NIHON NOHYAKU CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥47.71B
• Operating Income: ¥4.69B
• Net Income: ¥3.22B
• EPS: ¥43.09

Income Statement

Balance Sheet

Cash Flow Statement

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

Verdict: Strong rebound in profitability with robust revenue growth and exceptionally strong operating cash generation, though overall capital efficiency remains modest. Revenue rose 21.9% YoY to 477.1, driving operating income up 355.3% YoY to 46.87 and net income up 443.2% YoY to 33.72. Ordinary income surged 798.0% YoY to 46.61, indicating material improvement in core earnings despite largely offsetting non-operating items. Gross profit reached 169.17 (gross margin 35.5%), and operating margin stands at approximately 9.8%. Based on reported YoY growth and current figures, we estimate operating margin expanded by about 719 bps YoY (from ~2.6% to ~9.8%). Similarly, estimated ordinary margin expanded by roughly 843 bps YoY (from ~1.3% to ~9.8%), and net margin by about 548 bps YoY (from ~1.6% to ~7.1%). Operating cash flow was 157.32, equating to an OCF/NI of 4.67x, underscoring high earnings quality and favorable working capital conversion. Liquidity is strong with a current ratio of 259% and quick ratio of 197%, and leverage remains moderate with D/E at 0.78x. Interest coverage at 3.65x is adequate but below best-in-class thresholds, suggesting some sensitivity to interest rates. ROE is 4.1% and ROIC is 4.5%, both subdued versus typical cost of capital benchmarks, highlighting capital efficiency as a key area for improvement. Non-operating income and expenses largely net out (27.90 vs 28.16), though higher interest income (9.33) partially offsets interest expense (12.83). Inventory (266.73) and receivables (294.09) are sizable relative to sales, but OCF strength indicates healthy collection and inventory management in the quarter. With a calculated payout ratio of 53.5% and strong OCF, dividend capacity appears supported, though DPS details are unreported. Forward-looking, sustaining the improved margin profile and maintaining disciplined working capital will be critical to lift ROIC above 7–8% targets typical for high-quality chemical names. FX, raw material costs, and regulatory dynamics remain key external swing factors for agrochemicals.

Profitability Analysis

DuPont (ROE 4.1%) = Net Profit Margin (7.1%) × Asset Turnover (0.326) × Financial Leverage (1.78x). The largest driver of the YoY improvement is Net Profit Margin, as revenue grew +21.9% while net income grew +443.2%, implying substantial operating leverage and cost normalization. Business drivers likely include better mix/pricing, easing logistics/raw material costs, and scale over SG&A (SG&A is 25.6% of sales vs. an implied higher ratio last year). Asset turnover remains modest at 0.326, consistent with a working-capital-intensive model (high inventories and receivables). Financial leverage at 1.78x is moderate and not the main ROE driver. Sustainability: margin gains appear partly cyclical (input cost relief, FX) and partly structural (pricing/mix), with some risk of normalization if costs or FX reverse. Watch for SG&A growth relative to revenue; any re-acceleration of SG&A above revenue growth would pressure operating leverage.

Growth Assessment

Top-line growth of +21.9% YoY indicates solid demand recovery and/or pricing traction. Operating income growth of +355.3% YoY far outpaced sales, suggesting strong operating leverage and cost tailwinds. Ordinary income (+798.0%) and net income (+443.2%) further reflect margin expansion and disciplined costs. Current margins: gross 35.5%, operating ~9.8%, net 7.1%. Estimated YoY margin expansion: operating ~+719 bps, ordinary ~+843 bps, net ~+548 bps (derived from reported growth rates and current margins). Near-term outlook hinges on sustaining pricing/mix, stability in raw material and logistics costs, and FX; any re-tightening in input costs or yen appreciation could compress margins. The absence of segment disclosures limits visibility on sustainability by product/region. With ROIC at 4.5%, further gains in asset turns (inventory rotation, receivables collection) and steady margins are needed to approach a 7–8% ROIC target.

Financial Health

Liquidity is strong: Current Ratio 259.4% and Quick Ratio 196.9%, comfortably above benchmarks. No warning on liquidity (Current Ratio well > 1.0). Balance sheet leverage is moderate with D/E at 0.78x, below the 1.5x caution line. Interest-bearing debt is primarily loans (ST 59.92, LT 154.90), which are well covered by cash and deposits (316.17). Maturity mismatch risk appears low: current assets 1,106.70 vs current liabilities 426.61, and cash alone exceeds total short-term loans. Interest coverage is 3.65x—adequate but not strong—indicating some sensitivity to rate increases. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF/Net Income is 4.67x, indicating high-quality earnings with strong cash conversion—likely driven by favorable working capital movements alongside profitability. With OCF at 157.32 and capex at 4.80, a proxy FCF (OCF − Capex) is approximately 152.52, comfortably covering typical dividend needs and allowing for debt reduction or reinvestment. We do not detect signs of aggressive working capital manipulation given simultaneous profit and OCF strength; however, elevated inventories (266.73) and receivables (294.09) warrant continued monitoring for reversals. Investing CF details are unreported; large acquisitions or asset sales cannot be assessed from the given data.

Dividend Sustainability

The calculated payout ratio is 53.5%, within a generally sustainable range (<60%), though DPS details are unreported. On cash terms, proxy FCF of ~152.5 comfortably covers potential dividend requirements and routine capex, suggesting good coverage in FY2026 Q2. Balance sheet liquidity (cash 316.17) further underpins flexibility. Key watchpoints include the stability of OCF (tied to working capital) and input cost/FX dynamics that could affect margins and cash generation. Policy outlook cannot be assessed due to missing DPS history, but current cash generation supports ongoing distributions if policy is unchanged.

Risk Assessment

Business Risks:

• Raw material and logistics cost volatility affecting margins
• FX fluctuations impacting export pricing and imported inputs
• Regulatory changes and product registration risks in agrochemicals
• Weather-driven demand variability and crop cycle dependency
• Competitive pricing pressure in crop protection markets

Financial Risks:

• Interest rate risk with interest coverage at 3.65x
• Working capital intensity (large inventories and receivables) increasing cash flow volatility
• ROIC at 4.5% below typical cost of capital, risking value dilution if not improved
• Credit risk on sizable accounts receivable (294.09)

Key Concerns:

• Sustainability of margin expansion if input costs or FX reverse
• Capital efficiency below target levels despite profit rebound
• Limited visibility due to unreported investing CF and dividend details

Investment Implications

Key Takeaways:

• Significant profit rebound with estimated 700–850 bps margin expansion across key lines
• High-quality earnings evidenced by OCF/NI of 4.67x and strong proxy FCF
• Balance sheet is liquid and moderately leveraged, providing optionality
• Capital efficiency remains a constraint (ROE 4.1%, ROIC 4.5%), requiring further improvement
• Interest coverage is adequate but not robust; rate sensitivity remains

Metrics to Watch:

• Operating margin and gross margin trend vs raw material costs and FX
• Inventory and receivables turnover (days) and their impact on OCF
• Capex and any M&A outlays (Investing CF) affecting FCF and ROIC
• Interest coverage and effective tax rate stability
• Payout ratio and DPS policy updates

Relative Positioning: Within Japanese agrochemicals, the company shows a strong cyclical recovery in profitability and cash conversion, but still lags best-in-class peers on capital efficiency (ROIC/ROE). Strengthened liquidity and moderate leverage are positives, while sustaining current margins and improving asset turns are key to closing the performance gap.

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