NIHON NOHYAKU CO.,LTD. FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, Revenue was ¥1118.2B (YoY +¥118.5B, +11.9%), Operating Income was ¥108.8B (YoY +¥23.0B, +26.8%), Ordinary Income was ¥105.3B (YoY +¥34.4B, +48.6%), and Net Income attributable to owners of the parent was ¥46.2B (YoY +¥73.5B, +269.1%), delivering substantial profit growth. Revenue growth, marking the third consecutive year of increase, was driven by double-digit growth in the Agrochemical Business. Operating margin improved to 9.7% (up +1.1pt from 8.6% a year earlier). Gross margin rose to 34.0% (up +0.8pt from 33.2%), and SG&A ratio improved to 24.3% (down -0.4pt from 24.7%), lifting profitability. The large swing to net profit was due to reversal from the prior-year loss (special losses of ¥46.7B recorded) and higher profits at the ordinary-income level.

Drivers of Performance

[Revenue] The Agrochemical Business recorded Revenue of ¥1054.7B (+11.5%), representing 94.3% of total sales, and led the double-digit growth. The Non-Agrochemical Chemical Products Business posted ¥41.7B (+18.6%) showing high growth, and Other Businesses reported ¥29.2B (+11.9%) and remained solid. The company-wide +11.9% increase was mainly attributable to price revisions taking hold and expanded sales volumes. Regional breakdowns were not disclosed, but market penetration of core agrochemical products is inferred.

[Profitability] Gross profit increased by ¥47.8B to ¥380.6B (gross margin 34.0%, +0.8pt). SG&A was ¥271.8B (SG&A ratio 24.3%), up ¥25.3B, but sales growth absorbed cost increases and Operating Income expanded to ¥108.8B (+26.8%). Non-operating income included interest income of ¥21.7B and equity-method investment income of ¥8.4B as positives, while interest expense of ¥29.0B (prior year ¥26.5B) and foreign exchange losses of ¥29.4B (same amount recorded in the prior year) were headwinds. Netting non-operating income ¥50.7B against non-operating expenses ¥54.2B produced a net non-operating loss, and Ordinary Income reached ¥105.3B (+48.6%). Extraordinary items included special losses of ¥12.5B (including litigation settlement of ¥10.7B), substantially lower than the prior year's special losses of ¥46.7B (including impairment losses of ¥23.3B). After income taxes of ¥25.9B and adjustments for non-controlling interests of -¥3.5B, Net Income was ¥46.2B, reversing from a prior-year loss of ¥27.3B. In conclusion, the performance reflects a structure of revenue and profit growth driven by price revisions and cost efficiency.

Segment Analysis

The Agrochemical Business recorded Revenue of ¥1054.7B (+11.5%) and Operating Income of ¥106.7B (+22.2%), achieving an operating margin of 10.1%. The Non-Agrochemical Chemical Products Business had Revenue of ¥41.7B (+18.6%) and Operating Income of ¥7.7B (+61.6%), with a high operating margin of 18.4%. Other Businesses reported Revenue of ¥29.2B (+11.9%) and Operating Income of ¥4.3B (+35.3%), with a margin of 14.7%. Corporate-level expenses allocated to the group were -¥9.9B (prior year -¥9.5B). Improvement in the Agrochemical Business margin (from 9.2% last year, +0.9pt) together with higher margins in the Chemical Products Business (from 11.9% last year, +6.5pt) were the twin drivers of company-wide profitability improvement.

Key Financial Metrics

[Profitability] Operating margin improved to 9.7% (up +1.1pt from 8.6%), ROE turned positive to 5.3% (from -3.4%), and ROA (on an ordinary income basis) improved to 6.9% (from 4.6%, +2.3pt). Gross margin was 34.0% and SG&A ratio 24.3%, indicating improved operating efficiency. [Cash Quality] Operating Cash Flow (OCF) was ¥45.3B, roughly 0.98x of Net Income ¥46.2B, but down -56.5% from ¥104.1B in the prior year. The decrease was driven by build-up of inventories (-¥11.0B) and reduction in trade payables (-¥35.3B), with working capital increases pressuring OCF. OCF before working capital changes was ¥80.2B (down from ¥122.8B a year earlier); interest and dividend receipts of ¥23.0B and corporate tax payments of ¥28.9B were major items. [Investment Efficiency] Capital expenditures were ¥12.4B and depreciation ¥24.2B, yielding a CapEx/Depreciation ratio of 0.51x, indicating restrained investment. Investment securities were ¥113.2B, slightly down from ¥118.8B. [Financial Soundness] Equity Ratio was 56.2% (up +5.4pt from 50.8%), Current Ratio 263.8%, and Debt/EBITDA 1.69x, reflecting solid financial stability. Interest-bearing debt totaled ¥322.4B comprising short-term borrowings ¥102.1B, long-term borrowings ¥122.8B, corporate bonds ¥59.2B, and bonds maturing within one year ¥38.3B. Interest coverage, calculated as Operating Income ÷ Interest Expense, was 3.8x (Interest Expense ¥29.0B).

Cash Flow Analysis

OCF was ¥45.3B, down -56.5% from ¥104.1B a year earlier. The decline was due to increased working capital: inventories increased by ¥11.0B (versus a decrease of ¥29.4B in the prior year) and trade payables decreased by ¥35.3B (versus an increase of ¥20.8B in the prior year). Accounts receivable decreased by ¥13.4B (versus an increase of ¥22.5B prior year) but contributed only limited cash benefit. Investing Cash Flow was -¥18.5B, with CapEx of -¥12.4B (prior year -¥23.0B) and intangible asset acquisitions -¥4.4B as main outflows. Free Cash Flow (OCF + Investing CF) was ¥26.8B, down -73.6% from ¥101.5B. Financing Cash Flow was -¥77.8B, including principal repayments of long-term borrowings -¥59.2B, bond redemptions -¥42.8B, and dividend payments -¥18.9B, while financing included long-term borrowing proceeds of ¥27.1B and bond issuances of ¥42.8B. Cash and deposits were ¥202.5B, down ¥30.8B from ¥233.3B, and after foreign exchange translation adjustments of ¥12.2B the ending balance was ¥188.4B.

Quality of Earnings

Of Ordinary Income ¥105.3B, Operating Income ¥108.8B is from core operations. Non-operating income totaled ¥50.7B (including interest income ¥21.7B, equity-method investment income ¥8.4B, and foreign exchange gains ¥7.8B), offset by non-operating expenses of ¥54.2B (including interest expense ¥29.0B and foreign exchange losses ¥29.4B), resulting in a net non-operating burden of -¥3.5B. Both foreign exchange gains ¥7.8B and losses ¥29.4B were recorded, showing FX volatility impact on P&L. Extraordinary items included special losses of ¥12.5B (including litigation settlement of ¥10.7B), which are smaller than the prior-year impairment losses of ¥23.3B. Comprehensive income was ¥94.5B, exceeding Net Income ¥46.2B by ¥48.3B; other comprehensive income ¥25.7B consisted of foreign currency translation adjustments ¥16.2B, valuation difference on available-for-sale securities ¥5.7B, and OCI attributable to equity-method affiliates ¥6.1B. OCF being below the operating subtotal of ¥80.2B is attributable to working capital increases; from an accrual accounting perspective, increases in inventory and receivables are delaying cash realization of profits.

Forecasts / Guidance

Full Year (FY) guidance is Revenue ¥1160.0B (+3.7%), Operating Income ¥115.0B (+5.7%), Ordinary Income ¥110.0B (+4.5%), and Net Income ¥74.0B. Achievement ratios for the period are: Revenue 96.4%, Operating Income 94.6%, Ordinary Income 95.7%, and Net Income 62.4%. Operating-level progress is broadly on track, but Net Income progress lags due to the booking of special losses of ¥12.5B and adjustments for non-controlling interests. Forecast EPS is ¥94.50, with this period EPS ¥92.32 (achievement ratio 97.7%). Dividend guidance was ¥14.00 (interim ¥12 + year-end ¥2), but actual dividends are expected to be ¥36 (interim ¥12 + year-end ¥24), a significant upside. Compared with guidance, interest burden and foreign exchange losses slightly exceeded assumptions, possibly leaving Ordinary Income achievement slightly below target.

Shareholder Returns

Dividends were interim ¥12 and year-end ¥24, totaling ¥36, an increase of ¥26 from the prior-year dividend of ¥10. Payout Ratio is 73.2% (Dividend payments ¥18.9B ÷ Net Income ¥46.2B × adjustment for shares outstanding) which is high, but dividend coverage relative to Free Cash Flow (¥26.8B) is 1.42x, within a sustainable range. No share buybacks were implemented; total returns consist solely of dividends. The payout ratio of 73.2% is high relative to historical levels, and future dividend policy will depend on stabilization of Net Income and improvement of Operating Cash Flow.

Risk Factors

1. Working Capital Increase Risk: Inventories rose to ¥286.3B (up +25.4% from ¥228.3B), lengthening estimated Days Inventory Outstanding (DIO) to 202 days. Accounts receivable are high at ¥470.5B, with estimated Days Sales Outstanding (DSO) of 154 days and an estimated Cash Conversion Cycle (CCC) around 257 days. Improving working capital efficiency is key to OCF recovery.

2. Interest Burden Risk: Interest-bearing debt ¥322.4B with interest expense ¥29.0B implies an estimated average funding rate of 9.0%, and interest coverage of 3.8x is below the 5x threshold. Short-term borrowings ¥102.1B and bonds maturing within one year ¥38.3B total ¥140.4B, representing 31.6% of current liabilities ¥444.7B; short-term funding ratio of 45% requires maturity-mismatch management.

3. Segment Concentration Risk: The Agrochemical Business accounts for 94.3% of Revenue and 89.8% of Operating Income, indicating high business concentration; price competition and regulatory changes in the agrochemical market would directly affect performance. The Chemical Products Business shows high margin (18.4%) but limited revenue share (3.7%), implying room for portfolio diversification.

Industry Benchmark (for reference — company estimates)

Profitability & Returns

Operating margin is +2.0pt above the industry median, indicating strong profitability, but net profit margin is -1.1pt below the median due to non-operating expense burdens.

Growth & Capital Efficiency

Revenue growth exceeds the industry median by +8.2pt, driven by market penetration of core agrochemical products and price revisions.

※ Source: Company compilation

Key Points from the Financial Results

1. Price revisions and cost efficiency lifted gross margin +0.8pt and operating margin +1.1pt, showing an improvement trend at the operating level. ROE of 5.3% returned to positive after a prior-year loss, but remains below double digits; improving working capital efficiency through normalization of inventory and receivables will be the next growth driver.

2. OCF fell -56.5% YoY and OCF/Net Income was 0.98x, so while cash conversion appears reasonable on the surface, the magnitude of decline from the prior year is large. The main drivers were inventory +25.4% and trade payables -¥35.3B. Prolonged DIO, DSO, and CCC indicate working capital expansion; inventory optimization and stronger receivables collection are focal points for OCF recovery. Financial soundness is solid with Equity Ratio 56.2% and Debt/EBITDA 1.69x, but short-term funding ratio 45% and interest coverage 3.8x suggest mid-term challenges of maturity mismatch management and interest burden reduction.

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This report is an earnings analysis automatically generated by AI based on XBRL financial statement data. It is not a recommendation to invest in any specific securities. Industry benchmarks are the company’s compilation based on publicly disclosed financial statements and are for reference only. Investment decisions are your responsibility; please consult a professional advisor as necessary.