NOF CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥109.14B
• Operating Income: ¥20.65B
• Net Income: ¥17.05B
• EPS: ¥66.60

Income Statement

Balance Sheet

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

NOF Corporation (Nichi-yu; TSE: 44030) reported FY2026 Q2 (cumulative) consolidated results under JGAAP showing resilient margins against a modest revenue decline. Revenue was ¥109.1bn, down 1.2% YoY, while operating income fell 11.5% YoY to ¥20.65bn, indicating negative operating leverage as modest top-line softness translated into a larger profit contraction. Gross profit was ¥42.51bn, implying a healthy gross margin of roughly 39.0%, and operating margin remained robust at 18.9%. Ordinary income reached ¥21.63bn, benefiting from about ¥0.98bn in net non-operating gains, and net income came in at ¥15.42bn, a 14.1% net margin. DuPont decomposition indicates ROE of 5.45%, driven by a 14.13% net margin, asset turnover of 0.289x, and moderate financial leverage of 1.33x. Balance sheet strength is a clear positive: total assets were ¥377.6bn and total equity ¥283.1bn, implying an equity ratio of roughly 75% (the reported 0% equity ratio appears undisclosed in XBRL, not an actual zero). Liquidity is strong with a current ratio of 3.63x and quick ratio of 3.15x; working capital stands at ¥153.7bn. Interest coverage is very high at roughly 318x, reflecting low interest burden (¥65m) and strong operating earnings. The tax line (¥7.31bn) suggests an effective tax rate in the low-30% range using reasonable proxies, despite the calculated metric table showing 0% due to undisclosed mapping. Cash flow statements and depreciation were not disclosed (recorded as 0), limiting assessment of earnings durability, capex intensity, and free cash flow conversion this period. Dividend metrics (DPS, payout) likewise appear undisclosed in the dataset; therefore, cash return policy assessment relies on balance sheet capacity rather than flow coverage. Overall, NOF demonstrates strong profitability, conservative leverage, and ample liquidity, but softer revenue and a steeper decline in operating income point to mix/volume headwinds and operating leverage pressure in the half. Without cash flow data, we cannot verify whether working capital supported or absorbed cash or whether capex stepped up, both of which are important for sustainability. Key watchpoints include demand normalization, pricing discipline, and any changes in cost structure that could mitigate negative operating leverage in the second half.

Profitability Analysis

ROE_decomposition: ROE 5.45% = Net margin 14.13% × Asset turnover 0.289× × Financial leverage 1.33×. Implied ROA ~4.1% (NI/Assets using period-end assets as a proxy), with moderate leverage amplifying returns. margin_quality: Gross margin is 39.0% (¥42.51bn/¥109.14bn), operating margin 18.9% (¥20.65bn), ordinary margin 19.8% (¥21.63bn), and net margin 14.1% (¥15.42bn). The spread between gross and operating margin (~20.0% of sales) implies SG&A and R&D intensity at a manageable level. Ordinary income exceeding operating income by ~¥0.98bn suggests positive non-operating contributions (e.g., financial income or FX). operating_leverage: Revenue declined 1.2% YoY while operating income fell 11.5% YoY, indicating adverse operating leverage. The sensitivity of operating profit to revenue in this half appears high, consistent with fixed-cost absorption and/or unfavorable product mix.

Growth Assessment

revenue_sustainability: Top line contracted modestly (−1.2% YoY). Given NOF’s specialty-chemical profile, this likely reflects a combination of softer volumes in select end-markets and product mix effects rather than broad pricing erosion; however, segment details are not provided. profit_quality: Margins remain solid, but the disproportionate drop in operating income vs. sales highlights mix and fixed-cost absorption pressure. Ordinary income uplift vs. operating income indicates recurring non-operating tailwinds; sustainability of these should be monitored. outlook: With a strong balance sheet and high margins, the company is positioned to defend profitability if demand stabilizes in 2H. Key to re-accelerating earnings will be volume recovery in higher-margin products and continued pricing discipline. Visibility is constrained by the absence of cash flow and segment disclosures for this period.

Financial Health

liquidity: Current ratio 3.63x (¥211.98bn/¥58.33bn) and quick ratio 3.15x support robust short-term solvency. Working capital is ¥153.65bn, offering significant buffer. solvency: Total liabilities/Equity is ~0.27x (¥77.65bn/¥283.15bn). Interest coverage is ~318x (¥20.65bn/¥0.065bn), indicating negligible refinancing risk under current conditions. capital_structure: Equity ratio inferred at ~75% (¥283.15bn/¥377.59bn). Leverage is conservative (financial leverage 1.33x), providing flexibility for investment and shareholder returns.

Cash Flow Quality

earnings_quality: Operating CF is undisclosed this period (recorded as 0). Consequently, OCF/NI and accruals-based cross-checks cannot be evaluated. Depreciation is also undisclosed, so EBITDA and non-cash expense mix cannot be assessed. FCF_analysis: Free cash flow cannot be derived without OCF and capex. Given the strong net cash position implied by low liabilities and high equity, balance sheet capacity appears ample, but flow-based coverage remains unverified. working_capital: Inventories are ¥28.42bn; without average balance and OCF we cannot validate inventory normalization or working-capital release/absorption. The large working capital base (¥153.65bn) is a lever for future cash generation if demand normalizes.

Dividend Sustainability

payout_ratio_assessment: DPS and payout are not disclosed in this dataset (shown as 0). Based on net income of ¥15.42bn and strong equity, capacity for dividends appears supported by fundamentals, but a rigorous payout assessment requires OCF and capex data. FCF_coverage: Not assessable due to undisclosed OCF and capex (FCF recorded as 0). policy_outlook: With low leverage and high liquidity, the company has room to maintain or gradually enhance shareholder returns, contingent on maintaining margins and restoring growth; confirmation awaits cash flow disclosures and management guidance.

Risk Assessment

Business Risks:

• Demand softness or mix shifts in key specialty-chemical end-markets impacting volumes and margins
• Raw material and energy price volatility affecting gross margin despite pricing actions
• Potential FX fluctuations influencing both revenue (export mix) and non-operating income
• Customer concentration in niche applications raising revenue variability
• Regulatory and environmental compliance costs for chemical manufacturing

Financial Risks:

• Earnings sensitivity to operating leverage if volumes soften further
• Limited visibility on cash generation due to undisclosed OCF and capex
• Potential working-capital build in a slowing environment weighing on cash conversion
• Non-operating income contribution may be non-recurring or volatile

Key Concerns:

• Negative operating leverage in the half (OP −11.5% vs. sales −1.2%)
• Absence of cash flow data, depreciation, and DPS disclosure limits assessment of earnings durability and return policy
• Reliance on non-operating gains to bridge ordinary income above operating income

Investment Implications

Key Takeaways:

• Margins remain strong: gross margin ~39% and operating margin ~19% despite softer sales
• ROE of ~5.45% underpinned by high net margin and conservative leverage; asset turnover remains low at 0.289x
• Balance sheet is robust with an inferred ~75% equity ratio and minimal interest burden
• Negative operating leverage warrants monitoring of fixed-cost absorption and product mix
• Non-operating gains supported ordinary income; persistence uncertain without detail
• Cash flow and capex data gaps prevent verification of earnings-to-cash conversion

Metrics to Watch:

• Operating margin trajectory and SG&A ratio (gross-to-operating spread ~20% of sales)
• Volume vs. price/mix trends to gauge operating leverage in 2H
• OCF/Net income and working-capital movements once disclosed
• Capex and depreciation trends to assess reinvestment needs and EBITDA
• Inventory levels relative to demand to identify de-stocking or build
• Non-operating income components (interest/dividends/FX) sustainability

Relative Positioning: Versus broader Japanese specialty chemicals peers, NOF exhibits stronger-than-average margins and a more conservative balance sheet, but asset turnover is on the low side and the half’s negative operating leverage highlights sensitivity to top-line softness.

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