The Nisshin OilliO Group,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥269.92B
• Operating Income: ¥6.97B
• Net Income: ¥7.87B
• EPS: ¥578.64

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

Nisshin OilliO Group’s FY2026 Q2 results show modest top-line growth but significant compression in operating profitability and an outsized bottom line supported by non-recurring items. Revenue rose 3.4% YoY to ¥269.9bn, while gross profit reached ¥37.8bn, implying a gross margin of 14.0%. Operating income fell 32.6% YoY to ¥7.0bn, bringing the operating margin down to roughly 2.6%, indicating margin pressure despite higher sales. Ordinary income of ¥6.0bn came in below operating income, suggesting a net non-operating loss, likely driven by interest expense and other non-operating items. Net income surged to ¥18.5bn (+146.1% YoY), far outpacing operating performance, indicating the presence of sizable extraordinary gains or one-offs. EPS printed at ¥578.64, a level unlikely to be representative of normalized earnings power given the divergence between operating and net income. DuPont-calculated ROE was 8.71%, driven by a net margin of 6.86% that appears elevated versus the underlying operating margin due to extraordinary gains. Asset turnover of 0.628 and financial leverage of 2.02 are consistent with the reported balance sheet (assets ¥429.9bn; equity ¥212.4bn). Liquidity appears strong, with a current ratio of 2.15x and quick ratio of 1.18x; working capital stands at a sizable ¥122.4bn. Capital structure looks balanced: based on total equity and total assets, the implied equity ratio is approximately 49.4%, even though the disclosed equity ratio field shows 0.0% (unreported). Interest coverage is ample at 10.9x (operating income/interest), mitigating near-term refinancing risk. Cash conversion is a weak spot this half: OCF of ¥8.0bn versus net income of ¥18.5bn yields an OCF/NI ratio of 0.43, pointing to working capital drag or timing effects. Investing cash flows were not disclosed, preventing a reliable free cash flow calculation; the displayed FCF of 0 should be treated as unreported. Financing CF was an outflow of ¥4.4bn, indicating net repayments or shareholder returns, though dividends and buybacks were not disclosed. Overall, the core operating trend is softer than headline net income suggests, and the sustainability of earnings hinges on margin normalization and working capital discipline rather than one-off gains.

Profitability Analysis

ROE of 8.71% decomposes into a net profit margin of 6.86%, asset turnover of 0.628, and financial leverage of 2.02. The net margin is inflated by non-recurring gains, as operating margin is only about 2.6% (¥6.97bn/¥269.92bn). Gross margin at 14.0% indicates some relief versus raw material volatility but still leaves limited room after SG&A and logistics, as evidenced by the 32.6% YoY decline in operating income despite revenue growth. EBITDA is ¥12.06bn (EBITDA margin 4.5%), implying a modest buffer over operating profit; the D&A of ¥5.09bn is meaningful relative to EBIT, indicating moderate operating leverage. Operating leverage worked against the company this half: small revenue growth (+3.4%) translated into a larger decline in operating profit, reflecting inability to fully pass through costs or adverse mix. Ordinary income at ¥5.97bn below operating income confirms net non-operating headwinds (e.g., interest expense of ¥0.64bn and possibly other losses). The reported effective tax rate metric of 0.0% is not reliable; with income tax expense of ¥3.59bn and net income of ¥18.51bn, the bottom line likely benefited from extraordinary gains and/or tax effects not captured in the simplified ratio. Normalized profitability is likely closer to operating metrics (2–3% operating margin) rather than the 6.86% net margin implied by this interim period.

Growth Assessment

Revenue growth of 3.4% YoY to ¥269.9bn appears steady but not robust, likely driven by pricing and mix rather than volume outperformance. The decline in operating income (-32.6% YoY) suggests that cost pass-through was incomplete or that product mix shifted toward lower-margin categories. Gross profit of ¥37.8bn indicates some resilience, but the flow-through to operating profit was weak. Ordinary income performance also lagged operating income, indicating incremental non-operating pressure (interest and potentially FX/other). Net income growth (+146.1% YoY) is not reflective of the underlying run-rate; it likely contains one-time or extraordinary gains that boosted the bottom line. Sustainability of revenue appears reasonable given staple product characteristics and diversified channels, but profit quality in the half was challenged. Near-term outlook will depend on raw material cost trends (edible oil inputs), energy/logistics costs, and competitive pricing dynamics. If input prices stabilize and price pass-through continues, operating margin could normalize; however, if raw materials re-inflate or promotions intensify, margin recovery may lag. Structural initiatives (efficiency, product premiumization) would be needed for sustained margin expansion. Given the divergence between operating and net income, investors should track adjusted/normalized earnings rather than headline net profit.

Financial Health

Liquidity is strong: current ratio 215.1% (¥228.7bn CA vs ¥106.3bn CL) and quick ratio 117.9% suggest ample short-term coverage even after excluding inventories (¥103.3bn). Working capital stands at ¥122.4bn, providing a cushion for seasonal swings in procurement and receivables. Solvency appears sound: based on balance sheet totals, the implied equity ratio is approximately 49.4% (¥212.4bn equity / ¥429.9bn assets), even though the reported equity ratio field is unreported at 0.0%. Financial leverage in DuPont (2.02x) is consistent with the calculated equity ratio and indicates a moderate capital structure. The reported debt-to-equity ratio of 0.90x likely reflects a liabilities-to-equity measure in this dataset; if interpreted literally as interest-bearing debt, it would be unusually high relative to total liabilities, so definition clarity is needed. Interest coverage is healthy at 10.9x (¥6.97bn EBIT / ¥0.64bn interest), implying manageable debt service. Total liabilities are ¥190.2bn against equity of ¥212.4bn, reinforcing a balanced balance sheet.

Cash Flow Quality

Operating cash flow of ¥8.0bn versus net income of ¥18.5bn yields an OCF/NI ratio of 0.43, indicating weak cash conversion this half. The gap suggests working capital absorption (e.g., inventories, receivables) or timing differences between recognition and cash collection; inventories are sizable at ¥103.3bn, but changes were not disclosed. EBITDA of ¥12.06bn compared with OCF suggests cash taxes, interest, and working capital movements consumed a meaningful portion of operating cash. Investing cash flow was not disclosed (shows as 0, which indicates unreported), preventing a reliable free cash flow calculation; the displayed FCF of 0 should not be interpreted as zero. Financing cash flow was an outflow of ¥4.42bn, likely reflecting debt repayment and/or shareholder distributions, but split details are unavailable. Overall, earnings quality is mixed: accounting earnings were boosted by extraordinary items, and cash generation lagged reported net income. Monitoring OCF-to-EBITDA, working capital turns, and capex is key to assessing true free cash flow capacity.

Dividend Sustainability

Dividend data (annual DPS, payout ratio, FCF coverage) are unreported in this dataset, so no direct payout assessment can be made. EPS is ¥578.64 for the period, but net income benefits from one-off gains, making this an unreliable base for payout capacity. OCF of ¥8.0bn is positive, yet the lack of investing CF disclosure prevents a clear view on FCF and coverage. Financing CF outflows of ¥4.42bn could include dividends or buybacks, but details are not provided. Given margin pressure at the operating level and low cash conversion, a conservative stance on distribution sustainability would be prudent until normalized earnings and FCF are clearer. Company policy and historical payout track record are not available in the provided data; future guidance, if any, would be informative.

Risk Assessment

Business Risks:

• Raw material price volatility (vegetable oils) impacting gross margin and pricing power
• Competitive pricing and private label pressure in edible oils and food ingredients
• Logistics and energy cost inflation weighing on SG&A and distribution expenses
• Product mix shifts toward lower-margin categories
• FX fluctuations affecting import costs and overseas operations
• Potential demand elasticity if retail price pass-through persists

Financial Risks:

• Weak cash conversion in the half (OCF/NI 0.43) indicating working capital risk
• Exposure to interest costs (¥0.64bn) though coverage is currently healthy
• Possible reliance on extraordinary gains to support net income
• Definition ambiguity in leverage metrics (reported D/E 0.90x) complicating risk assessment
• Inventory intensity (¥103.3bn) elevating carrying and obsolescence risks if demand slows

Key Concerns:

• Sustainability of earnings given a 32.6% YoY decline in operating income
• Large gap between operating and net income, implying one-off drivers
• Low cash conversion and potential working capital build
• Lack of disclosure on investing cash flows and dividends limits visibility into FCF and returns

Investment Implications

Key Takeaways:

• Top line grew 3.4% YoY, but operating profit fell 32.6%, signaling margin compression
• Net income surged to ¥18.5bn due to extraordinary factors; not reflective of core run-rate
• Solid liquidity (current ratio 2.15x, quick ratio 1.18x) and balanced balance sheet (~49.4% equity ratio implied)
• Interest coverage is strong at 10.9x, reducing near-term solvency concerns
• Cash conversion is weak (OCF/NI 0.43), warranting close monitoring of working capital
• Lack of investing CF and dividend disclosure limits FCF and payout visibility

Metrics to Watch:

• Operating margin and gross-to-operating spread
• OCF/NI and OCF/EBITDA conversion ratios
• Inventory levels and days on hand; receivables/payables turns
• Input cost indices for key oils and pass-through pricing progress
• Ordinary vs operating income gap and any extraordinary items
• Capex and investing cash flows to gauge true FCF
• Interest-bearing debt levels and funding costs

Relative Positioning: Within Japan’s edible oils and food ingredient peers, Nisshin OilliO exhibits solid balance sheet strength and liquidity but currently weaker operating momentum and cash conversion. Sustained margin recovery and working capital discipline will be key to closing the gap with best-in-class peers that demonstrate steadier operating margins and stronger OCF conversion.

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