NAKAMURAYA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.50B
• Operating Income: ¥-1.93B
• Net Income: ¥-1.33B
• EPS: ¥-229.81

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

Verdict: FY2026 Q2 was weak operationally with a sizable operating loss, but liquidity remained solid and operating cash flow turned positive, softening near-term stress. Revenue declined 1.7% YoY to 124.96, reflecting soft demand/pricing that failed to offset cost pressures. Gross profit was 36.53, yielding a 29.2% gross margin, while SG&A of 55.10 (44.1% of sales) drove an operating loss of -19.30. Operating margin was -15.4%, and ordinary income was -18.02 as minor non-operating income (1.14, mainly dividends of 0.89) provided limited relief. Net income came in at -13.27 with an effective tax rate of 31.3% due to tax benefits on losses. EBITDA was -11.90, indicating negative core earnings before non-cash items despite 7.40 of depreciation and amortization. Margins clearly compressed versus last year, but precise basis-point changes cannot be calculated due to missing prior-period margins; the deterioration in operating loss (-38.3% YoY) against a small sales decline implies adverse operating leverage. Cash flow quality was mixed: operating cash flow was positive at 5.87 despite the net loss, implying supportive non-cash items and working capital inflows; however, the OCF/NI ratio flagged at -0.44 per our screen (note: OCF positive with NI negative is not inherently low-quality). Free cash flow was approximately 1.30 (OCF 5.87 less capex 4.57), indicating capacity to fund maintenance investments and potentially a modest dividend if declared. The balance sheet is conservative with a current ratio of 250% and D/E of 0.63x; cash and deposits were 26.17, and working capital stood at 67.27. Asset turnover was low at 0.270 and financial leverage moderate at 1.77x, resulting in a DuPont ROE of -5.1% driven primarily by the negative net margin (-10.6%). ROIC was -5.5%, below the 5% warning threshold, underscoring capital inefficiency this period. Interest coverage was deeply negative (-158x) because of the operating loss, though absolute interest burden is small (0.12). Forward-looking, restoring operating profitability requires either price/mix improvements or a reduction in SG&A intensity; stabilizing gross margin while resizing costs is pivotal. Near term, liquidity risk appears contained, but sustained negative EBITDA would erode flexibility and threaten dividend capacity if continued. We note data gaps (e.g., detailed SG&A and investing cash flows), which limit precision on cost drivers and capex mix.

Profitability Analysis

ROE decomposition: ROE (-5.1%) = Net Profit Margin (-10.6%) × Asset Turnover (0.270) × Financial Leverage (1.77x). The largest adverse contributor is the net margin, as operating margin was -15.4% and EBITDA negative, while leverage remains moderate and turnover structurally low. The net margin deterioration likely stems from cost inflation and SG&A rigidity: gross margin at 29.2% combined with SG&A at 44.1% of sales implies insufficient scale and/or pricing to cover fixed costs. This appears cyclical/operational rather than a one-off, given limited non-operating distortions and small interest burden; sustainability hinges on cost control and revenue recovery. Asset turnover at 0.270 suggests underutilized asset base, with high noncurrent assets (323.07) relative to sales; improving throughput or pruning low-return assets could lift this. Warning signs include SG&A growth outpacing revenue (we only have current period, but the widened operating loss alongside -1.7% sales suggests operating deleverage). Non-operating results (dividend income 0.89) are too small to offset core weakness. Overall ROE pressure is driven by margin compression; leverage is not the primary driver.

Growth Assessment

Top-line contracted 1.7% YoY to 124.96, indicating modest demand softness or pricing pressure. Operating income fell to -19.30, a much larger decline than revenue, confirming negative operating leverage. Gross margin at 29.2% suggests cost of sales pressures, while SG&A at 55.10 remains elevated relative to sales. Ordinary income (-18.02) indicates limited lift from non-operating items; dividend income (0.89) contributed but was marginal. EBITDA of -11.90 highlights weak underlying earnings momentum. Without segment or product detail, sustainability of revenue is uncertain; current data points to a need for price/mix actions and cost rationalization. Near-term growth is likely constrained by consumer demand and input costs; a stabilization scenario would require gross margin defense and SG&A discipline. Outlook: base case assumes gradual normalization of input costs and improved mix, with operating loss narrowing in the next quarters if cost actions are executed; downside risk persists if sales volumes weaken further.

Financial Health

Liquidity is strong: current ratio 250.3% and quick ratio 217.9% comfortably exceed benchmarks; no warning for Current Ratio < 1.0. Working capital is 67.27, and cash/deposits total 26.17. Solvency appears conservative with D/E at 0.63x (<1.5 benchmark) and minimal interest expense (0.12). Interest coverage is negative due to operating loss, but absolute debt service burden is low. Maturity mismatch risk looks limited: current assets (112.02) exceed current liabilities (44.75) by 67.27; short-term loans are 4.00, readily coverable by cash on hand. Noncurrent liabilities are 119.96; lack of detail (e.g., long-term loans vs provisions) is a data limitation. No off-balance sheet obligations were reported in the provided data. Equity base is solid at 261.74, with book value per share ~4,532 JPY.

Cash Flow Quality

OCF was +5.87 versus NI -13.27, producing an OCF/NI ratio of -0.44 (screened as a quality flag), but the positive OCF despite a loss suggests supportive non-cash items (D&A 7.40) and likely working capital inflows. Free cash flow (calculated) was ~1.30 after capex of 4.57, indicating basic capacity to fund maintenance capex. Financing CF was marginal at 0.08; share repurchases were de minimis (-0.01). With EBITDA negative, sustained positive OCF will depend on continued working capital management and cost actions; absent those, OCF could weaken. No clear signs of working capital manipulation are evident from point-in-time balances, but the reliance on working capital to bridge losses warrants monitoring. Investing CF details were unreported, limiting assessment of growth vs maintenance capex mix.

Dividend Sustainability

Dividend data were unreported; the calculated payout ratio of -31.5% is not meaningful given negative earnings. With FCF estimated at 1.30, a modest dividend could be covered near-term, but sustainability would depend on the company maintaining positive OCF while reducing operating losses. Capital structure is conservative, which helps, but prolonged negative EBITDA would pressure future distributions. Policy outlook cannot be inferred without management guidance; a prudent stance would prioritize balance sheet strength until operating profit normalizes.

Risk Assessment

Business Risks:

• Cost inflation (raw materials, energy) compressing gross margin
• Negative operating leverage due to SG&A rigidity versus declining sales
• Demand softness leading to revenue decline (-1.7% YoY)
• Execution risk in cost reduction and pricing/mix optimization
• Potential impairment risk if underperforming assets persist (ROIC -5.5%)

Financial Risks:

• Negative interest coverage (-158x) driven by operating loss, albeit with small absolute interest
• Dependence on working capital inflows to sustain positive OCF
• Limited visibility on long-term liabilities composition (119.96) and investing cash flows
• Erosion of retained earnings if losses persist

Key Concerns:

• Sustained negative EBITDA (-11.90) and operating margin (-15.4%)
• ROIC below 5% threshold (-5.5%), signaling capital inefficiency
• OCF/NI ratio screen flag (-0.44), indicating divergence between earnings and cash

Investment Implications

Key Takeaways:

• Core profitability deteriorated sharply with operating loss of -19.30 on modest sales decline
• Gross margin (29.2%) insufficient to cover elevated SG&A (44.1% of sales)
• Liquidity is ample (current ratio 250%, cash 26.17) and leverage moderate (D/E 0.63x)
• OCF positive at 5.87; FCF ~1.30 after capex 4.57, cushioning near-term cash needs
• ROE -5.1% primarily driven by negative net margin; asset turnover and leverage secondary
• ROIC -5.5% below warning threshold underscores need for asset and cost optimization

Metrics to Watch:

• Gross margin trend and input cost pass-through
• SG&A as a percentage of sales (operating leverage)
• EBITDA/interest coverage normalization
• Working capital movements (AR, inventory, AP turns) and OCF sustainability
• Capex intensity versus FCF
• Revenue trajectory (price/mix vs volume)

Relative Positioning: Within Japan’s food-related manufacturers, the company currently sits in the weaker profitability cohort due to negative EBITDA and operating margins, albeit with stronger-than-average liquidity and conservative leverage providing balance sheet resilience.

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