NITCHO CORPORATION FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥18.12B
• Operating Income: ¥844M
• Net Income: ¥601M
• EPS: ¥540.86

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

Nihon Chori-ki Co., Ltd. (29610) reported FY2025 Q4 full-year results under JGAAP (non-consolidated) with resilient profitability but notably weak cash conversion. Revenue was 18,118 million yen, down 1.8% YoY, indicating slight demand softness or project timing effects in the commercial kitchen equipment market. Gross profit was 5,372 million yen, implying a gross margin of 29.7%, which is healthy for equipment/manufacturing but suggests limited pricing upside in the current environment. Operating income declined 20.2% YoY to 844 million yen, compressing the operating margin to approximately 4.7% and signaling negative operating leverage. Ordinary income was 908 million yen, and net income was 601 million yen, down 14.2% YoY, yielding a net margin of 3.32%. DuPont analysis shows ROE at 8.04%, decomposed as 3.32% net margin × 1.365x asset turnover × 1.78x leverage, reflecting solid efficiency and moderate leverage. Asset turnover of 1.365x is comparatively strong for a capital goods maker, offsetting the mid-single-digit margin profile. The balance sheet remains sound with total assets of 13,269 million yen and equity of 7,474 million yen (liabilities/equity 1.01x), indicating modest leverage and capacity to withstand volatility. Liquidity appears comfortable: current ratio 176.5% and quick ratio 160.5%, supported by current assets of 11,274 million yen and working capital of 4,887 million yen. However, operating cash flow was a significant negative at -859 million yen, driving free cash flow to -869 million yen; this is a key weakness relative to the income statement. The OCF/net income ratio of -1.43 indicates poor cash conversion, likely driven by working capital uses (e.g., higher receivables or project advances) rather than earnings quality deterioration, given positive EBIT and minimal interest burden. Interest expense was only 0.8 million yen, yielding very high interest coverage (~1,074x) and underscoring low financial risk from debt service. Reported equity ratio and some share-related metrics are undisclosed in the dataset (zeros denote not reported), which limits certain per-share and capital policy analyses. Dividend data are not disclosed; payout and DPS are shown as zero placeholders and should not be interpreted as an actual suspension. Overall, the company maintained profitability and solid ROE despite a mild revenue decline, but negative OCF/FCF is the central issue to monitor. Near-term performance will depend on normalization of working capital, pricing discipline against input costs, and order timing. Data limitations (e.g., undisclosed cash balance, equity ratio, DPS, share count) constrain deeper granularity on capital policy and per-share metrics, but the available figures support a view of stable operations with a temporary cash flow headwind.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 3.32% (601m / 18,118m)
• asset_turnover: 1.365x (provided; indicates efficient use of assets for a machinery/equipment maker)
• financial_leverage: 1.78x (Assets/Equity ≈ 13,269m / 7,474m)
• calculated_ROE: 8.04% (matches reported) margin_quality: Gross margin at 29.7% suggests adequate value-add and product mix resilience. Operating margin at ~4.7% (844m / 18,118m) is compressed versus last year (OI -20.2% YoY against revenue -1.8%), implying cost pressure or unfavorable mix. Net margin at 3.32% remains reasonable given the low interest burden, but below potential if operating efficiency recovers. operating_leverage: Negative operating leverage evident: revenue declined 1.8% YoY while operating income fell 20.2% YoY. This indicates semi-fixed costs and/or lower utilization impacting margins; recovery of volume or mix should produce outsized profit improvement if demand normalizes.

Growth Assessment

revenue_sustainability: Top-line contracted modestly (-1.8% YoY) to 18,118m, consistent with soft demand or project timing in commercial kitchen installations and refurbishments. Asset turnover of 1.365x suggests active asset utilization; sustaining this will require stable order intake. profit_quality: Ordinary income (908m) exceeded operating income (844m), implying net non-operating gains/financial income. However, net income fell 14.2% YoY, showing core margin pressure. The gap between profits and cash flows (OCF -859m) points to working capital drag rather than earnings erosion per se. outlook: If order timing normalizes and pricing offsets input costs, margins could recover from the trough seen this year. Key swing factors include stainless steel and component costs, installation capacity utilization, and public/institutional capex cycles. Cash conversion improvement is essential to sustain growth investments.

Financial Health

liquidity: Current ratio 176.5% (11,273.7m / 6,386.7m) and quick ratio 160.5% indicate strong short-term coverage. Working capital stands at 4,887.0m, providing a buffer for project execution and inventory needs. solvency: Liabilities/equity at ~1.01x (7,542.6m / 7,474.0m) denotes moderate leverage. Interest expense of 0.8m with coverage ~1,074x reflects minimal debt service risk. capital_structure: Total assets 13,269m vs. equity 7,474m implies leverage of 1.78x. The undisclosed equity ratio in the dataset limits a standard solvency ratio, but the liability-to-equity profile appears conservative.

Cash Flow Quality

earnings_quality: Positive operating profit and net income alongside negative OCF (OCF/NI = -1.43) indicate earnings not converting to cash due to working capital swings, not necessarily accrual-driven quality issues. FCF_analysis: Free cash flow was -869m (OCF -859m plus investing CF -10m), with limited capex/investing outflow this period. The cash deficit appears predominantly working-capital related. working_capital: Inventories reported at 1,023.2m; with current assets high (11,273.7m), the drag likely stems from receivables or contract assets. Without period-to-period changes, we infer a build consistent with project timing and delivery schedules.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed in the provided data (zeros are placeholders). Therefore, we cannot assess historical payout behavior quantitatively. FCF_coverage: With FCF at -869m, dividend coverage for this period would be weak if dividends were paid; however, actual DPS is undisclosed, preventing calculation of coverage. policy_outlook: Given solid profitability but negative cash generation, a prudent policy would emphasize liquidity until working capital normalizes. Formal dividend guidance is not assessable from the disclosed figures.

Risk Assessment

Business Risks:

• Demand cyclicality in commercial kitchen equipment tied to foodservice, institutional, and construction investment cycles
• Input cost volatility (stainless steel, components) affecting gross margins
• Project timing and acceptance risk causing revenue and cash flow lumpiness
• Execution capacity constraints for installation/after-sales services impacting delivery schedules
• Customer concentration with large chain operators or public institutions
• Competitive pricing pressure in standardized equipment lines
• Supply chain disruptions for imported parts and logistics

Financial Risks:

• Negative operating cash flow and FCF driven by working capital build
• Potential increase in receivables days and inventory holding costs
• Exposure to interest rate normalization if borrowing increases from current low base
• Limited visibility on cash and equity ratio due to undisclosed items
• Refinancing and covenant headroom unknown given data limitations

Key Concerns:

• Sustained negative cash conversion (OCF/NI -1.43) despite profitability
• Margin compression (operating income -20.2% YoY vs revenue -1.8% YoY)
• Reliance on working capital to fund operations in the near term

Investment Implications

Key Takeaways:

• Stable revenue base with slight YoY decline (-1.8%) amid soft market conditions
• ROE at 8.04% supported by strong asset turnover (1.365x) and moderate leverage (1.78x)
• Gross margin healthy at 29.7%, but operating margin compressed to ~4.7%
• OCF materially negative (-859m), driving FCF to -869m; cash conversion is the central issue
• Balance sheet liquidity is solid (current ratio 176.5%, quick ratio 160.5%) with minimal interest burden
• Dividend and per-share metrics not disclosed, limiting capital return assessment

Metrics to Watch:

• Order intake, backlog, and book-to-bill ratio
• Gross and operating margins, particularly pricing vs. input costs
• Operating cash flow, receivables days, inventory turns, and advance payments
• Capex requirements and investing cash flows
• Liabilities/equity and any changes in interest expense
• Dividend policy disclosures and payout intentions

Relative Positioning: Within Japan small/mid-cap industrial equipment peers, the company shows moderate profitability with superior asset efficiency and conservative leverage, but currently weaker cash conversion than peers that maintained positive OCF in FY2025.

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