Nihon Yamamura Glass Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥36.66B
• Operating Income: ¥2.57B
• Net Income: ¥2.64B
• EPS: ¥258.43

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

FY2026 Q2 was solid operationally with margin-driven profit growth despite a slight revenue decline. Revenue fell 2.9% YoY to 366.65, but operating income rose 6.9% YoY to 25.72 as cost controls and price/mix improvements enhanced profitability. Gross profit of 81.33 implies a 22.2% gross margin, while the operating margin improved to 7.0%. Ordinary income increased 12.5% YoY to 30.57, aided by a positive non-operating balance of 4.85 (non-op income 9.76 minus non-op expenses 4.91). Net income advanced 25.8% YoY to 26.41, lifting net margin to 7.2%. Operating margin expanded by roughly 65 bps YoY (from ~6.37% to ~7.02%), offsetting topline softness. SG&A discipline remained evident with an SG&A ratio of 15.2%, supporting operating leverage. Earnings quality was acceptable with OCF of 23.28 at 0.88x net income, slightly below the ideal >1.0x but not concerning under our >0.8 threshold. Balance sheet strength underpinned flexibility: current ratio 198.7%, quick ratio 164.7%, D/E 0.72x, and interest coverage 16.9x. However, capital efficiency remains weak: ROE is 4.8% and ROIC 3.2%, below typical cost of capital and our 5% warning line. Non-operating contributions were meaningful (net +4.85), lifting ordinary income by roughly 19% versus operating income, which introduces some variability risk. Cash generation covered capex, with implied FCF (OCF − capex) around 5.8, but leaves limited buffer for growth investment and dividends simultaneously. The reported payout ratio is 57%, broadly in a sustainable range, though FCF coverage may be tight if capex remains elevated. Overall, the quarter reflects improving margin execution and robust liquidity, but persistent challenges in asset efficiency and structurally low ROIC. Forward-looking, sustaining margin gains will hinge on energy/raw material cost trends and pricing discipline, while ROIC improvement requires either higher asset turnover or portfolio/asset base optimization.

Profitability Analysis

Decomposing ROE via DuPont: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 7.2% × 0.389 × 1.72 ≈ 4.8%. The dominant constraint on ROE is modest asset turnover (0.389), characteristic of capital-intensive glass manufacturing. Net margin improved to 7.2% aided by better operating margin (~7.0%) and a positive non-operating balance (+4.85), partially offset by an 18.0% effective tax rate. Financial leverage at 1.72x is moderate and not the main driver. The most notable change this quarter was operating margin expansion of about 65 bps YoY, reflecting cost efficiencies and price/mix. Business drivers likely include lower energy/input cost pressure versus the prior year and pass-through/pricing effectiveness, with SG&A containment supporting leverage. Sustainability: pricing/mix improvements can persist if customer contracts hold, but non-operating gains (e.g., dividend/interest and other items) are less predictable. Watch for any reversal if energy prices rise or competitive pricing intensifies. A potential concern is dependence on non-operating contributions (net non-op equals ~19% of operating income), and ROIC at 3.2% signals returns below cost of capital despite margin gains.

Growth Assessment

Topline contracted 2.9% YoY to 366.65, indicating softer volume or product mix shifts despite pricing actions. Operating income rose 6.9% YoY to 25.72, implying margin-led growth rather than volume expansion. Ordinary income grew faster at 12.5% YoY to 30.57 on higher net non-operating income. Net income surged 25.8% YoY to 26.41, helped by operating leverage and a relatively low effective tax rate (18%). EBITDA of 43.75 places EBITDA margin at 11.9%; together with higher operating margin, this suggests improving cost absorption. Growth sustainability depends on maintaining price/cost spread (energy, soda ash, cullet) and retaining share versus alternative packaging (PET/cans). With ROIC at 3.2%, incremental growth should be calibrated to projects exceeding the cost of capital; otherwise, growth risks diluting value. Near-term outlook: stable to modestly improving profit if energy remains benign and price discipline holds; topline recovery requires volume stabilization in beverages/food and potential new applications. Non-operating income volatility is a swing factor to ordinary income growth.

Financial Health

Liquidity is strong: current ratio 198.7% and quick ratio 164.7%, comfortably above benchmarks; no warning on current ratio. Working capital stands at 200.81, with cash and deposits of 89.57 and receivables of 215.98 supporting near-term obligations. Short-term loans are 64.66 versus cash of 89.57, indicating low maturity mismatch risk; current liabilities of 203.38 are well covered by current assets of 404.19. Solvency is sound: total equity 547.45 over total assets 941.43 implies an equity ratio of ~58.2%. Debt-to-equity is 0.72x, well within conservative thresholds, and interest coverage is strong at 16.9x, indicating ample headroom. Long-term loans of 143.30 vs noncurrent assets of 537.23 suggest prudent long-term funding of fixed assets. No off-balance sheet obligations were reported in the provided data. Overall capital structure is healthy, leaving capacity to navigate cyclical swings.

Cash Flow Quality

OCF of 23.28 is 0.88x net income (26.41), slightly below the >1.0x ideal but above the 0.8x caution threshold; no immediate quality flag. Implied free cash flow (OCF − capex) is approximately 5.77, indicating capex absorption of 17.51 this period; note FCF was not formally reported, so this is an analytical estimate. Cash conversion appears primarily influenced by working capital timing (receivables/inventories vs payables), though detailed sub-movements were not disclosed. Interest expense of 1.52 is well covered by EBIT/EBITDA, supporting cash interest resilience. Sustainability: if capex remains around current levels (e.g., furnace maintenance/relines), FCF could stay modest; any uptick in growth capex would compress FCF unless OCF improves. No clear signs of working capital manipulation are evident from headline balances, but receivables at 215.98 are material and should be monitored for collection discipline.

Dividend Sustainability

The reported payout ratio is 57.0%, within our <60% benchmark and broadly sustainable on an earnings basis. With OCF at 23.28 and implied FCF at ~5.77 after capex, cash coverage for dividends may be tight if dividends approximate >5–6; however, actual dividends paid were not disclosed. Balance sheet strength (equity ratio ~58%, D/E 0.72x) provides buffer to smooth payouts through the cycle. Policy outlook: given improving profitability but low ROIC (3.2%), management may balance shareholder returns with selective investments aimed at raising capital efficiency. Key watchpoints are FCF trajectory versus capex needs and any commitment to stable/gradual DPS growth.

Risk Assessment

Business Risks:

• Energy and raw material cost volatility (fuel, electricity, soda ash) pressuring gross margin.
• Demand elasticity in beverage/food end-markets and potential downtrading or inventory adjustments by customers.
• Substitution risk from alternative packaging (PET bottles, cans) reducing glass container volumes.
• Pricing power risk if competitive intensity increases, limiting cost pass-through.
• Operational risks around furnace relining/maintenance causing downtime and capex spikes.

Financial Risks:

• ROIC at 3.2% below cost of capital, risking value dilution if capex not accretive.
• Non-operating income dependence (net +4.85) adds earnings volatility to ordinary income.
• Receivables concentration and collection timing could affect OCF (AR 215.98).
• Interest rate risk on floating-rate borrowings, though mitigated by low leverage and strong coverage.

Key Concerns:

• Sustaining margin gains if energy prices rebound.
• Tight implied FCF coverage for dividends and capex simultaneously.
• Low asset turnover (0.389) constraining ROE despite margin improvements.
• Potential cyclical softness in key end-markets weighing on revenue (-2.9% YoY).

Investment Implications

Key Takeaways:

• Margin-led profit growth: operating income +6.9% YoY despite revenue -2.9%.
• Operating margin expanded ~65 bps to ~7.0%; SG&A ratio held at ~15.2%.
• Ordinary income +12.5% YoY supported by positive non-operating balance (+4.85).
• Net income +25.8% YoY with net margin at 7.2% and effective tax rate 18%.
• Balance sheet robust: current ratio ~199%, D/E 0.72x, interest coverage 16.9x.
• Capital efficiency weak: ROE 4.8%, ROIC 3.2% (warning).
• OCF/NI at 0.88x—acceptable but below ideal; implied FCF ~5.8 after 17.5 capex.
• Dividend payout ratio 57% appears earnings-sustainable but may be tight on FCF if capex stays elevated.

Metrics to Watch:

• Energy/fuel and soda ash indices vs. realized pricing (price-cost spread).
• Operating margin progression and SG&A discipline.
• OCF/Net income conversion and receivables days outstanding.
• Capex schedule (furnace relining) and resulting FCF.
• ROIC and asset turnover improvements, including asset utilization.
• Magnitude and drivers of non-operating income/expenses.
• Debt/EBITDA and interest coverage under varying rate scenarios.

Relative Positioning: Within Japanese glass container peers, the company demonstrates improving operating margins and a conservative balance sheet, but remains constrained by low asset turnover and sub-par ROIC, leaving it defensively positioned rather than a high-return compounder.

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