NISSEI ASB MACHINE (6284) FY2026 Q2 Earnings Report

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Executive Summary

Operating income and net income grew at higher rates than revenue, resulting in an earnings report characterized by revenue growth, profit growth, and improved margins. Revenue was ¥240.4B (+9.8% YoY), operating income was ¥65.1B (+18.8%), ordinary income was ¥66.8B (+16.3%), and interim net income attributable to owners of the parent was ¥47.8B (+19.0%). The operating margin was 27.1%; the increase in profit exceeding the revenue growth rate was primarily attributable to improved profitability in East Asia.

Factors Affecting Business Performance

【Revenue】Revenue was ¥240.4B, representing a +9.8% increase YoY. By region, Europe (+33.5%), the Americas (+17.4%), and South and West Asia (+4.2%) contributed to revenue growth, while East Asia declined 19.1% YoY on an external revenue basis. The revenue composition was approximately 16% for East Asia, approximately 34% for the Americas, approximately 29% for South and West Asia, and approximately 21% for Europe, with the Americas and South and West Asia serving as the primary drivers in terms of scale.

【Profit and Loss】Operating income was ¥65.1B (+18.8% YoY), ordinary income was ¥66.8B (+16.3%), and net income was ¥47.8B (+19.0%), with each exceeding the 9.8% revenue growth rate. The ¥1.7B difference between ordinary income and operating income was attributable to non-operating income such as interest received and was not a temporary factor. Extraordinary gains and losses consisted solely of a ¥0.01B loss on disposal of fixed assets, resulting in a minor impact on net income. By segment, East Asia recorded substantial growth of +49.7% to ¥45.6B, while the Americas (-27.5%) and South and West Asia (-1.8%) posted declines in profit, indicating diverging profitability among regions. In conclusion, the company achieved both revenue and profit growth.

Segment Analysis

East Asia’s segment profit was ¥45.6B, accounting for 54.6% of the total reported segment profit of ¥83.5B, with a profit margin of 29.6%, significantly exceeding those of other regions. Although external revenue in East Asia declined, segment profit expanded, suggesting a shift toward a more profitable project mix. The Americas recorded revenue of ¥82.6B (+17.4%) and segment profit of ¥9.6B (-27.5%), with the profit margin declining to 11.7%. South and West Asia recorded revenue of ¥139.4B (+4.2%) and segment profit of ¥19.9B (-1.8%), with the profit margin declining slightly to 14.3%. Europe recorded revenue of ¥51.8B (+33.5%) and segment profit of ¥8.3B (+30.9%), with the profit margin remaining broadly flat at 16.1%. After deducting ¥18.4B in company-wide expenses and other items from total reported segment profit of ¥83.5B, consolidated operating income was adjusted to ¥65.1B.

Key Financial Indicators

【Profitability】The operating margin of 27.1% and net margin of 19.9% both improved from the same period last year, while the gross profit margin also remained high at 49.5%. ROE was 7.7%; despite the high level of profitability, capital efficiency remained somewhat low.【Cash Flow Quality】Operating Cash Flow (OCF) was 0.95 times net income, indicating a small divergence from accounting profit; however, the ratio of OCF to EBITDA remained at approximately 0.61 times, with an increase in working capital restraining cash conversion.【Investment Efficiency】Capital expenditures of ¥9.6B were approximately in line with depreciation and amortization expense of ¥9.5B, indicating an investment scale focused more on maintenance and replacement than on capacity expansion. Total asset turnover was low, suggesting room to improve asset efficiency, including the ¥331.4B in cash and deposits.【Financial Soundness】The equity ratio was 75.1% and the current ratio was 446.1%, both extremely high, while interest-bearing debt remained limited to ¥53.7B, indicating low financial risk.

Cash Flow Analysis

OCF was ¥45.7B, down -5.7% YoY, and remained slightly below net income of ¥47.8B. Investing Cash Flow was -¥9.6B, primarily due to capital expenditures of ¥9.6B, resulting in free cash flow of ¥36.0B. Financing Cash Flow was -¥37.9B due to dividend payments and other items, representing an outflow close in scale to free cash flow. The factors behind the sluggish growth in OCF relative to profit growth included working capital cash burdens from a ¥15.1B increase in trade receivables, a ¥7.1B increase in inventories, and a ¥8.0B decrease in trade payables. Contract liabilities increased by ¥17.4B, partially offsetting the working capital burden through the accumulation of advance payments corresponding to future revenue recognition. Cash and deposits were substantial at ¥331.4B, limiting the impact of the temporary increase in working capital on liquidity.

Quality of Earnings

Ordinary income was ¥66.8B against operating income of ¥65.1B. The ¥1.7B difference resulted from recurring factors, as non-operating income such as ¥1.4B in interest received exceeded non-operating expenses such as interest paid. Non-operating income amounted to approximately 1.0% of revenue, indicating limited dependence on non-operating income. Extraordinary gains and losses consisted solely of a ¥0.01B loss on disposal of fixed assets, and temporary items affecting net income were limited. The difference between ordinary income and net income was attributable to ¥19.0B in income taxes and other taxes, resulting in an effective tax rate of approximately 28.4%, in line with normal levels. OCF was 0.95 times net income, indicating limited accruals; however, the OCF-to-EBITDA ratio was relatively low, and the increase in trade receivables and inventories delayed the conversion of profit into cash to some extent, which should be considered when assessing earnings quality.

Earnings Forecast and Guidance

The cumulative Q2 progress rates against the full-year company forecasts were 48.1% for revenue, 50.0% for operating income, 51.0% for ordinary income, and 52.6% for net income. All were broadly in line with the plan, at around the standard first-half progress rate of 50%. The full-year forecasts are revenue of ¥500.0B (+14.5%) and operating income of ¥130.0B (+22.2%), implying acceleration in revenue growth and the maintenance of an operating margin close to the current level in the second half. During the quarter, both the earnings forecast and the dividend forecast were revised.

Shareholder Returns

As of the end of Q2, the dividend was ¥0 per share, while the full-year company forecast is an annual dividend of ¥240 per share. The payout ratio against forecast EPS of ¥607.03 is approximately 39.5%, calculated using dividends alone as the numerator. The forecast total dividend amount is approximately ¥36.0B, broadly in line with first-half free cash flow of ¥36.0B. Financial capacity, including cash and deposits of ¥331.4B and an equity ratio of 75.1%, supports the continuation of dividend payments. The dividend forecast was revised during the quarter.

Risk Factors

1. Risk of prolonged working capital cycle: On an annualized basis, days sales outstanding are 87 days, inventory turnover days are 282 days, and the cash conversion cycle is 344 days, while the OCF-to-EBITDA conversion ratio remains at approximately 0.61 times. If production or acceptance inspections are delayed, there is a risk that inventory accumulation and delayed cash collection could occur simultaneously.

2. Widening regional profitability disparity: The Americas’ segment profit margin declined to 11.7% (profit down -27.5% YoY), while South and West Asia’s profit margin also declined to 14.3%. If the situation in which revenue growth does not directly translate into profit continues, the earnings structure will remain dependent on the high profitability of East Asia.

3. High proportion of work in process: Work in process was ¥75.7B and represented a high proportion of inventories. If production bottlenecks or delivery postponements occur, this could lead to inventory valuation losses or additional manufacturing costs.

Industry Benchmark (For Reference; Based on Company Research)

Profitability and Returns

Both the operating margin and net margin significantly exceeded the industry median, placing profitability at a high level within the industry.

Growth and Capital Efficiency

The revenue growth rate was slightly below the industry median but remained within the IQR range.

※Source: Based on company research

Key Earnings Takeaways

1. The operating margin of 27.1% and net margin of 19.9% significantly exceeded the industry median, while profit growth exceeding the 9.8% revenue growth rate indicates improved fixed-cost absorption and a more profitable mix.

2. East Asia’s segment profit expanded by +49.7% despite a decline in external revenue, while profit did not increase in other regions despite revenue growth. The increasing divergence in regional profitability is a notable characteristic of the earnings structure.

3. While financial soundness was high, with an equity ratio of 75.1% and a current ratio of 446.1%, the combination of ROE of 7.7% and a prolonged annualized CCC of 344 days indicates that working capital duration is constraining capital efficiency, illustrating the gap between profitability and capital efficiency.

Theoretical Share Price (Reference Value)

Sensitivity: ¥4,716–¥4,992 at ±1% for the cost of equity, and ¥4,834–¥4,877 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used; there is a timing difference from the full-year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional as necessary.

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AI Financial Analysis

Executive Summary

FY2026 Q2 performance was strong, with revenue growth translating into faster operating and net-profit growth and margins expanding materially. Revenue increased 9.8% YoY to ¥24.04bn. Operating income rose 18.8% to ¥6.51bn, outpacing revenue growth. Net income attributable to owners increased 19.3% to ¥4.78bn. The operating margin expanded by 206bp YoY to 27.1% from 25.0%. Gross margin improved by 260bp to 49.5% from 46.9%, indicating favorable product mix, pricing, manufacturing profitability, or some combination thereof. Net margin increased by 160bp to 19.9% from 18.3%. Ordinary income of ¥6.68bn grew 16.3%, slightly below operating-income growth because non-operating income declined from the prior year. Interest income of ¥0.14bn remained the principal non-operating income item, while interest expense was only ¥0.02bn. The effective tax rate was 28.4%, producing a normal tax burden of 0.716x in the five-factor DuPont framework. Earnings were substantially cash-backed, as operating cash flow was ¥4.57bn and represented 0.95x net income. However, operating cash flow fell 5.7% YoY despite higher earnings, reflecting increased working-capital investment. The disclosed annualized cash conversion cycle of 344 days, including 87 receivable days and 282 inventory days, is the principal earnings-quality and operating-efficiency concern. The balance sheet remains exceptionally liquid, with cash of ¥33.14bn, a current ratio of 446.1%, and net cash of ¥27.77bn after interest-bearing debt. The full-year forecast implies Q2 revenue progress of 48.1%, modestly below the standard 50% midpoint, while operating-income progress is exactly 50.0% and net-income progress is 52.6%. The forecast was revised, and the company now expects full-year revenue of ¥50.00bn, operating income of ¥13.00bn, and owner-attributable net income of ¥9.10bn. The key forward implication is that the company needs a modest second-half revenue acceleration while preserving the current high gross margin and converting elevated receivables and production inventory into cash.

Profitability Analysis

Annualized ROE is 15.5%, meeting the threshold for excellent profitability, and is explained by a 19.9% net profit margin, 0.584x asset turnover, and 1.33x financial leverage. The dominant driver of returns is margin rather than leverage: financial leverage is conservative and asset turnover is moderate for a manufacturer with a sizeable cash balance. EBIT margin was 27.1%, while the interest burden was 1.027x because net non-operating financial income exceeded interest expense; this confirms that debt servicing is not constraining returns. The tax burden of 0.716x is normal, consistent with the 28.4% effective tax rate. Gross-margin expansion of 260bp was the largest disclosed YoY profitability improvement and drove the 206bp operating-margin expansion. Cost of sales rose only 4.8% YoY, substantially below 9.8% revenue growth, demonstrating strong gross-profit operating leverage. SG&A increased 12.5% YoY to ¥5.39bn, faster than revenue growth, partially offsetting the gross-margin gain. Even so, SG&A represented 22.4% of revenue versus 21.9% in the prior year, a 50bp increase that should be monitored if revenue growth normalizes. EBITDA was ¥7.46bn and the EBITDA margin was 31.0%, highlighting robust cash earnings before depreciation. Depreciation and amortization was ¥0.95bn, or 4.0% of revenue. There is no material JGAAP goodwill-amortization distortion evident in the disclosed intangible-asset balance, which is only 0.2% of total assets. The ¥0.01bn loss on disposal of fixed assets was immaterial, so reported profit was predominantly recurring operating and financial income.

Growth Assessment

Top-line growth was broad-based across the Americas, Europe, and South/West Asia, but East Asian external revenue declined. Americas revenue grew 16.9% YoY to ¥8.13bn, Europe grew 34.4% to ¥5.13bn, and South/West Asia increased 8.7% to ¥6.94bn. East Asia revenue declined 19.1% to ¥3.84bn, creating regional concentration risk within the otherwise positive growth profile. East Asia was nevertheless the core business by segment-profit contribution, generating ¥4.56bn of segment profit, or 54.6% of aggregate segment profit before corporate-cost adjustments. Its segment profit rose 49.7% YoY despite the sales decline, implying a very high profit mix, favorable internal production contribution, or both. Europe’s segment profit rose 30.9% to ¥0.83bn, broadly supporting its strong sales growth. Americas segment profit declined 27.5% to ¥0.96bn despite revenue growth, indicating margin pressure in a key growth region. South/West Asia segment profit declined 1.8% to ¥1.99bn despite revenue growth, also pointing to regional profitability divergence. Consolidated operating profit rose because East Asia’s profit expansion more than offset profit pressure in the Americas and South/West Asia. Contract liabilities increased 31.0% YoY to ¥6.79bn, which supports visibility of customer orders and advances, although it also contributed to the working-capital structure. Full-year revenue guidance calls for 14.5% growth to ¥50.00bn, requiring second-half revenue of ¥25.96bn, up 18.9% from the first half. Full-year operating-income guidance of ¥13.00bn requires second-half operating income of ¥6.49bn, essentially flat versus the first half; this implies management expects revenue acceleration but a lower second-half operating margin of approximately 25.0%. Full-year owner-attributable net-income guidance of ¥9.10bn requires ¥4.32bn in the second half, 9.7% below first-half earnings. This guidance profile suggests conservatism around second-half mix, regional margins, foreign exchange, or operating costs rather than a deterioration in the underlying first-half earnings base.

Financial Health

Financial health is very strong. The current ratio is 446.1% and the quick ratio is 423.6%, substantially above conventional liquidity thresholds and providing a large buffer against short-term obligations. Current assets of ¥65.07bn exceeded current liabilities of ¥14.59bn by ¥50.49bn. Cash and deposits were ¥33.14bn, equivalent to 40.3% of total assets. Interest-bearing debt was ¥5.37bn, comprising ¥1.49bn of short-term loans and ¥3.88bn of long-term loans. Cash exceeded total interest-bearing debt by ¥27.77bn, leaving the group in a substantial net-cash position. Debt-to-equity was a conservative 0.33x, debt-to-capital was 8.0%, and debt-to-EBITDA was only 0.72x. Interest coverage was 433.73x and EBITDA interest coverage was 497.33x, indicating negligible refinancing and interest-payment pressure. Short-term debt represented 27.8% of total debt, while cash was 22.20x short-term debt; there is no material maturity mismatch. Equity increased ¥29.04bn, or 4.9% YoY, to ¥61.85bn, supported by retained earnings and positive foreign-currency translation effects. The equity ratio was 75.1%, reinforcing the company’s capacity to absorb demand, currency, or inventory-cycle volatility. Contract liabilities of ¥6.79bn are economically important current operating obligations and should be monitored alongside production fulfilment and working-capital movements. Defined-benefit liabilities of ¥1.19bn and directors’ retirement provisions of ¥0.67bn are modest relative to the group’s equity and liquidity.

Notable B/S Changes

Trade receivables: +¥20.04bn (+21.3%) YoY to ¥114.34bn - significant collection and working-capital absorption; consistent with the disclosed annualized DSO warning. Finished goods: +¥6.44bn (+24.4%) YoY to ¥32.87bn - elevated inventory build increases demand-forecasting, shipment-timing, and potential obsolescence risk. Contract liabilities: +¥20.23bn (+42.5%) YoY to ¥67.87bn - stronger customer advances/order-related obligations support visibility and cash, but require timely and profitable fulfilment. Total assets: +¥39.47bn (+5.0%) YoY to ¥823.33bn - asset growth was concentrated in working-capital items and cash rather than major fixed-asset expansion. Cash and deposits: +¥6.74bn (+2.1%) YoY to ¥331.43bn - preserves a substantial net-cash position despite higher dividends and capital expenditures. Long-term loans: -¥7.47bn (-16.2%) YoY to ¥38.77bn - continued deleveraging further reduces already low financial risk. Accumulated other comprehensive income: +¥11.18bn (+114.5%) YoY to ¥20.94bn - mainly reflects positive foreign-currency translation effects and increases equity sensitivity to exchange-rate movements. Retained earnings: +¥17.86bn (+3.5%) YoY to ¥526.41bn - earnings retention continues to underpin capital strength and dividend capacity.

Cash Flow Quality

Cash-flow quality is adequate but not fully commensurate with the strength of reported earnings. Operating cash flow was ¥4.57bn, equal to 0.95x net income of ¥4.78bn; this is below the high-quality 1.0x threshold but above the 0.8x level generally associated with material accrual concern. The accruals ratio was a low 0.3%, supporting the view that accounting accrual intensity is contained. Cash conversion, measured as operating cash flow divided by EBITDA, was 0.61x and is below the 0.7x quality threshold. Operating cash flow declined from ¥4.84bn in the prior-year period even as net income increased by ¥0.77bn. Trade receivables increased by ¥1.51bn in the period, and disclosed annualized DSO of 87 days exceeds the 60-day warning threshold. The disclosed annualized DIO of 282 days is also high and indicates capital is tied up in the production and inventory cycle. The annualized cash conversion cycle of 344 days is far above the 120-day warning threshold, making working-capital release a major determinant of second-half cash generation. Work in process was ¥7.57bn and represented 40.3% of the disclosed manufacturing inventory base, marginally above the high-WIP warning threshold and consistent with potential production bottlenecks, lengthy equipment build cycles, or timing of project completion. Finished goods increased 24.4% YoY to ¥3.29bn, while raw materials increased 5.3% to ¥7.93bn and work in process was broadly stable. Contract liabilities increased ¥1.74bn during the period, partly supporting operating cash flow and indicating customer advances or order-related billing. Free cash flow was positive at ¥3.60bn after ¥0.96bn of capital expenditures. CapEx equalled depreciation at 1.00x, indicating maintenance and replacement investment is being broadly funded without clear evidence of aggressive capacity expansion. Cash dividends paid were ¥3.00bn, leaving first-half free cash flow modestly above cash dividends paid.

Dividend Sustainability

The full-year dividend forecast is ¥240 per share. Against forecast EPS of ¥607.03, the implied dividend payout ratio is 39.5%, which is comfortably within the less-than-60% sustainability benchmark. There were no share repurchases, so the dividend payout ratio and total return ratio are effectively the same on the disclosed data. The forecast cash dividend commitment is approximately ¥3.60bn based on 14.99 million issued shares. First-half free cash flow of ¥3.60bn approximately covers that full-year forecast dividend amount, although the comparison combines a half-year cash-flow figure with a full-year dividend commitment. The company also holds ¥33.14bn of cash and has a ¥27.77bn net-cash position, giving it a substantial balance-sheet buffer for dividends. First-half cash dividends paid were ¥3.00bn, exceeding the prior-year period’s ¥2.25bn and indicating stronger shareholder distributions. Retained earnings of ¥52.64bn provide further distribution capacity. Dividend sustainability is therefore strong under the current earnings outlook. The principal factor to monitor is not solvency but conversion of earnings into operating cash flow, particularly receivables, finished goods, and work in process. The stated Q2 DPS is ¥0, so the distribution pattern appears weighted to a year-end dividend rather than an interim cash dividend.

Risk Assessment

Business risks include Working-capital intensity is the highest operational risk: annualized DSO of 87 days, DIO of 282 days, and a 344-day cash conversion cycle expose cash flow to shipment timing, customer acceptance, collections, and production-cycle delays., Work in process of ¥7.57bn, representing 40.3% of the disclosed manufacturing inventory base, is slightly above the warning threshold and may signal long production lead times or bottlenecks. Delayed completion or delivery could defer revenue recognition and cash collection., Regional profitability is uneven. Americas revenue rose 16.9% but segment profit fell 27.5%, while South/West Asia revenue rose 8.7% but segment profit declined 1.8%. Sustaining consolidated margins requires stabilization in these regions., East Asia external sales declined 19.1%, despite segment profit rising 49.7%. Because East Asia is the largest segment-profit contributor, continuation of its revenue contraction could eventually challenge earnings resilience., As an export-oriented manufacturer of molding machinery, the group remains exposed to global capital-expenditure cycles, customer investment sentiment, competitive pricing, supply-chain availability, and foreign-exchange movements. The reported FX gain was immaterial in the period, but translation effects increased equity..

Financial risks include Cash conversion of 0.61x is below the 0.7x warning threshold. Although the OCF/net-income ratio is 0.95x, lower EBITDA-to-cash conversion shows that high accounting profitability is not yet fully translating into operating cash., Inventory and receivable expansion can increase the risk of future write-downs, discounting, or collection delays if end-market demand weakens., Contract liabilities of ¥6.79bn create delivery-performance obligations; project delays or cost overruns could pressure future margins and cash flow..

Key concerns include The quality alerts on low cash conversion, high receivable days, high inventory days, long cash conversion cycle, and high WIP ratio all point to working-capital execution as the key issue rather than leverage or liquidity., SG&A grew 12.5% YoY, faster than 9.8% revenue growth. Margin expansion was preserved by gross-profit strength, but expense discipline is necessary if gross-margin gains normalize., The full-year revenue forecast requires 18.9% second-half YoY growth, while management implicitly guides to a lower second-half operating margin than in the first half..

Investment Implications

Key takeaways include Revenue, operating income, and owner-attributable net income grew 9.8%, 18.8%, and 19.3% YoY, respectively, with operating margin reaching 27.1%., Annualized ROE of 15.5% is driven principally by an excellent 19.9% net margin rather than financial leverage., The company has exceptional liquidity, with ¥27.77bn net cash, 446.1% current ratio, 0.72x debt/EBITDA, and very high interest coverage., Cash flow remains positive and free cash flow was ¥3.60bn, but working-capital efficiency is weak and is the main constraint on earnings quality., The forecast dividend implies a sustainable 39.5% payout ratio, supported by free cash flow, retained earnings, and the net-cash balance sheet..

Metrics to watch include Receivable days and absolute trade receivables, which were ¥11.43bn at Q2., Inventory days, work-in-process balance, finished-goods balance, and evidence of project completion or shipment conversion., Cash conversion and operating cash flow relative to EBITDA and net income., Americas and South/West Asia segment-profit recovery relative to revenue growth., East Asia revenue trend and the durability of its unusually strong segment-profit contribution., Second-half revenue delivery against the implied ¥25.96bn requirement and operating-margin trajectory against the approximately 25.0% implied second-half level., Execution against the ¥240 per-share full-year dividend and the relationship between dividends and free cash flow..

Regarding relative positioning, The company combines unusually high manufacturing profitability and a net-cash balance sheet with a comparatively elongated working-capital cycle. Relative to typical leveraged capital-equipment manufacturers, solvency risk is low; relative to efficient manufacturing benchmarks, receivable, inventory, and WIP intensity are the key areas requiring operational improvement.