NISSHIN SEIFUN GROUP INC. FY2027 Q1 Earnings Report

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Executive Summary

Despite higher revenue, Ordinary Income declined, while Net Income fell sharply due to the reversal of extraordinary gains; operating performance was broadly in line with the previous year. Revenue was ¥2176.8B (+1.1% YoY), Operating Income was ¥112.0B (-0.9%), and Ordinary Income was ¥125.2B (-3.2%). Net Income attributable to owners of the parent was ¥93.5B (-19.5%), mainly due to the decline in gains on sales of investment securities, which decreased from ¥46.7B recorded in the previous year to ¥18.6B in the current period. Although the gross margin improved to 23.0%, the SG&A ratio rose to 17.8%, leaving the operating margin broadly flat at 5.1%.

Factors Affecting Performance

【Revenue】Revenue of ¥2176.8B increased 1.1% YoY. The core Milling segment (53.7% of revenue) led growth with a 6.5% increase, while the Food segment (25.3%) was broadly flat (-0.1%) and the Other segment (6.3%) declined 18.4%. The gross margin improved to 23.0% from 22.0% in the previous year, indicating the effects of price revisions and product mix.

【Profit and Loss】Operating Income of ¥112.0B (-0.9% YoY) reflected the offsetting effect of the higher SG&A ratio (17.8% versus 16.8% in the previous year) against gross profit improvement. Ordinary Income was ¥125.2B (-3.2%); dividends received of ¥14.5B and interest received of ¥3.6B provided support, although the increase in interest paid to ¥11.2B also had an impact. Net Income declined more sharply than Ordinary Income, falling to ¥93.5B (-19.5%), mainly due to the temporary effect of gains on sales of investment securities declining from ¥46.7B in the previous year to ¥18.6B in the current period. The results can be characterized as higher revenue but lower profit, with operating performance broadly flat while the reduction in extraordinary gains significantly pressured Net Income.

Segment Analysis

The Milling segment generated revenue of ¥1168.3B (+6.5% YoY) and Operating Income of ¥71.3B (+6.8%), securing stable growth in both revenue and profit as the core business, with a 6.1% margin. The Food segment was broadly flat in revenue at ¥551.6B (-0.1%), but Operating Income increased 23.5% to ¥22.9B, and the margin improved to 4.1% from approximately 3.3% in the previous year, resulting in higher profit without revenue growth. The Other segment (including engineering, mesh cloth, cargo handling and storage, etc.) recorded revenue of ¥136.4B (-18.4%) and Operating Income of ¥9.6B (-34.1%), resulting in declines in both revenue and profit. Although its margin was the highest among the segments at 7.0%, the contraction in business scale reduced the absolute level of profit. Within a structure in which the Milling segment accounts for more than half of both revenue and profit, improved profitability in the Food segment is contributing to growth in overall profit.

Key Financial Indicators

【Profitability】The operating margin was 5.1%, broadly unchanged from 5.2% in the previous year, as the improvement in the gross margin to 23.0% from 22.0% was offset by the increase in the SG&A ratio to 17.8% from 16.8%. The Net Income margin, based on income attributable to owners of the parent, was 4.3%, down from 5.4% in the previous year, mainly due to the reduction in extraordinary gains. 【Cash Flow Quality】Comprehensive Income was ¥82.7B, including ¥77.3B attributable to owners of the parent, below Net Income of ¥93.5B. The gap reflected a negative ¥4.15B change in valuation difference on securities, partially offset by a positive ¥2.31B foreign currency translation adjustment. 【Investment Efficiency】ROE was 1.8% versus 2.2% in the same period of the previous year, while EPS was ¥33.41 versus ¥40.11, down 16.7%; both declined from the previous year. 【Financial Soundness】The Equity Ratio improved to 63.8% from 63.4% in the previous year. The current ratio was 227.8% versus 225.7%, maintaining a high level of liquidity. Interest-bearing debt (total short-term borrowings, long-term borrowings, and bonds of ¥434.3B) remained low relative to equity of ¥5358.1B.

Cash Flow Analysis

Although the cash flow statement has not been disclosed, changes in the balance sheet provide insight into fund movements. Cash and deposits were ¥849.5B, down ¥128.4B from ¥977.9B in the previous year. While accounts receivable declined to ¥1102.9B from ¥1130.9B and inventories declined to ¥1240.2B from ¥1280.9B, accounts payable also decreased to ¥686.4B from ¥719.9B. Property, plant and equipment increased to ¥2693.0B from ¥2626.1B, indicating continued capital investment. Treasury stock increased to -¥49.1B from -¥25.7B, suggesting that share repurchases were one factor contributing to the decline in cash balances. Cash decreased despite an overall contraction in working capital items, suggesting a phase in which capital allocation toward investment and shareholder returns is taking precedence.

Earnings Quality

The gap between Ordinary Income of ¥125.2B and Net Income attributable to owners of the parent of ¥93.5B can be explained by the combined impact of net extraordinary gains of ¥14.4B (after deducting ¥0.7B in losses on disposal of fixed assets, etc., from ¥18.6B in gains on sales of investment securities), income taxes of ¥41.6B, and profit attributable to non-controlling interests of ¥4.4B. In the previous year, extraordinary gains were substantial at ¥46.7B, and gains on sales of investment securities boosted Net Income to a level exceeding recurring earnings power. Accordingly, the decline in profit this period has a strong element of reversal from a temporary factor. Non-operating income was primarily composed of dividends received of ¥14.5B and interest received of ¥3.6B, which represent recurring and stable sources of income. Comprehensive Income of ¥82.7B, or ¥77.3B attributable to owners of the parent, was below Net Income of ¥93.5B, mainly due to the negative ¥4.15B valuation difference on securities. Operating Income was broadly flat at -0.9% YoY, indicating that recurring earnings power itself remained solid.

Earnings Forecasts and Guidance

Against the full-year forecasts of revenue of ¥8700B, Operating Income of ¥460B, Ordinary Income of ¥490B, and Net Income of ¥410B, Q1 progress rates were 25.0% for revenue, 24.3% for Operating Income, 25.5% for Ordinary Income, and 22.8% for Net Income. The slightly lower progress rate for Net Income reflects the reduction in extraordinary gains, while Operating Income and Ordinary Income were broadly in line with a quarterly even-progress benchmark of approximately 25%. As of the current quarter, no revisions had been made to the earnings or dividend forecasts.

Shareholder Returns

The full-year dividend forecast is ¥32, representing a planned increase of ¥2 from the previous year’s actual dividend of ¥30. The Payout Ratio against the company’s forecast EPS of ¥146.59 is 21.8% (¥32 ÷ ¥146.59), which remains conservative. Treasury stock increased to -¥49.1B from -¥25.7B in the previous year, suggesting the implementation of share repurchases. The combined movement of dividends and share repurchases can be interpreted as demonstrating a continued commitment to shareholder returns, supported by financial soundness reflected in an Equity Ratio of 63.8% and a current ratio of 227.8%.

Risk Factors

1. Cost inflation and lag in price pass-through: While the gross margin improved to 23.0% from 22.0% in the previous year, the SG&A ratio rose to 17.8% from 16.8%, leaving the operating margin broadly flat at 5.1%. If increases in logistics and personnel costs continue to offset the benefits of price pass-through, the pace of profitability improvement could slow.

2. Dependence on extraordinary gains: Gains on sales of investment securities declined from ¥46.7B in the previous year to ¥18.6B in the current period, contributing to the larger decline in Net Income (-19.5%) than in Ordinary Income (-3.2%). Net Income remains structurally susceptible to fluctuations depending on the amount of extraordinary gains recognized in the future.

3. Concentration of the business portfolio: The Milling segment accounts for 53.7% of revenue and more than half of Operating Income, while the Other segment contracted by 18.4% in revenue and 34.1% in Operating Income. The earnings structure therefore has a relatively high degree of dependence on the core business.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (food_beverage)

Profitability and Returns

Profitability is broadly in line with the industry median for Operating Margin, while the Net Income Margin is above the industry median.

Growth and Capital Efficiency

The Revenue Growth Rate is below the industry median and also below the lower bound of the IQR.

※Source: Compiled by the Company

Key Points of the Earnings Results

1. The Operating Margin of 5.1% was broadly in line with the previous year, but the underlying composition was characterized by an approximately +1pt improvement in the gross margin being offset by an approximately +1pt increase in the SG&A ratio. The effectiveness of cost management is therefore a key factor to monitor in determining future profit trends.

2. Although revenue in the Food segment was broadly flat (-0.1%), Operating Income increased 23.5% and the margin improved to 4.1%. This indicates that profit growth without revenue growth is contributing to improved profitability within the portfolio.

3. The decline in Net Income (-19.5%) was primarily attributable to the temporary factor of reduced extraordinary gains, and the difference from the decline in Ordinary Income (-3.2%) indicates the impact of extraordinary items. Financial soundness remained high, with an Equity Ratio of 63.8% and a current ratio of 227.8%.

Theoretical Stock Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market price or a recommendation of any specific investment action.

Sensitivity: ¥1,803–¥1,911 at ±1% in the cost of equity, and ¥1,854–¥1,857 at ±0.1 in ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used; there is a timing difference relative to the full-year forecast.
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat above the appropriate level.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not predict or guarantee future stock prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.

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