NISSIN FOODS HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥373.24B
• Operating Income: ¥31.82B
• Net Income: ¥24.09B
• EPS: ¥77.97

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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 a weaker quarter for Nissin Foods Holdings, with earnings contracting on softer revenue and margin compression, partly cushioned by solid operating cash flow. Revenue declined 1.3% YoY to 3,732.4, and operating income fell 23.6% YoY to 318.2 as cost pressures and SG&A deleverage weighed on profitability. Net income decreased 22.2% to 226.0, with an effective tax rate of 27.7% and EPS of 77.97 yen. Gross profit was 1,282.7, translating to a gross margin of 34.4%. The implied operating margin was 8.5% (318.2/3,732.4), down meaningfully from last year’s implied level. Based on the provided YoY rates, we estimate operating margin compressed by roughly 250 basis points YoY. EBITDA totaled 487.4, yielding a 13.1% EBITDA margin. Equity-method income contributed 52.6, a notable but not dominant portion of profits, and non-operating factors were modest in the period. ROE printed at 4.4% on the DuPont basis (net margin 6.0%, asset turnover 0.409x, leverage 1.76x), reflecting subdued returns. ROIC stood at 4.1%, below the 5% warning threshold, indicating capital efficiency pressure amid an elevated investment phase. Operating cash flow was healthy at 346.6 and exceeded net income (OCF/NI 1.53x), signaling good earnings quality this quarter. However, free cash flow was slightly negative at -33.2 due to robust capex of 442.2. The balance sheet remains conservative with an equity ratio of 52.7% and D/E of 0.76x; Debt/EBITDA is a low 0.75x, indicating ample debt headroom. Shareholder returns were sizable with dividends of 102.8 and share repurchases of 204.7, necessitating positive financing cash flow of 107.1 to fund returns and capex. The calculated payout ratio of 92.2% appears elevated versus typical sustainability benchmarks. Looking forward, restoring operating margin and improving ROIC above the cost of capital will be central, while managing capex intensity to turn FCF positive is key. FX and raw material costs remain important swing factors for H2 recovery, alongside continued equity-method contribution stability.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (6.0%) × Asset Turnover (0.409x) × Financial Leverage (1.76x) = ROE 4.4%. The largest adverse change versus last year is most consistent with margin compression, given revenue declined only 1.3% while operating income fell 23.6%. Business drivers likely include higher input costs that were not fully offset by pricing/mix, and/or SG&A deleverage as fixed costs grew faster than sales. The compression appears cyclical/near-term rather than structural, but sustained relief requires cost normalization or renewed pricing/mix improvement. Asset turnover at 0.409x is steady-to-soft for a branded food company with sizable fixed assets; elevated capex also depresses turnover near term. Leverage at 1.76x is moderate and not a swing factor for ROE. SG&A ratio is 27.2% of revenue, which suggests limited operating leverage this quarter; without YoY SG&A disclosure we cannot confirm, but the scale of operating income decline implies SG&A growth likely outpaced sales. Overall, the profit algorithm in FY2026 Q2 was constrained by margin pressure more than by balance sheet or turnover dynamics.

Growth Assessment

Top line contracted modestly (-1.3% YoY) to 3,732.4, indicating a pause after prior pricing cycles; volume/mix details are not disclosed. Operating income fell 23.6% YoY to 318.2, notably underperforming revenue due to margin compression. Net income declined 22.2% to 226.0 despite a normalizing tax rate, underscoring operating leverage to margins. Equity-method income of 52.6 provided incremental support but did not offset core margin headwinds. With EBITDA margin at 13.1%, profitability sits below recent peaks; normalization of input costs and cost discipline are needed for recovery. Near-term growth hinges on raw material cost trends (e.g., grains, oils), FX impacts on imported inputs, and the cadence of overseas demand. The capex program (442.2) suggests ongoing capacity/efficiency investments that can underpin mid-term growth, but weighs on near-term FCF. Outlook: cautious near term on margins; constructive medium term if pricing, mix premiumization, and efficiency gains lift ROIC back above 7–8% targets typical for leading food peers.

Financial Health

Liquidity: Current ratio is not calculable due to missing current liabilities; however, current assets total 2,989.9, and short-term loans are 365.4, suggesting no immediate liquidity stress. No warning for Current Ratio <1.0 can be made without current liabilities. Solvency: Equity ratio 52.7% and D/E 0.76x indicate a conservative capital structure; Debt/EBITDA at 0.75x is very comfortable. Maturity profile/mismatch: Short-term loans (365.4) are small relative to current assets (2,989.9), limiting near-term refinancing risk; current liabilities detail is unreported, so a full mismatch analysis is not possible. Off-balance sheet: No disclosures provided; we cannot assess lease or other commitments. Overall, balance sheet resilience is strong, with ample capacity to navigate short-term volatility.

Cash Flow Quality

OCF of 346.6 exceeds net income of 226.0 (OCF/NI 1.53x), indicating solid earnings quality in the period. Working capital drivers are not decomposed, but strong OCF alongside a decline in profit suggests cash conversion was healthy, not reliant on accruals. FCF was slightly negative at -33.2 due to high capex (442.2), consistent with a reinvestment phase rather than poor cash earnings. Dividend (102.8) and buyback (204.7) outflows exceeded FCF and were supported by net financing inflows (107.1). No clear signs of working capital manipulation can be deduced given absence of YoY changes in AR, inventory, and AP; absolute balances are AR 1,181.7, inventory 738.2, AP 1,476.7.

Dividend Sustainability

The calculated payout ratio of 92.2% is high versus a <60% sustainability benchmark. FCF coverage of dividends is -0.16x in the period, indicating dividends were not covered by free cash flow due to elevated capex. Aggregate shareholder returns (dividends 102.8 + buybacks 204.7) exceeded FCF and leaned on financing inflows. With a strong balance sheet (equity ratio 52.7%, Debt/EBITDA 0.75x), near-term dividend capacity is supported, but sustained high payout alongside capex will require an FCF inflection. Policy outlook: maintaining dividends appears feasible, but scope for increases may be limited until margin recovery and capex normalization lift FCF.

Risk Assessment

Business Risks:

• Raw material cost volatility (wheat, palm oil, packaging) pressuring gross margin
• Foreign exchange volatility affecting imported input costs and overseas earnings translation
• Competitive pricing in instant noodles and convenience channels limiting price pass-through
• Execution risk on capex and productivity programs needed to restore ROIC
• Equity-method investee volatility impacting non-operating profit contribution (52.6 this period)

Financial Risks:

• Negative FCF in the period due to high capex, requiring financing to fund shareholder returns
• Potential near-term earnings sensitivity to margin swings given operating leverage
• Limited visibility on current liabilities and interest expense, constraining liquidity and coverage analysis

Key Concerns:

• ROIC at 4.1% below the 5% warning threshold, indicating weak capital efficiency
• Operating margin compression (~250 bps YoY implied) with uncertain timing of recovery
• High payout ratio (92.2%) relative to current earnings/FCF profile

Investment Implications

Key Takeaways:

• Earnings down sharply on margin compression despite only modest revenue decline
• OCF is solid and exceeds net income, but capex intensity turns FCF slightly negative
• Balance sheet strength (equity ratio 52.7%, Debt/EBITDA 0.75x) provides flexibility
• ROE (4.4%) and ROIC (4.1%) are below attractive thresholds, highlighting need for profit recovery
• Shareholder returns (dividends + buybacks) outpaced FCF and were supported by financing cash inflow
• Equity-method income is supportive but not a dominant earnings driver

Metrics to Watch:

• Operating margin trajectory and gross margin recovery
• Input cost indices (grains, oils) and USD/JPY trend
• Capex execution and FCF inflection timing
• ROIC uplift toward 7–8%
• SG&A ratio vs revenue growth (operating leverage)
• Equity-method income stability

Relative Positioning: Within Japanese packaged foods, Nissin retains a strong balance sheet and brand assets but currently lags top-tier peers on returns (ROE/ROIC) and near-term margin momentum; execution on cost/productivity and disciplined capex will be key to re-closing the gap.

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