Nippon Sheet Glass Company,Limited FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥420.75B
• Operating Income: ¥11.99B
• Net Income: ¥-3.36B
• EPS: ¥-55.29

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

Nippon Sheet Glass (NSG, 52020) reported FY2026 Q2 consolidated IFRS results showing resilient operating performance but weak bottom-line and cash generation. Revenue was 4,207.53, down 0.4% YoY, indicating stable topline despite a softer demand backdrop in architectural and automotive glass. Gross profit was 919.24 with a gross margin of 21.8%, reflecting improved cost pass-through and energy cost normalization versus FY2025 levels. Operating income increased 17.3% YoY to 119.95, implying an operating margin of approximately 2.9%, a notable improvement given flat sales. However, profit before tax was only 4.01, implying material non-operating losses of roughly 116 (including finance costs, FX, and other items) despite equity-method income of 28.88. The company recorded a net loss of -42.20 and a very high effective tax rate of 937.9%, suggesting non-deductible items, regional mix, and/or valuation allowances. Total comprehensive income was -105.78, pointing to sizable negative OCI, likely currency translation or fair value movements. DuPont analysis shows ROE of -3.1% driven by a -1.0% net margin, modest asset turnover of 0.413, and high financial leverage at 7.59x. The balance sheet remains stretched: total assets are 10,198.69, total liabilities 8,855.10, and equity 1,343.59, translating to an equity ratio of 10.4% and debt-to-equity of 6.59x. Operating cash flow was -24.25 and investing cash flow was -171.44 (including CapEx of -228.61), resulting in negative free cash flow of -195.69 under the provided definition (OCF + investing CF). Cash and equivalents were 421.81, providing a limited buffer relative to leverage and ongoing investment needs. Retained earnings are negative at -638.78, evidencing accumulated losses and balance sheet fragility despite capital surplus of 1,558.54. The OCF-to-net-income ratio of 0.57x indicates earnings quality pressures; while OCF is less negative than net income, cash generation remains weak. Key disclosure gaps include SG&A, interest expense, depreciation/amortization, current liabilities, and dividend information, which limit precision in margin and liquidity diagnostics. Overall, NSG shows improving operating profitability but is constrained by heavy leverage, negative FCF, and volatile non-operating/OCI items, keeping ROE negative and equity thin. Near-term outlook hinges on sustaining price/mix, stabilizing energy costs, lowering non-operating drag, and reining in capital intensity to restore positive FCF. Given data limitations, the assessment focuses on disclosed non-zero figures and derived ratios.

Profitability Analysis

ROE_decomposition: -3.1% ROE = (-1.0% net profit margin) x (0.413 asset turnover) x (7.59x financial leverage). The negative margin is the dominant driver of negative ROE, with leverage amplifying downside. margin_quality: Gross margin is 21.8% (919.24/4,207.53). Operating margin approximates 2.9% (119.95/4,207.53), up YoY given +17.3% operating income on slightly lower sales, implying improved price/mix and/or cost control. The sharp drop from operating income (119.95) to PBT (4.01) indicates substantial non-operating charges (≈ -116), overshadowing core improvements. Effective tax rate of 937.9% with a loss suggests non-recurring/non-deductible items and regional tax effects. operating_leverage: Despite flat revenue (-0.4% YoY), operating income rose +17.3% YoY, indicating positive operating leverage from cost actions and pricing. However, this leverage is not translating to bottom-line due to non-operating losses.

Growth Assessment

revenue_sustainability: Revenue of 4,207.53 was broadly stable YoY. Given industry dynamics (auto build rates normalization, architectural demand tied to construction/renovation), sustainability depends on maintaining price pass-through for energy and raw materials. profit_quality: Core profit quality is mixed: gross and operating margins improved, but the PBT collapse indicates earnings volatility outside operations (FX, interest, one-offs). Equity-method income of 28.88 partially offsets non-operating headwinds. outlook: Key to near-term earnings growth is reducing non-operating drag and normalizing the tax line, while sustaining cost pass-through. If operating trends persist and non-operating items subside, there is room for margin recovery; conversely, continued FX/interest burdens would cap earnings.

Financial Health

liquidity: Cash and equivalents are 421.81. Current assets are 3,070.46, but current liabilities are unreported; thus current and quick ratios are not calculable. The provided 'working capital' equals current assets and is not actual working capital due to missing current liabilities. solvency: Total liabilities are 8,855.10 vs equity of 1,343.59, implying an equity ratio of 10.4% and debt-to-equity of 6.59x. Financial leverage (assets/equity) is high at 7.59x, indicating thin solvency buffers. capital_structure: Retained earnings are negative at -638.78, offset by capital surplus of 1,558.54. Interest-bearing debt details are unreported, but leverage metrics suggest a debt-heavy structure that increases sensitivity to interest rates and refinancing conditions.

Cash Flow Quality

earnings_quality: Net income of -42.20 vs OCF of -24.25 yields an OCF/NI ratio of 0.57x (using absolute values), indicating OCF is less negative than earnings but still cash-consumptive. Large non-operating items and OCI volatility weigh on quality of earnings. FCF_analysis: Free cash flow (defined here as OCF + investing CF) is -195.69. CapEx was -228.61, exceeding OCF, highlighting high capital intensity. Sustained negative FCF will pressure liquidity unless offset by disposals or external financing. working_capital: Detailed working capital components are unavailable (AR/AP and current liabilities unreported). Negative OCF suggests either weaker cash earnings or working capital build; without sub-components, attribution is unclear.

Dividend Sustainability

payout_ratio_assessment: Dividend data are unreported; with net loss and negative retained earnings, the capacity for cash dividends appears constrained under a conservative capital policy. FCF_coverage: With FCF at -195.69, any dividend would not be covered by internal cash generation this period. policy_outlook: Given leverage and negative FCF, capital allocation is likely to prioritize balance sheet resilience and necessary CapEx over distributions until profitability and FCF normalize. Absence of reported DPS data limits definitive conclusions.

Risk Assessment

Business Risks:

• Energy and raw material cost volatility impacting glass melting and processing margins
• Demand cyclicality in automotive and construction end-markets
• Pricing power and pass-through effectiveness amid competitive pressures
• FX translation and transaction exposure given large overseas footprint
• Operational execution on productivity and yield improvements
• Project and ramp-up risks tied to high CapEx and modernization investments

Financial Risks:

• High leverage (equity ratio 10.4%, D/E 6.59x) increasing sensitivity to downturns
• Interest rate and refinancing risk amid negative FCF and thin cash buffers (421.81)
• Non-operating loss volatility (≈ -116 between operating and PBT)
• Potential covenant constraints given accumulated losses (retained earnings -638.78)
• Tax volatility evidenced by 937.9% effective tax rate

Key Concerns:

• Negative net income and total comprehensive loss despite improved operating margin
• Persistent negative FCF driven by CapEx and weak OCF
• Thin equity base and high financial leverage limiting shock absorption
• Limited visibility due to unreported SG&A, interest, and current liabilities

Investment Implications

Key Takeaways:

• Operating margin improved to about 2.9% with +17.3% YoY operating income on flat sales
• Large non-operating losses reduced PBT to 4.01, driving a net loss of -42.20
• Equity remains thin (equity ratio 10.4%) with leverage elevated (D/E 6.59x, leverage 7.59x)
• OCF (-24.25) and FCF (-195.69) were negative; CapEx (228.61) exceeded OCF
• Total comprehensive loss (-105.78) signals OCI headwinds, likely FX/valuation
• Accumulated deficits (retained earnings -638.78) constrain capital flexibility

Metrics to Watch:

• Non-operating items: net finance costs, FX gains/losses, and equity-method income trajectory
• Cash conversion: OCF versus operating income; working capital movements
• CapEx intensity and timing versus project returns; progress toward FCF breakeven
• Leverage and liquidity: net debt (when disclosed), interest coverage, refinancing profile
• Pricing/mix versus energy and raw material costs; sustainability of gross margin
• Tax normalization and any one-off items impacting effective tax rate

Relative Positioning: Within the global glass industry, NSG’s operating margin remains thin and more volatile than larger peers, with higher leverage and weaker FCF resilience; successful cost pass-through has improved core margins, but outsized non-operating headwinds and a thin equity base leave it comparatively more sensitive to macro and FX shocks.

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
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