NORITAKE CO.,LIMITED FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥68.31B
• Operating Income: ¥4.74B
• Net Income: ¥6.08B
• EPS: ¥192.69

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

Noritake Co., Limited (5331) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥68.3bn (-2.1% YoY) and operating income of ¥4.74bn (-12.9% YoY), indicating margin compression on modest top-line softness. Gross profit of ¥19.53bn implies a gross margin of 28.6%, and EBITDA of ¥7.23bn yields a 10.6% margin; operating margin stands at 6.9%, pointing to some cost pressure or an unfavorable mix. Net income was ¥5.42bn (-10.4% YoY), for a net margin of 7.94% and EPS of ¥192.69. DuPont shows ROE of 3.52%, driven by a modest net margin, low asset turnover (0.323x), and conservative leverage (1.37x), underscoring a returns profile constrained more by efficiency than by financing. Liquidity is strong with a current ratio of 243.9% and quick ratio of 212.2%, and solvency appears conservative with debt-to-equity of 0.31x and interest coverage at 526.8x. However, cash flow conversion is notably weak: operating cash flow was only ¥34m, yielding an OCF/NI of 0.01, suggesting a substantial working capital outflow in the half. Investing cash flow is unreported, limiting our ability to assess free cash flow, and reported FCF of zero should be treated as a placeholder. Total assets were ¥211.8bn and equity ¥154.1bn, implying an equity ratio of roughly 72.8% (despite an unreported figure in the dataset), supporting balance sheet resilience. Working capital stands at ¥53.33bn, providing a buffer but also potentially tying up cash if collections are slow. Operating income declined much faster than revenue, signaling elevated operating leverage and sensitivity to demand or costs. The effective tax rate shown as 0.0% is inconsistent with the disclosed tax expense and ordinary income and should be disregarded; a normalized tax burden appears closer to the mid-20s. Dividend data are unreported (DPS and payout shown as zero), so dividend sustainability cannot be concluded from this release. Overall, the company exhibits robust financial strength but faces near-term profitability headwinds and materially weak cash conversion in H1, which warrants monitoring of working capital dynamics and order momentum. Data limitations (several zeros indicate undisclosed items) constrain precision around free cash flow and capital allocation conclusions.

Profitability Analysis

ROE of 3.52% decomposes into Net Margin (7.94%) × Asset Turnover (0.323x) × Financial Leverage (1.37x). The net margin is respectable for a diversified industrial/ceramics profile, but the low asset turnover meaningfully drags returns, and leverage is conservatively low, keeping ROE modest. Gross margin is 28.6% and EBITDA margin 10.6%, with operating margin at ~6.9%, suggesting operating cost pressure and limited pricing tailwinds. Operating income fell 12.9% on a 2.1% revenue decline, implying high operating leverage (profit sensitivity ~6x), likely due to fixed-cost absorption and/or weaker product mix. Ordinary income of ¥6.66bn indicates sizable non-operating contributions (e.g., financial income or equity-method gains) relative to operating profit; interest cost is de minimis (¥9m), so non-operating gains support bottom line quality this period. The effective tax rate in the calculated metrics (0.0%) is unreliable; using ordinary income as a proxy for pre-tax suggests a more normalized tax rate (~27%). Overall, profitability is solid but pressured YoY, with efficiency (asset turnover) remaining the key structural constraint on ROE.

Growth Assessment

Revenue declined 2.1% YoY to ¥68.3bn, a mild contraction that nonetheless translated into a 12.9% decline in operating income, indicating unfavorable operating leverage and/or mix. Net income fell 10.4% YoY, cushioned by strong non-operating items relative to operating profit. The sustainability of revenue depends on end-market demand in industrial ceramics/tools and electronic materials; the current softness suggests cyclicality or customer inventory adjustments. Margin pressure at the operating level hints at either pricing constraints, higher energy/raw materials costs, or lower utilization. The low asset turnover (0.323x on a half-year basis) signals slower throughput versus the asset base; improving capacity utilization or asset-light growth would be needed for better efficiency. Outlook hinges on order intake into H2, normalization of working capital, and cost pass-through; absent clear acceleration, full-year growth appears subdued with risk skewed to margins rather than volume.

Financial Health

Liquidity is strong: current ratio 243.9% and quick ratio 212.2% indicate ample short-term coverage, supported by ¥53.33bn of working capital. Solvency is conservative: debt-to-equity at 0.31x and interest coverage of 526.8x reflect minimal financial risk from leverage or interest burden. Balance sheet strength is high: equity ¥154.1bn vs assets ¥211.8bn implies an equity ratio around 72.8% (the reported equity ratio of 0% is an undisclosed placeholder). Inventory is ¥11.74bn (~17% of H1 sales), reasonable, though cash conversion issues suggest receivables or other current assets increased materially. Overall, capital structure is solid with capacity to absorb volatility.

Cash Flow Quality

Earnings quality is mixed: while net margin is decent, cash conversion is very weak this half with OCF of ¥34m versus net income of ¥5.42bn (OCF/NI = 0.01), implying a substantial working capital build (likely receivables and/or other current asset increases). D&A is ¥2.49bn, but investing cash flow is undisclosed this period, preventing a reliable free cash flow calculation; the reported FCF of zero should not be interpreted as actual zero. Financing cash flow was an outflow of ¥1.29bn, likely reflecting dividends and/or debt repayment, though DPS is undisclosed. Given the thin OCF, near-term cash generation relies on working capital normalization in H2; absent that, discretionary outlays (capex, shareholder returns) could compress free cash flow temporarily.

Dividend Sustainability

Dividend information (DPS and payout) is undisclosed in this dataset; reported zeros are placeholders. On an earnings basis, coverage of a typical industrial dividend would appear adequate given H1 EPS of ¥192.69, but cash coverage is currently weak due to minimal OCF in H1. Without investing cash flow and actual DPS, free cash flow coverage cannot be determined. If the company targets a stable or progressive dividend policy, sustainability will hinge on H2 OCF recovery and capex intensity versus D&A. Balance sheet strength provides a backstop, but persistent weak cash conversion would pressure payout flexibility.

Risk Assessment

Business Risks:

• End-market cyclicality in industrial ceramics, tooling, and electronic materials impacting volume and mix
• Operating leverage leading to profit sensitivity when utilization declines
• Raw material and energy cost volatility affecting gross margins
• Customer inventory adjustments and order timing creating near-term volatility
• FX exposure on exports and overseas operations (translation and transaction risks)
• Competitive pricing pressure in commoditized or matured product lines

Financial Risks:

• Weak H1 cash conversion (OCF/NI = 0.01) indicating working capital outflow risk
• Potential capex requirements not disclosed, creating uncertainty on near-term FCF
• Reliance on non-operating income to bridge from operating to net income
• Information gaps (undisclosed cash balance, investing CF, DPS) limiting visibility

Key Concerns:

• Operating income down 12.9% on a 2.1% sales decline, highlighting elevated operating leverage
• Very low OCF relative to earnings in H1; need for working capital normalization
• Low asset turnover (0.323x) constraining ROE despite healthy margins and low leverage
• Data inconsistencies in some reported metrics (e.g., effective tax rate, equity ratio placeholders) require caution

Investment Implications

Key Takeaways:

• Top line resilience is modest; margins compressed, amplifying operating leverage
• ROE at 3.52% is constrained by low asset turnover and conservative leverage
• Balance sheet is strong with low debt and high liquidity, mitigating solvency risk
• Cash conversion is the main near-term watchpoint; OCF needs to rebound in H2
• Non-operating gains support net income; core operating performance bears closer monitoring

Metrics to Watch:

• Order intake/backlog and book-to-bill into H2
• Working capital metrics: days sales outstanding, inventory days, and OCF recovery
• Segment/region margin trends and energy/raw material cost pass-through
• Capex versus D&A to gauge underlying FCF
• FX rates and sensitivity given export exposure

Relative Positioning: Relative to domestic industrial ceramics peers, Noritake exhibits stronger balance sheet conservatism and interest coverage, but lower asset turnover depresses ROE; near-term profitability is more sensitive to volume/mix shifts, and cash conversion lags in the current half.

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