Nitta Gelatin Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥18.50B
• Operating Income: ¥2.32B
• Net Income: ¥1.26B
• EPS: ¥121.88

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

Nitta Gelatin (4977) reported FY2026 Q2 consolidated results under JGAAP showing resilient profitability despite top-line softness. Revenue declined 6.3% YoY to ¥18.5bn, but operating income rose 9.2% YoY to ¥2.32bn, indicating strong margin execution. Net income surged 170% YoY to ¥2.21bn, aided by improved operating efficiency and limited non-operating drag. Gross margin was 28.0% and operating margin 12.6%, both healthy for a materials/ingredients business and indicative of effective cost control and pricing/mix. EBITDA was ¥2.91bn (15.7% margin), providing ample coverage for interest expense (36.3x), underscoring low financial risk from leverage. DuPont analysis shows ROE of 8.09%, driven by an 11.97% net margin, asset turnover of 0.437x, and moderate financial leverage of 1.55x. Balance sheet strength is notable, with current ratio of 281% and quick ratio of 206%; working capital of ¥16.0bn provides operational flexibility. Based on reported assets of ¥42.3bn and equity of ¥27.4bn, the computed equity ratio is about 64.7%, though the disclosed equity ratio item is unreported in the dataset. Operating cash flow of ¥2.58bn exceeds net income (OCF/NI 1.16x), pointing to solid earnings quality. Investing cash flow was not disclosed, so free cash flow cannot be reliably derived from reported figures; the provided FCF of zero should be treated as a placeholder. Financing cash flow was an outflow of ¥1.13bn, consistent with deleveraging or shareholder returns, though detailed breakdowns are not provided. Despite revenue contraction, the company demonstrated operating leverage in reverse—protecting profit through cost discipline and mix optimization. The improvement in ordinary income to ¥2.39bn suggests non-operating items were manageable, with limited interest burden. Liquidity and solvency metrics suggest ample headroom to withstand raw material or FX volatility typical in gelatin/collagen supply chains. Dividend metrics are not disclosed (DPS and payout shown as zero should be treated as unreported), so dividend policy cannot be assessed directly; however, current profitability and OCF indicate capacity for distributions if targeted by management. Overall, the quarter reflects margin-led profit resilience, a strong balance sheet, and good cash conversion, with the key variable remaining the sustainability of revenue in a softer demand environment.

Profitability Analysis

ROE_decomposition: ROE 8.09% = Net margin 11.97% × Asset turnover 0.437 × Financial leverage 1.55. ROE is primarily margin-driven, with modest asset efficiency and conservative leverage. margin_quality: Gross margin 28.0% and operating margin 12.6% (¥2,324m/¥18,499m) indicate effective cost pass-through and/or favorable product mix. EBITDA margin 15.7% corroborates healthy underlying economics. Net margin at 11.97% benefited from manageable non-operating items. operating_leverage: Despite a 6.3% YoY revenue decline, operating income increased 9.2% YoY, implying strong cost flex and disciplined SG&A. D&A of ¥583m (about 19.9% of operating income) indicates a moderately capital-intensive base, but current margin gains stem more from operating efficiency than depreciation relief.

Growth Assessment

revenue_sustainability: Top line decreased to ¥18.5bn (-6.3% YoY). This suggests volume softness and/or pricing headwinds in select end markets. Asset turnover at 0.437x is stable but not expanding, pointing to limited near-term scale gains. profit_quality: Operating income grew to ¥2.32bn (+9.2% YoY) on improved margins, indicating mix improvement and cost control. Interest burden is low (36.3x coverage), supporting clean translation from operating to net income. outlook: With revenue under pressure, sustaining current margin levels is key. If input cost normalization and mix benefits persist, profits can remain resilient; however, any rebound in raw material costs or demand softness could compress margins. FX and international demand trends are typical swing factors for this business.

Financial Health

liquidity: Current ratio 281.1% and quick ratio 205.5% reflect strong short-term liquidity. Working capital of ¥16,008m provides ample buffer against inventory and receivable cycles. solvency: Debt-to-equity 0.55x suggests moderate leverage. Interest coverage of 36.3x indicates low refinancing risk and strong service capacity. capital_structure: Total assets ¥42,313m against equity ¥27,377m implies an equity ratio of approximately 64.7% (computed), consistent with a solid capital base. Financial leverage at 1.55x (assets/equity) is conservative.

Cash Flow Quality

earnings_quality: OCF/Net income at 1.16x (¥2,575m/¥2,214m) indicates that earnings are backed by cash generation, with limited working-capital drag in the period. FCF_analysis: Investing cash flow was not disclosed; therefore, free cash flow cannot be reliably calculated from this dataset (the provided FCF of zero is a placeholder). D&A of ¥583m suggests recurring maintenance capex requirements; absent capex data, FCF is uncertain. working_capital: Inventories at ¥6,684m within current assets of ¥24,845m and current liabilities of ¥8,837m indicate a comfortable liquidity cushion. The increase in OCF versus NI suggests working-capital management contributed positively or at least did not detract materially this quarter.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed in the dataset (zeros are placeholders). Based on profitability, the company appears capable of distributions, but explicit payout cannot be inferred. FCF_coverage: Given unreported investing cash flows, FCF coverage of dividends cannot be assessed. OCF of ¥2,575m provides capacity, but capex needs are unknown. policy_outlook: Without disclosed DPS/payout policy, outlook is indeterminate. With moderate leverage, strong liquidity, and solid OCF, the balance sheet could support dividends if aligned with management priorities for growth investments.

Risk Assessment

Business Risks:

• Demand volatility in food, pharmaceutical, and health/nutrition end markets impacting gelatin/collagen volumes
• Raw material price fluctuations (e.g., hide/skin sourcing) affecting gross margins
• Foreign exchange movements influencing both revenues and input costs
• Customer concentration risk in specialty ingredient contracts
• Regulatory and quality compliance requirements in pharma/food applications

Financial Risks:

• Potential capex needs to maintain quality and capacity without disclosed investing cash flows
• Inventory valuation and working capital swings affecting cash conversion
• Exposure to interest rate changes on any floating-rate debt, albeit mitigated by strong coverage
• Currency translation impacts on balance sheet and earnings

Key Concerns:

• Top-line contraction (-6.3% YoY) raises questions about demand momentum
• Sustainability of margin gains if input costs normalize upward
• Limited visibility on capex and FCF due to unreported investing cash flows

Investment Implications

Key Takeaways:

• Profit resilience with operating income up 9.2% YoY despite a 6.3% revenue decline
• Healthy margins: gross 28.0%, operating 12.6%, EBITDA 15.7%
• Strong liquidity and solvency: current ratio 281%, D/E 0.55x, interest coverage 36.3x
• ROE of 8.09% driven mainly by margin rather than leverage
• OCF exceeds net income (1.16x), indicating solid earnings quality
• Visibility gap on FCF and dividends due to unreported investing cash flows and DPS

Metrics to Watch:

• Revenue trajectory and order trends to gauge recovery from -6.3% YoY decline
• Gross and operating margin sustainability amid raw material and FX moves
• Capex disclosures and investing cash flows to refine FCF assessment
• Working-capital intensity (inventory and receivable turns) and OCF/NI ratio
• Leverage trends (D/E) and interest coverage as rates and financing conditions evolve

Relative Positioning: Within specialty ingredients/materials, the company exhibits above-average balance sheet strength and cash conversion with margin-led profitability, though near-term revenue softness tempers top-line momentum.

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