Noevir Holdings Co.,Ltd. FY2026 Q3 Earnings Report

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Executive Summary

The cumulative results through Q3 showed a decline in both revenue and profit, with the slowdown in the core Cosmetics Business and an increase in the SG&A expense ratio putting pressure on profitability. Revenue was ¥460.8B (-2.6% YoY), Operating Income was ¥69.0B (-13.9%), and Ordinary Income was ¥72.9B (-13.4%). Consolidated Net Income remained nearly flat at ¥43.0B (+0.8%), but it should be noted that this differs in both level and direction of change from Net Income attributable to owners of the parent of ¥40.9B (-0.8%). The primary reason for the decline in profit was the increase in the SG&A expense ratio (53.1%, +2.2pt), which exceeded the improvement in the gross profit margin (68.1%, +0.3pt). Extraordinary gains, including a ¥9.2B gain on the sale of fixed assets, supported final profit.

Factors Affecting Performance

【Revenue】Revenue of ¥460.8B (-2.6% YoY) primarily reflected declines in both core segments: the Cosmetics Business (79.1% of revenue) declined -2.6%, while the Pharmaceuticals and Food Business declined -4.4%. The Other Businesses grew +10.3%, but their impact on the Company as a whole was limited due to their small scale (4.1% of revenue).

【Profit and Loss】Although the gross profit margin improved to 68.1% (from 67.8% in the previous year, +0.3pt), reflecting an improvement in product mix, the SG&A expense ratio rose to 53.1% (from 50.9% in the previous year, +2.2pt), offsetting this improvement. As a result, the Operating Income margin declined to 15.0% (from 16.94% in the previous year, -1.9pt), and Operating Income was ¥69.0B (-13.9%). Ordinary Income was ¥72.9B (-13.4%), supported by ¥3.9B in non-operating income (including a ¥1.0B foreign exchange gain and ¥0.4B in dividends received). In extraordinary gains and losses, a ¥9.2B gain on the sale of fixed assets was recorded as a temporary factor. Together with a ¥1.2B impairment loss on land in the Pharmaceuticals and Food Business, this contributed positively on a net basis and lifted Profit Before Tax to ¥79.3B (-7.0%). The effective tax rate improved to 45.7% (from 49.9% in the previous year), and the reduction in the tax burden supported final profit. Consequently, consolidated Net Income was nearly flat at ¥43.0B (+0.8%). As this was not a period of revenue growth, the overall conclusion is a decline in both revenue and profit.

Segment Analysis

The Cosmetics Business generated revenue of ¥364.2B (-2.6%) and Operating Income of ¥80.8B (-9.9%), with a profit margin of 22.2%. It remains the core contributor to Company-wide profit, but its revenue growth trend has ended and it has shifted to a decline in profit. The Pharmaceuticals and Food Business generated revenue of ¥80.0B (-4.4%) and Operating Income of ¥5.6B (-24.7%), with a profit margin of 7.0%; it recorded the largest decline in profit, and a ¥1.2B impairment loss on land scheduled for sale was also recorded in Q3. The Other Businesses were the only segment to achieve both revenue and profit growth, generating revenue of ¥18.7B (+10.3%) and Operating Income of ¥1.6B (+13.1%), although their scale is small. Company-wide unallocated expenses increased to ¥19.1B (¥18.5B in the previous year), confirming an imbalance in profitability across the portfolio together with the disparity in segment profit margins (22.2% for Cosmetics versus 7.0% for Pharmaceuticals and Food).

Key Financial Indicators

【Profitability】The Operating Income margin was 15.0%, down from 16.94% in the previous year, as the increase in the SG&A expense ratio to 53.1% (+2.2pt) outweighed the improvement in the gross profit margin to 68.1% (+0.3pt). ROE was 8.4% (based on consolidated Net Income), and although the effective tax rate improved to 45.7% from 49.9% in the previous year, it remains at a relatively high level.【Cash Flow Quality】Cash and deposits were ¥142.3B, a decline of ¥127.0B year on year, while inventories increased to ¥80.7B (+¥20.9B YoY, +35.0%). Accordingly, attention should be paid to working capital in assessing the linkage between earnings and cash generation.【Investment Efficiency】Total assets were ¥735.0B (down from ¥764.9B in the previous year), and the Total Asset Turnover Ratio is on a declining trend, suggesting that the increase in inventories may be weighing on asset efficiency.【Financial Soundness】The Equity Ratio remained high at 70.1%, while Current Liabilities stood at only ¥96.2B against Current Assets of ¥462.1B, indicating a conservative and stable financial foundation.

Cash Flow Analysis

As data from the statement of cash flows has not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits declined to ¥142.3B, down ¥127.0B year on year (-47.2%), while investment securities increased to ¥39.7B (+¥11.0B YoY, +38.5%) and current securities increased to ¥99.5B, suggesting a shift of funds from cash and deposits to securities. At the same time, inventories increased to ¥80.7B (+¥20.9B YoY, +35.0%), indicating that the expansion of working capital may have contributed to funds being tied up. Accounts receivable and notes receivable declined by ¥26.3B year on year to ¥94.8B, which appears to have had a positive effect on cash efficiency. Taking into account the ¥9.2B gain on the sale of fixed assets, the current period can be characterized as one in which a review of the asset composition and an increase in inventories progressed simultaneously.

Quality of Earnings

Recurring earnings for the current period were centered on Revenue and Operating Income, while non-operating income of ¥3.9B (including a ¥1.0B foreign exchange gain, ¥0.4B in dividends received, and ¥1.1B in interest received) and an extraordinary gain of ¥9.2B (gain on the sale of fixed assets) supported final profit. Accordingly, the difference between Ordinary Income and Net Income includes the contribution of temporary factors. On the extraordinary loss side, a ¥1.2B impairment loss on land related to the Pharmaceuticals and Food Business was recorded, resulting in a net gain from extraordinary gains and losses. Comprehensive Income was ¥53.9B (+29.4% from ¥41.7B in the previous year), and there was a ¥10.2B difference from Net Income attributable to owners of the parent of ¥40.9B. The primary factors were valuation differences on securities of ¥7.5B and foreign currency translation adjustments of ¥3.4B. This difference resulted from changes in the fair value of securities held and translation differences at overseas subsidiaries, and it should be noted that it does not directly indicate the underlying earning power of the core business.

Earnings Forecast and Guidance

The full-year earnings forecast is Revenue of ¥650.0B (+0.4% YoY), Operating Income of ¥114.0B (+2.9%), Ordinary Income of ¥118.0B (+0.2%), and EPS of ¥240.07, with no revisions to the forecast during the period. Cumulative progress rates are 70.9% for Revenue, 60.5% for Operating Income, 61.8% for Ordinary Income, and 49.9% for Net Income (on a basis attributable to owners of the parent), all below the 75% benchmark for the nine-month point. Progress is particularly delayed on the profit side, making the trend in SG&A expenses in Q4 and improvement in the profitability of the Pharmaceuticals and Food Business the key factors in achieving the full-year plan.

Shareholder Returns

The full-year dividend forecast is ¥230, resulting in a Payout Ratio of approximately 95.8% against the full-year EPS forecast of ¥240.07. The interim dividend (end of Q2) was ¥0, and the Company has adopted a policy of paying a single year-end dividend. The estimated annual dividend amount is approximately ¥78.6B (¥230 × 34,157 thousand issued shares), and execution feasibility from a funding perspective is secured when compared with cash and deposits of ¥142.3B at the end of the period. However, given the high Payout Ratio, the impact of future earnings fluctuations and changes in working capital on dividend sustainability warrants monitoring. No share repurchases have been confirmed.

Risk Factors

1. Segment concentration risk: The Cosmetics Business accounts for 79.1% of Revenue (¥364.2B/¥460.8B) and generates the majority of Operating Income. This structure makes Company-wide earnings highly susceptible to changes in demand for this business.

2. Deterioration in working capital: Inventories increased +35.0% year on year to ¥80.7B, while Revenue declined -2.6%, creating a divergence between inventory growth and revenue growth. If inventory optimization does not progress, this could lead to inventory write-downs and lower cash efficiency.

3. Structural change in profitability: The SG&A expense ratio rose +2.2pt year on year to 53.1%, offsetting the improvement in the gross profit margin and reducing the Operating Income margin. This suggests that SG&A expenses, which have a high fixed-cost component, are not being fully absorbed during a period of declining revenue.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Return

The Company's profitability is substantially above the industry median for both the Operating Income margin and Net Profit margin, placing it at a high level within the manufacturing sector.

Growth and Capital Efficiency

The Revenue growth rate is below the industry median, and the slowdown is relatively pronounced compared with other companies in the same industry that are on a revenue growth trajectory.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Although the gross profit margin improved to 68.1%, the Operating Income margin declined to 15.0% due to the increase in the SG&A expense ratio (+2.2pt). The rigidity of the cost structure during a period of declining revenue will be a key point when assessing the future trend in profitability.

2. Inventories increased substantially by +35.0% year on year, moving in contrast to the decline in Revenue. Future trends in inventory levels will be an important item to monitor when evaluating cash generation capacity and asset efficiency.

3. Full-year progress rates remain around 60% on the profit side, and the gap from the standard progress benchmark of 75% will serve as a reference point for assessing Q4 performance. The Payout Ratio is high at approximately 95.8%, making consistency with earnings progress another item requiring ongoing monitoring.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,758–¥1,850 at Cost of Equity ±1%, and ¥1,797–¥1,812 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not forecast or guarantee the future share price)

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This report is a financial results analysis document automatically generated by AI based on XBRL financial results summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available financial results data. Investment decisions should be made at your own responsibility, after consulting a professional as necessary.

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