a buffer for seasonal inventory and receivables swings. solvency: Total liabilities/Equity is 0.56x; estimated equity ratio (Equity/Assets) is ~64.6% (¥272.5bn/¥421.5bn), reflecting a conservative balance sheet. capital_structure: Interest expense is low at ¥0.12bn with interest coverage of ~90.5x, indicating minimal financial risk. Leverage (DuPont financial leverage 1.55x) remains modest and unlikely to be a driver of ROE expansion.

Cash Flow Quality

earnings_quality: Operating CF of ¥6.59bn equals 0.71x net income (¥9.27bn), acceptable but suggests cash conversion was pressured, likely by working capital or tax timing. FCF_analysis: Investing CF is undisclosed (shown as 0), so reported free cash flow is not computable from the data provided. Without capex detail, FCF coverage and sustainability assessments are limited. working_capital: Inventories of ¥26.6bn are moderate relative to sales; the OCF/NI ratio suggests some working capital absorption in H1. Monitoring inventory turns and receivables collection will be important for H2 cash conversion.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are undisclosed (reported as 0.00). With EPS of ¥112.20 in H1, the capacity to pay dividends appears supported by earnings, but actual policy cannot be evaluated from the provided data. FCF_coverage: FCF coverage cannot be assessed due to missing investing cash flow and capex details. policy_outlook: Given the strong balance sheet and historically stable profiles in the sector, a steady dividend policy would be typical; however, definitive conclusions require disclosed DPS and cash deployment guidance.

Risk Assessment

Business Risks:

• Input cost volatility (wheat, edible oils, energy) affecting gross margin
• FX fluctuations impacting imported raw materials and overseas operations
• Regulatory/pricing framework for government wheat selling prices in Japan
• Competitive pricing pressure in staples and frozen foods
• Consumer downtrading affecting mix and premium product margins

Financial Risks:

• Working capital swings reducing cash conversion (OCF/NI at 0.71 in H1)
• Potential tax rate volatility (implied ~40% in H1) impacting net income
• Exposure to extraordinary items affecting bottom-line stability
• Interest rate normalization (albeit limited given low current debt service)

Key Concerns:

• 34% YoY decline in net income despite higher operating profit
• Earnings-to-cash conversion below 1.0x in the period
• Limited visibility on capex and investing cash flows constrains FCF assessment

Investment Implications

Key Takeaways:

• Modest sales growth with slight operating margin expansion in H1
• Net income decline driven by tax/extraordinary impacts rather than core operations
• Strong balance sheet and liquidity reduce financial risk
• Cash conversion is adequate but below earnings; working capital management is a focus
• ROE of 3.40% constrained by margin rather than leverage

Metrics to Watch:

• Gross and operating margin trajectory vs input cost trends
• OCF/Net income ratio and working capital turns (inventory and receivables)
• Effective tax rate and any extraordinary gains/losses
• Capex and investing cash flows to gauge FCF and shareholder returns capacity
• Pricing actions and volume/mix in processed foods and flour

Relative Positioning: Within Japan’s food staples peer set, Nippn exhibits stable top-line growth, improving operating margins, and conservative leverage, with bottom-line variability linked to taxes/one-offs rather than core operations; the balance sheet strength compares favorably, while ROE remains middling due to modest margins.

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