NISSIN FOODS HOLDINGS (2897) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period of the fiscal year ending March 2026, revenue increased while profit declined. Revenue was ¥586.56B (+0.7% year on year), remaining virtually flat, while Operating Income fell to ¥53.40B (down 11.7%) and Net Income attributable to owners of the parent (hereinafter the same) declined to ¥41.70B (down 10.4%). The primary causes of the profit decline were higher material prices and lower volumes and increased promotional expenses in the U.S. business, indicating that price pass-through and improvements in the cost mix were insufficient to convert revenue growth into profit growth. Nevertheless, the overseas business returned to profit growth on a standalone Q3 basis, and the magnitude of the decline is narrowing.

Factors Affecting Performance

【Revenue】Revenue was ¥586.56B, representing a marginal 0.7% increase year on year. The Domestic Instant Noodles Business (+2.6%) and Domestic Non-Instant Noodles Business (+3.3%) maintained revenue growth, but the Overseas Business recorded a 3.3% decline due to lower volumes in the U.S. and Asia, restraining overall growth.

【Profit and Loss】Operating Income was ¥53.40B (down 11.7%), primarily due to higher material prices (a negative impact of ¥6.0B domestically and ¥3.3B overseas) and increased promotional expenses in the U.S. business (a negative impact of ¥4.0B). Profit Before Tax of ¥56.00B exceeded Operating Income, supported by net financial income (financial income of ¥4.24B less financial expenses of ¥1.65B) and equity-method investment gains of ¥8.69B. Equity-method investment gains accounted for approximately 20.9% of Net Income and represent an important component of consolidated earnings. No special or other temporary profit or loss factors were disclosed; overall, the result was higher revenue and lower profit.

Segment Analysis

The Domestic Instant Noodles Business was the largest segment by revenue composition (¥219.9B, approximately 37.5% of total revenue) and is positioned as the “core business.” Operating Income was ¥31.2B (down 1.7% year on year), with higher material costs partially absorbed through solid sales of price-conscious products. The Domestic Non-Instant Noodles Business recorded Operating Income of ¥12.0B (down 5.3%); although both the chilled foods and confectionery businesses increased revenue, higher material costs and increased depreciation expenses drove the decline in profit. The Overseas Business recorded Operating Income of ¥24.3B (down 17.4%), the largest rate of decline among the segments and the primary segment contributing to the consolidated profit decline. However, on a standalone Q3 basis, the Overseas Business returned to profit growth, supported by volume recovery in the U.S. and strong performance in Brazil and China, contributing to a narrowing of the company-wide profit decline. The Domestic Instant Noodles Business had the highest segment operating margin, while the lower profit margin of the Overseas Business weighed on the overall margin through the business mix.

Key Financial Indicators

Profitability: ROE was 7.8%, and the Operating Income Margin was 9.1% (down from 10.4% in the previous year).
Cash flow quality: Operating Cash Flow (OCF) / Net Income was 1.33x (¥55.57B ÷ ¥41.70B), exceeding 1.0x and indicating adequate cash backing for earnings.
Investment efficiency: Capital expenditures / depreciation was 2.91x (¥75.86B ÷ ¥26.10B), indicating a phase of growth investment.
Financial soundness: The Equity Ratio was 51.2% (down from 60.0% in the previous year due to expansion of total assets and liabilities).

Cash Flow Analysis

Operating Cash Flow was ¥55.57B, improving 41.9% year on year, and was 1.33x Net Income, indicating cash backing for earnings. Investing Cash Flow was negative ¥64.37B, primarily due to capital expenditures of ¥75.86B. Financing Cash Flow was an inflow of ¥24.93B; shareholder returns consisting of dividend payments of ¥20.33B and share repurchases of ¥20.47B were supplemented by borrowings, including a net increase in short-term borrowings of ¥7.83B. Free Cash Flow (OCF + Investing Cash Flow) was negative ¥8.80B, indicating that during this period of expanded capital investment, internal funds alone were insufficient to fund dividends and share repurchases. Cash generation is assessed as standard to strong at the operating level, but overall monitoring is warranted because FCF was negative due to expanded investment.

Earnings Quality

The difference between Profit Before Tax of ¥56.00B and Net Income of ¥41.70B was attributable to income taxes of ¥14.30B, resulting in an effective tax rate of approximately 25.5%, with no material deviation. In non-operating items, in addition to financial income of ¥4.24B and financial expenses of ¥1.65B, equity-method investment gains of ¥8.69B were recorded. This represented 20.9% of Net Income and is positioned as a recurring source of earnings. OCF of ¥55.57B exceeded Net Income of ¥41.70B, indicating limited accrual-related concerns. However, accounts receivable and notes receivable increased by ¥16.30B, warranting attention to changes in collection terms during the revenue expansion phase.

Earnings Forecast and Guidance

The cumulative Q3 progress rates against the full-year forecast (Revenue of ¥792.00B and Operating Income of ¥60.50B) were 74.1% for Revenue and 88.3% for Operating Income. Compared with the standard progress rate of 75%, Operating Income is significantly ahead of schedule. This is likely because the full-year forecast incorporates an 18.6% year-on-year decline in Operating Income and assumes a greater impact from higher material prices and increased selling, general and administrative expenses in the second half, particularly Q4. Management assumes continued volume recovery in the U.S. during the second half, contributions from equity-method investments in Europe, and a bottoming out of profit through price revisions and mix improvements.

Shareholder Returns

The annual dividend forecast is ¥70.00 (an interim dividend of ¥35.00 and a year-end dividend of ¥35.00 assumed), and the forecast Payout Ratio calculated based on forecast full-year profit of ¥43.00B and the average number of shares outstanding during the period is approximately 47.0%. Separately, the company conducted share repurchases of ¥20.47B during the cumulative Q3 period. Combined with dividends of ¥20.33B, the Total Return Ratio was approximately 104.5% relative to Net Income of ¥41.70B. Total shareholder returns exceeded FCF (negative ¥8.80B), indicating that the funding sources for shareholder returns depend on financing other than internal funds.

Catalysts

【Short term】The extent to which volume recovery in the U.S. business continues in Q4 and profit margins stabilize through price revisions and mix improvements. 【Long term】Category diversification through the consolidation of Gaemi Food and ABC Pastry in China, and expanded coverage of the EMEA region through Nissin Turkey, scheduled to be established in November 2025.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

The company’s profitability is substantially above the industry median.

Growth and Capital Efficiency

The revenue growth rate is below the industry median, indicating relatively sluggish top-line growth.

※Source: Compiled by the Company

Risk Factors

1. Material Price and Cost Pass-Through Risk: The company incurred impacts from higher material prices of ¥6.0B domestically and ¥3.3B overseas. The quantitative data confirm that cost pressures are exceeding the company’s ability to absorb costs through price pass-through, with Revenue up 0.7% while Operating Income declined 11.7%.

2. Overseas Business Volume and Foreign Exchange Risk: The Overseas Business recorded declines of 3.3% in revenue and 17.4% in Operating Income, affected by lower volumes in the U.S. and Asia. The foreign exchange impact was reported as a negative ¥0.1B against existing core Operating Income for the cumulative Q3 period.

3. Working Capital and Liquidity Risk: Accounts receivable and notes receivable increased by ¥16.30B, while short-term borrowings expanded to ¥53.78B (¥38.04B in the previous year). Capital expenditures of ¥75.86B increased Investing Cash Flow, and FCF was negative ¥8.80B, indicating that shareholder returns were not funded by internal funds.

Key Earnings Highlights

1. Although the Operating Income Margin declined from the previous year to 9.1%, it remained 4.1pt above the industry median of 5.0%, indicating that the company’s relative profitability remains high. The focus going forward will be the recovery of cost absorption capacity against higher material prices and increased overseas promotional expenses.

2. Capital expenditures reached 2.91x depreciation, indicating a phase of growth investment. Whether these investments translate into volume recovery in the Overseas Business and improved efficiency in the Domestic Non-Instant Noodles Business could represent a structural turning point for the recovery of profit margins over the medium term.

3. While the full-year company forecast assumes an 18.6% decline in Operating Income, the cumulative Q3 profit progress rate is ahead of schedule at 88.3%. The extent to which the cost structure and effects of price revisions are realized in the second half will provide a basis for assessing earnings quality.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,692–¥1,789 at ±1% for the Cost of Equity, and ¥1,739–¥1,740 at ±0.1 for ω.

Notes:

• Because Net Income progress against the full-year forecast is 91%, exceeding the standard level of 75%, forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of schedule tend to exceed forecasts. The adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the quarter-end have been used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI through integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. 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 responsibility, after consulting professionals as necessary.

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