Noevir Holdings (4928) FY2026 Q2 Earnings Report

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Executive Summary

This earnings report is qualitatively noteworthy because it combines a decline in revenue and operating income from the core business with an increase in net income resulting from gains on the sale of fixed assets. Revenue was ¥306.1B (down -4.4% YoY), Operating Income was ¥45.3B (down -20.6%), and Ordinary Income was ¥47.9B (down -20.5%), indicating a slowdown in the core business, while Net Income increased 3.6% YoY to ¥28.5B. The primary factors were weak sales in the core Cosmetics Business and an increase in the SG&A ratio, while the increase in net income was supported by the one-time gain on the sale of fixed assets of ¥9.2B.

Factors Affecting Earnings

【Revenue】Revenue was ¥306.1B, a -4.4% YoY decline. The core Cosmetics Business, which accounted for 79.0% of revenue, generated ¥241.7B, down -5.0% YoY, making it the primary cause of the consolidated revenue decline. The Pharmaceuticals and Food Business also declined to ¥53.9B, down -3.8% YoY. The Other Businesses increased revenue to ¥11.9B, up +5.6% YoY, but remain small in scale.

【Profit and Loss】Operating Income declined 20.6% YoY to ¥45.3B, a decline exceeding the rate of revenue contraction. The gross margin was 67.8%, a slight improvement from 67.5% in the same period of the previous year; however, the SG&A ratio increased from 49.7% to 53.0%, and insufficient absorption of fixed costs was the primary cause of the decline in Operating Income. Ordinary Income also declined by approximately the same amount, falling 20.5% YoY to ¥47.9B. Meanwhile, Net Income increased 3.6% YoY to ¥28.5B. This resulted from the gain on the sale of fixed assets of ¥9.2B, recorded as extraordinary income, exceeding extraordinary losses of ¥2.9B, including an impairment loss of ¥1.2B. The divergence between Ordinary Income and Net Income was therefore attributable to extraordinary income and losses. In conclusion, this earnings report reflects a structure in which declining revenue and profit from the core business coexist with an increase in net income driven by extraordinary factors; in substance, the Company remains in a phase of declining revenue and profit.

Segment Analysis

The Cosmetics Business generated Revenue of ¥241.7B (down -5.0% YoY) and Operating Income of ¥53.6B (down -16.5%), with a profit margin of 22.2% (-3.0pt from 25.2% in the previous year), making it the segment that most significantly determines fluctuations in consolidated profit. The Pharmaceuticals and Food Business was somewhat weak, with Revenue of ¥53.9B (down -3.8%), Operating Income of ¥3.9B (down -8.5%), and a profit margin of 7.2% (-0.4pt from 7.6% in the previous year). An impairment loss of ¥1.2B related to land scheduled for sale was recorded in this business. The Other Businesses increased Revenue to ¥11.9B (up +5.6%), but Operating Income declined 41.6% to ¥0.6B, and profitability deteriorated, with the profit margin falling to 4.9% from 10.1% in the previous year. Corporate expenses increased 3.3% YoY to ¥15.1B, placing additional pressure on the consolidated Operating Income margin amid declining revenue.

Key Financial Indicators

【Profitability】The Operating Income margin declined to 14.8%, down -3.0pt from 17.8% in the same period of the previous year. The Net Income margin improved to 8.9% from 8.2%, up +0.7pt; however, the improvement in the Net Income margin was primarily driven by extraordinary income and contrasts with the deterioration in the profitability of the core business.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥30.8B, representing 1.13x Net Income and providing a minimum level of cash support. However, the OCF/EBITDA ratio remained at 0.61x, as increases in accounts receivable and inventories, together with tax payments, constrained cash conversion.【Investment Efficiency】Annualized ROE was 11.5%, supported by total asset turnover and profitability. Meanwhile, capital expenditures were only ¥2.5B, below depreciation and amortization of ¥4.8B, resulting in a capital expenditures/depreciation and amortization ratio of approximately 0.53x and indicating insufficient investment.【Financial Soundness】The Equity Ratio was 69.0%. Cash and deposits were ¥234.2B, accounting for 32.7% of total assets, reflecting a conservative financial structure in which current assets substantially exceeded current liabilities.

Cash Flow Analysis

Operating Cash Flow was ¥30.8B, down -22.7% from ¥39.9B in the same period of the previous year. Increases in accounts receivable, which used ¥14.6B of funds, and inventories, which used ¥13.4B, pressured OCF, and the increase in accounts payable, which generated ¥2.8B of funds, was insufficient to offset them. In addition, income taxes paid of ¥21.1B were high, and the heavy tax burden relative to Profit Before Tax constrained cash-generating capacity. Investing Cash Flow was +¥10.6B, attributable to proceeds of ¥14.2B from the sale of fixed assets. Capital expenditures were limited to -¥2.5B, a small amount that can hardly be characterized as recurring investment activity. Financing Cash Flow was -¥79.0B, primarily due to dividend payments of ¥78.5B. As shareholder returns exceeded Free Cash Flow of ¥41.4B, cash and deposits declined from ¥269.3B in the same period of the previous year to ¥234.2B.

Quality of Earnings

Against Ordinary Income of ¥47.9B, Profit Before Tax was ¥54.3B. The ¥6.4B difference consisted of the net amount of extraordinary income of ¥9.2B, primarily gains on the sale of fixed assets, and extraordinary losses of ¥2.9B, including an impairment loss of ¥1.2B. The ¥9.2B gain on the sale of fixed assets represented approximately 32% of Net Income of ¥28.5B, indicating that the increase in Net Income was heavily dependent on this one-time factor. Non-operating income was ¥2.5B, equivalent to only 0.8% of Revenue, and consisted of various items, including foreign exchange gains of ¥0.7B, interest income of ¥0.6B, and dividend income of ¥0.2B, indicating low dependence on any specific item. Income taxes of ¥25.8B represented an effective tax rate of approximately 47.5% relative to Profit Before Tax, placing pressure on the conversion of pre-tax profit into after-tax income. OCF/Net Income was 1.13x, providing cash support, but OCF/EBITDA was low at 0.61x, indicating a certain divergence between accrual-based earnings and cash flow.

Earnings Forecast and Guidance

The full-year Company forecast remains unchanged, calling for Revenue of ¥650.0B (up +0.4% YoY), Operating Income of ¥114.0B (up +2.9%), and Ordinary Income of ¥118.0B (up +0.2%). Progress against the full-year forecast based on first-half results was 47.1% for Revenue, 39.8% for Operating Income, 40.6% for Ordinary Income, and 33.1% for Net Income (attributable to owners of the parent), all below the standard progress level of approximately 50%. Operating Income progress was particularly low, trailing the standard level by 10.2pt, and Operating Income of ¥68.7B, representing an increase of +51.4% over the first half, will be required in the second half. Achieving the Company’s forecast will require a recovery in sales in the Cosmetics Business and a decline in the SG&A ratio during the second half.

Shareholder Returns

Although the Q2 (interim) dividend was ¥0, dividend payments of ¥78.5B were recorded in the statement of cash flows, reflecting a structure premised on the payment of dividends for the full year. The full-year dividend forecast is ¥230, and the forecast total dividend based on the average number of shares outstanding during the period of 34,156 thousand shares is approximately ¥78.6B. The Payout Ratio relative to the full-year Net Income forecast of ¥82.0B is approximately 95.8% (calculated based solely on dividends), representing a high level. Based on first-half results, dividend payments of ¥78.5B exceeded Free Cash Flow of ¥41.4B, meaning that dividends could not be covered by FCF for the period alone. The high level of cash and deposits of ¥234.2B and low debt levels support short-term capacity for shareholder returns, but dividend sustainability will depend on the extent of recovery in core-business profit and Operating Cash Flow during the second half.

Risk Factors

1. Declining revenue and profit in the core business: The Cosmetics Business continued to record declines, with Revenue of ¥241.7B (down -5.0% YoY) and Operating Income of ¥53.6B (down -16.5%). Its profit margin also fell by -3.0pt to 22.2%. This is the largest factor weighing on consolidated performance, and any delay in the recovery of this business will directly affect the achievement of the full-year plan.

2. Deterioration in working capital efficiency: Accounts receivable were ¥106.9B and inventories were ¥72.1B, both of which are trending upward. Operating Cash Flow declined -22.7% YoY, while the OCF/EBITDA ratio of 0.61x indicates lower cash conversion efficiency. Changes in demand trends and collection terms should be closely monitored.

3. Delayed progress toward the full-year plan and high tax burden: Operating Income progress toward the full-year forecast was 39.8%, below the standard level, requiring Operating Income in the second half to increase +51.4% versus the first half. In addition, the effective tax rate was high at approximately 47.5%, placing pressure on the efficiency of converting Profit Before Tax into Net Income.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin both exceed the industry median, placing its profitability at a relatively high level within the industry.

Growth and Capital Efficiency

The Company’s Revenue growth rate is significantly below the industry median, placing it behind its industry peers in terms of growth.

※Source: Compiled by the Company

Key Takeaways from the Earnings Report

1. Core-business Operating Income declined -20.6% YoY, while Net Income increased +3.6%, supported by the ¥9.2B gain on the sale of fixed assets. The key point is that the increase in profit was not attributable to an improvement in the core business.

2. Progress toward the full-year Operating Income forecast of ¥114.0B was 39.8% in the first half, below the standard progress level of approximately 50%. A recovery in sales in the core Cosmetics Business and a decline in the SG&A ratio during the second half are prerequisites for achieving the plan.

3. The Payout Ratio was high at approximately 95.8% (based solely on dividends), and first-half dividend payments of ¥78.5B exceeded Free Cash Flow of ¥41.4B. The financial foundation of ¥234.2B in cash and deposits supports capacity for shareholder returns, but dividend sustainability will depend on the extent of recovery in core-business profit and Operating Cash Flow during the second half.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,712–¥1,802 at ±1% for the cost of equity, and ¥1,750–¥1,765 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥0.9 per share has been added back to profit (as a non-cash expense and to enhance comparability with IFRS companies).
• Net assets as of the quarter-end have been used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(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 and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. 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 with a professional as necessary.

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