Nippon Beet Sugar Manufacturing Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥32.98B
• Operating Income: ¥-148M
• Net Income: ¥5.82B
• EPS: ¥95.59

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

Nihon Beet Sugar Manufacturing (2108) reported FY2026 Q2 (cumulative) revenue of ¥32.98bn, up 13.0% YoY, indicating solid top-line traction despite a difficult cost environment. Gross profit was ¥6.54bn with a gross margin of 19.8%, suggesting that pricing and/or product mix partially offset input cost pressures but not enough to sustain operating profitability. Operating income deteriorated to a loss of ¥148m (-59.1% YoY), pointing to negative operating leverage as expenses rose faster than revenue. Ordinary income improved to a positive ¥271m, implying non-operating gains (e.g., financial income or subsidies/other income) helped narrow the operating shortfall. Net income was ¥1.184bn (-79.6% YoY), well above ordinary income, indicating material below-the-line or extraordinary factors supported the bottom line. The reported net margin was 3.59%, but the operating margin was approximately -0.45%, underscoring a disconnect between core operations and bottom-line results. Depreciation and amortization were ¥1.184bn, and EBITDA (OI + D&A) was ¥1.036bn, for an EBITDA margin of 3.1%, which is modest for a commodity-linked food processor. On the balance sheet, total assets were ¥95.9bn and equity ¥73.68bn, implying a high equity ratio of roughly 76.8% (the disclosed 0% should be treated as unreported), and financial leverage of 1.30x as per the provided DuPont metrics. Liquidity was strong with current assets of ¥51.32bn against current liabilities of ¥16.44bn, yielding a current ratio of 312% and working capital of ¥34.88bn. Inventories stood at ¥24.03bn, which is material and consistent with seasonal dynamics in sugar/beet processing. Operating cash flow was robust at ¥9.59bn, vastly exceeding net income (OCF/NI = 8.10x), indicating favorable working-capital movements and acceptable earnings quality for the period. Investing cash flow and cash & equivalents were shown as zero (unreported), limiting full free cash flow analysis; the reported FCF of 0 should be treated as not computable rather than truly zero. Financing cash flow was a sizable outflow of ¥12.57bn, likely reflecting debt reduction and/or other financing activities; dividends appear nil (DPS 0), so the outflow was not from shareholder distributions. DuPont-calculated ROE was 1.61% on the back of a 3.59% net margin, 0.344x asset turnover, and 1.30x leverage, consistent with the reported ROE. The divergence between negative operating income and positive net income coupled with heavy OCF highlights the importance of seasonal inventory unwinds and non-operating/extraordinary items in this half. Overall, the company retains a solid balance sheet and liquidity buffer, but core operating profitability remains weak and sensitive to commodity and cost swings. Data limitations include missing equity ratio, cash and equivalents, investing cash flow, and share-related data (all shown as zero but likely unreported), which constrain precision in certain conclusions.

Profitability Analysis

ROE_decomposition: Reported/Calculated ROE: 1.61% = Net margin 3.59% × Asset turnover 0.344 × Financial leverage 1.30. Despite weak operating profit, bottom-line margin was supported by non-operating/extraordinary items; low asset turnover and modest leverage constrain ROE. margin_quality: Gross margin at 19.8% is reasonable for a sugar/beet processor, but operating margin of approximately -0.45% signals elevated SG&A, energy, logistics, or other costs offsetting gross profit. Ordinary margin was ~0.82% (¥271m/¥32.98bn), indicating some non-operating support. Net margin at 3.59% likely includes significant below-the-line effects; sustainability is less certain without recurring operating improvement. operating_leverage: Revenue rose 13.0% YoY while operating income fell to a ¥148m loss, evidencing negative operating leverage this half. Fixed cost absorption appears pressured, and cost inflation or campaign timing likely weighed on profitability. EBITDA margin of 3.1% provides limited cushion against input/cost volatility.

Growth Assessment

revenue_sustainability: Top-line growth of 13.0% YoY suggests solid demand and/or pricing gains, potentially aided by commodity price levels and product mix. However, a meaningful portion may be cyclical/commodity-driven; volume versus price contributions are not disclosed. profit_quality: With operating income negative and bottom-line supported by non-operating/extraordinary items, profit quality is mixed. The gap between ordinary income (¥271m) and net income (¥1.184bn) indicates one-off support that may not recur. OCF strength improves quality optics, but appears heavily influenced by working-capital seasonality. outlook: Near-term earnings depend on sugar price spreads, beet procurement costs, energy and logistics expenses, and inventory valuation. A normalization of extraordinary items without operating recovery would pressure net income. Seasonal production/sales cadence and hedging strategies will be key to stabilizing margins in 2H.

Financial Health

liquidity: Current assets ¥51.32bn vs. current liabilities ¥16.44bn yields a current ratio of 312% and quick ratio of 166%, indicating ample near-term liquidity. Working capital of ¥34.88bn and large inventories (¥24.03bn) underscore seasonal dynamics but also tie up capital. solvency: Total liabilities ¥27.39bn vs. equity ¥73.68bn implies a high equity ratio of ~76.8% (derived) and low financial leverage (1.30x assets/equity). Interest expense is minimal at ¥17m, and balance-sheet strength provides resilience against commodity and crop shocks. capital_structure: Debt-to-equity is reported at 0.37x (likely total liabilities/equity proxy); interest-bearing debt details are not disclosed. Financing outflow (¥12.57bn) implies deleveraging or other financing activities; with DPS at 0, shareholder distributions did not drive outflows.

Cash Flow Quality

earnings_quality: OCF of ¥9.59bn vs. net income of ¥1.184bn (OCF/NI = 8.10x) signals strong cash conversion this period, likely due to seasonal inventory/liability timing. Given negative operating income, cash realization appears driven by working-capital release rather than core margin strength. FCF_analysis: Investing CF is unreported (shown as 0), preventing reliable FCF calculation; the displayed FCF of 0 should not be interpreted as actual zero. If capex is modest relative to OCF, underlying FCF could be positive, but this cannot be confirmed. working_capital: Inventories are sizeable at ¥24.03bn; the OCF strength suggests inventory drawdown and/or improved receivables/payables timing. Sustaining positive OCF will depend on managing seasonal builds associated with the beet campaign and sugar sales cycle.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is reported at ¥0.00 and payout at 0.0%, implying no dividends despite positive net income. With ROE at 1.61% and operating income negative, retaining earnings to reinforce operations appears consistent with current fundamentals. FCF_coverage: FCF coverage cannot be assessed due to unreported investing cash flows; the reported 0.00x is not informative. OCF is strong, but without capex data, distributable cash capacity is unclear. policy_outlook: Given weak operating profitability and reliance on non-operating/extraordinary items, a conservative dividend stance is likely until recurring operating margins improve and FCF visibility strengthens.

Risk Assessment

Business Risks:

• Commodity price volatility in sugar affecting sales prices and inventory valuation
• Agricultural yield and quality risks for sugar beets (weather, disease, climate variability)
• Energy and logistics cost inflation impacting processing margins
• Import competition and global sugar market dynamics influencing domestic pricing
• Regulatory and policy changes related to agriculture and food markets
• Sales mix and seasonality leading to earnings volatility across halves
• Hedging effectiveness for sugar and FX exposures

Financial Risks:

• Large inventory positions creating valuation and working-capital swing risk
• Potential mismatch between accounting earnings and cash due to seasonal flows
• Concentration risk if financing access is required during inventory build periods
• Uncertainty around extraordinary items impacting net income sustainability
• Limited visibility into capex and investment needs (Investing CF unreported)

Key Concerns:

• Negative operating income despite double-digit revenue growth
• Net income dependence on non-operating/extraordinary factors
• High reliance on working-capital dynamics to generate cash in the half
• Lack of disclosure on investing cash flows and cash balances
• Margin sensitivity to input costs and energy prices

Investment Implications

Key Takeaways:

• Top-line grew 13.0% YoY to ¥32.98bn, but operating income slipped into a ¥148m loss, revealing negative operating leverage
• Ordinary income (¥271m) and net income (¥1.184bn) indicate material non-operating/extraordinary support to the bottom line
• OCF was strong at ¥9.59bn (8.1x net income), likely driven by seasonal working-capital release
• Balance sheet is robust with an inferred equity ratio of ~76.8% and low leverage (1.30x assets/equity)
• Liquidity is ample (current ratio 312%, quick ratio 166%), but inventories are large at ¥24.03bn
• Dividend currently suspended (DPS 0), with financing outflows (¥12.57bn) likely tied to debt reduction or other financing activities
• Visibility on FCF is limited due to unreported investing cash flows and cash balances

Metrics to Watch:

• Operating margin progression and SG&A/energy cost trends
• Ordinary income vs. extraordinary items to gauge earnings sustainability
• Inventory turnover and valuation impacts on margins and OCF
• Capex and Investing CF disclosures to assess true FCF
• Sugar price spreads vs. beet procurement costs and hedging effectiveness
• Equity ratio and leverage trajectory post large financing outflows

Relative Positioning: Within the Japanese sugar and beet processing space, the company exhibits strong balance-sheet resilience and liquidity relative to typical peers, but lags on core operating profitability this half; sustained improvement will require better cost absorption and margin management amid commodity and seasonal dynamics.

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
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