Nitta Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥44.11B
• Operating Income: ¥2.58B
• Net Income: ¥5.89B
• EPS: ¥197.85

Income Statement

Balance Sheet

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

Nitta Co., Ltd. (5186) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥44.1bn (-0.5% YoY), gross profit of ¥11.94bn, operating income of ¥2.58bn (+0.7% YoY), ordinary income of ¥6.44bn, and net income of ¥5.48bn (-6.0% YoY). Gross margin held at 27.1%, while operating margin was 5.9%, indicating modest cost discipline amid slightly softer top-line conditions. The sharp step-up from operating to ordinary and net income suggests a sizable non-operating income contribution in the period, which bolstered bottom-line profitability. Net profit margin of 12.43% and an interest coverage of 83.2x highlight ample earnings headroom relative to debt service. The DuPont bridge indicates ROE of 3.51% (net margin 12.43% x asset turnover 0.242 x leverage 1.17), with ROE constrained by low asset turnover and conservative leverage. Balance sheet strength is notable: total assets ¥182.6bn vs. total equity ¥156.0bn and total liabilities ¥25.8bn, yielding a low debt-to-equity of 0.17x. Liquidity is robust, with current ratio 468% and quick ratio 381%, and working capital of ¥66.3bn. Inventory of ¥15.64bn (about 18.6% of current assets) appears manageable and does not signal stress on its own. EPS was ¥197.85 for the period, but dividend data were not disclosed (DPS shown as 0.00 indicates not reported). Cash flow statements are not disclosed in this dataset (OCF/FCF show as zero by convention), limiting cash conversion analysis. The effective tax rate in the summary table shows 0.0%, but income tax expense of ¥1.36bn vs. net income suggests a normal tax burden; therefore, the 0.0% should be interpreted as not provided. Overall, the period shows resilient operating profitability despite flat sales, supported by non-operating income, on top of a fortress-like balance sheet. ROE remains modest due to low asset turnover and limited leverage, characteristics typical of highly capitalized manufacturers with substantial liquid assets. Outlook hinges on normalization of non-operating items and stabilization of end-market demand across industrial segments. Data limitations (notably cash flow and dividend details) mean conclusions on earnings quality and payout capacity rely on balance sheet and income statement signals. The company’s financial risk is low, but dependence on non-operating gains to elevate bottom-line profitability is a key watch point.

Profitability Analysis

ROE decomposition indicates: net margin 12.43%, asset turnover 0.242x, and financial leverage 1.17x, yielding ROE of 3.51% for the period. Operating margin is 5.85% (¥2.58bn/¥44.11bn), substantially below the net margin, implying meaningful non-operating contributions (e.g., FX gains, investment securities income, or equity-method gains). Gross margin of 27.1% suggests stable pricing and cost control despite the slight revenue contraction. Ordinary margin is approximately 14.6% (¥6.44bn/¥44.11bn), reinforcing the role of non-operating income in earnings. Interest expense is minimal at ¥31m, consistent with very low financial leverage and underpinning a high interest coverage ratio of 83.2x. The slight YoY rise in operating income (+0.7%) against a minor revenue decline (-0.5%) implies positive operating leverage from mix/pricing and cost discipline. However, sustainability of bottom-line margin depends on recurring operating profitability rather than non-operating items.

Growth Assessment

Revenue declined modestly (-0.5% YoY to ¥44.11bn), indicating soft demand or cautious customer ordering in industrial end markets. Gross profit held at ¥11.94bn and operating income rose 0.7% YoY, reflecting disciplined cost management and potentially improved mix. Net income fell 6.0% YoY to ¥5.48bn, suggesting a less favorable non-operating environment versus the prior year or a normalization of one-off gains. The gap between operating and net income underscores reliance on non-operating profit to meet earnings targets in the period. Sustainability of revenue will hinge on demand trends in key applications (e.g., factory automation, automotive, electronics), pricing power, and FX. Profit quality would improve with a higher proportion of operating income in total profit; monitoring ordinary-to-operating income ratio will be important. Near-term outlook is cautiously stable: margins appear resilient, but absent growth catalysts, operating leverage may be limited if volumes remain flat. Continued cost control and selective price/mix improvements could support operating margins even in a flat revenue environment.

Financial Health

Liquidity is very strong: current ratio 468.2%, quick ratio 381.3%, and working capital of ¥66.27bn (¥84.26bn current assets minus ¥17.99bn current liabilities). Solvency is robust with total liabilities of ¥25.75bn versus total equity of ¥156.02bn (debt-to-equity 0.17x). The equity base provides a substantial buffer against cyclical downturns. While the reported equity ratio is shown as 0.0% in the data summary (indicating not disclosed), the balance sheet figures imply a high equity ratio. Interest expense is de minimis (¥31m), and interest coverage of 83.2x indicates minimal financial risk. Inventory stands at ¥15.64bn, a manageable portion of current assets, with no immediate sign of overstocking based on available data.

Cash Flow Quality

Operating, investing, and financing cash flows are not disclosed in this dataset (zeros indicate unreported), so OCF-to-net income and FCF cannot be evaluated directly. Earnings quality assessment must therefore rely on the income statement and balance sheet. The large spread between operating income (¥2.58bn) and net income (¥5.48bn) suggests non-operating items were a significant contributor; without OCF, it is not possible to confirm cash conversion. Working capital appears ample, which can support operations and buffer cash flow volatility; however, trends in receivables and payables are not available. In the absence of OCF, prudence suggests treating current-period net income as partially non-recurring until operating cash generation is verified.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed in this dataset (zeros indicate not reported). With EPS at ¥197.85 for the period and a very strong balance sheet (debt-to-equity 0.17x), capacity to sustain dividends appears supported by capital strength, but actual sustainability requires confirmation of operating cash flow and board policy. FCF coverage is not calculable given missing cash flows. Policy outlook cannot be inferred from the provided data; monitoring official guidance, historical payout trends, and upcoming cash flow disclosures will be key.

Risk Assessment

Business Risks:

• End-market cyclicality in industrial, automotive, and electronics demand affecting volumes and pricing
• Raw material price volatility (rubber and petrochemical inputs) impacting gross margins
• Foreign exchange fluctuations influencing both operating results and non-operating income
• Competitive pressures in belts, hoses, and industrial components leading to price/mix erosion
• Potential slowdown in China and other Asia markets affecting export and local sales
• Supply chain disruptions affecting lead times and inventory management

Financial Risks:

• Earnings reliance on non-operating income, increasing volatility in bottom-line results
• Limited visibility on cash generation due to undisclosed cash flow statements
• Potential pension/retirement benefit obligations (not disclosed here) that could affect equity and cash
• Interest rate and market risk on financial assets if non-operating income includes investment gains

Key Concerns:

• Sustainability of net income given large non-operating contribution relative to operating profit
• Low asset turnover constraining ROE despite healthy margins
• Lack of disclosed operating cash flow and dividend policy data hindering assessment of cash returns

Investment Implications

Key Takeaways:

• Stable operating performance: operating income +0.7% YoY on -0.5% revenue
• Gross margin resilient at 27.1%; operating margin 5.9%
• Bottom line supported by non-operating income; net margin 12.4%
• ROE 3.51% constrained by low asset turnover (0.242x) and conservative leverage (1.17x)
• Balance sheet exceptionally strong: debt-to-equity 0.17x, current ratio 468%
• Cash flow data not disclosed; earnings cash conversion unassessed
• Dividend data not disclosed; payout capacity appears supported by balance sheet but unverified without OCF

Metrics to Watch:

• Ordinary-to-operating income ratio to gauge dependence on non-operating gains
• Operating cash flow and free cash flow once disclosed
• Revenue trajectory by end market and geographies; pricing/mix vs. volume
• Gross and operating margin trends amid input cost and FX changes
• Inventory levels and turnover to assess demand-supply alignment
• ROE drivers: asset turnover improvement and capital allocation efficiency

Relative Positioning: Financially conservative, balance-sheet-strong industrial components manufacturer with resilient margins but modest ROE driven by low asset turnover and limited leverage; earnings quality would be stronger with a higher share of operating profit in total profitability.

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
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