NATORI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥23.72B
• Operating Income: ¥212M
• Net Income: ¥686M
• EPS: ¥14.65

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

For FY2026 Q2 (consolidated, JGAAP), Natori reported revenue of ¥23,720 million, declining 1.0% YoY, indicating mild top-line pressure amid a difficult cost and pricing environment. Gross profit was ¥5,087 million, yielding a gross margin of 21.4%, which appears compressed for a branded/snack food manufacturer facing raw material and logistics inflation. Operating income fell sharply to ¥212 million (-78.1% YoY), translating to an operating margin of just 0.9%, highlighting significant margin squeeze and negative operating leverage. Ordinary income was ¥232 million, broadly in line with operating income, suggesting limited non-operating support; interest expense was modest at ¥16.6 million with 12.8x coverage, reflecting manageable financial costs. Net income was ¥184 million (-73.1% YoY), putting net margin at 0.78%, consistent with the DuPont-derived figure and underscoring weak bottom-line conversion. Asset turnover stood at 0.57x for the interim period, and with financial leverage at 1.57x, calculated ROE was 0.69%, far below typical cost of equity, indicating subpar returns in the half. Operating cash flow was negative at ¥470 million, implying cash conversion of -2.55x relative to net income, likely driven by working capital needs in the half. Investing cash flows were not disclosed (shown as zero), so capital expenditure trends cannot be assessed; this limits free cash flow interpretation beyond noting reported FCF as zero/unavailable. Financing cash flow was an outflow of ¥1,267 million, likely reflecting debt repayments and/or shareholder returns, but details are not disclosed. The balance sheet remains solid with total assets of ¥41,580 million and total equity of ¥26,512 million, implying an equity ratio near 63.8% (the reported 0.0% is not disclosed) and providing a healthy buffer. Liquidity appears ample with a current ratio of 177% and quick ratio of 160%, supported by working capital of ¥9,122 million. Inventories were ¥2,027 million; based on interim COGS, this implies roughly 20 days of inventory coverage, which is reasonable for the category. EBITDA was ¥799 million (3.4% margin), indicating some cushion from non-cash depreciation (¥587 million), but underlying profitability remains thin. The compression in operating income despite stable revenue signals negative operating leverage, likely from input cost inflation and elevated SG&A that price increases have not fully offset. Dividend per share is not disclosed for the period (shown as zero), and payout metrics should not be interpreted as actual zero. Overall, the half shows resilient liquidity and solvency but weak earnings quality and cash generation, with recovery contingent on gross margin repair and improved cash conversion.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 0.78%
• asset_turnover: 0.57x
• financial_leverage: 1.57x
• calculated_ROE: 0.69%
• commentary: ROE is depressed by low net margin; leverage is modest and not a meaningful driver. Asset turnover at 0.57x (interim) is reasonable, but margin weakness dominates the equation. margin_quality:
• gross_margin: 21.4% (GP ¥5,087m on revenue ¥23,720m)
• operating_margin: 0.9% (OP ¥212m)
• EBITDA_margin: 3.4% (EBITDA ¥799m)
• net_margin: 0.78% (NI ¥184m)
• assessment: Gross margin compression and a narrow operating margin suggest cost inflation (raw materials, energy, logistics) and possibly higher SG&A. Limited non-operating gains keep ordinary income close to operating income. operating_leverage:
• evidence: Revenue fell only 1.0% YoY, but operating income fell 78.1% YoY, indicating substantial negative operating leverage.
• drivers: Cost pass-through lag vs input inflation; product mix; channel terms; interim promotional intensity; depreciation is significant, but non-cash and not the primary driver.

Growth Assessment

revenue_sustainability: Revenue held relatively steady (-1.0% YoY), suggesting end-demand resilience in core snack categories, albeit with potential share or mix pressure. profit_quality: Sharp decline in operating and net income points to fragile profitability despite stable revenue, with margins heavily exposed to cost pressures and pricing dynamics. outlook: Recovery hinges on gross margin repair via pricing, mix upgrade, and procurement efficiencies. With asset turnover adequate, margin normalization could quickly lift ROE, but near-term visibility is limited given H1 cash conversion weakness and ongoing cost headwinds.

Financial Health

liquidity:

• current_ratio: 177%
• quick_ratio: 160%
• working_capital: ¥9,122m
• commentary: Strong liquidity buffer supports operations and seasonality. Cash balance was not disclosed; however, current assets of ¥20,975m vs current liabilities of ¥11,853m indicate ample headroom. solvency_capital_structure:
• total_assets: ¥41,580m
• total_liabilities: ¥15,360m
• total_equity: ¥26,512m
• equity_ratio_implied: ≈63.8% (reported 0.0% indicates non-disclosure)
• debt_to_equity: 0.58x
• interest_coverage: 12.8x
• assessment: Low-to-moderate leverage with strong implied equity ratio and healthy interest coverage suggests low solvency risk despite earnings softness.

Cash Flow Quality

earnings_quality: OCF of -¥470m versus NI of ¥184m (OCF/NI = -2.55) indicates poor cash conversion in the half, likely driven by working capital build and timing effects. FCF_analysis: Investing CF is undisclosed (shown as zero), preventing a reliable FCF calculation beyond noting reported FCF as zero/unavailable. Capex intensity and maintenance vs growth split cannot be assessed. working_capital_dynamics: Inventories at ¥2,027m imply roughly 20 days on interim COGS, which is manageable; the OCF shortfall likely reflects receivables and payables timing alongside inventory normalization.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are not disclosed for the period (zeros indicate non-disclosure). With NI positive but weak, sustainable payout depends on H2 recovery and cash generation. FCF_coverage: FCF coverage cannot be assessed due to undisclosed investing CF and negative OCF in H1. policy_outlook: Given strong balance sheet and modest leverage, the capacity for dividends exists, but interim earnings weakness and negative OCF argue for prudence until margin and cash conversion improve.

Risk Assessment

Business Risks:

• Raw material price volatility (meat, seafood, nuts, dairy inputs) and procurement risk
• FX risk (yen depreciation) raising import costs
• Channel concentration risk in convenience stores and mass retail
• Private label and price competition compressing margins
• Regulatory and food safety/quality control risks
• Consumer demand elasticity to price hikes and promotional intensity
• Logistics and energy cost inflation

Financial Risks:

• Weak cash conversion and potential working capital volatility
• Margin squeeze reducing interest coverage if sustained, though currently adequate
• Potential need for higher short-term financing in seasonal peaks
• Limited visibility on capex due to non-disclosure of investing cash flows

Key Concerns:

• Operating income down 78.1% YoY despite only a 1.0% revenue decline
• Negative OCF of ¥470m and OCF/NI of -2.55 in the half
• Gross margin at 21.4% insufficient to support fixed cost base, driving negative operating leverage

Investment Implications

Key Takeaways:

• Top line resilient but margins under acute pressure, driving a sharp earnings contraction
• Balance sheet strength (implied equity ratio ~64%, low leverage) mitigates solvency risk
• Cash conversion weak in H1; improvement in working capital discipline is key
• ROE at 0.69% reflects margin-driven underperformance; leverage is not the lever
• Visibility on capex and FCF is limited due to investing CF non-disclosure

Metrics to Watch:

• Gross margin trajectory and price/mix realization
• Operating margin and SG&A efficiency
• OCF and working capital turns (receivables, payables, inventory days)
• Ordinary income vs operating income gap (non-operating items and FX impacts)
• Interest coverage and debt-to-equity amid any refinancing or rate changes
• Disclosure on capex/investing CF to assess FCF sustainability

Relative Positioning: Within Japanese packaged foods/snacks, Natori shows stable demand but weaker interim margin resilience versus peers that executed earlier or larger price pass-through; however, its balance sheet strength compares favorably, supporting flexibility to restore profitability.

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