The Nisshin OilliO Group,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

The first quarter of the fiscal year ending March 2027 showed substantive earnings improvement accompanied by higher operating income, while net income declined significantly due to the reversal of a one-time gain recorded in the same period of the previous year. Revenue was ¥15.24B (+15.4% YoY), Operating Income was ¥0.643B (+70.7%), and Ordinary Income was ¥0.518B (+66.6%), clearly demonstrating improved core earnings power. Net Income was ¥0.354B (-79.0% YoY), primarily because the same period of the previous year included ¥2.32B in extraordinary income, including a ¥2.32B gain on the sale of fixed assets. This should be assessed separately from underlying operating performance.

Factors Affecting Results

【Revenue】Revenue was ¥15.24B, an increase of +15.4% YoY. By segment, the Global Oils and Processed Oils Business posted the largest increase, with revenue of ¥4.389B (+46.7%), making it the primary driver of overall growth. The Domestic Oils and Oilseeds Business also expanded to ¥8.687B (+8.5%), while the Processed Foods and Materials Business remained almost flat at ¥1.940B (+0.1%).

【Profit and Loss】Operating Income was ¥0.643B (+70.7%), and the Operating Margin improved to 4.2% from 3.1% in the previous year (¥0.376B/¥13.207B). Gross Margin was 14.0% and the SG&A ratio was 9.8%; SG&A growth was contained relative to revenue growth, resulting in positive operating leverage. Ordinary Income was ¥0.518B (+66.6%), although the ¥0.088B interest expense burden among non-operating expenses partially offset growth at the ordinary income level. Net Income was ¥0.354B (-79.0%), primarily due to the reversal of the previous year’s ¥0.232B extraordinary income (gain on the sale of fixed assets). In the current period, extraordinary gains and losses consisted of a ¥0.020B gain on the sale of investment securities and a ¥0.006B loss on the disposal of fixed assets, resulting in a minor net impact. The decline in Net Income can therefore be viewed as the expiration of a temporary factor. Overall, the Company achieved higher revenue and earnings at the Operating Income and Ordinary Income levels.

Segment Analysis

The Global Oils and Processed Oils Business recorded substantial increases in both revenue and earnings, with revenue of ¥4.389B (+46.7%) and Operating Income of ¥0.254B (+411.1%), restoring its margin to 5.8%. The absence of the impairment loss recorded in the same segment in the previous year (¥1.57B) also contributed to the earnings increase. The Domestic Oils and Oilseeds Business improved, with revenue of ¥8.687B (+8.5%) and Operating Income of ¥0.248B (+45.1%), although its margin remained low at 2.9%. The Processed Foods and Materials Business was nearly flat in revenue at ¥1.940B (+0.1%), but Operating Income declined to ¥0.082B (-34.1%), with cost pressures and price competition pushing its margin down to 4.2%. The Fine Chemicals Business maintained the highest profitability among all segments, with revenue of ¥0.471B (+19.0%), Operating Income of ¥0.056B (+37.8%), and a margin of 11.9%.

Key Financial Indicators

【Profitability】The Operating Margin was 4.2%, improving from 2.8% in the previous year (¥0.376B/¥13.207B), while Gross Margin edged up to 14.0% from 13.7%. Net Margin was 2.3%, a significant decline from 12.8% in the previous year. This reflects the reversal of the temporary uplift from the previous year’s extraordinary income and contrasts with the improvement in profitability at the ordinary income level.
【Cash Quality】Operating Cash Flow (OCF) was -¥0.377B, meaning that cash flow was negative despite Net Income of ¥0.354B, indicating a divergence between earnings and cash generation. The primary factors were increases in accounts receivable of ¥0.414B and inventories of ¥0.392B, with expanded working capital absorbing cash.
【Capital Efficiency】ROE was 1.6%, remaining low as a result of the substantial decline in Net Income. Capital expenditures were ¥0.443B, exceeding depreciation and amortization of ¥0.301B, indicating continued growth investment.
【Financial Soundness】The Equity Ratio remained broadly unchanged at 49.5% (49.2% in the previous year). Current assets of ¥26.282B substantially exceeded current liabilities of ¥11.126B. Fixed liabilities were ¥11.696B, including long-term borrowings of ¥6.512B and bonds of ¥2.500B, indicating a relatively high level of leverage.

Cash Flow Analysis

Operating Cash Flow was -¥0.377B, improving from -¥0.985B in the same period of the previous year but remaining negative. OCF was negative despite Net Income of ¥0.354B because working capital expanded due to increases in inventories of ¥0.392B and accounts receivable of ¥0.414B, compounded by ¥0.550B in payments of corporate income taxes and other taxes. Investing Cash Flow was -¥0.411B, primarily reflecting capital expenditures of ¥0.443B, indicating continued investment in growth areas. As a result, Free Cash Flow was -¥0.788B and was partially offset by Financing Cash Flow of +¥0.094B, including an increase in short-term borrowings. The fact that operating cash flow did not cover earnings indicates that improving working-capital turnover efficiency will be a key determinant of future cash-generation capacity.

Quality of Earnings

The current period’s earnings structure was primarily composed of recurring earnings centered on Operating Income of ¥0.643B. Among non-operating items, dividend income of ¥0.013B and interest income of ¥0.008B were outweighed by interest expense of ¥0.088B, resulting in a net non-operating burden. Extraordinary income and losses consisted of a ¥0.020B gain on the sale of investment securities and a ¥0.006B loss on the disposal of fixed assets, for a minor net gain of +¥0.014B. Unlike the same period of the previous year, there was no large one-time factor such as the ¥2.32B gain on the sale of fixed assets. This difference was the primary cause of the substantial -79.0% YoY decline in Net Income, contrasting with the +66.6% increase in Ordinary Income. Comprehensive Income was ¥0.454B, exceeding Net Income of ¥0.354B due to positive factors including foreign currency translation adjustments of ¥0.092B. The fact that OCF was below Net Income was largely attributable to accrual factors arising from increased working capital, requiring monitoring from the perspective of earnings monetization.

Earnings Forecast and Guidance

The full-year forecast is revenue of ¥59.00B (+6.4% YoY), Operating Income of ¥1.900B (+11.6%), and Ordinary Income of ¥1.800B (+12.3%). Progress in Q1 was 25.8% for revenue, 33.8% for Operating Income, and 28.8% for Ordinary Income. Operating Income is therefore progressing faster than the simple 25% linear run rate. This appears to reflect the early contribution from the recovery in the overseas oils business and increased earnings in the domestic business, indicating a generally steady start relative to the full-year plan. No revision to the earnings forecast was made during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥60 per share, based on the post-stock-split basis. Based on forecast full-year EPS of ¥131.19, the Payout Ratio is approximately 45.7%. No revision was made to the dividend forecast during the quarter. A 3-for-1 stock split was implemented effective April 1, 2026, while the previous period’s dividend was disclosed on a pre-split basis. No share repurchases were confirmed during the current period, and shareholder returns are centered on dividends.

Risk Factors

1. Structural profitability constraints: Gross Margin was 14.0% (13.7% in the previous year), reflecting a highly commoditized business structure. Fluctuations in edible oil prices, the primary raw material, can therefore directly affect profitability. The -34.1% decline in Operating Income in the Processed Foods and Materials Business also indicates challenges in passing through prices and absorbing costs.

2. Working-capital expansion and cash flow: Working-capital items such as inventories of ¥12.183B and accounts receivable of ¥9.981B have expanded, and OCF remains negative at -¥0.377B. If the delay in converting earnings into cash continues, dependence on the financing structure may increase.

3. Interest burden: Interest expense was ¥0.088B, and the Company has interest-bearing debt, including long-term borrowings of ¥6.512B and bonds of ¥2.500B. Changes in the interest-rate environment will affect Ordinary Income through non-operating expenses.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (food_beverage)

Profitability and Returns

The Company’s profitability metrics were both below the industry median, reflecting the relatively low margins associated with its highly commoditized business composition.

Growth and Capital Efficiency

Revenue growth substantially exceeded the industry median, with the expansion of the overseas oils business achieving high growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Results

1. Growth in revenue and earnings was clear at the operating level, with the sharp +411.1% recovery in Operating Income in the Global Oils and Processed Oils Business being a particular feature of the current period. The substantial -79.0% decline in Net Income resulted from the reversal of the previous year’s gain on the sale of fixed assets and should be assessed separately from recurring earnings power.

2. OCF was negative (-¥0.377B) due to expanded working capital resulting from increases in inventories and accounts receivable, creating a timing gap between earnings growth and cash generation. Working-capital trends will be a key focus in assessing future capital efficiency.

3. While Operating Income in the Processed Foods and Materials Business declined by -34.1%, the Fine Chemicals Business maintained relatively high profitability with a margin of 11.9%. Differences in profitability among segments provide useful information for understanding the structure of the overall business portfolio.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥2,114–¥2,235 for a ±1% change in the cost of equity, and ¥2,164–¥2,179 for a change of ±0.1 in ω.

Notes:

• Goodwill amortization of ¥0.5 per share has been added back to earnings (as a non-cash expense and for comparability with IFRS companies).
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end have been used; there is a timing difference relative to the full-year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat above the appropriate level.

(Model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast or guarantee future share prices)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings-release 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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